- Fiscal 2023 Sales growth driven by strength in aftermarket
sales to refining and petrochemical markets and diversification
into the space industry
- Net income for fiscal 2023 was $367 thousand, compared to loss
in prior fiscal year; achieved adjusted EBITDA* of $7.7 million
within guidance range despite $2.5 million reserve for inventory
and bad debt for large space customer, net of associated
performance-based compensation
- Fourth quarter revenue grew 8% to $43.0 million driven by
strength in aftermarket and space industry
- Fourth quarter net loss of $481 thousand impacted by reserves
for bad debt and inventory; adjusted EBITDA* of $1.2 million, or
2.9% of sales
- Fourth quarter orders of $50.8 million, including MK48 Mod 7
Heavyweight Torpedo follow-on order, leads to record fiscal year
orders of $202.7 million
- Expect fiscal 2024 revenue to grow to approximately $165
million to $175 million, up 8% at mid-point over prior fiscal year
with adjusted EBITDA* in the range of $10.5 million to $12.5
million, a 49% improvement over fiscal 2023 at the mid-point of the
range
- Raising original strategic financial goals to now deliver over
$200 million in revenue and achieve low to mid-teen adjusted EBITDA
Margin* in fiscal 2027
Graham Corporation (NYSE: GHM) (“GHM” or the “Company”), a
global leader in the design and manufacture of mission critical
fluid, power, heat transfer and vacuum technologies for the
defense, space, energy and process industries, today reported
financial results for its fourth quarter and full fiscal year ended
March 31, 2023 (“fiscal 2023”). Financial results include those of
Barber-Nichols, LLC (“BN” or “the acquisition”) from the date it
was acquired on June 1, 2021.
Daniel J. Thoren, President and CEO, commented, “We made great
strides in fiscal 2023 to stabilize our business, improve our
performance, and capture new opportunities. We ended fiscal 2023 on
a strong note, achieving our guidance for the year despite the
significant reserve related to a space market customer. We
delivered record revenue, achieved adjusted EBITDA of $7.7 million,
had record annual orders and ended with a strong backlog of $302
million that supports further growth and margin expansion. Further,
we believe our book-to-bill ratio for the fiscal year of 1.3x is
validation of the importance of the investments we have made, our
customer’s confidence in our execution, and the success we are
having in winning new business across our diversified markets.
Importantly, we are expanding our opportunity with existing
customers while diversifying with new customers and
applications.”
Fourth Quarter Fiscal 2023 Performance Review (All
comparisons are with the same prior-year period unless noted
otherwise.)
($ in millions except per share data)
Q4 FY23 Q4
FY22 $ Change Net sales
$
43.0
$
39.7
$
3.3
Gross profit
$
7.2
$
4.2
$
3.0
Gross margin
16.6%
10.6%
Operating loss
$
(0.4)
$
(2.1)
$
1.7
Operating margin
(0.8%)
(5.2%)
Net loss
$
(0.5)
$
(1.4)
$
0.9
Diluted net loss per share
$
(0.05)
$
(0.13)
$
0.08
Adjusted net income (loss)*
$
0.0
$
(0.2)
$
0.2
Adjusted diluted net income (loss) per share*
$
0.00
$
(0.02)
$
0.02
Adjusted EBITDA*
$
1.2
$
0.4
$
0.8
Adjusted EBITDA margin*
2.9%
1.0%
*Graham believes that adjusted EBITDA (defined as consolidated
net income (loss) before net interest expense, income taxes,
depreciation, amortization, other acquisition related expenses
(income), and other unusual/nonrecurring expenses), and adjusted
EBITDA margin (adjusted EBITDA as a percentage of net sales), which
are non-GAAP measures, help in the understanding of its operating
performance. Moreover, Graham’s credit facility also contains
ratios based on adjusted EBITDA as defined in the lending
agreement. Graham also believes that adjusted net income (loss) and
adjusted diluted net income (loss) per share, which excludes
intangible amortization, other costs related to the acquisition,
and other unusual/nonrecurring (income) expenses, provides a better
representation of the cash earnings of the Company. See the
attached tables and other information on pages 9 and 10 for
important disclosures regarding Graham’s use of adjusted EBITDA,
adjusted EBITDA margin, adjusted net income (loss), and adjusted
diluted net income (loss) per share, as well as the reconciliation
of net income (loss) to adjusted EBITDA, adjusted net income
(loss), and adjusted diluted net income (loss) per share.
