ELMT

• Company Overview & Competitive Positioning

  • Elmet Group is the sole U.S.-based provider of certain precision-engineered refractory metal components and high-power microwave systems, serving ADG, industrial, medical, semiconductor, and energy end markets.
  • Key competitive advantages include: strong macro tailwinds from U.S. reshoring, defense fortification, and critical material independence; unique domestic supplier status for critical components; vertically integrated operations with full control from raw material processing to final machining; high barriers to entry from a decades-old, hard-to-replicate asset base; and a proven track record of organic and acquisition-driven growth.

• Q2 2026 Core Operational Results

  • Total company revenue grew 35% YoY, adjusted EBITDA grew 57.9% YoY, and open order backlog reached a record $131.5 million, up 55% YoY. ADG end market backlog alone grew 100.5% YoY, driven by programs including CERN, Strategic Missile Systems PRISM, Standard Missile, and Patriot.
  • Over 95% of the company's tungsten and molybdenum is sourced from outside of China, shielding it from Chinese export control-related supply chain disruptions and pricing volatility.
  • In Q2 2026, the company increased its ownership stake in EQ Resources, a fast-growing Western tungsten mining group, as part of a strategic collaboration and long-term off-take contract to further secure resilient raw material supply.
  • The company was awarded $4.3 million in strategic U.S. defense funding to expand domestic manufacturing capabilities for molybdenum-based refractory metal components for defense interceptor programs; the funds will be used for capacity expansion and advanced manufacturing technology deployment.
  • The company has made significant investments in staffing and third-party support to boost CMC factory productivity, which has already delivered measurable favorable operational impacts.

• Balance Sheet & Financial Updates

  • The company completed its IPO in April 2026, raising net proceeds of $125.4 million; after retiring $17.5 million in term debt and covering $8.6 million in working capital and corporate costs, it ended Q2 with $66.1 million in cash.
  • Inventory grew to $102.4 million, driven by CMC raw material price increases, sourcing adjustments, and volume growth for the business.

• Management reaffirms that the long-term operating environment remains highly favorable, supported by an early-stage investment super cycle driven by megatrends of increased global defense spending, U.S. reshoring, and critical material supply chain security.
  • Management maintained its long-term target of reaching and sustaining a 30% gross margin within the next 4 to 5 years, driven by faster-than-expected productivity improvements and growth in higher-margin ADG business.
  • Management expects continued funding opportunities from U.S. defense appropriation and budget cycles, given the company's status as a critical domestic supplier for mission-critical programs.
  • Management expects current strong demand trends in ADG and industrial end markets to continue through the remainder of 2026.

Elmet Group operates two core segments: Critical Materials Components (CMC) and Engineered Microwave Products (EMP). No explicit revenue contribution percentages are provided for each segment. Overall company Q2 2026 revenue grew 35.2% year-over-year (YoY) to $66.4 million. CMC was the primary driver of all strength in the quarter: the segment benefited from the company's strategic pre-negotiated tungsten sourcing agreements that allowed it to capture upside from sharply rising global tungsten and molybdenum prices, plus recent productivity investments that drove operational improvements. CMC drove the 63.7% YoY increase in total company gross profit to $16.6 million, and the 57.2% YoY increase in adjusted EBITDA to $8.9 million. For EMP, the segment saw growing record backlog across industrial, aerospace, defense, government (ADG), and semiconductor end markets, but has faced temporary margin pressure as raw material costs outpaced pre-negotiated pricing for long-term contracts with institutions like CERN and Fermi.

• Global tungsten and molybdenum prices have risen significantly over the past year, a trend exacerbated by export controls and fluctuating tariffs, creating cost volatility for the business. While the company's diversified sourcing strategy mitigates this risk for CMC, EMP has faced near-term margin pressure as raw material cost spikes outpace pre-negotiated pricing for long-term contracts.
  • Quarterly performance is inherently susceptible to fluctuations driven by the timing of large customer purchase orders, particularly from large key accounts like the major medical customer that drove a sharp decline in non-ADG backlog in Q2 2026, and metals pricing dynamics.
  • Energy end market demand remains in early development stages, with visible traction yet to materialize for fusion and fission projects, leading to near-term weakness in that segment.

Q: Large missile defense interceptor awards to defense primes have not yet shown up in Elmet's backlog. What is the expected magnitude and timing of these orders flowing down to Elmet? / A: No awards from the new U.S. appropriation cycle have appeared in Elmet's backlog as of Q2 end. Only small residual sweep orders for spares and partial multi-year production have come in from residual program funding. Management confirms that significant flow-down from the large prime awards has not yet occurred, with no material volume booked to date.\n\nQ: Non-ADG backlog declined this quarter despite strong ADG growth. What is driving this decline, and will non-ADG order activity pick up? / A: The entire decline is driven by inconsistent ordering patterns from one large medical customer, even as underlying annual demand from this customer is up year-to-date. All other non-ADG end markets show growth: industrial has grown across both segments, semiconductor is seeing early traction, and energy is only modestly down while the company waits for fusion/fission demand to move past development. The volatility from the medical customer is expected to remain quarter-to-quarter.\n\nQ: How much of Q2's strong gross margin comes from raw material pricing benefits, and why has EBITDA improvement been limited at EMP? / A: Around half of CMC's gross margin expansion in the quarter came from capturing upside from rising tungsten prices, enabled by the company's pre-negotiated strategic supply agreements. Productivity gains from recent investments also contributed and will continue to benefit margins going forward. At EMP, near-term margin pressure stems from faster-than-expected raw material cost increases that have outpaced fixed pricing on existing long-term contracts; management is working to address this and improve margins for the EMP backlog going forward.\n\nQ: How will gross margins evolve as large ADG volume production awards come in over the next 1-2 years? / A: Long-term, growth will be driven primarily by ADG, which has a higher average margin profile than other end markets, since ADG requires higher-value finished components rather than basic raw materials. Productivity improvements have also progressed faster than originally expected. The combination of these factors plus ongoing upside from strategic material sourcing will lift overall company gross margins, and the long-term target of reaching and sustaining 30% gross margin in 4-5 years remains intact.