Graham Corporation (NYSE:GHM) Q2 2025 Earnings Call Transcript

Graham Corporation (NYSE:GHM) Q2 2025 Earnings Call Transcript November 8, 2024

Graham Corporation beats earnings expectations. Reported EPS is $0.2984, expectations were $0.14.

Operator: Greetings. And welcome to the Graham Corporation’s Second Quarter Fiscal Year 2025 Financial Results Conference Call. At this time, all participants are in listen-only mode. The question-and-answer session will follow today’s formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Deborah Pawlowski, Investor Relations for Graham Corporation. Thank you. You may now begin.

Deborah Pawlowski: Thank you, Rob, and good morning, everyone. We certainly appreciate your time today and your interest in Graham. Here with me on the call are Dan Thoren, our President and CEO; Chris Thome, our Chief Financial Officer; and Matt Malone, Vice President of Graham Corporation and General Manager of Barber-Nichols. Dan, Chris and Matt are going to provide their formal remarks, after which we will open the line for questions. You should have a copy of the second quarter fiscal year 2025 financial results that were released this morning. If you don’t have the release, it is on our website at ir.grahamcorp.com. You will also find there the slides that will accompany today’s discussion. So in looking at those slides, if you would turn to Slide 2, I will review the Safe Harbor statement.

You should be aware that we may make some forward-looking statements during the formal discussion, as well as during the Q&A session. These statements apply to future events that are subject to risks and uncertainties, as well as other factors that could cause actual results to differ materially from what is stated here today. These risks and uncertainties and other factors provided in the earnings release, as well as with other documents filed by the company with the Securities and Exchange Commission. You can find those documents on our website or at scc.gov. During today’s call, we will also discuss some non-GAAP financial measures. We believe these will be useful in evaluating our performance. However, you should not consider the presentation of this additional information in isolation or as a substitute for results prepared in accordance with GAAP.

We have provided reconciliations of non-GAAP measures with comparable GAAP measures in the table that accompany today’s release and slides. We also use key performance indicators to help gauge the progress and performance of the company. These key performance metrics are orders, backlog and a book-to-bill ratio. These are operational measures and a quantitative reconciliation of each of this is not required or provided. You can find the disclaimer regarding our use of KPIs at the back of our slide deck. So, with that, if you’ll please advance to Slide 3, I’ll turn it over to Dan to begin. Dan?

Dan Thoren: Thank you, Deb. Good morning, everyone. Our team delivered record revenue of $53.6 million, marking a 19% increase that highlights robust demand across our markets. This quarter showcases the effectiveness of our efforts to expand our market reach, improve operations and strengthen our business model over the last few years. Notably, our results reflect significant margin expansion. Our gross margin improved by 790 basis points, reaching nearly 24% of sales and our adjusted EBITDA margin expanded by 550 basis points to 10.5% of sales. This margin expansion translated into meaningful bottomline growth, reinforcing our focus on higher margin opportunities and solid execution throughout the business. We are positioning Graham as a resilient and increasingly profitable leader in our key markets.

In addition, we are operating from a position of financial strength with no debt, more than $32 million in cash on hand and access to an additional $43 million through our revolving credit facility. This strong balance sheet enables us to confidently pursue growth initiatives that meet our hurdle rates while maintaining agility. In line with our growth strategy, we recently launched our NextGen steam ejector nozzle at a Gulf Coast Refinery, marking a significant milestone for the company. This new technology is designed to deliver efficiency improvements, environmental benefits and enhanced profitability for our customers, demonstrating the success of our R&D investments. Based on our estimates of the current installed base that can benefit from this advanced product, we see meaningful potential for our NextGen nozzle technology with an estimated total market opportunity exceeding $50 million over the next five years to 10 years.

