Graham Corporation (NYSE:GHM) Q1 2024 Earnings Call Transcript

Christopher Thome: Yes, that’s a great question, Brett. Unlike — just like everyone else, we’re not immune to the difficult labor market that’s out there. I will say that overall, our human resources team has done a fabulous job. Our labor is actually up 44 people since this time last year, which is about a 9% increase but then within our budget, we still expect to increase our labor force another 8%. So we’ve done a great job till now. But as you can imagine, to grow your revenue 8% to 10% a year, you need to build your workforce equivalently. But we’ve been able to manage through it so far, and our HR team is doing great with the programs that they have with the local community colleges, the Arc and Flame welding program that we partnered with the local community colleges with and other programs that are out there. So they’ve done a really great job being able to keep up with our growth to this point.

Operator: Our next question comes from the line of Rick Ryan with Oak Ridge Financial.

Richard Ryan: And also congratulations on a strong report guys. Chris, I think you mentioned better pricing and backlog. Is that more a mix, the end market composition there? Or actually, are you seeing better pricing? And if you are, what markets would that be occurring in?

Christopher Thome: Yes. So we are seeing better pricing, and that’s on the — in several different areas, right? We’ve been able to — because of the demand, we’ve been able to increase pricing in aftermarket several times over the last year. So that’s part of it. As you know, after you get done with your first article programs, when you’re bidding on the next articles, it’s based on the hours that you spent on the first, I’ll call it, unit, right? So you get a natural bump in price because it’s based on the first article hours. But at the same time, then you do get — as Dan has just been talking about more efficient on producing those. So that will help expand the margin as well. So the mix is coming from, again, higher-priced second and third article units as well as, as I mentioned, the aftermarket.

Daniel Thoren: And I think I’d add to that, that we’re able to get a little bit better pricing even on the commercial side, the refinery, petrochem. We are seeing that heat up a little bit. Certainly, the aftermarket has been busy for the last 1.5 years. We’re seeing some capital projects starting to come through. The pricing on those, we’re able to get a little bit better pricing than we have in the past even on the commercial side. So it’s improving, I would say, across several different markets.

Christopher Thome: And I guess, , I would just add to that. We’ve also been putting and stressing to the team about going back where our customers caused a delay or they caused the cost to go up for either more engineering that they request? Or if there was a delay in the order and material prices go up, right, we’ve been encouraging the team to go back and we’ve been successful and going back and negotiating change orders and increased the PO prices to compensate us for that. So that’s also being built into some of the pricing that you’re seeing as well.

Richard Ryan: Okay. Yes, because I know your — I thought you were going to be putting more emphasis going after some of that aftermarket business. So it’s good to see that, that’s bearing some fruit. Dan, you briefly mentioned seeing some pickup on the energy side. Is that domestic? What are you seeing in your India and China operations from an energy standpoint?