Today is Dan Thoren, President and CEO, and Chris Thome, CFO. And with that I'll hand it over to Dan. Thank you.
I'm Dan Thoren. Chris, we're pretty excited to tell you about Graham. We love talking about our company and we've got an exciting story and I hope you walk away from this saying hey, that's one of those great ideas that comes out of the IDEAS Conference. Before we start, I want to point out that we may be making some forward-looking statements during the presentation and the following Q& A. Those statements are covered under the safe harbor that's shown here. Graham Corporation. The pertinent words here are critical supplier. We make pumps, turbines, compressors, heat exchangers, vacuum systems that go into power systems and fluid systems and are typically the heart of those systems. If our equipment fails, the whole system kind of comes down.
So we're. Our equipment is highly engineered. Manufacturer is very critically reviewed and then our equipment goes through a bunch of testing qualification as you'll see in some of the applications that I go over here. Other things on this slide that are of interest. We've got three locations here in the U.S. Actually four with the sales office in Houston, but manufacturing engineering in Batavia, New York, also in Arvada, Colorado. We have a new acquisition in Jupiter, Florida that's more of an R & D facility. Houston sales office, as I said. And then we've got sales and engineering offices that are located in China and India where we're selling a lot of the commercial equipment that we make. Graham has evolved quite a bit the last couple of years.
In 2021, prior to the acquisition of Barber-Nichols, you see the revenue there at $97.5 million with the majority of the business coming in the refinery and petrochem space. In June of 2021, Graham acquired Barber-Nichols. And Barber-Nichols brought with it some defense work as well as some space work. You fast forward, you know, essentially four years forward and we've doubled the revenue of the company and we really have transitioned to much more of a defense centric business. So you see the defense now being, you know, close to 60% of the business versus the legacy petrochem refining. When Chris and I. So I came with the acquisition of Barber-Nichols. When Chris and I joined, we both joined in 2021. I was 21, he was 22. The company was really, really good. What's that? Yeah, not our age.
When we joined, the company was in fairly rough shape. We were behind on some Navy programs. The Navy was coming and visiting us way too often, pounding on the table saying you are impacting the build of a strategic Navy submarine. Get your stuff together. We did. It cost us quite a bit of money. After fiscal 2021 we had a fiscal 2022 that was a loss year. We lost money in fiscal 2022. It was at that time that Chris and I put together a five-year strategic plan and said here's where we believe that we can get to. We laid out the 2027 aspirational goals of greater than $200 million in revenue. Then EBITDA in the low-to-mid teens.
And people looked at us and said, sure, sounds great, but I'm not sure anybody believed us. But since then, we've now put together a couple of really nice years. So 2022 was a loss. 2023 was a 5% EBITDA. 2024 as you see, was 7.2%. We're guiding to 9.5% EBITDA here in 2025 and then 2027. We feel very comfortable with our, with our aspirational goals from two and a half years ago. We've refined them a little bit. So we're actually up a little bit to $240 million-$250 million in revenue still the low- to mid-teens% EBITDA. We've done that with the strategies that are shown above. You'll get a sense of those as we kind of walk through this.
Skip.
The Navy programs that we're involved with, three main strategic programs, the carrier, the Virginia-class submarine and the Columbia-class submarine. The fourth that's not really shown on here is the MK 48 torpedo program. We can't say too much about that quantities, build rates, all that stuff. But as we look at these programs, the build plan is shown in the first column. The number of ships that have been completed that are under construction, that are remaining. The second column talks about the build timeline. So it gives, it also gives you a sense of how long they run. So some of them are running out in the 2050s. And then the third column looks at the revenue potential for the stuff that we're making today. Not necessarily anything more that we're going to win on those programs.
When you add all of that up, it kind of adds up to $1.2 billion-$1.4 billion in revenue potential here over the next couple of decades. Some really nice strategic long runway kinds of programs. We like the Navy for a couple of reasons. First one is the visibility that we get out of Navy programs is really nice. You can plan your business around it. You really can start to make those long term decisions that long term programs give you the visibility for. As I said, we got into trouble with the Navy early and we got out of it. We got back on schedule pretty quickly and the Navy said, hey, we like you. You are one of those subcontractors that we're pretty interested in continuing to work with and help succeed.