Additionally, we made a land purchase in Arvada, Colorado, to support the anticipated growth of our Barber-Nichols subsidiary. We also announced yesterday our plans to establish a new cryogenic propellant testing facility, further leveraging Graham’s expertise in the cryogenic and space launch industries. I will leave it to Matt to provide more details on these two exciting initiatives. Chris will review our financials further, but I’m pleased to share that we raised our full year guidance for both gross margin and adjusted EBITDA, which puts us solidly on track to achieve our long-term goal of low- to mid-teen EBITDA margins by fiscal 2027. With a record $407 million in backlog and a strong book-to-bill ratio of 1.2 times, we are confident that our momentum will continue supporting sustained growth and profitability in the years ahead.

Lastly, with recent headlines highlighting challenges in Navy ship and submarine production, we recognize that supply chain issues are creating concerns about potential schedule delays and future order rates. However, in the short-term, this is not expected to impact our business, as our customers are urging us to maintain and even accelerate schedules. In fact, this environment presents an opportunity for us to capture additional work where other suppliers may be struggling to meet demands. Now, I will turn it over to Matt, who will provide more insight into our recent growth initiatives. Matt?

Matt Malone: Thank you, Dan. Good morning, everyone. Starting with Slide 4, you will see our recent strategic land acquisition in Arvada, Colorado. The aerial shot on the right of the slide shows our current campus, with bold black outlines marking our existing footprint. To the right of that is the new plot of land we have secured. As you can see, the image highlights the space constraints we have been working within. This $1.4 million investment is a proactive step to address those limitations as we continue to grow. This new plot will enable us to consolidate certain operations, freeing up space within our existing facilities and better positioning us for future expansion. With the construction slated to begin in fiscal year 2026, the additional facility will support our long-term growth initiatives, allowing us to scale for new product lines and smaller emerging programs as we move forward.

Moving to Slide 5, as announced in our release yesterday, we are excited to share plans for a state-of-the-art cryogenic propellant testing facility, set to be constructed near our P3 Technologies subsidiary in Florida. By providing a scalable, cost-effective alternative to existing centers, which often prioritize flagstaff programs, our facility will serve critical programs needing timely, specialized testing solutions for liquid hydrogen, liquid oxygen and liquid methane across space, defense, new energy, and potentially even medical applications. Enhanced capabilities will include in-house product validation for quality assurance, covering testing for pumps, components, fluid management systems and combustion devices. The facility will also enable us to enter high — new high-demanding markets with scalable testing solutions, addressing the involving needs for customers across all of our segments.

Additionally, it will support early feasibility studies for potential long-term customers, making this a versatile asset that aligns with our strategic goals. We are aiming to break ground soon and expect initial testing to begin by mid-calendar year 2025. Financially, the facility is projected to achieve a cash payback in approximately two years to three years and deliver an internal rate of return exceeding 20%. To summarize, these two initiatives, the land acquisition in Colorado and the new testing facility in Florida, are crucial steps in preparing for the future, providing the space and capabilities needed to support both current growth and future innovation. We are excited to leverage these investments as we continue to expand our reach in critical markets.

With that, I will turn it over to Chris for second quarter financial details. Chris?

Chris Thome: Thank you, Matt, and good morning, everyone. As a reminder, our results for the quarter include P3 Technologies, which we acquired in November of 2023. I will begin on Slide 6. As you can see, we achieved another record quarter with sales totaling $53.6 million, a 19% increase over last year and was across all our diversified revenue base. This increase also included $0.9 million of incremental sales from P3. Sales to the defense market were a major driver, reaching $30.9 million, which represents a 23% increase over the prior year. This growth was fueled by the expansion of new defense programs, a ramp up in existing programs and a timing of critical project milestones. Additionally, higher refining and chemical petrochemical sales contributed $2.2 million to the overall growth, mainly reflecting the timing of capital improvement projects.