Net sales of $43.0 million increased 8%, or $3.3 million. Growth
in the space market, as well as improvements in the commercial
aftermarket, offset continued weakness in large refining and
petrochemical capital investment projects. Aftermarket sales to the
refining and petrochemical markets were $7.1 million, up 45%. See
supplemental data for a further breakdown of sales by market and
region.
Compared with the prior year period, the 70% increase in gross
profit and 6 percentage point expansion of gross margin reflected
increased productivity, higher volume and improved mix of higher
margin sales. Offsetting gross profit and margin improvement were
$0.8 million in reserves related to the bankruptcy filing of a
major space customer, net of associated performance-based
compensation.
Selling, general and administrative expense (“SG&A”),
inclusive of amortization, in the fourth quarter of fiscal 2023 was
$7.5 million, or 17% of sales, up $1.4 million over the prior-year
period. Impacting SG&A in the quarter was $1.7 million, or 4%
of sales, in reserves related to the space customer, net of
associated performance-based compensation. The prior year’s fourth
quarter SG&A was impacted by $0.2 million in
acquisition-related costs.
Net loss and loss per diluted share were $481 thousand and
$0.05, respectively. On a non-GAAP basis, adjusted diluted net
income* and net income per share* were breakeven. Reserves related
to the space customer, net of associated performance-based
compensation, had an approximate $0.19 per share impact on earnings
in the quarter.
Full Year Fiscal 2023 Performance Review (All comparisons
are with the same prior-year period unless noted otherwise.)
($ in millions except per share data)
FY23 FY22
Change Net sales
$
157.1
$
122.8
$
34.3
Gross profit
$
25.4
$
9.1
$
16.3
Gross margin
16.2%
7.4%
Operating income (loss)
$
1.3
$
(11.3)
$
12.6
Operating margin
0.8%
(9.2%)
Net income (loss)
$
0.4
$
(8.8)
$
9.2
Diluted net income (loss) per share
$
0.03
$
(0.83)
$
0.86
Adjusted net income (loss)*
$
2.5
$
(6.6)
$
9.1
Adjusted diluted net income (loss) per share*
$
0.24
$
(0.62)
$
0.86
Adjusted EBITDA*
$
7.7
$
(5.0)
$
12.7
Adjusted EBITDA margin*
4.9%
(4.1%)
Net sales for fiscal 2023 were $157.1 million, up $34.3 million,
or 28%, driven by a $15.4 million increase in sales to multiple
customers in the space industry. Sales to the defense market
increased 5%, or $3.1 million, to $65.3 million, representing 42%
of total revenue. Aftermarket sales to the refining and
petrochemical markets increased 25.5% to $24.9 million, or 15.9% of
total revenue. See supplemental data for a further breakdown of
sales by market and region.
Year-over-year, gross margin improved 8.8 percentage points
reflecting improved mix of sales related to higher margin projects
(commercial space and aftermarket) and improved execution and
pricing on defense contracts. These improvements were partially
offset by the same impact of inventory reserves, net of associated
performance-based compensation, as noted in the fourth quarter.
Gross profit in fiscal 2022 included an estimated $10 million
impact related to labor and material cost overruns for first
article U.S. Navy projects. In fiscal 2023, the Company completed
four first article U.S. Navy projects, and remains on schedule to
complete its remaining two first article projects by the end of the
first half of fiscal 2024.
SG&A expense, inclusive of amortization, was $24.2 million,
up $2.9 million or 13% over the prior year. The increase reflects
the $1.7 million of reserves accrued for the space customer, net of
associated performance-based compensation, and $1.4 million
incremental SG&A expense from the full year of the acquisition.
Offsetting these increases were cost containment measures such as
the reduction of outside sales agents and delayed hiring of
non-critical positions, as well as the elimination of $0.6 million
in acquisition and integration costs incurred in the prior
year.
Net income and income per diluted share were $0.4 million and
$0.03, respectively. On a non-GAAP basis, adjusted net income* and
adjusted diluted net income per share* were $2.5 million and $0.24,
respectively.