So the Navy, because of all the geopolitical pressure, really has been spending around $500 million a year investing in the supply chain. Not just the shipbuilders, but further down into the supply chain. We've been able to capture some of those grants. So a year, a little over a year ago, we got a $13.5 million investment that basically helped us build a new building and equip it with all of the state-of-the-art equipment, machine tools, automated welders, that type of stuff that will enable us to accelerate the production of the equipment that we're making for the U.S. Navy. More recently, we ended up getting another grant to help with the training program that we set up in Batavia that was associated with training welders. The U.S. is really short on welders.
You hear Newport News Shipbuilding is really challenged with new welders and maybe not as well-trained welders as they may like. So the U.S. is really struggling there. Navy really likes our program and has invested in it. Another really nice thing about Navy is we're a sole source supplier on about 80% of the work that we do for them. There's high barriers to entry. Certainly they're not absolutely ours. We don't, we're not under contract for that full $1.2 billion-$1.4 billion, but we're in great shape and as long as we can perform quality and schedule wise, we don't have any reason to lose it.
We have been working on margin expansion, a lot of the continual improvement activities that we've been doing on the Navy side, documenting processes, evaluating operations such that, you know, where we can automate things, we are automating them to drive quality up, weld quality and execution time down. And then as we look further out in the U.S. Navy, there's potential aftermarket revenue as well as we're involved in some design work on the next-gen attack submarine. So a long runway there. But those are all the reasons that we really like the U.S. Navy. We get involved in space. Also in the early 2000s, we got involved with Elon Musk and Jeff Bezos on launch. In the last several years, launch has started to consolidate, really being driven to lower and lower cost, vertically integrating within those primes.
We're doing less on the launch side, but we've started to migrate more towards the payload side. We are getting involved in some of the communication satellites that are really starting to go power dense, communication dense kinds of applications, such that the electronics are so tightly packed that they have to actively cool them now. We're making pumps that pump liquid into the electronics area to cool those. We're also involved in environmental control and life support systems for the astronauts' next-generation spacesuit. When we think about space, there's, there's a lot of opportunity there. There's a lot of red herrings there too. You know, there's, there's the one-offs that, that may go somewhere, they may not go anywhere. We kind of prefer those opportunities that have multiple kind of production opportunities associated with them like satellites and spaces.
On the energy side, Graham has been involved in energy for decades and we will remain involved in those. We like the refinery and petrochem applications that we have. We've got a $1 billion installed base of that equipment that really provides a really nice aftermarket for us. We're also finding that if we can upgrade our equipment, bring in new technology, the customers are really interested in that. If we can save them energy within their plants, we are golden. And, and that's what we've done with some of this next generation nozzle equipment that's, that's discussed on this slide where we can save them 5-10% of the steam usage in their, in their vacuum systems, on their distillation towers. It's hundreds of thousands of dollars of savings per year.
Or they can turn that into increased plant output, which turns into million dollars of additional revenue for them. So it's really cool technology that, as we kind of put our engineering hats on, helps our customers come up with new solutions. We can add value even into industries that you might say are dead and dying. We look at it as a very viable market for decades to come. This slide really kind of captures our businesses and tells and gives you a sense of where they are and where they're going. So the size of the bubble are the different markets that we're involved in. So the new energy bubble is very small. The revenue that comes off that is really small. You see the defense bubbles being the largest bubbles there. That's where the majority of our revenue comes from.
On the Y axis it talks about growth and on the X axis it's really profitability. So if you look at aftermarket, for instance, that's one of our highest profitability segments that we have. But it's also very low growth. We think that grows at global GDP. The energy and the chemical market don't know that we're going to get a lot more growth out of that. And profitability kind of, you know, we're now kind of battling internationally with that equipment and so profitability isn't probably going to move all that much. But as we look at defense, new energy, space, we see in each one of those the opportunity to grow both revenue as well as profitability in those. We have shown that we're going to be able to grow at 8%-10% per year organically.
