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Research Analyst at Valley Forge Capital Management, LP
Gary Schwab is the President and Analyst at Valley Forge Capital Management, specializing in equity analysis with a focus on small- and mid-cap companies such as Graham Corporation. With a career in investment management spanning over a decade, Schwab has held leadership positions at Valley Forge since joining the firm and plays a key role in investment diligence and portfolio management. Under his leadership, Valley Forge has been recognized as an award-winning hedge fund, demonstrating strong risk-adjusted returns for its clients. Schwab's credentials include extensive experience in financial analysis and portfolio strategy, backed by robust industry knowledge and a hands-on approach to company research.
Gary Schwab sought clarification on whether FlackTek's $30 million 2026 revenue estimate refers to the calendar year or Graham's fiscal year ending next month.
Chris Thome, CFO, clarified that the $30 million estimate refers to the calendar year 2026, representing the current run rate for that period.
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Gary Schwab inquired about potential restrictions from the FlackTek partnership with Anduril regarding the sale of the Mega product line to other major solid rocket motor competitors. He also asked if Mega is expected to be FlackTek's leading product and if an available market size for Mega has been determined. Finally, he sought clarification on whether the $30 million 2026 revenue estimate for FlackTek was based on Graham's fiscal year-end.
President and CEO Matt Malone stated that while Anduril is a key end user for the Mega product, there are no restrictions on providing dual asymmetric mixing machines to others, with the exception of the Mega product line itself, pending specific purchase agreements. He noted that other FlackTek machines are adequate for other providers. Malone added that the focus will shift towards production-level machines, including Mega, but a precise Total Addressable Market (TAM) for Mega is still being quantified, seeing broad applicability across various industries. CFO Chris Thome clarified that the $30 million estimate for FlackTek is based on its calendar year 2026 run rate.
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Gary Schwab from Valley Forge Capital Management requested more detail on the potential $2-5 million financial impact from tariffs and asked about potential mitigation strategies, such as price adjustments.
CFO Chris Thome explained that the potential impact stems from overseas raw material purchases and sales to foreign customers. He outlined mitigation tactics, including leveraging an extensive network of in-country manufacturing partners for commoditized components and incorporating favorable contract terms, like equitable adjustment clauses, to protect the company. He confirmed the impact was not material in Q1.
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Gary Schwab from Valley Forge Capital Management asked for more detail on the potential $2-5 million impact from tariffs and what mitigation strategies, such as price adjustments, are available.
CFO Chris Thome explained that the impact stems from overseas raw material purchases and sales to foreign customers. He outlined mitigation strategies including using their network of in-country manufacturing partners for commoditized components, and incorporating favorable INCO terms and equitable adjustment clauses in contracts to protect Graham from tariff impacts. He reiterated that the Q1 impact was not material.
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Gary Schwab from Valley Forge Capital Management asked for more detail on the potential $2-5 million financial impact from tariffs and the company's ability to mitigate it through pricing adjustments.
CFO Christopher Thome explained the potential impact stems from overseas raw material purchases and sales to foreign customers. He outlined mitigation strategies that include leveraging in-country manufacturing partners and protective contract clauses like favorable INCO terms and equitable adjustments, noting the impact in Q1 was not material.
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Gary Schwab from Valley Forge Capital Management asked about the allocation of new welders, future headcount needs for new facilities, and the commercial status of P3's SCAMP and MCD products, including potential applications outside of space.
President & COO Matthew Malone explained that new welding talent is cross-utilized between defense and energy markets and that new facilities will not require a large personnel increase. He noted that Graham is now seen as a leader in workforce development. Regarding P3 products, Malone confirmed SCAMP has broad interest in medical and transportation, while the MCD has potential to disrupt the 24/7 pump market, though it is still in the early business development phase.
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Gary Schwab asked about the potential impact of General Dynamics' investment in the Austal shipyard for submarine module construction. He also followed up on the NextGen nozzle, inquiring what percentage of the installed base Graham has contact information for to begin marketing.
President and CEO Daniel Thoren stated that the Austal shipyard expansion does not directly affect Graham's specialized equipment business but views it as a positive development for accelerating overall shipbuilding. Regarding the customer contact list for the new nozzle, Thoren replied that he did not have that specific number available.
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