‘Chance meetings’ can’t really happen with virtual, says Graham Corporation
Based in New York but operating across the globe, Graham Corporation designs and manufactures critical engineering equipment for a variety of sectors, including defense, energy and chemical. CEO Jeff Glajch, who joined the company in 2009, talks about his recent experiences as IR lead at the small-cap firm.
The small-cap space is often seen as being somewhat separate from larger peers. What challenges have you faced over the past 18 months and what opportunities were thrown up by the pandemic? How did you go about communicating around those topics?
On June 1, 2021, we announced a transformational acquisition that further pivoted the company into a defense industry-focused business, lessening the impact of the highly cyclical energy business that had been the driver of the company’s long history.
We announced the acquisition in conjunction with our fiscal year-end results, with two separate releases for earnings and the acquisition announcement, and we also created supplemental decks for both issues. A challenge connected with the acquisition announcement was that the underlying legacy business was also addressing margin pressure due to some first-article defense business and tight spreads on early wins in defense.
Large caps tend to have less meaningful change in intrinsic value drivers, whereas small caps can have more significant changes independent of macroeconomic factors that can create incremental value over the long term.
To get your message heard, you have to use multiple media: active outreach to investors, releases, conferences, one-on-ones and the website, as well as persistence and a great degree of repetition! Messages must be concise and clear. And staying in front of shareholders is key to consistent messaging and credibility.
Small caps have had a good run since the initial shock of Covid-19. In what ways have you harnessed that interest?
Unfortunately, our energy influence weighed on our stock and limited the upside as most stocks recovered from the Covid-19 recession. We’ve been working since the acquisition to change investors’ interpretation of our outlook. There is much greater visibility to our growth, less impact of the shifting characteristics of the energy industry and more opportunities for expanding new platforms in the hydrogen economy with electric vehicles.
What impact has going virtual had on your marketing and corporate access efforts? Has it allowed you to get in front of investors you might not otherwise have seen?
It’s been interesting. We’ve had more opportunities to meet investors, and we believe investors are using the virtual forum to expand their corporate access as well. On the other hand, those chance meetings we may have had ‘just because we were there’ that otherwise would not have happened, are not occurring. It’s harder to communicate effectively with new shareholders via a remote process than with ones that already know us.
Long before Covid-19 or even Mifid II, we were hearing about how challenging the small-cap research space is. How many analysts cover you and what is your experience of getting new coverage? Do you have any advice you can share?
There’s no question it has become harder. On the other hand, we’re finding that there are brokerages that are looking for that niche – the same niche that, over decades, folks have looked to fill. In fact, we picked up coverage from a firm recognizing the transformation we are undergoing.
Finally, what do you expect the main topics of conversation will be with your investors over the coming year or so?
I believe our conversation will shift as recognition of the transformation the company is going through begins to resonate with investors. If I have learned anything through all these years, it is that truth, patience and persistence pay off.