Elmet Group (ELMT) Q2 2026 Earnings Call: Umsatz steigt um 35 %, Auftragsbestand erreicht Rekordniveau

Wichtigste Erkenntnisse

• Der Umsatz im zweiten Quartal 2026 stieg im Jahresvergleich um 35,2 % auf 66,4 Millionen US-Dollar. Etwa 55 % des Anstiegs stammten aus einer höheren Nachfrage in den Märkten für Luft- und Raumfahrt, Verteidigung und Behörden (ADG), Industrie, Medizintechnik sowie Halbleiter; der Rest spiegelte die Preisentwicklung bei Wolfram und Molybdän wider.
• Der Rohgewinn stieg um 63,7 % auf 16,6 Millionen US-Dollar, während sich die Bruttomarge um 430 Basispunkte auf 25,0 % ausweitete. Strategische Wolfram-Beschaffung und Produktivitätssteigerungen im Geschäftsbereich Critical Materials Components (CMC) trieben die Verbesserung voran.
• Das bereinigte EBITDA stieg um 57,2 % auf 8,9 Millionen US-Dollar. Der Nettoverlust nach GAAP belief sich auf 4,5 Millionen US-Dollar, was in erster Linie auf aktienbasierte Vergütungen im Zusammenhang mit dem Börsengang der Elmet Group zurückzuführen war.
• Der feste Auftragsbestand erreichte mit 131,5 Millionen US-Dollar einen Rekordwert, was einem Anstieg von 55 % gegenüber 84,6 Millionen US-Dollar im Vorjahr entspricht. Der ADG-Auftragsbestand stieg um 100,5 %, getragen von Raketen-, Luft- und Raumfahrt- sowie Radarprogrammen.
• Der Börsengang im April erbrachte einen Nettoerlös von 125,4 Millionen US-Dollar. Elmet beendete das Quartal mit liquiden Mitteln von 66,1 Millionen US-Dollar und einer Gesamtliquidität von rund 110,7 Millionen US-Dollar, einschließlich der Kreditlinienkapazität.
• Das Management erklärte, dass große mehrjährige Aufträge zur Raketenabwehr an Hauptauftragnehmer noch nicht in nennenswertem Umfang in den Auftragsbestand von Elmet eingeflossen sind, obwohl die Angebotseinholungen (RFQs) und bescheidene Nachfinanzierungsaufträge zugenommen haben.

Wichtige Finanzdaten

Die Betriebsausgaben enthielten 12,9 Millionen US-Dollar für die einmalige Unverfallbarkeit von Aktienzuteilungen durch den Börsengang. Dem Unternehmen entstanden zudem höhere Compliance-Kosten für börsennotierte Unternehmen sowie wachstumsbedingte Kosten.

Elmet nutzte die Erlöse aus dem Börsengang zur Tilgung von Laufzeitverbindlichkeiten in Höhe von 17,5 Millionen US-Dollar und zur Rückzahlung von rund 31,0 Millionen US-Dollar auf revolvierende Kreditfazilitäten. Zum Quartalsende verfügte das Unternehmen zusätzlich zu den liquiden Mitteln über eine Kreditlinienkapazität von 44,6 Millionen US-Dollar.

Geschäfts- und operative Entwicklung

CMC war der Haupttreiber der Margenausweitung im zweiten Quartal. Dank der strategischen Wolfram-Beschaffungsvereinbarungen von Elmet konnte das Unternehmen vom kräftigen Anstieg der Wolframpreise im ersten Quartal profitieren, als sich diese Effekte in der Gewinn- und Verlustrechnung niederschlugen. Auch der Verkauf bestehender Vorräte näher an den Marktpreisen trug dazu bei. Das Management erklärte, dass sich die Fabrikproduktivität nach zusätzlichen Neueinstellungen und operativer Unterstützung durch Dritte verbessert habe.