Christopher Thome, Chief Financial Officer, commented, “We have
successfully diversified into the defense industry, as well as new
markets such as space and new energy. At fiscal year-end, we had
$8.2 million in backlog for the space market that reflected orders
from several space customers and a variety of programs. This
included no orders from the space customer that unfortunately filed
for bankruptcy protection in our fourth quarter. While a
disappointment, our improved operations enabled us to absorb the
impact of this event and still meet our guidance.” There remains
approximately $1 million to $2 million in potential additional
exposure related to the space customer depending on the outcome of
their proceedings and asset sale. However, at this time, the
Company does not expect further impact in fiscal 2024 or
beyond.
Cash Management and Balance Sheet
Cash generated from operations in the fourth quarter was $5.0
million. Cash and cash equivalents on March 31, 2023, were $18.3
million compared with $17.2 million on December 31, 2022. Capital
expenditures for the fourth quarter of fiscal 2023 were $1.3
million.
Debt at fiscal year-end was down $2.4 million to $11.7 million
compared with December 31, 2022. As of March 31, 2023, the Company
was in compliance with its lending agreement with a leverage ratio
as calculated in accordance with the terms of the credit facility
of 2.1x. At March 31, 2023, the amount available under the
revolving credit facility was approximately $10 million.
Orders and Backlog
See supplemental data for a further breakdown of orders and
backlog by market.
Q1 22 Q2 22 Q3 22 Q4 22 FY22
Q1 23 Q2 23 Q3 23 Q4 23 FY23
Orders
$
20.9
$
31.4
$
68.0
$
23.7
$
143.9
$
40.3
$
91.5
$
20.0
$
50.9
$
202.7
Backlog
$
235.9
$
233.2
$
272.6
$
256.5
$
256.5
$
260.7
$
313.3
$
293.7
$
301.7
$
301.7
Orders for the three-month period ended March 31, 2023, were up
$27.2 million, or 115%, to $50.8 million compared with $23.7
million for the same period of fiscal 2022. Aftermarket orders for
the refining and petrochemical markets were $11.5 million in the
fiscal 2023 fourth quarter, an increase of 37%.
Record orders in fiscal 2023 of $202.7 million were driven by
demand in most markets including defense, space, and new energy, as
well as aftermarket demand in refining and petrochemical markets.
Aftermarket orders were up 34% to $40.6 million for the year.
Backlog at fiscal year-end was $301.7 million, compared with
$293.7 million on December 31, 2022, and $256.5 million on March
31, 2022. Approximately 50% to 55% of orders currently in backlog
are expected to be converted to sales in fiscal 2024 and another
25% to 30% is expected to convert to sales within the next year.
The majority of orders expected to convert beyond twelve months are
for the defense industry, specifically the U.S. Navy.
Fiscal 2024 Outlook
Mr. Thoren concluded, “These are exciting times for our Company.
We continue to evolve our strategy to reduce our cyclicality and
further diversify our opportunities as we develop technologies that
help solve our customers’ problems. We are focusing our efforts
to:
- Pursue clearly defined markets where product and technology
differentiation matters
- Drive operational excellence while investing in process
optimization including digital and automated tools
- Build an elite team of people passionate about their work
- Engage all stakeholders to capture value
We have made significant progress with the advancements in our
business, which puts us ahead of schedule in achieving our fiscal
2027 goals. As a result, we now believe that we can achieve greater
than $200 million in revenue and adjusted EBITDA margins in the low
to mid-teens in fiscal 2027.”
The Company established guidance for fiscal 2024 as follows:
(as of June 8, 2023)
Fiscal 2024 Guidance
Revenue:
$165 million to $175 million
Gross margin:
~17%-18%
SG&A expense(1)
~15%-16% of sales
Adjusted EBITDA(2)
$10.5 million to $12.5
million
Effective tax rate
~22%-23%
Capital expenditures
$5.5 million - $7.0 million
(1)
SG&A expense as a % of sales includes
approximately $2 million to $3 million of BN performance bonus and
approximately $0.5 million to $1.0 million of enterprise resource
planning system (“ERP”) conversion costs.
(2)
Adjusted EBITDA excludes approximately $2
million to $3 million of BN performance bonus and approximately
$0.5 million to $1.0 million of ERP conversion costs. See
“Forward-Looking Non-GAAP Measures” below for additional
information about this non-GAAP measure.