But we're also interested in acquisitions. So this slide gives you some of the M&A criteria that, that is on our minds as we look for acquisitions, you know. Barber-Nichols was an acquisition. P3 was an acquisition. You know, if we do an acquisition every one to two years, I think that's about right. The nice thing about growing at an 8%-10% organic growth is that you don't have to acquire to grow. So we can be very opportunistic as we search for, you know, those, those companies that fit in well with our existing businesses. We like engineered products. We think that, that if, if you've got a strong engineering group, you can reinvent yourself, you can develop new technology for existing markets and, and really add some value. So, so we're open to vertical, we're open to horizontal. We like the multi markets.
We're not married to any particular market. At all. Pretty open there. And with that, I think that I'll turn it over to my buddy Chris and he can walk through the rest of this slide and then jump into the financials.
Great. Thanks Dan. Hello everyone. Thanks for being here today. So, just to finish off this slide, the nice thing about having the 8%-10% organic revenue growth is that we don't have to do acquisitions just to grow. So we describe it as we're more opportunistic now with regards to acquisitions and we're really looking to narrow it down to this criteria that you see on this slide. We're not, you know, never say never, but we're not looking for a transformational acquisition at this point in time. We're looking for something in the purchase price range of $20 million-$80 million. We're certainly not going to overpay for an acquisition. So it would be under 10 times EBITDA. Hopefully well under 10 times EBITDA. And we do like using a combination of cash stock and earn out consideration.
Just because the stock and the earnout portions of the consideration really ties the management team into seeing that the acquisition succeeds into the future. And finally, since we're not doing too large of an acquisition, we're not certainly not going to over leverage and we keep leverage under three. And as I'll show in a few slides, we feel like we have plenty of dry powder to both support our organic as well as our inorganic opportunities. So halfway through fiscal year 2025, we're off to a really good start. Revenue for the second quarter of fiscal year 2025 was $53.6 million, up 19% over the prior year. But what was nice about it is that it was across, it was across all our markets, 24% growth in the chemical petrochemical market, 23% in defense and space and 15% in the refining market.
The one negative for the quarter was that aftermarket was down 14%, but that's really due to being at a record level in the second quarter of last year. Aftermarket business continues to be strong and we continue to see nice order flow in the aftermarket business. This slide here shows how that revenue growth is falling down to the gross profit line. As we've increased revenue, we've been able to leverage our fixed overhead for the second quarter. Our gross margin percentage was 23.9%, 790 basis points over the prior year, and that was really due to not only the higher volume, but also improved pricing and improved execution from some of the initiatives that Dan just walked you through.
I should also point out that the current quarter benefited about $400,000 or 80 basis points of margin due to the grant from Blue Forge Alliance that Dan talked about. We expect that to continue for the next two quarters here. Similar to gross margin, we also seen improvement in our EPS. Adjusted EPS was $0.31 a share for the second quarter of fiscal year 2025, up 343% over the prior year. As you could see, the charts show the steady improvement that we've been able to make. We're not done. We plan to continue this steady improvement until we hit our 2027 goals. Similar to our margins and our Adjusted EPS, Adjusted EBITDA is also showing nice consistent improvement. Adjusted EBITDA for the second quarter of fiscal year 2025 was $5.6 million, or 10.5% of revenue.
That's that margin is up about 550 basis points versus the prior year. Partially offsetting this increase in gross margin is we are continuing to invest in our operations and our people and technology. With that, we've seen an elevated SGA level as we invest in things like a new ERP system in our Batavia facility, investing in the R & D for some of the initiatives that Dan talked about. Additionally, during the current quarter and for the last several quarters, we had about $1.1 million in the quarter related to a supplemental earnout bonus related to the Barber-Nichols earnout related to the Barber-Nichols acquisition. In connection with the acquisition, there was an earnout agreement that was reached with the shareholders. Shortly after the acquisition, the shareholders gave that, terminated that agreement and converted it into a supplemental bonus program.