Elmet bezieht mehr als 95 % seines Wolframs und Molybdäns außerhalb Chinas. Laut Unternehmensangaben verringert dies das Risiko von Lieferunterbrechungen im Zusammenhang mit Exportkontrollen. Zudem erhöhte das Unternehmen im Rahmen einer strategischen Zusammenarbeit und einer langfristigen Abnahmevereinbarung seine Beteiligung an EQ Resources.

Der ADG-Auftragsbestand stieg im Jahresvergleich um 100,5 %, angetrieben durch Programme wie CERN, Strategic Missile Systems, PrSM, Standard Missile und Patriot sowie durch zivile und militärische Luft- und Raumfahrt- und Radarprogramme. Etwa 36,3 Millionen US-Dollar des Anstiegs des Auftragsbestands von 46,9 Millionen US-Dollar gegenüber dem Vorjahr entfielen auf Wolframprodukte innerhalb von ADG, was sowohl Preis- als auch Volumeneffekte widerspiegelt.

Elmet sicherte sich strategische Fördermittel in Höhe von 4,3 Millionen US-Dollar zur Erweiterung der inländischen Fertigungskapazitäten für Produkte auf Molybdänbasis und Komponenten aus refraktären Metallen, die in kritischen Verteidigungsprogrammen, einschließlich moderner Abfangsysteme, eingesetzt werden.

Außerhalb von ADG sank der Auftragsbestand im Bereich Medizintechnik aufgrund des Bestellverhaltens eines Großkunden von fast 12 Millionen US-Dollar im zweiten Quartal 2025 auf etwa 5,5 Millionen US-Dollar im zweiten Quartal 2026. Das Management betonte, dass die Nachfrage dieses Kunden im ersten Halbjahr trotz ungleichmäßiger Bestellzeitpunkte über dem Niveau des Vorjahres lag. Die Nachfrage aus der Industrie stieg in beiden Geschäftsbereichen, während die Aktivitäten im Halbleiterbereich erste Verbesserungen zeigten. Der Energiebereich blieb verhalten, da sich die Nachfrage nach Fusion und Fission größtenteils noch in Entwicklungszyklen befand.

Der Geschäftsbereich Engineered Microwave Products (EMP) verzeichnete einen Rekordauftragsbestand in den Bereichen Industrie, ADG und Halbleiteranwendungen. Operative Probleme beeinträchtigten jedoch ein Werk, das höhermargige ADG- und Halbleiterprodukte herstellt. Zudem belasteten steigende Materialkosten bestimmte Langzeitprogramme.

Ausblick des Managements

Das Management geht davon aus, dass die CMC-Beschaffungsvereinbarungen und die Produktivitätsgewinne der Werke für den Rest des Jahres 2026 weiterhin vorteilhaft bleiben. Es wird zudem erwartet, dass ADG der primäre langfristige Wachstumstreiber bleibt; neu hinzukommendes ADG-Geschäft weise im Allgemeinen höhere Margen auf, da die Produkte näher an fertiggestellten, nach Spezifikation gefertigten Komponenten liegen.

Das Unternehmen sieht das Erreichen und Halten einer Gesamtmarge von 30 % weiterhin als realistisches Ziel für die nächsten vier bis fünf Jahre an. Das Management gab zu bedenken, dass die Quartalsergebnisse aufgrund des Zeitpunkts von Bestellungen, der Metallpreise und anderer Geschäftstreiber schwanken können.

Es wird erwartet, dass sich die Performance von EMP gegenüber dem Niveau des zweiten Quartals verbessert, sobald die operativen Probleme behoben sind, obwohl das Management einräumte, dass die Erholung den Rest des Jahres in Anspruch nehmen könnte.