Although our aftermarket sales were down compared to last year’s record levels, they remained strong, underscoring the resilience of our aftermarket business. U.S. sales made up 85% of our total revenue, highlighting the scale and importance of our domestic defense business. Turning to Slide 7, our gross margin expanded by 790 basis points to 23.9%. This improvement was driven by higher sales volume, a favorable project mix, enhanced pricing and strong operational execution. Our gross profit for the quarter also benefited $0.4 million or roughly 80 basis points from the BlueForge Alliance Grant. This $2.1 million grant, which we announced in July, supports our defense welder training program in Batavia and funds-related equipment. The grant will continue to contribute to our gross margin over the next two quarters at similar levels, aligning with our commitment to workforce development and securing skilled labor for future growth.

As a reminder, the BlueForge Alliance is a non-profit that supports the U.S. Navy’s submarine industrial base and we are grateful for this partnership as we expand our capabilities and talent pipeline. On Slide 8, we see how our strong performance is boosting our bottomline. GAAP net income for the second quarter reached $3.3 million, a significant increase from the $0.4 million in the same period of fiscal 2024, translating to $0.30 per diluted share. This quarter’s results include $0.6 million — a $0.6 million reversal of a previously accrued earn-out liability for P3. This adjustment was not due to any lost orders, but rather the timing of projects which extend beyond the earn-out period. Excluding this item, among others, our adjusted net income grew by 353% to $3.4 million or $0.31 per diluted share.

While our effective tax rate can fluctuate quarterly based on factors like projected income levels, the mix of foreign-derived income and discrete items, this year’s tax rate reflects a benefit from the vesting of restricted stock awards in the first quarter, bringing our year-to-date effective tax rate to approximately 18% and was at a more normalized level in Q2 at 23.6%. For the full fiscal year, we continue to expect our effective tax rate to be between 20% and 22%. Slide 9 highlights our adjusted EBITDA, which totaled $5.6 million for the second quarter, reflecting a 10.5% margin, an expansion of 550 basis points over the prior year. While our SG&A expenses increased this quarter by $2.8 million over the prior year, this rise was primarily attributed to our strategic investments in operations, personnel and technology.

Specifically, we incurred $0.4 million in additional costs related to the P3 acquisition, along with a $0.3 million increase in the supplemental performance bonus from the Barber-Nichols acquisition. We also recorded $0.2 million in expenses for the ERP conversion at our Batavia facility and another $0.2 million in increased investment in R&D. The remainder of the SG&A increase reflects costs associated with our overall growth, inflation and various ongoing initiatives. Overall, these investments position us well for future growth and support our long-term objectives. I should point out that the supplemental performance bonus from the Barber-Nichols acquisition was $1.1 million during the quarter, or approximately 200 basis points of revenue and will be completed at the end of fiscal 2026.

Turning to Slide 10, we continue to demonstrate robust cash generation, reporting $13.9 million of cash flow from operations for the quarter. Our balance sheet remains strong, with $32.3 million in cash and no outstanding debt. Additionally, we have $43 million available on our revolving credit facility as of September 30th, providing us with significant financial flexibility to pursue our strategic growth initiatives. For the quarter, our capital expenditures totaled $3.5 million and are focused on capacity expansion and productivity enhancement, including investments in automated welding equipment and new machining centers. Additionally, approximately $1.5 million of this CapEx plan is related to the customer-supported expansion of our Batavia facility, which is essential for accommodating an accelerated shipbuilding schedule for the U.S. Navy.

Given our recent land acquisition in Arvada, Colorado, and plans to construct a cryogenic testing facility in Florida that Matt discussed, we have increased our fiscal 2025 capital expenditure expectations to a range of $13 million to $18 million, up from the previous $10 million to $15 million. We expect this elevated level of capital spend of around 7% to 10% of sales to continue for the next several years in order to meet our long-term growth objectives. I should point out that nearly all of our large capital projects have a return on investment greater than 20% and that our maintenance CapEx is approximately $2 million. Turning to Slide 11, we reported orders of $63.7 million for the quarter, resulting in a book-to-bill ratio of 1.2 times.

