What Elmet Group (ELMT) Said on Its Q3 Earnings Call

Key Points

• Q3 revenue rose 55.6% to $79.6 million, with higher tungsten and molybdenum prices accounting for about 70% of the increase and stronger demand the rest. Net income reached $8.3 million, while gross margin expanded to 31.3%.
• Firm backlog climbed to $347.4 million, including $161.9 million in initially funded orders under a Defense Logistics Agency tungsten contract. The backlog increase reflects both new orders and higher metal prices.
• A $450 million government investment will fund a multiyear expansion of Elmet’s U.S. processing and manufacturing operations, with defense capacity expected to begin coming online in the second half of 2028. New trading and refining activity depends on supplier production ramps, with the Springer tungsten facility targeted to restart in 2029.

Elmet Group NASDAQ: ELMT reported a 55.6% increase in third-quarter revenue as higher tungsten and molybdenum prices and stronger demand boosted results. The company also outlined a multiyear plan to expand its manufacturing and refining operations following a $450 million government investment.

Revenue rose to $79.6 million from $51.1 million a year earlier. Chairman and CEO Peter V. Anania said approximately 70% of the increase reflected higher raw material prices, while the remaining 30% came from increased demand. CFO Mike Lee said aggregate shipments grew about 15% excluding the impact of significant material price increases.

Net income rose to $8.3 million, or $0.24 per diluted share, from $1.6 million, or $0.08 per diluted share. Adjusted EBITDA, a non-GAAP measure, increased to $17 million from $7.4 million.

Lee cautioned that the per-share figures were affected by a materially different share count. He also noted that the company was organized as a pass-through entity and was not subject to corporate income tax in the prior-year quarter, before its reorganization ahead of its initial public offering.

Metal Prices Lift Margins and Backlog

Gross profit increased to $24.9 million from $11.1 million, while gross margin expanded to 31.3% from 21.7%. Lee said roughly two-thirds of the margin improvement came from higher material prices and the company’s markup on those materials, with the remainder attributable to operational performance.

Lee said tungsten price changes can take up to nine months to flow through the company’s income statement and have a more substantial effect on margins than molybdenum price changes. The company still has some room before the full effects of the first-quarter tungsten price spike are reflected in results, he said.

Operating expenses rose to $12.9 million from $7.7 million, including about $1.6 million in equity compensation and approximately $0.9 million in one-time acquisition diligence and Department of War agreement costs.

Firm order backlog reached approximately $347.4 million at the end of the quarter, up from $131.5 million at the end of the second quarter and $87.3 million a year earlier. The latest figure included $161.9 million in initially funded orders under a Defense Logistics Agency tungsten contract.

Lee said backlog at the company’s existing Critical Materials Components and Engineered Microwave Products divisions increased by $98.1 million from a year earlier. Approximately $52.7 million of that increase was attributable to higher tungsten and molybdenum prices.

Government Investment Supports Expansion

Anania said the Department of War committed $450 million to expand Elmet’s U.S. tungsten processing and manufacturing capabilities, with an initial $200 million draw at closing. The investment consists of redeemable preferred equity and warrants representing up to 19.9% of Elmet’s common stock on a post-exercise basis, along with governance rights.

Elmet expects to allocate approximately $165 million to expand and modernize facilities in Maine, Michigan and Ohio. Anania said procurement and modernization work is expected during 2027, with expanded capacity for defense programs beginning to come online in the second half of 2028. He gave both 2030 and 2031 as targets for the upgraded facilities to reach full run rate at different points in the call.

The company also invested $100 million of the government funding and about $25 million of its own cash in supply partner Masan. It intends to allocate approximately $150 million to initiatives involving Blue Moon’s Springer Tungsten Complex in Nevada, including an Elmet-controlled joint venture to restart and expand ammonium paratungstate, or APT, conversion capacity.

Elmet’s new Refining and Trading division will manage sourcing, APT conversion capacity and delivery across the tungsten and molybdenum supply chain. The company expects the trading business to begin fulfilling the DLA contract in the first half of 2028, subject to mine ramps. The Springer APT restart is targeted for the first half of 2029 or sooner, subject to closing conditions, with the facility expected to run at capacity in 2031.

The DLA agreement has a $2 billion ceiling and a five-year base ordering period through August 2031, with an option to extend for two years. The ceiling is separate from the initially funded orders included in backlog.

New Business Timing Depends on Supply

Elmet has signed a long-term agreement with Tungsten West for more than 1,000 metric tons of tungsten concentrate annually. Lee said it was difficult to pinpoint 2027 revenue from the new trading business because timing depends on Tungsten West’s production ramp and subsequent processing.

At full scale and current prices, the trading operation could reach a revenue run rate of a couple hundred million dollars or more, Lee said. He cautioned that the timing and accounting will depend on how much material is available, where it is processed and how it is sold.

Separately, Elmet expects to close its acquisition of ams OSRAM’s metal production operations in Schwabmünchen, Germany, in the first quarter of 2027. Anania said German foreign direct investment approval had been obtained and the company was working through the transition from ams OSRAM. Lee said the business is a turnaround that will dilute margins for a period, with a goal of becoming cash-flow positive by year three.

Asked about forthcoming defense procurement rules, Lee said Elmet had not yet seen a significant increase in orders distinctly tied to the changes, though management expects them to support future backlog growth. He also said the timing of a broader increase in munitions bookings will depend in part on appropriations and the flow of funding through larger contractors.

About Elmet Group (NASDAQ:ELMT)

Elmet provides precision-engineered components and advanced high-energy systems for growth markets. Our customers in these markets require advanced technology involving critical and strategic materials, such as tungsten, molybdenum and niobium (such materials, the “Critical Materials”) and high-level radio frequency (“RF”) engineering, including plasma generation, radar, and other high-energy systems (together, “High-Power Microwave”). Our products and solutions are integral to the Aerospace, Defense and Government, Industrial, Medical, Semiconductor and Electronics, and Energy industries.

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