Risiken und zu beobachtende Bereiche

• Die Preise für Wolfram und Molybdän sind kräftig gestiegen, während Exportkontrollen und schwankende Zölle die Beschaffung und Preisgestaltung weiterhin erschweren.
• Die Vorräte stiegen aufgrund höherer Rohstoffpreise, Beschaffungsanforderungen und Volumenwachstums auf 102,4 Millionen US-Dollar.
• Die EMP-Margen wurden durch operative Herausforderungen und schneller als erwartet steigende Materialkosten bei bestimmten Langzeitverträgen belastet.
• Der Auftragsbestand im Bereich Medizintechnik bleibt volatil, da ein Großkunde unregelmäßig bestellt, selbst wenn das zugrundeliegende Volumen stabil ist.
• Die Quartalsergebnisse von Elmet können je nach Zeitpunkt der Bestellungen und der Preisentwicklung am Metallmarkt schwanken.
• Große mehrjährige Aufträge zur Raketenabwehr sind seitens der Hauptauftragnehmer noch nicht in erheblichem Umfang in den Auftragsbestand von Elmet eingeflossen.

Highlights aus der Fragerunde der Analysten

Chancen im Bereich Raketenabwehr: Das Management bestätigte, dass jüngste Großaufträge an Hauptauftragnehmer im Verteidigungsbereich noch nicht wesentlich im Auftragsbestand enthalten sind. Elmet verzeichnete Angebotseinholungen (RFQs) und mehrere bescheidene Aufträge, die aus verbleibenden Programmbudgets finanziert wurden, aber noch keine bedeutenden Aufträge aus dem neuen Bewilligungszyklus.

Orbital Computing und Satelliten: Elmet hat derzeit keine Aufträge von SpaceX. Das Unternehmen hat rund 3 Millionen US-Dollar in eine neue CMC-Produktionslinie für andere Satellitenunternehmen investiert, und die Linie nimmt derzeit die Produktion auf. EMP erweitert zudem seine Fähigkeiten zur Drohnenabwehr in Richtung weltraumbasierter Anwendungen.

Margentreiber: Das Management führte etwas mehr als die Hälfte des Quartalswachstums von CMC auf Vorteile im Zusammenhang mit steigenden Materialpreisen und Beschaffungsvereinbarungen zurück. Produktivitätssteigerungen leisteten einen zusätzlichen Beitrag und stellten sich schneller ein als ursprünglich erwartet.

Industrielle Nachfrage: EMP verzeichnet eine steigende Industrieaktivität sowie potenzielle Chancen im Zusammenhang mit seinem geistigen Eigentum. CMC profitiert sowohl von der Nachfrage als auch von der Preisgestaltung bei Wolfram- und Molybdänprodukten für Industrieanwendungen.

Kapitalunterstützung: Das Management erklärte, dass Elmet weiterhin im Bereich Government Relations aktiv sei und beabsichtige, zusätzliche Fördermöglichkeiten zu nutzen, um die inländische rüstungsindustrielle Kapazität zu erweitern.

Vollständiges Transkript der Telefonkonferenz zu den Quartalszahlen

Vollständiges Transkript der Telefonkonferenz

Ausführungen des Managements

Operator

Good morning. Welcome to the Elmet Group Company Second Quarter 2026 Earnings Conference Call. Joining us for today's presentation are the company's Chairman and CEO, Peter V. Anania; and CFO, Mike Lee. [Operator Instructions] I would like to remind everyone that this call will be recorded and made available for replay via a link available in the Investor Relations section of the company's website at investors.theelmetgroup.com.

Before I turn the call over to Elmet's Chairman and CEO, the company would like to remind all participants that statements made by management during the course of this conference call that are not historical facts are considered to be forward-looking statements within the meaning of the U.S. securities laws, including the Private Securities Litigation Reform Act of 1995. These statements are predictions, projections or other statements about future events and are based on current expectations and assumptions that are subject to risks and uncertainties, including those risks identified in the Risk Factors section of the company's registration statement on Form S-1 and in its other reports and filings with the Securities and Exchange Commission. Participants on this call are cautioned not to place undue reliance on these forward-looking statements, which reflect management's belief only as of the date hereof. The company expressly disclaims any duty to update or correct any forward-looking statements.

Further, management's remarks today will include certain non-GAAP financial measures. These measures are calculated by management and do not have any standardized meanings under the U.S. GAAP. These non-GAAP measures supplement GAAP measures but should not be viewed as substitutes for GAAP measures. A reconciliation of the most directly comparable GAAP financial measures to these non-GAAP financial measures is available in the company's quarterly report on Form 10-Q and in its earnings press release.

