Elmet Q3 revenue jumps 55.6% as $450 million plan advances

Grace Kim

How strong was the quarter?

Elmet Group (NASDAQ: ELMT) reported third-quarter revenue of $79.6 million, up 55.6% from $51.1 million, on higher tungsten and molybdenum prices and stronger demand. Chairman and CEO Peter V. Anania said about 70% of the increase came from raw-material prices and 30% from demand. CFO Mike Lee said aggregate shipments rose about 15%, excluding significant material price increases.

• Profit: Net income rose to $8.3 million, or $0.24 per diluted share, from $1.6 million, or $0.08. Adjusted EBITDA (a non-GAAP earnings measure) increased to $17 million from $7.4 million.
• Comparability: Lee said a materially different share count affected the per-share figures. The prior-year quarter had no corporate income tax because Elmet was a pass-through entity before its reorganization ahead of the initial public offering.

Takeaway: Revenue and profit rose sharply, but share count and tax structure limit per-share comparisons.

What drove profitability?

Gross profit rose to $24.9 million from $11.1 million, and gross margin expanded to 31.3% from 21.7%. Lee said roughly two-thirds of the margin gain came from higher material prices and Elmet’s markup; operational performance produced the rest.

Tungsten price changes can take up to nine months to flow through the income statement and affect margins more than molybdenum changes. Lee said room remained before results captured the full effect of the first-quarter tungsten price spike.

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.

Takeaway: Pricing drove most of the margin gain; volume and operations also helped.

How much business is booked?

Firm backlog reached approximately $347.4 million at quarter-end, from $131.5 million at the end of the second quarter and $87.3 million a year earlier. It included $161.9 million in initially funded Defense Logistics Agency tungsten orders.

Backlog in Elmet’s existing Critical Materials Components and Engineered Microwave Products divisions rose $98.1 million year over year. About $52.7 million reflected higher tungsten and molybdenum prices.

Takeaway: Backlog nearly quadrupled year over year.

What does the $450 million commitment fund?

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

Elmet plans approximately $165 million to expand and modernize facilities in Maine, Michigan and Ohio. Anania said procurement and modernization should occur during 2027, with “expanded capacity for defense programs beginning to come online in the second half of 2028.”

The upgraded facilities target full run rate at different points in 2030 and 2031.

Takeaway: Public capital starts the build-out, but execution determines when spending becomes operating capacity.

When can new supply and trading scale?

Elmet put $100 million of government funding and about $25 million of its own cash into supply partner Masan. It plans roughly $150 million for initiatives involving Blue Moon’s Springer Tungsten Complex in Nevada, including an Elmet-controlled joint venture to restart and expand ammonium paratungstate (APT) conversion capacity.

Its new Refining and Trading division will manage sourcing, APT conversion capacity and delivery across tungsten and molybdenum. Trading should begin fulfilling the Defense Logistics Agency contract in the first half of 2028, subject to mine ramps.

The APT restart at Springer 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 Defense Logistics Agency agreement has a $2 billion ceiling and a five-year base ordering period through August 2031, with a two-year extension option. That ceiling is separate from initially funded orders in backlog.

Elmet 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 trading revenue because timing depends on Tungsten West’s production ramp and subsequent processing.

Lee said that “at full scale and current prices, the trading operation could reach a revenue run rate of a couple hundred million dollars or more.” Timing and accounting depend on material availability, processing location and sale method.

Takeaway: Mine ramps and processing milestones, not committed capital, set the revenue clock.

What does the German acquisition change?

Elmet expects to close the purchase of ams OSRAM’s metal-production operations in Schwabmünchen, Germany, in the first quarter of 2027. It has obtained German foreign direct investment approval and is managing the transition. Lee called the business a turnaround that will dilute margins for a period, targeting cash-flow positivity by year three.

Takeaway: The German deal brings new operations, but its turnaround will dilute margins before cash generation improves.

What could support the next order cycle?

Lee said Elmet had not seen a significant increase in orders distinctly tied to forthcoming defense-procurement rules, though management expects them to support future backlog growth. Broader munitions bookings depend partly on appropriations and funding flowing through larger contractors.

Elmet supplies precision-engineered components and advanced high-energy systems for growth markets. Its critical and strategic materials include tungsten, molybdenum and niobium. Its high-power microwave offering combines high-level radio-frequency engineering with plasma generation, radar and other high-energy systems. End markets span aerospace, defense and government, industrial, medical, semiconductor and electronics, and energy.

Takeaway: Defense policy could help, but funding must arrive before the order book accelerates.