Notably, approximately half of these orders were for the defense sector, including the award for the MK19 Air Turbine Pump used in the torpedo ejection system of the Columbia-class submarine that we announced in August. In addition, we saw an increase in orders for the space sector, which totaled $13.5 million in the quarter. This included a key contract for a cryogenic recirculation pump for one of our large space customers. Furthermore, our refining orders totaled $10.6 million for the quarter, driven by ongoing strength in aftermarket orders. Aftermarket orders to the refining and chemical petrochemical market totaled $13 million for the quarter, up 11% over the prior year. Slide 12 highlights our backlog, which reached a record $407 million at September 30th, due to our consistent order demand and strong market position.

This robust backlog not only provides us with excellent visibility into the future, but also ensures a high degree of operational stability. Overall, our backlog has grown by 30% year-over-year, with the defense backlog increasing by 31% or nearly $77 million. Our space backlog has surged by 150%, up almost $11 million, while our chemical and petrochemical backlog has risen by 58%, or approximately $8 million. It’s nice to see our backlog growing across all of mark — all of our diversified markets. We expect approximately 35% to 45% of our backlog to convert to sales within the next 12 months, with an additional 30% to 40% projected for conversion over the following 12 months. It is important to note that the majority of the orders anticipated to convert beyond 12 months are from the defense sector, primarily for the U.S. Navy.

On slide 13, we are updating our guidance for fiscal 2025 from what we provided last quarter. We continue to anticipate revenue between $200 million and $210 million, which reflects a projected topline growth of 11% over fiscal 2024, at the midpoint of this range. However, based upon the results to-date, our better-than-expected gross margins, and expectations for the remainder of the year, we are raising our adjusted EBITDA guidance by $1.5 million on the top and bottom end of the range to $18 million to $21 million, implying a 47% increase at the midpoint. This range also suggests an adjusted EBITDA margin of approximately 9.5% at the midpoint, representing a 230 basis point improvement over fiscal 2024. I should point out that we have taken into account the seasonal cadence in our projections, noting historically lighter third-quarter revenue due to the holidays and direct labor vacations.

On Slide 14, we emphasize our strategic and operational priorities that are essential for achieving our long-term goals. We are making steady progress in meeting our targets and strategically positioning ourselves for sustained growth. This momentum, coupled with our recent adjustment to the EBITDA guidance, keeps us on track to achieve our goal of low-to-mid-teen adjusted EBITDA margins by fiscal 2027, just two short years away. Importantly, an additional component that will help bridge our progress toward this long-range goal is the completion of the Barber-Nichols Supplemental Bonus expense at the end of fiscal 2026. This will contribute approximately 200 basis points to our adjusted EBITDA margin in fiscal 2027. With that, we can now open the call for questions.

Operator: Thank you. [Operator Instructions] Our first question today is from the line of Joe Gomes with Noble Capital Markets. Please proceed with your question.

Q&A Session

Joe Gomes: Good morning. Thanks for taking my question.

Dan Thoren: Hi, Joe.

Chris Thome: Good morning, Joe.

Joe Gomes: I want to start off on the space segment. Really nice job there. The reason I’m asking, I was on a couple of calls and people are talking about, they’ve seen the space segment slow down some, basically driven by the OEMs there. But it doesn’t seem to be impacting your guys. I was just wondering, maybe you could talk a little bit about your space business and how you got to, pardon me, you’re building up that backlog that we’re seeing here?

Dan Thoren: Matt, do you want to take that one?

Matt Malone: Yeah. Yeah. I will. This is Matt Malone at Barber-Nichols. So, specifically on the space side, we continue to see a lot of opportunity there. There certainly is a lot of consolidation of the launch market, which is, at this point, sort of consolidated down to the top few main providers. On that being said, large satellite deployment as well as, microsatellites kind of all in Leo are still very prominent. And I think what we’re starting to see is a transition from exploration and scientific experimentation to really value-added space assets. And so, where we’re seeing the continued growth is in the value-added space assets. So, satellite cooling, very specifically around advanced propulsion technology for these different assets and so, that’s where we’re seeing the growth. What I will say is it still remains yet a stable and growing part of our business, and the future is bright on it.