I will now turn the call over to Elmet's Chairman and CEO, Peter V. Anania, for his comments. Sir, please proceed.

Peter Anania

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 new 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 and/or ADG as well as industrial, medical, semiconductor and electronics and energy.

We operate through 2 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 and 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 the 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.

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 and 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 ADG 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 tungstens 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.

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, and 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 2 years, we have witnessed an increased focus on the critical material supply chain, particularly in defense applications, which is why we sought out the 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 accelerating 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 a 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 -- 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 Iran 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 multiyear implementations, we are not an impediment to the process, and we typically produce multiple years of production in 1 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 megatrends 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.

Michael Lee

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 aerospace, defense and government, 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 onetime 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 the growth.

Turning to the balance sheet. Cash at the end of Q2 2026 totaled $66.1 million compared to $1.8 million at the end of Q1 2026 and $1.8 million at the end of Q4 2025. The increase in cash is driven by proceeds from our April IPO, where we raised net proceeds of $125.4 million, retired $17.5 million in term debt and paid approximately $8.6 million for working capital and other corporate requirements. We also paid approximately $31.0 million on our revolving credit facilities to optimize interest expense.

At the end of Q2 2026, we had approximately $44.6 million in borrowing capacity on our revolving credit facilities, which, when combined with cash on hand, gave us approximately $110.7 million of cash availability for strategic investments.

At the end of Q2 2026, we saw inventories grow to $102.4 million, up from $75.0 million in Q1 2026 and $67.1 million in Q2 2025. The increase is driven by our CMC division by a combination of tungsten and molybdenum raw material pricing increases, sourcing dynamics and volume increases associated with growth.

To supplement our financial statements presented in accordance with GAAP, we use certain non-GAAP financial measures, including adjusted net income, EBITDA and adjusted EBITDA because we believe these metrics provide investors with additional meaningful methods to evaluate certain aspects of our results. We define adjusted net income as net income less stock-based compensation and onetime nonrecurring costs such as tax impacts of our reorganization, discontinued operations, the costs associated with the IPO, certain acquisition and transaction costs, severance and restructuring costs, other nonrecurring costs and income tax benefit of such adjustments as applicable.

Net loss for Q2 2026 was $4.5 million or $0.16 per share compared to net income of $1.2 million or $0.06 per share in Q2 2025. Adjusted net income for Q2 2026 was $5.2 million or $0.18 per share compared to $2.8 million or $0.14 per share in Q2 2025. It's worth noting that the majority of the adjustments in Q2 2026 are associated with the equity compensation associated with our initial public offering. We define adjusted EBITDA as our net income plus interest expense, income taxes, depreciation and amortization and as applicable for each period, stock-based compensation expense and noncash gains and losses on sale of assets.

Adjusted EBITDA also excluded certain nonrecurring costs such as costs associated with the IPO, certain acquisition and transaction costs, severance and restructuring and other nonrecurring costs. Adjusted EBITDA for Q2 2026 increased 57.2% to $8.9 million compared to $5.6 million in Q2 2025. The increase was driven by operational performance improvements within our CMC division. A full reconciliation between GAAP net income and adjusted net income and EBITDA and adjusted EBITDA can be found in our quarterly report and our earnings press release. As we've shared previously, our susceptibility to quarterly performance fluctuations driven by factors, including timing of purchase orders, metals market pricing dynamics and other drivers across our business, we believe it's prudent to examine our results over a longer time horizon.

To that end, I will now review our results for the trailing 12 months or TTM. For clarity, the following comparisons will be made between the 12-month period ending -- excuse me, July 3, 2026 and April 3, 2026. Revenue increased 8.2% to $228.5 million compared to $211.3 million for the prior TTM period. Approximately 55% of revenue growth is attributed to demand across -- increase across aerospace, defense and government, industrial, medical and semiconductor end markets with the balance associated with tungsten and molybdenum raw material pricing impacts. Gross profit increased 14.6% to $50.7 million or 22.2% gross margin compared to $44.3 million or 20.9% gross margin in the prior TTM period. The increase in gross profit and gross margin was driven by the aforementioned effects of our strategic tungsten sourcing and productivity gains within the CMC division.

