The Elmet Group Co. Common Stock 2026 Q2 Earnings Call

Welcome. Thank you. Welcome everyone, and thank you for joining us for The Elmet Group's second earnings call as a public company. Since we are still news to many people following our story, I'll begin my remarks with a brief overview of who we are and what we do before discussing updates from our strong second quarter. The Elmet Group brings together a rare set of strengths with the mission to secure U.S. critical material supply chain. Today, we are the sole U.S.-based provider of certain precision engineered refractory metal components and some high-power microwave systems, serving the U.S. government and top blue chip customers across key end markets such as aerospace and defense, or AD&G, as well as industrial, medical, semiconductor, and electronics, and energy.

We operate through two divisions, the Critical Materials Components, or CMC, a vertically integrated manufacturer of critical materials specializing in tungsten and molybdenum products, from powders to machine goods, to fine wires. Engineered Microwave Products, or EMP, a manufacturer of microwave systems and high-power components for military and demanding industrial applications. In terms of how we are positioned competitively in the market, we believe our long-term outlook is supported by several key advantages. First, macro tailwinds from defense fortification and U.S. reshoring, and the overall focus on U.S. material independence continue to drive backlog and future growth. Second, as mentioned a moment ago, we have a sole U.S.-based supplier of certain highly engineered critical materials components, making us a critical supplier for key end markets and customers.

Third, our vertically integrated operations, supported by a dedicated engineering team, allow us to maintain strong control throughout the engineering to production process, from material processing all the way to final machining. Fourth, our difficult to replicate asset base, paired with our specialized production capabilities, has created a naturally high barrier to entry, which took decades to develop. Finally, our team has a proven track record of driving organic growth in the business while also integrating synergistic acquisitions, helping drive sustainable long-term growth. Excuse me. With that overview complete, I will now briefly discuss some updates from the quarter before handing the call over to our CFO, Mike Lee, for a review of our financial results in greater detail. In the second quarter, we built on our existing momentum and delivered strong results highlighted by our acceleration in revenue growth and profitability with a record backlog.

More specifically, revenues growth increased 35% year-over-year to $66.4 million. Gross profit expanded by 430 basis points, leading to 57.9 growth in adjusted EBITDA. Our open order backlog now stands at $131.5 million, up 55% from this time last year. Our performance was driven by a healthy combination of strong operational execution, skillful navigation of dynamic metals pricing market, and ongoing returns from our strategic focus on servicing the broader AD&G landscape, all of which we expect to drive continued demand through the balance of the year. Outside of our own execution, the largest factor impacting our results this year has been the significant and persistent rise in prices for global tungsten and molybdenum markets, which have been exasperated by export controls on critical materials.

The prices of critical materials like tungsten have dramatically increased over the last year, which is further complicated by fluctuating and often steep tariffs on those same critical materials. While these dynamics create challenges, they also create opportunities that we have navigated to date through a combination of foresight and strategic agility. For over a decade, we have sourced more than 95% of our tungsten and molybdenum from outside of China, which largely shields us from export control-related supply chain disruptions. Additionally, our strategic tungsten sourcing agreements have kept us highly protected from material input pricing changes. This positioning enables us to capture the benefits of the sharp increase in tungsten prices during Q1, which drove a portion of the increase in Q2 backlog.

Relatedly, to further support our commitment to securing sustainable and resilient supply chain for critical raw materials, in June, we announced our increased ownership stake in EQ Resources as part of our strategic collaboration and long-term offtake contract. Over the last two years, we have witnessed an increased focus on the critical material supply chain, particularly in defense applications, which is why we sought out this strategic collaboration with one of the fastest-growing Western tungsten mining groups. We look forward to continuing our strategic collaboration, as well as exploring additional opportunistic investments to bolster our long-term competitive positioning. We believe today's environment presents a significant opportunity to grow our business and differentiate ourselves, thanks to our positioning. To that end, we are investing in growth to support the accelerated demand we are seeing.

Our increases in both staffing and third-party support to improve operations in our CMC factories have been significant, and we are already seeing favorable impacts on productivity across the CMC sites. Looking outward, there is bipartisan support for strengthening our domestic industrial base, and we are seeing the effects of current U.S. focus on replenishing stockpiles for the general increase in global defense spending. For example, in June, we announced, excuse me. In June, we announced we had secured strategic funding of $4.3 million to develop and advance domestic manufacturing capabilities for molybdenum-based products and refractory metal components utilizing critical defense programs. This contract award aims to bolster domestic manufacturing readiness to meet the projected long-term demand for refractory metal components, specifically molybdenum-based products used in modern defense interceptor programs.

These funds will enable us to expand capacity and deploy advanced manufacturing technologies in support of our nation's critical defense initiatives, several of which depend on molybdenum-based components as a foundation. With the ongoing conflict in Ukraine as well as the in-process budget and appropriation cycle as a backdrop, we expect to see continued funding opportunities ahead. Importantly, while many AD&G programs operate on multi-year implementations, we are not an impediment to the process, and we typically produce multiple years of production in one year for such programs. Looking ahead, we believe we remain well-positioned to effectively meet today's and tomorrow's demand as we expand our role as a trusted supplier across mission-critical systems. Longer term, we expect the operating environment to remain highly favorable for Elmet, supported by our strategic position and the nexus of several mega trends that remain in the early stages of an investment super cycle.

Now, I would like to turn the call over to our CFO, Mike Lee, to go over the results for the second quarter.

Thank you, Peter, and good morning, everyone. We are pleased to present a strong Q2 performance for the fiscal year 2026. Before I begin, please note that all numbers I plan to discuss have been rounded for ease of presentation. Our full financial results for the quarter can be found in our quarterly report filed with the SEC this morning. Now let's get started. Revenue in Q2 increased 35.2% to $66.4 million, compared to $49.1 million in Q2 2025. Approximately 55% of the revenue growth is attributed to net demand increase across AD&G, industrial, medical, and semiconductor end markets, with the balance associated with tungsten and molybdenum raw material pricing impacts. Gross profit for Q2 2026 increased 63.7% to $16.6 million or 25% gross margin, compared to $10.1 million or 20.7% gross margin in Q2 2025.

The increase was driven by our CMC division, as our strategic tungsten sourcing agreements enabled us to capture the benefits of the sharp increase in tungsten pricing during Q1 that began flowing through our P&L during the quarter. We also saw favorable impacts from productivity increases across our CMC sites, making a meaningful impact. Operating expenses for Q2 2026 increased 251.2% to $24.2 million, compared to $6.9 million in Q2 2025, or a net increase of $17.3 million. Within the quarter, we incurred approximately $14.2 million associated with equity-based compensation, compared to $0.4 million in Q2 2025. Of the $14.2 million, $12.9 million was associated with one-time vesting of awards associated with the completion of our IPO. We also saw increases in costs associated with our initial public offering, ongoing compliance, and expenses associated with growth.