That supplemental bonus program covers fiscal year 2024, 2025 and 2026 and will end at the end of fiscal year 2026 and really is about a 200 basis point decrement to our margins. So that 10.5% EBITDA margin that you saw for the second quarter really would have been closer to 12.5%. So along with our improved profitability, we've been able to shore up our balance sheet. At the end of September, we had zero debt outstanding. We were able to repay it all over the last several years. We also have access to $43 million under our revolving credit facility, which we just restructured a year ago. So we have four years remaining on that. And we had $32 million of cash on our balance sheet, so plenty of dry powder to support our organic and inorganic opportunities for the year.
We did guide that our CAPEX spend would be $13 million-$18 million as we invest in these inorganic opportunities that we have, such as automated welding equipment, buildings and land for expansion and milling machines and things like that. I should point out that all of these larger CAPEX projects that we have in place all have a greater than 20% ROI associated with them. So we plan to continue to spend and we've said that we expect CAPEX spend to be 7%-10% of revenue over the next several years. An example of one of the things that we did invest in. This is a picture of our Arvada, Colorado facility, which is outlined in black. You could see that we are landlocked in Arvada, so there's not a lot of land that's available. So this month, when a plot of land did become available.
The green box to the upper right. We did make a strategic and opportunistic purchase of that land for future expansion. We still have to lay out the building plans going forward and we would expect to begin construction on that facility in fiscal year 2026. And then once that facility is built, we'll be able to consolidate some of our larger programs into that building to gain more efficiencies in production and then move into the buildings that are vacated, moving in some new, smaller organic growth opportunities. Additionally, with the release of our earnings this month, we also announced plans to construct a new cryogenic testing facility. We're going to put that facility near our P3 subsidiary in Florida where we're going to be able to test liquid hydrogen, liquid oxygen and methane. And this really does three things for us.
One, currently, today, when we want to test our cryo, our cryogenic pumps, we have to lease testing space with testing facilities, which is very hard to come by. So oftentimes we have to schedule out several months in advance to get this testing space. So one, we're going to save the cost from having to lease these facilities. Two, we're going to be able to be more responsive to our customers because we'll be able to go in and test these pumps whenever we want. But three, any excess capacity at this facility is going to be used and leased out to others in the industry. So it really give us an avenue to keep tabs on the industry, see what's going on, and maybe even get into some other programs on the ground floor. So we're really excited about this opportunity.
And luckily with Phil Pelfrey, who was the sole owner of P3 Technologies that we acquired a year ago, happens to be a cryogenic fluid expert. So we're really excited to have him on board and are really excited about this opportunity. And our customers are really excited too. Early reactions and feedback from our customers all been very positive. And once again I should point out that all these long term capital expenditure programs have a greater than 20% ROI associated with them. In addition to our results, we've also seen some nice order growth. For the first half of fiscal year 2025, we've had about $120 million of orders, which equates to a 1.2 times book-to-bill ratio and is really across all our markets. You could see because of the large long term nature of some of these contracts, our orders tend to be very lumpy.
But if you look at the graph on the bottom, the bar chart on the bottom left, you could see that we've seen some nice steady growth in our order flow. Some of the highlights from first half 2025 fiscal year 2025 is that we did receive the follow on order for our MK 48 Torpedo program. We competitively bid and won the MK1 9 Air Turbine Pump for the Columbia class submarine and we also received a large order from a space customer for a cryogenic pump for a space launch vehicle. So some very nice wins there. Additionally, as I mentioned earlier, our aftermarket orders continue to be strong and were up 8% year- to- date over the prior year and 11% for the quarter. So seeing some very strong aftermarket orders.
Continuing these strong order flows resulted in a backlog of $407 million at the end of September, which was a record for us. 80% of that is comprised of the defense industry and approximately 35%-45%. We expect that approximately 35%-45% of our backlog will be recognized into revenue over the next 12 months with another 30%-40% the following year after that. So seeing some very long term stable programs which provides a lot of visibility and stability to our business. And that backlog of $407 million is up 30% over the prior year. With the release of our second quarter earnings, we also updated our guidance. Our revenue guidance was the same of $200 million-$210 million of revenue for fiscal year 2025, which implies an 11% revenue growth at the midpoint of that range.