Joe Gomes: Thanks for that insight. And obviously, we had the election on Tuesday, and there’s been a lot of, for lack of a better term here, Trump trades. And I think you guys have benefited somewhat from that. If you’re looking out and knowing maybe what you know or have heard from your contacts, what kind of potential additional growth do you think you could see because of the change in administration? Do you think that there’s going to be a bigger emphasis on specific areas that you’re in or do you think, hey, with the programs we’re on, it doesn’t matter who is really president, where those programs are going to be growing? Any thoughts on color on that would be appreciated.

Dan Thoren: Yeah. Happy to take that one, Joe. So, it’s always hard to tell the future, so I’ll start with that. But I really like where we’re starting from with a nicely diversified base of business and quite a bit of backlog and strategic Navy programs. So, if I look at the future, I think that I see some pretty stable, maybe even growing a little bit defense budgets, and specifically the strategic programs that we’re on, I see those as very safe. When I look at energy, there is likely some changes coming on the energy side. So, when Trump was in office before he opened up a lot of the public lands for exploration and we saw quite a bit of pressure on prices for oil and gas. There’s benefit for the general economy when that happens lower-priced fuel.

I think that there’s, on the refinery side, it probably hurts the refineries a little bit because their margins start to reduce. On the petrochemical side, it’s a low-cost feedstock in the natural gas, so that benefits. So, we see some pluses and minuses in the legacy energy markets that we serve. And then, probably for the new energy side, that probably becomes less of a focus for the new administration. But the beauty of the company that we’ve built is that, again, a really nicely diversified market mix, such that as one goes up, another one is probably coming down and we’re able to move between them. So, generally, I’m okay with where we’re at and what the future looks like.

Joe Gomes: Thank you.

Operator: The next question is from the line of Dick Ryan with Oak Ridge. Please proceed with your question.

Dick Ryan: Thank you and good job on another quarter of strong execution, Dan.

Dan Thoren: Yeah. Thanks, Dick.

Dick Ryan: A question, on the — it was good to hear your comments on any potential build rate impacts with the supply chain. You mentioned there could be a potential to capture additional work. Can you elaborate a little bit? What does that mean? What’s your confidence level in that occurring?

Dan Thoren: Yeah. So, again, this is a little bit of hearsay, but as we listen to our customers and kind of understand what they’re seeing and what’s going on there. The Navy is really, really active in supporting the supply chain, making investments, et cetera, and so, that’s wonderful. There also — Navy’s also talking to the shipbuilders about what are the opportunities to accelerate and what can you reallocate to high-performing supply chain partners like Graham Corporation. So, we’re getting some of those inquiries that traditionally have been held within the Navy Yards. And I think that the Navy is also talking about, what is it that we can do relative to extending life of the assets that we have in the field. So, it’s good problem solving across the Board where everybody’s looking at, okay, we do have challenges in the supply chain. What can we do to improve? And as I look at it, I just see opportunity for Graham.

Dick Ryan: Okay. And kind of related, you’ve had very strong support for the Batavia expansion, land and building, the $13 million-ish investments and now the BlueForge for the welding program. Are there additional pots to go after for Batavia business? And then maybe for Matt, with the Barber-Nichols expansion, are there grant opportunities to help you expand your Colorado campus?

Matt Malone: Yeah, Dick. So, all we can really say about that right now is that we are in constant communication with our customers as to how we can accelerate our shipbuild schedule and what we need to help improve our volume flow. And we have constant communications with our customers in BlueForge and we see opportunities on both Barber-Nichols and Graham’s side for future opportunities such as the ones we just announced. Nothing that we can really talk to today, but we just think it validates, the fact that, we are a strategic supplier to the U.S. Navy and have a lot of opportunity in front of us that Dan just talked about.

Operator: The next question comes from the line of Russell Stanley with Beacon Securities. Please proceed with your questions.

