Chris Thome: Which is the nice thing, Bill, about our defense business now because if we should happen to see a lull in some of these orders, right, we can just shift our resources to the defense. And as you know, with over $400 million of backlog now, we have quite a bit of runway.
Bill Baldwin : That’s a good option to have there. Absolutely. Absolutely. Okay. And I guess lastly, I’ll just ask on the proverbial labor issues, labor question is. Labor availability and training pretty much going as planned or ahead of plan or behind plan? How do you — how is that progressing in your shop there, your factory labor?
Dan Thoren: Chris, do you want to take that one?
Chris Thome: Sure. So I’d say, again, as I’ve said on the last couple of calls, our HR team does a great job from the second quarter of last year to now, our workforce is up 9% and that’s — it’s up 13%, 18% in direct labor at Batavia and Barber-Nichols, respectively. So they’re doing a great job growing the labor force. I would even venture to say that we’ve seen a slight softening as of late in the labor market. So we’ve had a lot more applications and for welders and other machinists and things like that. But the team has also gotten very creative. As you know, we have the Arkin flame welding program. We have apprenticeship programs that we’ve started. So the team has really done a great job finding the talent that we need to support our growth.
We’ve kind of said that we want to see 8% to 10% revenue growth per year, but as you know, we’re a direct labor business. So without the direct labor, we’re not going to have that growth. So essentially, we’re going to need to grow our workforce just as much. But they’ve done a great job to date. Again, I’d venture to say that we’ve seen a soft lightening — soft — a slight softening as of late.
Bill Baldwin : Well, when you get your factory capacity additions completed here in the next year, 1.5 years, I mean, can you quantify how much increase that gives you in your production capacity at the company? I mean is that a doubling of capacity or 50%?
Chris Thome: It’s not a doubling, but I would say it’s consistent with our 8% to 10% revenue growth per year that we’re — that we’ve guided to.
Bill Baldwin : So I’ll take through your strategic out through the end of ’27 — fiscal ’27?
Chris Thome: Right. And then getting us to that low to mid-teen adjusted EBITDA margin as well.
Bill Baldwin : Right, right. So I guess you got to keep your labor force expanding here, so there’ll be — you’ll have them ready when the new capacity comes on.
Dan Thoren: We’re typically —
Bill Baldwin : Timing is there. Isn’t?
Dan Thoren: It really is, Bill. I mean we’re basically projecting out into the future and saying, okay, we test and we need this and we need this. It’s — we’re keeping several different initiatives from facilities to tools, to systems, to people, all pushing forward to enable the steady growth. So it’s actually a ton of fun.
Bill Baldwin : Well, I know you’d be intrigued by it, Dan and Chris. I mean that’s why I keep your blood flow in that kind of stuff. That’s one of the things. is that capacity addition at both Batavia and BN? Or is it mostly in Batavia?
Dan Thoren: So this more recent one is in Batavia. So the investment from the Navy customer, that really is in Batavia. But we just finished a pretty significant expansion in in Barber-Nichols early this year. And we’re continuing to look at what additional facilities do we need to continue with to support this growth. So you’ll see growth in facilities in both locations going forward.
Bill Baldwin : As I recall, you got the land to further expand your undercovered square footage there, don’t you have any color?
Dan Thoren: In BN, it’s a little tougher. In Batavia, we’ve got quite a bit of land, yes.
