Graham (GHM) 2024 Southwest IDEAS Conference summary

Business transformation and strategic focus

• Shifted from refinery/petrochem focus to a defense-centric model after the 2021 acquisition of Barber-Nichols, with defense now comprising 57%-60% of revenue.

• Revenue nearly doubled from $97.5M in FY21 to $196.4M TTM Q2 FY25.

• Implemented a five-year strategic plan targeting $240M-$250M revenue and low-to-mid teens EBITDA by 2027, up from initial $200M+ goal.

• Focused on engineered products and opportunistic M&A, targeting $20M-$80M deals under 10x EBITDA, with no transformational acquisitions planned.

• Expanded U.S. operations and R&D, with international sales and engineering offices in China and India.

Defense and government programs

• Major supplier for Navy programs: carriers, Virginia-class, Columbia-class submarines, and MK48 torpedo, with long-term contracts extending into the 2050s.

• Estimated $1.2B-$1.4B revenue potential from Navy programs over the next decades, with 80% sole-source status and high barriers to entry.

• Record backlog of $407M, up 30% YoY, with 80% in defense; 35%-45% to be recognized as revenue in the next 12 months.

• Benefited from $13.5M+ in government grants for facility upgrades and welder training, supporting production acceleration.

• Defense business is insulated from Ukraine conflict, driven by Pacific geopolitical tensions and strategic Navy programs.

Market diversification and growth

• Diversification into space and new energy markets, leveraging installed base and R&D for hydrogen, solar, and small modular nuclear opportunities.

• Space business shifting from launch to payload and life support systems, with new opportunities in satellite cooling and astronaut suits.

• Energy and chemical markets remain stable, with a $1B installed base and strong aftermarket business in North America ($30M-$40M/year).

• Aftermarket is highly profitable but low growth; defense, new energy, and space offer higher growth and profitability potential.

• Organic growth targeted at 8%-10% per year, with acquisitions supplementing but not required for growth.