Greetings. Welcome to Graham Corporation's Fiscal Fourth Quarter and Full Year Fiscal 2025 Conference Call. [Operator Instructions] Please note, today's conference is being recorded. At this time, I'll turn the conference over to Tom Cook, Investor Relations for Graham Corporation. Tom, you may now begin your presentation.

Thank you, Rob, and good morning, everyone. Welcome to Graham's Fiscal Fourth Quarter and Full Year 2025 Earnings Call. With me on the call today are Dan Thoren, CEO; Chris Thome, CFO; and Matt Malone, President and COO. This morning, we released our financial results. Our earnings release and accompanying presentation to today's call are available on our website at ir.grahamcorp.com. You should be aware that we may make 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 are provided in the earnings release as well as with other documents that are filed by the company with the Securities and Exchange Commission. You can find these documents on our website or at sec.gov. During today's call, we will also discuss 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 tables 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 ROIC, orders, backlog and book-to-bill ratio. These are operational measures and a quantitative reconciliation is not required or provided. You can find a disclaimer regarding our use of KPIs at the back of today's presentation. So with that, if you'll please advance to Slide 3, I'll turn it over to Dan to begin. Dan?

Thank you, Tom. Good morning, and welcome, everyone, to our fourth quarter and full year fiscal 2025 earnings call. I'm pleased to report we finished the year with strong momentum as our full year revenue grew approximately 13% to $210 million and adjusted EBITDA increased 69% to $22.4 million or 10.7% as a percentage of sales. These results reflect the continued long-term demand of our product portfolio and solid execution of our business plan. I'd particularly like to highlight our record backlog of $412 million as of March 31, up 7% sequentially. Additionally, our book-to- bill ratio was 1.1, marking the fifth year in a row book-to-bill was over 1.0. This underscores our strong market position and deep expertise in delivering highly engineered mission-critical products. Before I turn it over to Matt, who will outline our stabilize, improve growth strategy, and then to Chris for a detailed review of our financials. I'd like to first highlight our end markets and recent commercial successes, followed by an update on key strategic initiatives that are beginning to deliver results. On the Defense side, we continue to be a key supplier for U.S. Navy programs, including both the Columbia-class and Virginia-class submarine programs and other vital shipbuilding initiatives. This is demonstrated by our recently announced $136.5 million contract award to provide mission-critical equipment for the Virginia-class submarine program. Our Barber-Nichols division has been integral to the Virginia-class submarine program since the 1980s, given our strong performance of high-quality on-time production. Additionally, this latest contract builds upon our successful execution of previous work for these types of multiyear programs. As our relationship with the U.S. Navy deepens, these multiyear programs provide Graham with stable recurring revenue as well as strong visibility into our future revenue for years to come. Additionally, we announced last month…

Thank you, Dan, and good morning, everyone. I will begin my remarks on Slide 5. First, I want to acknowledge Dan's tremendous leadership in stabilizing and transforming Graham Corporation, particularly with resetting the corporate strategy and driving consistent results. Under his direction, we've established a strong foundation for sustainable growth moving forward. At the end of fiscal year 2022, we introduced a 5-year strategic vision to provide investors insight into where we are headed. Since then, we've executed on the first phase, stabilize, which we focused on rebuilding the foundation of the business across people, processes, structure and core operating fundamentals, all under the umbrella of continuous improvement. This foundational work is now complete, and we're leveraging that momentum as we evolve into the next phases of improve and growth, which all go hand in hand. I'll walk through these in more detail. Let's start on Slide 6 with where we've been. The stabilized phase initiated under the new leadership team, we focused on resetting our strategy and positioning the business for sustainable success. We addressed critical areas, including process rigor, customer engagement, employee alignment and the completion of low-margin legacy jobs. And since rolling out our strategic plan in the mid-2022, we've consistently delivered results in line with expectations. A few highlights. Revenue more than doubled from $97.5 million to over $210 million, while we reshaped our portfolio from 75% commercial and 25% defense to a more balanced 40% commercial and 60% defense mix. We executed our dozen organic capital projects, each exceeding our 20% ROIC hurdle, including the Mark 48 production ramp-up and the Arvada machine shop expansion. Backlog tripled from $138 million to $412 million, enhancing visibility and supporting disciplined capital deployment. Adjusted EBITDA declined from 6.1% to a low of minus 3.4% during fiscal year 2022…