Operating expenses increased 52.2% to $50.8 million compared to $33.3 million in the prior TTM period. The increase was primarily related to the equity compensation associated with the IPO, expenses associated with the ongoing public company compliance and expenses associated with growth. Net loss was $1.7 million or $0.08 per share compared to the net income of $4 million or $0.20 per share in the prior TTM. Adjusting for IPO-related operating expenses, equity compensation and reorganization costs, our adjusted net income increased to $18.6 million or $0.84 per share compared to $16.2 million or $0.81 per share in the prior TTM period. Adjusted EBITDA increased 11.3% to $31.8 million compared to $20.6 million in the prior TTM period.

I'd like to touch base on our backlog where we've seen significant growth over the last year. Our firm order backlog grew to approximately $131.5 million at the end of Q2 2026 compared to approximately $113.3 million at the end of Q1 2026 and approximately $84.6 million at the end of Q2 2025. Our ADG end market backlog was up 100.5% at the end of Q2 '26 compared to the end of Q2 2025, driven by a series of new and growing programs such as CERN, Strategic Missile Systems, PrSM, Standard Missile, and Patriot, along with a mix of commercial and defense-related aerospace and radar programs. We also attribute approximately $36.3 million of the $46.9 million of total backlog growth between Q2 2025 and Q2 2026 to tungsten product increases within the ADG market, driven by a mixture of price and volume.

That concludes our prepared remarks. I'd like to hand it back to our operator for Q&A.

Operator

[Operator Instructions] And our first question comes from the line of Colin Canfield with Cantor.

Fragen und Antworten

Colin Canfield

Maybe starting out on munitions. We saw some pretty sizable missile defense interceptor awards to the defense primes, and it looks like that's probably not reflected in backlog yet. So maybe if you could characterize kind of how kind of the quantity or the magnitude of those potential orders related to those specific orders and then perhaps kind of the timing of when you think that might hit?

Michael Lee

Thanks for the question, Colin. Yes, you're correct. We really haven't seen a significant amount of those larger multiyears the primes are being awarded flow down to us yet. We've definitely seen some RFQ activity, and we've seen a couple of modest, I would consider sweep funding type orders where certain programs had residual funding and they came in for either some spares orders or they could do a few years based on residual funding. But nothing from the new appropriation cycle is really in our backlog at this point in time of significance.

Colin Canfield

That's great. And then maybe following up on the orbital compute discussion from last quarter. If you could kind of talk through kind of where initial discussions are at with SpaceX and how you think about U.S. domestic supply chain requirements for orbital compute satellites versus international sourcing?

Peter Anania

Yes. Well, we're not presently have orders from SpaceX. We do have from other satellite companies that we have just bought a new line, roughly spent $3 million in CapEx to stand it up, and that is just starting to produce. And we see that, that is going to continue to be an area that we want to increase. That's on the CMC side.

And on the EMP side, we are seeing an increase in drone defense activities, and now that is expanding into satellite areas where we're going to -- we are providing a similar product to help defense against drones from space.

Operator

And the next question comes from the line of Jim Ricchiuti with Needham & Company.

James Ricchiuti

I was hoping to get a little bit more color on the decline in backlog outside of ADG. Obviously, you saw significant growth in ADG backlog. But I'm wondering if you're anticipating a pickup in order activity from your large medical customer.

Michael Lee

Yes. Thanks, Jim. And you hit it right on the head. That large medical customer is -- absolutely creates volatility in the other bucket for us. And while they are -- the actual demand for them is up this year in the first half over run rate last year. They are -- again, the order pattern tends to be a bit inconsistent. The they'll place large orders or they'll place small orders, but the volume is very consistent for us.

