Graham Corporation (NYSE:GHM) Q2 2024 Earnings Call Transcript

Dan Thoren: Very little, actually, again, because we’re under NDA. But Barber-Nichols makes some very specialty turbo machinery. These are pumps and turbines and compressors. And they can be used to transfer the working fluid through the nuclear power plant and those working fluids from different companies are pretty unique types of working fluid. And so they require kind of the specialty pumps and turbines could be involved in the circulation of those fluids. They could also be involved in the power production. So using turbines to produce the power that comes from the heat and those small modular nuclear type devices. So again, yes, think of it as various specialty types of equipment that is — that we’re using for technology demonstration at this point. And as those continue to progress and mature, we’re hopeful that we’re on the right horse in this race to be able to supply those in quantity in the future. But it’s still quite a ways to go.

Operator: Our next question comes from the line of John Bair with Ascend Wealth Advisors.

John Bair : Good progress. Great progress. Very pleased to see it. One quick question on the new credit facility. Wondering what you’re thinking, if anything, about reinstating a dividend now that you’re getting better, is that further off in the distance?

Chris Thome: Yes. Thanks, John. As we have been talking for a few quarters now, we have a lot of organic growth opportunities in front of us as the guidance was laid out on the call today. We have a significant amount of CapEx spend $12 million to $13.5 million this year. I would expect a similar level next year. So we have a lot of inorganic growth opportunities in front of us as well as potential M&A down the line. So once those initiatives are exhausted, then we would look to returning it to shareholders in the form of a dividend or a buyback.

John Bair : Okay. And I had a lot of questions there have been discussed about the green hydrogen. So that kind of covers that. My other question in general, can you speak to what you’re seeing with regards to space-related business? Is it holding steady? What’s your outlook there?

Dan Thoren: Yes. I would say, John, that on the space side, steady for us with the potential of growth. We’ve talked and been able to talk publicly about some of the oxygen blowers and water circulating pumps that are used on these backpacks for astronauts. And so we continue to see that going strong. Thus far, essentially what we’ve done is we’ve built development units for our customers to test. But we see eventually some orders coming for production versions of those. We’re also seeing some good strength in thermal management systems for satellites. So these are communication satellites that they’re trying to put more and more volume through. And so the electronics need to be cooled and that’s what our equipment is doing.

We’re seeing some opportunities also for some of the the LUNAR initiatives that are going on, again, not high volume, pretty interesting types of activities there, though. And so I would say that it won’t be a huge growth area for us, but steady to slower growth is kind of what we’re seeing at this point in time.

John Bair : Okay. Great. And my last question, you noted in the press release about a strength in short order refining markets. Is that predominantly domestic? Or how is that spread out?

Dan Thoren: Yes. We’re seeing it mostly domestically. So if the aftermarket orders have been very, very strong as we’re running refineries pretty hard in this country. And so we’re seeing lots of spare parts to keep them running. We’re starting to see a little bit of an uptick on the capital side within our pipeline, but nothing like in the past where we went through these big build-out types of situations. So we’re pretty happy with where the domestic market is on the aftermarket side. That’s where our bigger margins are. And as these oil companies start to say, we need to expand or revamp or just replace some of this capital equipment that’s been neglected for quite a while. We expect that we’ll see some of the capital orders increasing.