Graham Corporation · NYSE:GHM
Graham — Gabelli Funds Pump Valve Conference 2022
30 slides from Graham's conference presentation, Feb 24, 2022
Slide 1: Gabelli Funds Pump Valve Conference
Gabelli Funds Pump Valve Conference NYSE: GHM • February 24, 2022 Daniel J. Thoren, President and Chief Executive Officer Jeffrey F. Glajch, Vice President & Chief Financial Officer Page 1
Slide 2: Safe Harbor Statement
Safe Harbor Statement This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are subject to risks, uncertainties and assumptions
Slide 3: Critical Equipment Supplier for Defense, Energy, Chem/Petrochem, and Aerospace/Space
Critical Equipment Supplier for Defense, Energy, Chem/Petrochem, and Aerospace/Space How we do it Demonstrate Diversification Engaged people NYSE: Power of into Defense Continuous improvement GHM Earnings and and Space Unique capabilities Cash Generation Smart investments Employee-driven culture Acq
Slide 4: Acquisition Creates Growth Momentum
Acquisition Creates Growth Momentum Acquisition of Barber-Nichols (BN) expands reach into more stable, higher growth markets FY21 Sales Refining $97.5 million 23% Defense 46% Chem / Defense Petrochem 25% 16% FY16 Sales Refining $90.0 million 41% Other Other Aerospace / 12% 10% Space 3% Defense Chem
Slide 5: Building Opportunities on Two Primary Platforms
Building Opportunities on Two Primary Platforms Defense and Space Energy and Chemical/Petrochemical • Strong visibility into future naval programs – • Expanding geographically and into more price ships and submarines sensitive markets • Engaged in Space development programs • Expect petrochem to dec
Slide 6: Deepening Presence in Defense Industry
Deepening Presence in Defense Industry Long history with the U.S. Navy ~$43M FY22 Est. Sales >$500M Market Opportunity(1) • Highly specialized propulsion and ejection systems for a variety of undersea defense applications • Customized, highly engineered surface condensers for Naval Nuclear Propulsio
Slide 7: Current Defense Programs and Pipeline
Current Defense Programs and Pipeline CVN Carrier SSN Virginia Class Subs SSBN Columbia Class Subs Content Condenser, Air Ejectors, PPFW Condenser and PPFW HEXs*, SGCD HEX*, ATP*, HEXs*, Pulsation Dampener, various heat exchangers ALT/Regulator for Torpedoes ALT/Regulator for Torpedoes Value $40 to
Slide 8: New Frontier: Space
New Frontier: Space Serving the private space exploration market NASA is long time BN customer • Relationships at Marshall, Johnson, and Glenn centers Critical space flight hardware • Leader in specialized turbomachinery for cryogenic rocket engine fuels • High-end turbomachinery and fluid transfer
Slide 9: Large Energy and Petrochemical Installed Base
Large Energy and Petrochemical Installed Base End markets investing in existing facilities before new capacity Refining $25.2M Q3 FY22 TTM Sales $150M Market Opportunity(1) An ejector system lowers the pressure in the distillation column to allow crude oil to boil at a lower Chemical / Petrochemical
Slide 10: New Market: Advanced Energy Systems with Cryogenics
New Market: Advanced Energy Systems with Cryogenics Cryogenic fluid systems for hydrogen production, distribution, and fueling systems Full systems and equipment to support organic binary and supercritical CO2 power generation systems Among world’s largest helium pumps moving liquid helium coolant t
Slide 11: Differentiation with Comprehensive Customer Support Model
Differentiation with Comprehensive Customer Support Model Provide unique value before and throughout project life cycle Consultative • Detailed engineering and equipment scope analysis Selling Platform • Solutions engineering and prototype developments and Product Development • Deliver in-depth solu
Slide 12: Q3 FY22: Allocated Resources to Meet Requirements
Q3 FY22: Allocated Resources to Meet Requirements ($ in millions, except per share data) Sales Adjusted EBITDA and Margin(1) $34.1 $1.8 $27.2 $28.8 6.7% (9.0%) 6.7% ($2.6) Q3 FY21 Q3 FY22 Q3 FY21 Q2 FY22 Q3 FY22 Gross Margin GAAP and (1) Sales increased $1.6 million, or 6% over Q3 FY21 Adjusted Dilu
Slide 13: 3Q Actions and Long-Term Solutions
3Q Actions and Long-Term Solutions Strong Growth and Margin Opportunities with Improvements in Defense for Batavia Ops Batavia Navy Operations Labor Plan vs. Actual 3Q Actions Increased labor hours to stay on schedule and (in thousands) meet higher specs • Redirected internal resources & outsourced
Slide 14: YTD FY22: Strategic Diversification into Defense
YTD FY22: Strategic Diversification into Defense ($ in millions, except per share data) Sales Adjusted EBITDA and Margin(1) $83.1 $4.0 $71.8 5.6% ($5.4) (6.5%) YTD FY21 YTD FY22 YTD FY21 YTD FY22 GAAP and Sales increased 16% driven by defense industry Gross Margin Adjusted Diluted EPS (1) + $31.9 mi
Slide 15: Expect Amended Lending Agreement in Q4 FY2022
Expect Amended Lending Agreement in Q4 FY2022 CAPITALIZATION Noncompliant on two of three covenants with ($ in millions) term loan and revolver Dec. 31, Sept. 30, 2021 2021 Suspended dividend subject to analysis of capital priorities and lending agreement terms Cash and cash equivalents $ 14.0 $ 16.