And without a doubt, we saw medical fluctuate quite heavily. Q2 2025 in our CMC division, driven by this customer, we had almost $12 million of backlog. And at the end of Q2 '26, we're at like $5.5 million, all driven by that one customer. So it's -- if you look at that total bucket of other, they're driving the swing. All other -- if we look at our other end markets, we've seen increases in industrial in both business divisions. We've seen semi starts to move up a little bit. Again, that's a smaller end market for us, but we're seeing some traction there.

Energy is down a little bit, but it's small enough that the variability is expected quarter-to-quarter, and a lot of that is waiting for fusion and vision demand to actually start to manifest beyond development cycles. So I mean we have -- we're seeing the nonmedical influence, we're seeing some traction and energy continues to be just a waited out kind of situation.

James Ricchiuti

Just if we could switch gears a little bit and talk about margins. Obviously, very strong gross margins in Q2. And I don't know if this is in any of your filings or if there's -- you can give us some color as to how much of a benefit you've gotten from pricing on gross margin. And the follow-up to the margin question is just around EBITDA margins where you showed very good growth improvement in CMC, but we're still not seeing much improvement on the EMP side. So I wonder if you could just talk to some of those margin questions.

Michael Lee

Yes. Thanks for the question, Jim, and insightful questions. So starting with gross margin, in particular with the impact of material pricing. We definitely saw -- first off, I want to acknowledge the excellent operational execution of our team during a rapid material price increase. That could have damaged us if we didn't have good process in place, but we do and we got the benefit of managing the price curve up.

As we look in our CMC division, the growth in the quarter, we attribute about half of that growth to slightly more to some capture of that as the material spikes, we're able to either, a, leverage our existing agreements with our supply partners or b, in effect, sell some material at market versus what we had on the shelf and simple way to think about it. So that's definitely been beneficial. We do think that our supply agreements will continue to help us as we move through the rest of the year. And productivity within our factories, we're seeing some very good signs that not only did it hit us in Q2, but it's going to continue to be beneficial going forward. And we tie that back to the investments we made, both in direct hires as well as some third-party support.

Regarding EBITDA margins, the balance of the year and going forward, again, just given its size, CMC will kind of dictate how the bottom line performs in general. So based on what I just said, you can draw a line to bottom line performance, at least in the, I'd say, the balance of the year. EMP margins and EMP EBITDA, we definitely -- we have a lot of demand for our end product. We're seeing record backlog come our way, both in industrial and the ADG space as well as semiconductor for that business. We did see some operational challenges in Q2 in our factory that happens to deal with a lot of our ADG and semiconductor product, which tends to be on the higher margin side. So we're working quite diligently to correct that in the second half and see some improvement from our Q2 results. But we do think it's going to take us a little while to get there throughout the balance of the year.

Operator

And the next question comes from the line of Chip Moore with ROTH MKM.

Alfred Moore

I wanted to maybe follow up on industrial, the strength there, right? I think 64% growth or something like that. Just maybe some of the trends you're seeing there and pockets of strength.

Michael Lee

Yes. So we're seeing a couple of spots. In our EMP division, we've definitely seen an uptick in the industrial space, and we continue to see further growth there and a lot of opportunity. We think there's some opportunity with our IP that could definitely give us some longer-term continued growth.

On the CMC side, we've seen -- while we've seen demand growth with tungsten drive ADG. We're also seeing the industrial segment get some uplift as well. We do sell tungsten and moly into those end market as well. So that is a little more distributed where it's more concentrated in ADG. But in general, we're seeing -- we haven't seen a real pull -- a major pullback on demand in industrial at CMC and the pricing uplift definitely flows through there. So we're seeing it for various reasons. But for sure, it's something we're very happy about, and we see it as being something that's going to continue throughout the foreseeable future.

Peter Anania

Yes. I think we're in a good CapEx cycle. But in addition, people are finding more and more uses for our products. in the industrial space, which is -- looks good.