Thanks, Matt, and good morning, everyone. I will begin my review of results on Slide 9. But first, I would like to point out that we have updated our end market disclosures to better align with how we evaluate our business and product portfolio. As part of this change, revenue previously classified as refining, chemical, petrochemical and other, which included new energy product sales are now consolidated into one market, which has been renamed Energy and Process. The defense and space end market classifications remain unchanged. Prior period amounts have been updated to reflect this change. With that, let's begin. We had strong growth for our fourth quarter of fiscal 2025 with sales of $59.3 million. This was up 21% over the prior year and included growth across all markets. Sales to the defense market grew by $7.7 million or 28% from the prior year period, driven by growth in existing programs, better execution, improved pricing and the timing of key project milestones. Energy and Process sales contributed $1.8 million to growth, driven by increased sales of capital equipment to the Middle East and Asia and higher aftermarket sales. Aftermarket sales to the Energy and Process and Defense markets of $12.1 million remained strong and were 3% higher than the prior year. Looking at the full year, you can clearly see the effectiveness of our strategic initiatives. We achieved record sales of $209.9 million in fiscal 2025, which was up $24.4 million or 13% over fiscal 2024. This growth has primarily been organic and has been driven by strong defense sales, which was up 23%. Having a full year of P3 results contributed $2.8 million to this increase, which was primarily to the Space and Defense markets. Turning to Slide 10. Gross margin expanded 110 basis points to 27% in…

Thanks, Chris. On Slide 15, we would like to remind everyone of our strategic and operational priorities that will drive our long-term success. Our expanded R&D investments and capital programs are powering key growth initiatives. with a target return on invested capital exceeding 20% for all of our major investments. These opportunities, coupled with our strong balance sheet, provides us with the flexibility to pursue growth, both organically and inorganically as we remain opportunistic for any potential strategic acquisitions. We are proud of what we have accomplished to date, but we still have a lot of work ahead of us to achieve our fiscal 2027 financial goals of 8% to 10% organic revenue growth per year and low to mid-teen adjusted EBITDA margins. The long-term strategic plan we have in place, coupled with our culture of continuous improvement and our newly expanded executive team led by Matt gives me great confidence that we will hit those marks. With that, we can now open the call for questions.

[Operator Instructions] And our first question is from the line of Russell Stanley with Beacon Securities.

Good morning and congrats on an excellent quarter. Maybe my first question just around the guidance and the gross margin outlook, in particular, relative to what you produced in fiscal '25. Understanding that you've got the tariffs in there and the absence of a grant. I'm wondering if there are any other factors you can call out behind the gross margin outlook such as revenue mix or labor availability that's impacting that or if it's really just the first 2 items.

Thanks, Russ. No, it really is just those first 2 items, which we are working to offset with process improvement initiatives that we have in place that we talked about on the call today. But it really is just those 2 factors that are causing maybe a little bit lower-than- expected margin lift.

That's great. Maybe just coming back to that investment you announced in the radiographic testing equipment. Can you elaborate, I guess, on how that helps the business? I imagine that allows you to bring something in-house and the extent perhaps to which that equipment can be used for other verticals.

Yes, Russ, this is Matt. The X-ray equipment has been -- this will be a huge lift for the business. Today, these welds are quite complex on the Navy side specifically. And we either have to -- we have to go through shots that could take up to a week of time. This new piece of equipment has the ability to penetrate into the entire structure within 1, 2 shots that can greatly simplify the process and then really hone in on ensuring that rework is very exact when it's needed. And so between the automated welding, really looking to create stability and repeatability with the in process, coupled with a very -- an efficient process to evaluate the welds, we see great implications from it. What we're starting to also see is the benefit of that same technology across the energy and process side. And so I think you'll continue to hear the theme moving forward of what we're experiencing in one core market can be applied to others and leveraged.

Okay. Got it. Maybe one last question for me, if I can, just around acquisitions. Wondering what you're seeing with respect to target quality and valuation expectations at this point and how you're seeing that opportunity now?

Yes. So the M&A pipeline is, I would say, robust, and Dan and I have continued to interact with many great business leaders around. What we're seeing is this. We're seeing a lot of opportunity from the aging single or small ownership group, mostly private. And we're seeing valuations that I would say are opportunistic for us because exit plans due to capital availability and others is complicated. What we're really seeing at the highest level is we're seeing opportunities that look quite nice because they integrate into our strategy. So they're strategic acquisitions that others wouldn't be able to get the lift from. And so we're sort of in a -- we're in an island of M&A that large businesses wouldn't have transformation from, but they can impact our smaller corporation in great magnitude.