Slide 16: Order Growth Driven by Market Diversity
Order Growth Driven by Market Diversity ($ in millions) Orders Q3 FY22 TTM Orders $133.7 million $68.0 Space 4% $61.8 Other 13% $45.6 $31.4 $52.3 $20.9 Defense Chem/Petrochem 14% $13.4 $12.4 49% $2.4 $5.4 $18.5 $19.0 $22.4 $9.5 $8.0 Q3 FY21 Q4 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Refining 20% Quarterly Net
Slide 17: Graham Fiscal 2022 Guidance
Graham Fiscal 2022 Guidance(1) Revenue: $120 million to $125 million Gross margin: 8% to 10% SG&A: 16% to 17% of sales Adjusted EBITDA: Break even in Q4 FY22; ~$(5.0) million for FY22 Capital expenditures: $2.5 million to $3.0 million (1) FY2022 guidance as of February 7, 2022 The revenue, gross mar
Slide 18: Execution of Strategy: Evolving into Defense Business
Execution of Strategy: Evolving into Defense Business Longer-term visibility into future naval programs – ships and submarines BN acquisition strengthens presence in defense industry and brings long history of defense experience • Contributed $26.6 million of $43.5 million to defense industry Addres
Slide 19: FY2023 and Beyond
FY2023 and Beyond Graham Corporation Create related group of mission critical engineered product businesses that win on quality, performance and customer trust Graham Manufacturing Barber-Nichols Future Opportunities Diverse markets Diverse markets Get beyond current • Navy • Defense challenges • Re
Slide 20: Transforming to Drive Value
Transforming to Drive Value Leverage transformational Upgrade talent and add acquisition to accelerate required experience from growth in defense industry Board of Directors to skilled and enhance knowledge labor Preparing for refining Contained challenges; and petrochem focused on cash generation u
Slide 21: For more information:
For more information: Jeffrey F. Glajch Deborah K. Pawlowski Vice President – Finance and CFO Kei Advisors LLC Phone: (585) 343-2216 Phone: (716) 843-3908 [email protected] [email protected] Page 21
Slide 22: Supplemental Information
Supplemental Information Page 22
Slide 23: Adjusted EBITDA Reconciliation
Adjusted EBITDA Reconciliation (Unaudited, $ in thousands) Three Months Ended Nine Months Ended December 31, December 31, 2021 2020 2021 2020 Net (loss) income $ (3,730) $ 1,060 $ (7,348) $ 1,986 Acquisition related inventory step-up expense 27 - 68 - Acquisition related costs 111 - 373 - Change in
Slide 24: Adjusted Net Income Reconciliation
Adjusted Net Income Reconciliation (Unaudited, $ in thousands) Three Months Ended Nine Months Ended December 31, December 31, 2021 2020 2021 2020 Net income (loss) $ (3,730) $ 1,060 $ (7,348) $ 1,986 Acquisition related inventory step-up expense 27 - 68 - Acquisition related costs 111 - 373 - Amorti
Slide 25: Barber-Nichols (BN) and Transaction Overview
Barber-Nichols (BN) and Transaction Overview • HQ: Arvada, Colorado • 2020 revenue: $56 million • Established: 1966 • Demonstrated growth • Employees: 155 • Operating margin: low double digit Item Terms Purchase Price $72.0 million purchase price: split 87% cash / 13% stock • $61.1M in cash (funded
Slide 26: BN: Highly Engineered Suite of Products
BN: Highly Engineered Suite of Products • Electric motor • High speed • Permanent Pumps Rocket Engine Turbopumps • Robust and Compressors & Fans • Axial and radial • Ground and Motors, Generators & Controllers Turbines & Power Systems Thermal Management Solutions driven economical electric motor mag
Slide 27: North American Competition
North American Competition Market Competitors Naval Nuclear Propulsion Program/Defense DC Fabricators; Joseph Oat; PCC; Triumph Aerospace; Xylem Croll Reynolds Company, Inc.; Gardner Denver, Inc.; GEA Wiegand Refining vacuum distillation GmbH Chemicals/Petrochemicals Croll Reynolds Company, Inc.; Ga
Slide 28: International Competition
International Competition Market Competitors Edwards, Ltd.; Gardner Denver, Inc.; GEA Wiegand GmbH; Korting Refining vacuum distillation Hannover AG Croll Reynolds Company, Inc.; Edwards, Ltd.; Gardner Denver, Inc.; GEA Chemicals/Petrochemicals Wiegand GmbH; Korting Hannover AG; Schutte Koerting Che
Slide 29: Representative List of Customers
Representative List of Customers Aerojet Rocketdyne Cummins Jacobs Engineering Oak Ridge National Group Inc. Laboratory Air Liquide DuPont Kairos Power Raytheon Technologies Applied Research Dow Chemical Koch Fertilizer ENID LLC Roush Laboratory Aramco General Atomics Lockheed Martin SAIC Bechtel Pl
Slide 30: Executive Compensation
Executive Compensation Shareholder alignment Base Salary • Reviewed annually by our compensation committee and determined based on company performance, individual performance, job responsibilities, and internal pay equity • Provides compensation that is not “at-risk” to compensate executive officers