Russell Stanley: Good morning and congrats on the quarter. With respect to the gross margin and the guidance lift, a great number this quarter, falling on almost 25% last quarter. I’m just looking at the lift, and I guess it implies a bit of compression in H2. Are there any specific headwinds that you’d call out that would drive that beyond the holidays and the impact in Q3 or does this just reflect a bit of conservatism on your end?

Dan Thoren: It’s really just reflective of our typically seasonally lower Q3, right? Year-to-date, we’re at about 24% margin and the guidance is 23% to 24%. So, that’s the range we feel comfortable with, given the slowdown in the third quarter.

Russell Stanley: Got it. And just following up on an earlier question around the election and I’m wondering what its implications might be for you on the acquisition front. Does it change your criteria or what you might be focusing on, given what we now know so far about the next government? Thanks.

Dan Thoren: Yeah. So, Russ, as you know, acquisitions are part of our long-term strategic plan. The nice thing is that, when you’re growing 8% to 10% organically per year, we don’t have to do acquisitions just for the sake of doing acquisitions to get growth. So, as we framed in the past, we feel we’re going to be more opportunistic with regards to acquisitions. There’s nothing really imminent today as we sit here today, but we do have discussions all the time with potential targets and we don’t see any change in the current administration changing that.

Operator: Thank you. The next question is from the line of Frank Francese with First Eagle Investment. Pleased to see you with your question.

Frank Francese: Dan, Chris, Matt and Deb, great quarter. Thanks for taking my question. I wish all my companies reported like this. Anyway, Dan, I was wondering if you could give a little bit more scoping around the NextGen nozzle stuff, $50 million opportunity five years, 10 years, you’re actively marketing. Is that something that’s just the easy stuff that you see already in the CapEx structure from your clients? And how difficult is it for this nozzle to fit onto other non-Graham refiners or petrochem places out there?

Chris Thome: Yeah. Great question, Frank. So, what we’ve identified right now is the easy pickings, I guess, I would say. So we’ve got a bunch of steam ejectors out there that we know that this technology will provide an improvement on. Now within the R&D environment, what we’re doing is looking to expand that to other types of nozzles that we have produced here over the years. So we would expect that that kind of $50 million ballpark addressable market starts to grow. But we really wanted to get this one out to the market just so that we could start to get some experience in the field and show the improvement that we’re making with the R&D investments that we’re putting into place.

Dan Thoren: Frank, I would just add to that, that we all — as you know, our installed base is global and a lot of other countries aren’t as fortunate as the U.S. to have such affordable utility costs, right? So in other countries where the utility costs are much higher, this is a lot more valuable to them. And we’re introducing this through our India and our China subsidiaries and they’re very excited about this technology.

Matt Malone: And then to follow up on your other question about is this usable for our competitors’ nozzles, it isn’t a replacement option for them. It would have to be the entire steam ejector is replaced with the Graham ejector for this to work.

Frank Francese: Great. Thank you. And just a little bit more of a strategic question, Dan. We keep talking about Barber-Nichols. We talk about Batavia. We talk about Florida. How much of the, I guess, mind transfer or employee transfer or how much sharing is actually going on behind the scenes that maybe you’re seeing either accelerating or better than expected in the kind of sharing that’s going across those three locations?

Dan Thoren: Yeah. Real — another really great question, Frank. So we have been pretty active. We’ve been sharing best practices on the HR side, on the IT side. More recently, on the engineering side. So P3 Technologies is really strong in computational fluid dynamics and they’ve been coming up to Batavia and working hand in hand with our R&D group on some new technology that we’re not ready to talk about yet. But there’s some nice collaboration that’s going on and I think that we’re really leveraging the subject matter experts in each of our business units to help the other ones. So honestly, it is a ton of fun and I think that we’re really building a cohesive group as we’re able to kind of introduce the business units to each other and the people within those business units to each other. It’s a ton of fun.

Operator: Thank you. [Operator Instructions] The next questions are from the line of Gary Schwab with Valley Forge Capital Management. Please proceed.