That's great color. Thanks all. I'll hop back in the queue and congrats again.

The next questions come from the line of Dick Ryan with Oak Ridge Financial.

Congratulations guys on continued strong performance. So obviously, with the commentary we've heard from the shipbuilders for the past, whatever, 6 months to a year, the demand is there to get the ships delivered to the Navy. Chris, when you look at the $136 million that's come in, is anything changing within those orders from what you've seen in the past, either from a margin perspective or cost plus versus fixed? Anything changing in the contracts that are being awarded from the profitability side?

And Dick, this is Matt. Maybe I'll take that one. So the answer is no, there's not much changing with one important update. So we now have clauses that we've worked to include in the contract that protect the business from commodity-based pricing volatility. And so we've been negotiating in to protect us, and it's been really important for us moving forward. So we are on firm fixed price as was disclosed in the announcement. But we have some protection clauses for things that are sort of outside of our business control. And on a program, as you can imagine, that lasts 5-plus years, those protections are really critical. In addition, the one other color I'd add is we've been able to factor in the ability to order the majority of the high-risk material early on. So that really allows quote validities to still be active and allows us to press on and get material in-house to take out some of that volatility.

Great. And on the expansion of your capacity, you've made investments, the BlueForge Alliance grant and other customer investments. Where are you in your welder fleet? I mean, we're hopefully not going to go back to a situation of fiscal '21, '22. But how is your employment on the welder side held up? And what do you see going forward as far as those needs might be?

No, I was just going to say our welder training program has been a tremendous success and has been really well received, both within the community and within Graham. I can report that our welders at our Batavia facility are up 10% year-over-year. So the supply of welders has not been an issue for us, and that's enabling us to grow our revenue on the defense side. Matt, anything you wanted to add there?

No.

Okay. Great. Thank you.

Our next questions are from the line of Joe Gomes with NOBLE Capital Markets.

Let me add my congrats to the nice quarter and year. So on the cryogenic facility, you mentioned it should be up and running this year. I was just wondering, you talked about you're out there talking to people for use of the facility. How is the book filling up, so to speak? What kind of utilization rate do you think the facility is going to have once you are up and running?

Yes. So Joe, great question. The first reality is we're on a really aggressive time line. When you look at facilities of this magnitude, they can be years. And we've got Phil Pelfrey, who is the founder and owner at P3 running it because he set these up in the past. And we're essentially sticking to plan. What that means is a lot of the energy has gone into getting the building up, going through the permitting. So today, I can confidently say that we're progressing towards the next few months having it online. The booking side, we're now just starting to transition our energy to it. And the reason being is we had to make sure that we had a facility that was ready to operate. And what I'll say is we don't have any firm bookings today, but we have enough inquiries to make us confident that it will fill up nicely. And there's 2 main differentiators just for your knowledge. So the first is we're augmenting a great need out there. Most of this testing is happening at places like NASA and others at this large scale. The second is we actually have power on the facility. And so when you talk 3-phase high-power capability with all these -- this new shift towards electrification is requiring power at test facilities, which are conventionally located in deserts and other areas where power is not plentiful. And so we're seeing as a result of that pretty heavy demand in the pipeline.

Okay. And just you mentioned the contribution from P3 for the year. How is that -- is P3 has it met your guys' objectives from when you first acquired it? Were you still seeing growth potential there? Maybe just a little color on that acquisition.

Yes. So the acquisition has gone quite well. They are, at this point, fully integrated with the Barber-Nichols team in terms of ERP system, quality manuals and rigor around quality. There's always an evolution as an acquisition unfolds. And what we're seeing is actually potential for greater benefit than we had originally forecasted. And the 2 areas that we're seeing that, the first is the ability to bring advanced technology to our existing energy and process business, which we didn't expect. And so we're seeing them use advanced analytical capability to accelerate the R&D process at the parent Graham business. The second is they've become, in some ways, the fast lane for opportunities that may not have been good fits for Barber-Nichols. And so projects or applications that require a 1 to 6-month turnaround time for what I'll call a novel design, they have a very small capable team that can move extremely rapidly and deploy. And so we've actually, just in the fourth quarter, finished a few of those jobs that had those characteristics that, frankly, we may have had to pass on in the past. So I'd say integration going well, pretty much done at this point and continued path forward looking quite favorable with the biggest focus being on designs that actually impact the larger business units in Graham Corporation.