Webcast and Conference Call
GHM’s management will host a conference call and live webcast
today at 11:00 a.m. Eastern Time (“ET”) to review its financial
condition and operating results, as well as its strategy and
outlook. The review will be accompanied by a slide presentation,
which will be made available immediately prior to the conference
call on GHM’s investor relations website.
A question-and-answer session will follow the formal
presentation. GHM’s conference call can be accessed by calling
(201) 689-8560. Alternatively, the webcast can be monitored from
the events section of GHM’s investor relations website.
A telephonic replay will be available from 2:00 p.m. ET on the
day of the teleconference through Thursday, June 22, 2023 at 11:59
p.m. ET. To listen to the archived call, dial (412) 317-6671 and
enter conference ID number 13738114 or access the webcast replay
via the Company’s website at ir.grahamcorp.com, where a transcript
will also be posted once available.
About Graham Corporation
GHM is a global leader in the design and manufacture of mission
critical fluid, power, heat transfer and vacuum technologies for
the defense, space, energy, and process industries. The Graham
Manufacturing and Barber-Nichols’ global brands are built upon
world-renowned engineering expertise in vacuum and heat transfer,
cryogenic pumps, and turbomachinery technologies, as well as its
responsive and flexible service and the unsurpassed quality
customers have come to expect from the Company’s products and
systems.
Graham Corporation routinely posts news and other important
information on its website, grahamcorp.com, where additional
information on Graham Corporation and its businesses can be
found.
Safe Harbor Regarding Forward Looking Statements
This news release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as
amended.
Forward-looking statements are subject to risks, uncertainties
and assumptions and are identified by words such as “expects,”
“outlook,” “anticipates,” “believes,” “could,” “guidance,”
“should,” ”may”, “will,” “tends,” “focus,” “plan” and other similar
words. All statements addressing operating performance, events, or
developments that Graham Corporation expects or anticipates will
occur in the future, including but not limited to, profitability of
future projects and the business, its ability to deliver to plan,
its ability to meet customers’ shipment and delivery expectations,
the future impact of low margin defense projects and related cost
overruns, expected expansion and growth opportunities within its
domestic and international markets, anticipated sales, revenues,
adjusted EBITDA, adjusted EBITDA margins, capital expenditures and
SG&A expenses, the timing of conversion of backlog to sales,
orders, market presence, profit margins, tax rates, foreign sales
operations, its ability to improve cost competitiveness and
productivity, customer preferences, changes in market conditions in
the industries in which it operates, changes in general economic
conditions and customer behavior, forecasts regarding the timing
and scope of the economic recovery in its markets, and its
acquisition and growth strategy, are forward-looking statements.
Because they are forward-looking, they should be evaluated in light
of important risk factors and uncertainties. These risk factors and
uncertainties are more fully described in Graham Corporation’s most
recent Annual Report filed with the Securities and Exchange
Commission (the “SEC”), included under the heading entitled “Risk
Factors”, and in other reports filed with the SEC.
Should one or more of these risks or uncertainties materialize
or should any of Graham Corporation’s underlying assumptions prove
incorrect, actual results may vary materially from those currently
anticipated. In addition, undue reliance should not be placed on
Graham Corporation’s forward-looking statements. Except as required
by law, Graham Corporation disclaims any obligation to update or
publicly announce any revisions to any of the forward-looking
statements contained in this news release.
Forward-Looking Non-GAAP Measures
Forward-looking adjusted EBITDA and adjusted EBITDA margin are
non-GAAP measures. The Company is unable to present a quantitative
reconciliation of these forward-looking non-GAAP financial measures
to their most directly comparable forward-looking GAAP financial
measures because such information is not available, and management
cannot reliably predict the necessary components of such GAAP
measures without unreasonable effort largely because forecasting or
predicting our future operating results is subject to many factors
out of our control or not readily predictable. In addition, the
Company believes that such reconciliations would imply a degree of
precision that would be confusing or misleading to investors. The
unavailable information could have a significant impact on the
Company’s fiscal 2024 financial results. These non-GAAP financial
measures are preliminary estimates and are subject to risks and
uncertainties, including, among others, changes in connection with
purchase accounting, quarter-end, and year-end adjustments. Any
variation between the Company’s actual results and preliminary
financial estimates set forth above may be material.