However, we did raise our gross margin and our adjusted EBITDA guidance because of the improvement in profitability that we're seeing. So for the fiscal year 2025 we expect gross margins to be 23%-24% and our adjusted EBITDA to be $18 million-$21 million. At the midpoint of the $18 million-$21 million adjusted EBITDA guidance, it implies a 47% growth rate and would imply a 9.5% EBITDA margin. And again, once again that is inclusive of the Barber-Nichols supplemental bonus that goes away at the end of fiscal year 2026, which is about a 200 basis point decrement to that. So in summary, we're really proud of the accomplishments to date. We've successfully transformed the company to a diversified business serving multiple markets. We have a very strong defense business which brings stability and visibility to our business, but we're not done yet.
9.5% EBITDA margins is still a ways away from the low- to mid-teens fiscal year 2027 goals that we're going to achieve, but we feel very confident in achieving that and feel that we have the right team in the plan to do that. So with that, Dan and I would be happy to take any of your questions.
See Elon Musk, Department of Government Efficiency affect you. And then, if Trump didn't negotiate with Putin to end the war, okay, those are all big.
Yes.
But how do those types of things affect your defense business, which is a major chunk of your business?
Yeah, so our defense business really is associated with ships. We're not associated with some of the land equipment used. So the Ukraine war hasn't affected us thus far. Hasn't been affected, but to us like it has been other companies. And we don't expect it to be a decrement to us either. The Navy business that we have really is ship centric and is driven mostly by geopolitical tensions in the Pacific with China. And so we expect that will continue. And I suspect that the Navy programs that we're on right now don't have any concern about being canceled. The Columbia-class submarine is a third leg of our nuclear triad. It's replacing Ohio-class submarines that are at end of life and we've got to build those if we want to maintain the nuclear triad.
They attack submarines if, you know, if the next war is at sea, you got to have them, and so I think that we feel pretty comfortable with those strategic programs that we're on. The Department of DOGE, Government Efficiency. I don't know how that's going to roll out. I suspect that there'll be a lot of noise and probably not much action, but we'll see. Your guess is as good as mine on that one.
Long term projects that probably were committed like years ago.
Yes. Yeah, they're decades long programs. Yeah. Yes, sir.
Petrochemical industry, are you selling to the firms that are reworking, however often they shut down the plants and rework everything? So are you supplying a lot of parts that need to be replaced periodically or are you just doing certain critical parts to stay until they grow?
Yeah. So the question is trying to characterize our refinery business, our aftermarket business. So the U.S. is not building any new refineries. They're not really even expanding them, but they are running them hard. And so we see a very nice aftermarket business from the U.S. North America, aftermarket businesses, $30 million-$40 million per year. We don't see that slowing down at all. Our place in that is spare parts for our equipment and, and replace. Some of it is, you know, $40 bolts and some of them are, you know, replacement ejectors at $500,000 each. So it's a wide range of stuff that we end up supplying. We, the new capital equipment we really are supplying overseas. They're building new plants in India, the Middle East and China. And so we're supplying complete cap, you know, big capital equipment into those.
The aftermarket there really hasn't taken off yet.
How does cryo pump and all the other surrounding equipment with it simplify for specialty opportunities? Who's really in charge of that? Your supplier to another party?
Yeah. So the cryogenic equipment that we're making typically are cryogenic pumps. And so they would go into rocket engines, for instance, and the, you know, the SpaceX or Blue Origin or those types of companies are doing the assembly of our pump into the engine. We also make cryogenic pumps that are used in physics research facilities around the world. And the operators of those physics research facilities take our pump and they install it into their equipment. We have a medical application for cryogenic ablation that is under development right now. And really that's just more of a lab type environment. So our customers typically take that integration role in all of them and then integrate them into their equipment.
The important thing about the test site that we are going to build out is that we will be able to verify and validate that the pump itself works well before handing it to them and then finding that it doesn't really meet their needs, so we'll be able to do a lot of that more simplified but really challenging testing up front before handing it to them for integration, and I'm out of time, thank you very much.