Graham Corporation's Fourth Quarter 2023 Financial Results

Introduction

The management of Graham Corporation proudly presents the financial results for the fourth quarter of fiscal year 2023 (FY23), showcasing significant progress and strategic growth. The company has successfully navigated various challenges and achieved remarkable milestones in revenue and market diversification. This report provides a comprehensive analysis of the financial performance and strategic developments that have contributed to our success.

Financial Highlights

Graham Corporation achieved record revenues and strong order performance during the fourth quarter of FY23. The total revenue for the year was $157 million, reflecting a 28% increase from the previous fiscal year, with an inclusion of $8.9 million from acquired revenues.

Notably, the revenue growth is attributed to successful diversification into various markets. The defense sector accounted for 42% of the total revenue, while refining and petrochemical markets combined formed 31%. The space segment grew to 13% of the total revenue, and the new energy segment, driven primarily by hydrogen and lithium extraction initiatives, contributed 14% to sales.

Orders during the fourth quarter amounted to $50.8 million, contributing to a record $202.7 million in orders for the fiscal year. This includes a significant $23 million follow-up order for power hardware for the Mark 48 Torpedo.

Revenue and Profit Analysis

For FY23, Graham Corporation attained total revenue of $185.53 million, with a gross profit of $43.16 million, resulting in a gross profit margin of 23.26%. Operating income stood at $7.35 million, and the net income was $4.56 million, equating to an EPS of $0.42.

Gross margin showed a substantial improvement, reaching 16.2% for the year compared to 7.4% in FY22. The enhanced gross margin is a result of better cost management, an improved mix of business, and higher productivity. Notably, SG&A expenses were controlled effectively, reflecting fiscal discipline and cost containment measures.

Cash Flow and Balance Sheet

Operating cash flow for the year amounted to $28.12 million, leading to a free cash flow of $18.89 million after capital expenditures of $9.23 million. Cash and cash equivalents were $16.94 million at the end of FY23.

The strong cash generation allowed the company to reduce debt by $6.6 million during the fiscal year. The total debt now stands at $7.77 million, with a favorable net debt position of -$9.17 million, illustrating a well-managed balance sheet with ample liquidity for strategic investments.

Market and Strategic Developments

Graham Corporation continued its focus on diversification and market expansion. The defense sector remains a cornerstone, with significant orders for the Mark 48 Torpedo. The company also leveraged its capabilities in vacuum and heat transfer technology for new energy applications, including hydrogen and geothermal lithium extraction projects.

Despite the disappointment from a large space customer filing for bankruptcy, the company maintained robust financial performance and achieved its adjusted EBITDA guidance.

Outlook for FY24

For FY24, Graham Corporation anticipates further growth with revenue guidance of $165 million to $175 million, indicating an approximate 8% growth at the midpoint. Adjusted EBITDA is projected to range between $10.5 million and $12.5 million. The company aims to continue improving margins and profitability by focusing on operational excellence and strategic investments.

Key initiatives include the deployment of an upgraded ERP system, investment in automated welding technology, and ongoing infrastructure enhancements.

Conclusion

The financial results for the fourth quarter of FY23 underscore Graham Corporation's resilience and strategic prowess in navigating a complex business environment. With strong revenue growth, a diversified market base, and a robust balance sheet, the company is well-positioned to capitalize on future opportunities and drive sustained shareholder value.