Great. And then one last one for me, if I may. Maybe just give us an update on the progress of the next-gen nozzle and the potential clients and customers out there.

Yes. So next-gen nozzle, it's a completed design, but we're never done. This theme of continuous improvement. So on the next-gen nozzle, it's specifically today designed for a subset of large-scale steam injectors. We have made contact with all of the installed base that has those -- has the nozzles installed today, which it can upgrade. And now what happens, Joe, is you have to get to the point where they have an upcoming turnaround, which is when they take the facility down for updates and maintenance. So we're essentially waiting for that process to play out, which could be over the next, as mentioned, sort of 5-plus years. But the sort of conversion or hit rate is going quite well on those inquiries because the ROI for the end users is an immediate payback -- or a very short-term payback, I should say. And it's becoming what I would call a playbook for the future. New technologies. This is one ejector style of nozzle, and we have many more that we think we can apply the same capability to. So excited about what this can sort of become.

Great. Thanks for that. I'll get back in queue.

Our next questions are from the line of Christopher Gordon with Oppenheimer.

Thanks. Good morning. So healthy backlog, you talked about 45% conversion next 12 months, suggests about 2% of the outlook would be book and ship variety. And just looking for a little better understanding of that. It doesn't strike one as a high bar, but what's your normal strengths in pulling book ship business within current year forecast?

Yes. Thanks, Chris. So most of our business, as you know, are long lead projects, right? So from book to ship can be anywhere from 6 months to over a year. So really, at the start of the year, we have to have a large portion of the orders for the next fiscal year in backlog, which we do, as you pointed out. The low run rate business that we have is really our aftermarket business, which is about $40 million. So that's really -- those typically book and ship within 1 to 3 months. So that's really what we're looking to kind of fill that gap. And right now, as you saw from the numbers today, orders still continue to remain strong, but we continue to monitor the situation based upon the uncertainty that's in the market today.

Okay. Great. And you mentioned 5 years running positive book-to-bill. You do have some very long cycle characteristics. Does that lend itself to an ability to comment if you expect to sustain positive book-to-bill this year? And in either scenario, maybe you could provide some context.

Yes. So as stated in the commentary, every year, our goal is to grow our backlog. So we always set in our long-term goals of a book- to-bill ratio of 1.1 for the year for our goals for the year. And as you mentioned, we have been successful in seeing that for the last 5 years. But also, as you know, our orders tend to be very lumpy given the nature of our business. One thing that will give us a lift for fiscal year '26, as we mentioned on the call, is the $86.5 million of the $136.5 million order for the -- to support the Virginia-class submarine. So that gives us a great start to the year.

Okay. And last one for me. You mentioned improved pricing models as part of the gross margin expansion that you've delivered. And just curious if you'd call your pricing models more or less mature right now or still in the process of building the analytics for competitive value capture?

So I'll answer that one in 2 ways. The first is we've made great progress on the pricing models for legacy product. I think where the biggest opportunity still lies as we talk through this full product life cycle capability as we add testing facilities and capability of the portfolio plus disruptive solutions through R&D, we start to enter a regime or a pricing point that no one else potentially could offer that value. And so really, the remaining stone to turn over is in bringing additional value that the customers are willing to pay for.

Our next question is from the line of Tommy Bancroft with Gabelli Funds.

Congratulations. Maybe I could just take a minute to just sort of update us on what the Navy is viewing, obviously, after recent news of the increase in shipbuilding, the Navy's nuclear strategy, I know it's critical to them. There's a lot going on. I mean are you guys able to -- are going to be able to keep up with this huge amount of demand? I know you put a lot of investment in, but it just seems like it's an outrageous number. Just maybe you could just give us your view on that and just your thoughts on sort of keeping up with that growth.

Yes, Tony, 2 things I'll share. The first is, yes, we're seeing continued opportunity, as mentioned, not only in our core swim lanes, which is the stuff we've conventionally provided, but also where others are falling down. We've made some key investments that have really driven -- that will -- that have and will continue to drive efficiency in the process. And what I mean by that is we have automated welders that are being deployed throughout the factory in combination with our extremely skilled welder workforce that we have as just one example. And so we're actually -- we're keeping up today, and we're adding capability to further even expand and absorb more. The second thing I'd mention is we're building this new facility in Batavia, 30,000 square feet, and we have basically put in the infrastructure to put 2 additional facilities next to it should we need to in the future. And what I mean by that is the electricity, the communal meeting areas and stuff are all built for additional expansion. So the turnaround time between need and upstanding of new additional capacity even in addition to what we have is there. And then lastly, when you look at the Barber-Nichols side, we've proactively acquired opportunistically land nearby, as mentioned. It's right next to our current facilities, and we're developing that land in this calendar year to be ready. So we're sort of, to your point, Tony, staying one step ahead and ensuring that we're shovel-ready across all of the different facilities.

