Graham Corporation

Greetings. Welcome to Graham Corporation's first quarter fiscal year 2022 financial results. At this time, all participants will be in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. Please note this conference is being recorded. At this time, I'll now turn the conference over to Deborah Pulaski, Investor Relations for Graham Corporation. Ms. Pulaski, you may now begin.

Thank you, Rob, and good morning, everyone. We certainly appreciate your joining us today to discuss Graham's first quarter fiscal 2022 financial results. We announced those results earlier this morning, and you should have a copy of that along with the slides that will accompany our conversation today. If you do not have the releases or the slides, you can find them on the company's website at www.gram-mfg.com. We also simultaneously this morning announced the planned retirement of Jim Lines, our Chief Executive Officer. He's on the call today with us and will be making some formal remarks. Also joining us are Jeff Gleick, our Chief Financial Officer, and Dan Thorin, our President and Chief Operating Officer, who has been named effective with Jim's retirement our new Chief Executive Officer. Jim will start with his overview and then cover the brief results of the quarter. Jeff will then review details of the financial results and then we'll have Dan close out with his remarks. As you are aware, we may make some forward-looking statements during this discussion as well as during the Q&A session. These statements apply to future events and are subject to risks and uncertainties as well as other factors which could cause actual results to differ materially from what is stated on the call today. These risks and uncertainties and other factors are provided in the release and in the slides as well as with other documents filed by the company with the Securities and Exchange Commission. These documents can be found on our website or at sec.gov. I would like to point out that during today's call we may also discuss some non-GAAP financial measures which we believe are useful in evaluating our performance. You should not consider the presentation of this additional information in isolation or as a substitute for the results prepared in accordance with GAAP. We have provided the reconciliations of comparable GAAP with non-GAAP measures in the tables accompanying today's release. So with that, it's my pleasure to turn the call over to Jim Lyons. Jim?

Thank you, Debbie, and good morning, everyone. I will begin my remarks at slide three and provide a brief review of the financial results before discussing my planned retirement. Revenue in the quarter was $20.2 million. $16.7 million was organic, and $3.5 million was due to the acquisition of Barber Nichols that closed June 1st. Defense revenue was 35% of total revenue in the quarter. We do expect that defense revenue will approach 50% of total quarterly revenue with Barbara Nichols fully in future quarters. This acquisition and the shift in revenue mix is a major transformation for Graham and measurably advanced our diversification strategy. On an organic basis, revenue was similar year over year. However, it was for different reasons. You might recall that our first quarter last year operated at nominally 50% capacity due to COVID-19, thus impacting revenue and profitability due to under-adsorption. In the most recent quarter, our workforce utilization was at capacity. However, mix was very different. Orders from our crude oil refining and petrochemical markets were very low during the third and fourth quarters last fiscal year, where non-Navy orders totaled $17.5 million for both quarters. Consequently, greater production resources were pulled into Navy backlog, which are lower margin due to first article work and also due to contract structure for a large order and backlog. Those headwinds work out of backlog across the next few quarters and largely behind us as we exit this current fiscal year. Organic revenue and profitability are expected to improve across the fiscal year. Orders in the first quarter were $20.9 million and were principally organic. Barbara Nichols' orders were $200,000 for the month of June. Somewhat encouragingly, there were strong orders from our crude oil refining market in the quarter that totaled $11.5 million. We did have a significant win in the quarter for a domestic refiner revamping their facility to improve crude oil feedstock processing flexibility. That particular win was gratifying for me. I still remember losing the original order to a domestic competitor in the mid-1990s. And now, 25 years later, we won back the installation and replace the original supplier with our own vacuum systems. Consolidated backlog at June 30th was $236 million, of which 80% is for defense. Importantly, as we work through the more challenging margin backlog that impacts the current fiscal year, margin potential for our defense backlog improves measurably. The Barbers Nichols acquisition provides additional market diversity to our profile as it also adds backlog for new markets including space and advanced energy industries. While we put considerable cash toward acquiring Barbara Nichols to strengthen and diversify revenue along with earnings, our balance sheet remains strong and our opportunity to drive our return on assets improves. As announced earlier today and as Debbie had mentioned, I am very pleased to confirm that I will retire effective August 31st at the end of this month. And Dan Thorin will succeed me as president and CEO of the corporation. He also will join our board of directors at that time. It has been a tremendous honor and great privilege for me to serve Graham shareholders and the corporation as its principal executive officer since 2006. I believe I am departing on a high note. as this is an incredibly exciting time for the company considering, first, the strength of our organic defense strategy, having advanced to preferred supplier status for many of the products the company provides to the U.S. Navy, and in some cases, we are now bidding on a sole source basis. The credit goes to Alan Smith and his team for executing well our defense strategy. Secondly, the progress we have had innovating execution to become successful in price-focused international crude oil refining and petrochemical markets. The sales team has proven we can take market share, and also the operations team has shown we're able to realize or beat target margins. Thirdly, the investments we've made in IT tools, systems, and resources to leverage our installed base and the expected benefit that will provide. I believe crude oil refining and chemical petrochemical customers will invest in existing facilities for greater throughput before investing in new capacity. I feel we are ahead of competitors regarding commitment to the installed base. Lastly, the transformational acquisition of Barbara Nichols creates a new, strong growth platform for both organic and M&A expansion. I've had the opportunity to work with Dan through the acquisition process for over nearly three years, and most recently the last two months as he onboarded with the Graham team. I believe that Dan is well equipped to lead Graham and has a terrific and broad vision for the next phase of growth for the company. I'm thrilled this acquisition has proved to be as transforming as we had envisioned, and part of that transformation is building out the bench strength of our leadership team. Ultimately, over the last couple of months, it became more clear to me that this has provided for my succession plan as well. I'm thrilled that the board saw the same potential in Dan that I have seen. As a Graham shareholder, I'm looking forward to benefiting from the value of Dan's strategic direction. Congratulations, Dan. You have my full support, not only through this transition, but well into the future. I also want to take a moment as well to thank our shareholders. I have enjoyed our many conversations all these years and have very much appreciated your ongoing support. With that, I will turn the call over to Jeff for his review of the financial results. Jeff?