Key Performance Indicators
In addition to the foregoing non-GAAP measures, management uses
the following key performance metrics to analyze and measure the
Company’s financial performance and results of operations: orders,
backlog, and book-to-bill ratio. Management uses orders and backlog
as measures of current and future business and financial
performance and these may not be comparable with measures provided
by other companies. Orders represent written communications
received from customers requesting the Company to provide products
and/or services. Backlog is defined as the total dollar value of
net orders received for which revenue has not yet been recognized.
Management believes tracking orders and backlog are useful as it
often times is a leading indicator of future performance. In
accordance with industry practice, contracts may include provisions
for cancellation, termination, or suspension at the discretion of
the customer.
The book-to-bill ratio is an operational measure that management
uses to track the growth prospects of the Company. The Company
calculates the book-to-bill ratio for a given period as net orders
divided by net sales.
Given that each of orders, backlog and book-to-bill ratio is an
operational measure and that the Company's methodology for
calculating orders, backlog and book-to-bill ratio does not meet
the definition of a non-GAAP measure, as that term is defined by
the U.S. Securities and Exchange Commission, a quantitative
reconciliation for each is not required or provided.
FINANCIAL TABLES FOLLOW.
Graham Corporation
Consolidated Statements of Operations - Unaudited (Amounts
in thousands, except per share data)
Three Months Ended Year Ended March
31, March 31,
2023
2022
% Change
2023
2022
% Change Net sales
$
43,027
$
39,737
8%
$
157,118
$
122,814
28%
Cost of products sold
35,870
35,526
1%
131,710
113,685
16%
Gross profit
7,157
4,211
NA
25,408
9,129
NA
Gross margin
16.6%
10.6%
16.2%
7.4%
Other expenses and income:
Selling, general and administrative
7,235
5,852
24%
23,063
20,386
13%
Selling, general and administrative – amortization
274
274
0%
1,095
913
20%
Other operating expense (income), net
-
135
(100%)
-
(827)
(100%)
Operating profit (loss)
(352)
(2,050)
NA
1,250
(11,343)
NA
Operating margin
(0.8%)
(5.2%)
0.8%
-9.2%
Other income, net
(62)
(111)
(44%)
(250)
(527)
(53%)
Interest income
(58)
(7)
729%
(129)
(50)
158%
Interest expense
300
150
100%
1,068
450
137%
Income (loss) before provision (benefit) for income taxes
(532)
(2,082)
NA
561
(11,216)
NA
Provision (benefit) for income taxes
(51)
(657)
NA
194
(2,443)
NA
Net income (loss)
$
(481)
$
(1,425)
NA
$
367
$
(8,773)
NA
Per share data:
Basic:
Net income (loss)
$
(0.05)
$
(0.13)
NA
$
0.03
$
(0.83)
NA
Diluted:
Net income (loss)
$
(0.05)
$
(0.13)
NA
$
0.03
$
(0.83)
NA
Weighted average common shares outstanding: Basic
10,617
10,645
10,614
10,541
Diluted
10,617
10,645
10,654
10,541
Dividends declared per share
$
-
$
-
$
-
$
0.33
N/A: Not Applicable
Graham Corporation
Consolidated Balance Sheets – Unaudited (Amounts in
thousands, except per share data)
March 31, March 31,
2023
2022
Assets Current assets: Cash and cash equivalents
$
18,257
$
14,741
Trade accounts receivable, net of allowances ($1,841 and $87 at
March 31 and March 31, 2022, respectively)
24,000
27,645
Unbilled revenue
39,684
25,570
Inventories
26,293
17,414
Prepaid expenses and other current assets
1,534
1,391
Income taxes receivable
302
459
Total current assets
110,070
87,220
Property, plant and equipment, net
25,523
24,884
Prepaid pension asset
6,107
7,058
Operating lease assets
8,237
8,394
Goodwill
23,523
23,523
Customer relationships, net
10,718
11,308
Technology and technical know-how, net
9,174
9,679
Other intangible assets, net
7,610
8,990
Deferred income tax asset
2,798
2,441
Other assets
158
194
Total assets
$
203,918
$
183,691
Liabilities and stockholders’ equity Current