The next question is from the line of Gary Schwab with Valley Forge Capital Management.

Great quarter. A question about welders. I know you said that the new welding school, you're up 10% again this year. Is that going to commercial? Or is it going to the Navy side? And what will your new needs be for the headcount growth with these 3 -- the Batavia expansion, the radiographics, the P3 test lab. Are there going to -- how many new roles will be required to support all these capabilities and training and certifications?

Yes. So I'll take that one because it's a pretty expansive question, but I'll start with the welder program specifically. in Batavia specifically. So when you look at Batavia, the majority of that welding talent is going to a mix of defense and energy and process. What we're seeing, Gary, is we're actually working on cross utilizing a lot of those resources. And so we're able to maximize the resource allocation based on the needs in the business. It happens so much right now. It happens to be right now that a lot of that demand is in the Navy side to sort of catch up and then exceed, but we're seeing those resources in times of need deploy to the energy and process side. At P3 specifically, this new test facility coming online, we're being efficient with this. It's not a huge lift in terms of additional personnel. All of the personnel there today knows how to execute and maintain and do the work that's there in that new facility. So it's bringing on someone to oversee the facility as well as an executor, but it's not an extensive list of personnel. So I would just say it's a continued methodical approach kind of that it's in parallel with the percentages that align with our revenue growth. And what I'd lastly add is the nice thing is the majority of it is direct labor. So it really does directly translate to value.

Right. So as you grow these facilities, it seems like you're going to need to grow your base labor greater than 10%. You're adding 3 new facilities basically. Have you had any discussions with your primes to help secure labor if needed because there are certain certifications that are needed for some of these jobs?

Yes. So Gary, I'd flip the script on that question and say, we are -- we have an engaged workforce, and it's a great place to work. We're recruiting the talent internally, and we're actually the place where our customers are asking us how we're doing it. So it's not so much of us asking them. They are supporting us like with the Welder workforce program. But we're actually becoming more of a pilot for how it's done. And so I think we see continued capability to add the talent to fill these facilities and maximize the output.

Okay. Great. And I just have one last question on P3. Has SCAMP been sold? Or is it being evaluated in any industries outside of space such as medical? And what about sales of the MCD? Are there any natural gas operations evaluating MCD?

Yes. So just for the rest of the crew, MCD is multichannel diffuser. And I'll keep this response really high level. And Gary, what I would suggest is Dan is going to introduce that we're attending some conferences. We're going to have some updates at those. So I'd suggest following along. What I would tell you is this, SCAMP has a lot of interest across a lot of applications far reaching out of space. And so yes, we have provided it as disclosed previously for medical applications, and we're seeing it in applications in transportation, both on ground and in air. So there's a lot of uses for SCAMP, which is basically for the rest of the crew at solenoid pump. On the MCD, -- so one of the things that we're working with -- that Dan is leading the charge on is working product market fit for the multichannel diffuser. And we see a huge opportunity to bring new technology and disrupt -- frankly, I'm just going to say it, all 24/7 pumps. So pumps that operate 24/7, we are confident that this potential technology advancement could have a huge impact on that market. So we're in the early phases. It has not been deployed at this point. And one of the first business development areas as part of our enhanced strategy is to bring it to market. .

At this time, we've reached the end of our question-and-answer session. I'll hand the floor over to Dan Thoren for closing remarks.

Okay. Thank you, operator. I'd also like to remind everyone that we will be presenting at the Wells Fargo Industrials Conference later this week on June 12 in Chicago and at the Northland Growth Conference on June 25, which is virtual. Interested investors should contact their sales representative to register and schedule one-on-one or group meetings. As always, a live webcast of the presentation along with presentation materials will be available on our Investor Relations website. We hope to see you there. And as always, please reach out with any questions. Thank you, everyone, for joining us today and for your interest in Graham.

This concludes today's conference. Thank you for your participation. You may now disconnect your lines at this time.