Alfred Moore

Yes. No, that's helpful. And maybe back to just the raw material side, and you've done a great job managing that, particularly tungsten with some of the volatility. It looks like that contributed to those gross margins in CMC for sure. Just anything near term to contemplate around some of the movements in some of the underlying commodities?

Peter Anania

Well, we did talk about the margins at the EMP division being down a little bit, and I think that may be because material costs there were spiking faster than we thought with some of our long-term agreements that we have with like CERN and Fermi and so forth, making these gigantic circulators. And I think that caught us off guard.

But as Mike said, we're really digging into it, really making sure that the backlog -- we can figure out how to get that backlog up and gross margins up in the backlog. That's what I want to say and move forward.

Operator

Your next question comes from the line of Austin Moeller with Canaccord Genuity.

Austin Moeller

I think we already discussed the outstanding opportunities for some of the missile system weapons and structures for tungsten and moly that are outstanding. But I was just wondering if we could think about how we should think about the gross margin ramp and improvement as some of those larger volume production awards come in, in the next 12 to 24 months.

Michael Lee

Thanks for the question, Austin. I'll go back to some of our prior communications in our S-1 that all holds -- continues to hold true. We make a mixture of -- or we provide engineering services microwave components that are quite difficult to produce and as well as a lot of materials that can be from early-stage production, say, powders all the way through to near net shape or finished components built to spec.

Just a simple nature of the closer you get to an end component, the more value you put into the actual product. When we get into the ADG space, we're starting to live in that space. So we -- and creating more value for the customer, and therefore, our margin profile tends to be better when we're dealing with ADG. And so as we see our growth being driven predominantly over the long term, by ADG, we expect the new business to be coming at a differentiated margin, and that will end up lifting our overall average.

We're seeing some of the productivity improvements happen faster than we had originally anticipated. We're very encouraged by that. But the combination of those two things and then we've done fairly well with managing, again, the material pricing spike where we've been able to capture that phenomenon as well. And that will help us throughout the, I'd say, the next 6 to maybe 12 months. So that's the way that I continue to think about it is net demand growth coming from ADG, which is on average higher margin. And that -- us getting to 30% and holding that, we still think that's a very viable target for us in the next 4 to 5 years.

Austin Moeller

Okay. And can you comment on within the fiscal year '27 base budget and also the reconciliation bills that are being talked about 3.0 or 4.0, are you seeing any opportunities in there for additional investment funds for the defense industrial base that could be allocated to increase your capacity?

Michael Lee

Yes. I mean we've always got a finger on that pulse. We're very active in our governmental relations. Yes, I think it's fair to say that when the opportunity arises, we'll be prepared for it. We've had success in the past, and we continue to be seen as a critical partner for the Department of War. And as the nature of material supply chains change, we only think that's going to be more distinct.

Operator

At this time, this concludes our question-and-answer session. If you have additional questions, you may contact Elmet's Investor Relations team at elmt@gateway-grp.com.

I'd now like to turn the call back over to Mr. Anania for his closing remarks.

Peter Anania

Thanks again, everyone, for joining us today. Before we wrap up, I want to provide you with some closing remarks about why we remain confident in our long-term opportunity. As the sole U.S.-based supplier of certain highly engineered critical materials and components and some high-power systems, we believe we remain well positioned to benefit from several favorable long-term market trends.

With most of our competitors owned by foreign entities and as export restrictions cause more constraints, we remain one of the last U.S.-based facilities with capabilities to provide key components for mission-critical systems and the ability to source critical materials at a reasonable cost. We have leveraged our difficult-to-replicate asset base and production capacity to support key U.S. defense programs over the last decade, which we intend to continue growing as we qualify on additional Dow programs given the accelerating demand we are seeing today.

Finally, we remain encouraged by the opportunities and increased activities we are seeing across all of our markets, driven by multiple megatrends from increased global defense spending to reshoring of critical manufacturing. To close, I'd like to thank our employees, partners, shareholders for their committed support. Operator?

Operator

Thank you for joining us today for the Elmet Group Company Second Quarter 2026 Earnings Conference Call. You may now disconnect.