liabilities: Current portion of long-term debt
$
2,000
$
2,000
Current portion of finance lease obligations
29
23
Accounts payable
20,222
16,662
Accrued compensation
10,401
7,991
Accrued expenses and other current liabilities
6,434
6,047
Customer deposits
46,042
25,644
Operating lease liabilities
1,022
1,057
Income taxes payable
16
-
Total current liabilities
86,166
59,424
Long-term debt
9,744
16,378
Finance lease obligations
85
11
Operating lease liabilities
7,498
7,460
Deferred income tax liability
108
62
Accrued pension and postretirement benefit liabilities
1,342
1,666
Other long-term liabilities
2,042
2,196
Total liabilities
106,985
87,197
Stockholders’ equity: Preferred stock, $1.00 par
value, 500 shares authorized
-
-
Common stock, $0.10 par value, 25,500 shares authorized, 10,774 and
10,801 shares issued and 10,635 and 10,636 shares outstanding at
March 31, 2022 and 2021, respectively
1,075
1,080
Capital in excess of par value
28,061
27,770
Retained earnings
77,443
77,076
Accumulated other comprehensive loss
(7,463
)
(6,471
)
Treasury stock (138 and 164 shares at March 31, 2022 and 2021,
respectively)
(2,183
)
(2,961
)
Total stockholders’ equity
96,933
96,494
Total liabilities and stockholders’ equity
$
203,918
$
183,691
Graham Corporation
Consolidated Statements of Cash Flows – Unaudited (Amounts
in thousands)
Year Ended March 31,
2023
2022
Operating activities: Net income (loss)
$
367
$
(8,773
)
Adjustments to reconcile net income (loss) to net cash provided
(used) by operating activities: Depreciation
3,511
3,077
Amortization
2,476
2,522
Space accounts receivable and inventory reserves
3,050
-
Amortization of actuarial losses
672
996
Amortization of debt issuance costs
212
-
Equity-based compensation expense
806
809
Gain on disposal or sale of property, plant and equipment
-
23
Change in fair value of contingent consideration
-
(1,900
)
Deferred income taxes
(120
)
(3,233
)
(Increase) decrease in operating assets: Accounts receivable
1,520
(2,055
)
Unbilled revenue
(14,228
)
1,550
Inventories
(9,919
)
3,483
Prepaid expenses and other current and non-current assets
(97
)
(340
)
Income taxes receivable
139
(1,208
)
Operating lease assets
1,206
1,059
Prepaid pension asset
(651
)
(1,207
)
Increase (decrease) in operating liabilities: Accounts payable
3,467
(3,238
)
Accrued compensation, accrued expenses and other current and
non-current liabilities
2,654
1,164
Customer deposits
20,526
5,523
Operating lease liabilities
(1,049
)
(962
)
Long-term portion of accrued compensation, accrued pension
liability and accrued postretirement benefits
(628
)
491
Net cash provided (used) by operating activities
13,914
(2,219
)
Investing activities: Purchase of property, plant and
equipment
(3,749
)
(2,324
)
Redemption of investments at maturity
-
5,500
Acquisition of Barber-Nichols, LLC
-
(60,282
)
Net cash used by investing activities
(3,749
)
(57,106
)
Financing activities: Borrowings of short-term debt
obligations
5,000
-
Principal repayments on debt
(11,000
)
(39,750
)
Proceeds from the issuance of debt
-
58,250
Principal repayments on finance lease obligations
(23
)
(21
)
Repayments on lease financing obligations
(275
)
(225
)
Payment of debt issuance costs
(122
)
(271
)
Dividends paid
-
(3,523
)
Purchase of treasury stock
(21
)
(41
)
Net cash (used) provided by financing activities
(6,441
)
14,419
Effect of exchange rate changes on cash
(208
)
115
Net increase (decrease) in cash and cash equivalents
3,516
(44,791
)
Cash and cash equivalents at beginning of period
14,741
59,532
Cash and cash equivalents at end of period
$
18,257
$
14,741
Graham Corporation
Adjusted EBITDA Reconciliation (Unaudited, $ in thousands,
except per share amounts)
Three Months Ended Year Ended March
31, March 31,
2023
2022
2023
2022
Net income (loss)
$
(481
)
$
(1,425
)
$
367
$
(8,773
)
Acquisition related inventory step-up expense
-
27
-
95
Acquisition & integration costs
-
189
54