Gary Schwab: Hi, guys. Fantastic job in sales and margins this quarter. I just — I have a question about, you mentioned Navy Yards. Can you add some color to the announcement made by GD in September that they awarded $450 million to the Austal Shipyard in Mobile to build a state-of-the-art expansion facility there, specifically for the non-nuclear modules of the Virginia and Columbia? How is that going to affect our business?

Dan Thoren: We — yeah. We don’t think that it affects us per se. I’m not that familiar with that specific transaction. But I think it just goes to show that the Navy is really questioning the current approach and understand and open to it and supporting different approaches to really accelerate our shipbuilding process. The shipyards don’t give up that stuff very easily. So I’m sure that there’s been a little bit of arm-twisting. But generally, for our specialized equipment, it doesn’t affect us at all from a competitive perspective. It probably helps accelerate the shipbuilding, which we’re going to be able to support. So in total, I would say that it’s a very positive thing for our country.

Operator: Thank you. Our next question is from the line of Tony Bancroft with Gabelli Funds. Please proceed with your question.

Tony Bancroft: Good morning, gentlemen. Congratulations on the great quarter. My question, Dan, is maybe just more longer term. In five years, you guys have performed so well and been doing acquisitions. So, where do you see yourself sort of five years from now? Are you looking to do something more transformational to your company or do you look at someone who would want to come and acquire you? Sort of what, I’m just trying to see, this company has a lot of growth, there’s a lot of opportunity and I’m just trying to sort of see where your next sort of long-term move is?

Dan Thoren: Yeah. We really are enjoying what we’re doing right now. We see a really nice road ahead of us as far as the ability to both grow organically and inorganically. I think that, the mega trend of baby boomers retiring gives us some opportunity to potentially acquire and grow organically and capture some really pretty interesting business. At this point in time, we’re component suppliers, if you will, and the next logical move is towards subsystems and system integration. So I could see that in the next five years to 10 years. But gosh, we’re so small right now as a little microcap public company that I think that there’s a lot of room for additional growth organically and inorganically. I love that we’re very diversified in a bunch of different markets and we’re able to use our strengths to help ourselves in each of the different markets, apply the lessons learned and the new technology to new markets that may have not seen it before.

So I, honestly, Tony, I just see it as this nicely controlled growth that was a part of Barber-Nichols before the acquisition and now Graham Corporation after the acquisition.

Tony Bancroft: Great job. Thank you. Well done.

Dan Thoren: Thank you.

Operator: Thank you. The next question is a follow-up from Gary Schwab with Valley Forge Capital. Please proceed with your question.

Gary Schwab: Yeah. Hi, guys. I had a follow-up on the NextGen nozzle that you just introduced. From what I understand, almost all of your aftermarket sales that you’ve been getting are coming from — that are coming from the huge installed base and refinery in petro have been initiated by your customers rather than your solicitations, because you said it’s still hard getting the needed contact information. Matt had also mentioned that he’d like to set up a condition-based monitoring program as a subscription service for your refineries and petro customers. Can you say, because you got these orders coming in from the customers, what percentage of that used base you already have the names and the contact numbers so you can start selling both the ejectors and possibly a subscription service?

Matt Malone: Boy, I probably couldn’t tell you that number, Gary. It’s something that I don’t know off the top of my head.

Operator: Thank you. At this time, I would like to turn the floor back to Dan Thoren for further comments.

Dan Thoren: Thanks, Rob. Thank you all for joining us today. If you’d like an opportunity to speak with us in more detail, we will be participating in two upcoming conferences, the Southwest IDEAS Conference on November 21st in Dallas and the Noble Emerging Growth Equity Conference in Boca Raton on December 4th. As always, these presentations will be available on our website or please feel free to reach out to us at any time. We look forward to talking with you all again after our third quarter fiscal 2025 results. Enjoy your day.

Operator: Thank you. This does conclude today’s teleconference. We thank you for your participation. You may now disconnect your lines at this time and have a wonderful day.