562
Change in fair value of contingent consideration
-
-
-
(1,900
)
CEO and CFO transition costs
-
244
-
1,182
Debt amendment costs
-
278
194
278
Net interest expense
242
143
939
400
Income taxes
(51
)
(657
)
194
(2,443
)
Depreciation & amortization
1,519
1,602
5,987
5,599
Adjusted EBITDA
$
1,229
$
401
$
7,735
$
(5,000
)
Adjusted EBITDA margin %
2.9
%
1.0
%
4.9
%
(4.1
%)
Adjusted Net Income (Loss) and
Adjusted Diluted Earnings (Loss) per Share Reconciliation
(Unaudited, $ in thousands, except per share amounts)
Three Months Ended Year Ended March
31, March 31,
2023
2022
2023
2022
Net income (loss)
$
(481
)
$
(1,425
)
$
367
$
(8,773
)
Acquisition related inventory step-up expense
-
27
-
95
Acquisition & integration costs
-
189
54
562
Amortization of intangible assets
619
757
2,476
2,522
Change in fair value of contingent consideration
-
-
-
(1,900
)
CEO and CFO transition costs
-
244
-
1,182
Debt amendment costs
-
278
194
278
Normalize tax rate(1)
(130
)
(299
)
(572
)
(548
)
Adjusted net income (loss)
$
8
$
(229
)
$
2,519
$
(6,582
)
GAAP diluted net income (loss) per share
$
(0.05
)
$
(0.13
)
$
0.03
$
(0.83
)
Adjusted diluted net income (loss) per share
$
0.00
$
(0.02
)
$
0.24
$
(0.62
)
Diluted weighted average common sharesoutstanding
10,617
10,645
10,654
10,541
(1) Applies a normalized tax rate to non-GAAP adjustments,
which are pre-tax, based upon the statutory tax rate of 21%.
Non-GAAP Financial Measures
Adjusted EBITDA is defined as consolidated net income (loss)
before net interest expense, income taxes, depreciation,
amortization, other acquisition related expenses, and other
unusual/nonrecurring expenses. Adjusted EBITDA margin is defined as
Adjusted EBITDA as a percentage of sales. Adjusted EBITDA and
Adjusted EBITDA margin are not measures determined in accordance
with generally accepted accounting principles in the United States,
commonly known as GAAP. Nevertheless, Graham believes that
providing non-GAAP information, such as Adjusted EBITDA and
Adjusted EBITDA margin, is important for investors and other
readers of Graham's financial statements, as it is used as an
analytical indicator by Graham's management to better understand
operating performance. Moreover, Graham’s credit facility also
contains ratios based on EBITDA. Because Adjusted EBITDA and
Adjusted EBITDA margin are non-GAAP measures and are thus
susceptible to varying calculations, Adjusted EBITDA, and Adjusted
EBITDA margin, as presented, may not be directly comparable to
other similarly titled measures used by other companies.
Adjusted net income (loss) and adjusted diluted earnings (loss)
per share are defined as net income (loss) and diluted earnings
(loss) per share as reported, adjusted for certain items and at a
normalized tax rate. Adjusted net income (loss) and adjusted
diluted earnings (loss) per share are not measures determined in
accordance with GAAP, and may not be comparable to the measures as
used by other companies. Nevertheless, Graham believes that
providing non-GAAP information, such as adjusted net income and
adjusted diluted earnings (loss) per share, is important for
investors and other readers of the Company’s financial statements
and assists in understanding the comparison of the current
quarter’s and current fiscal year's net income (loss) and diluted
earnings (loss) per share to the historical periods' net income
(loss) and diluted earnings (loss) per share. Graham also believes
that adjusted earnings (loss) per share, which adds back intangible
amortization expense related to acquisitions, provides a better
representation of the cash earnings of the Company.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230608005202/en/
Christopher J. Thome Vice President - Finance and CFO Phone:
(585) 343-2216 Deborah K. Pawlowski Kei Advisors LLC Phone: (716)
843-3908 dpawlowski@keiadvisors.com
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