엘멧 그룹(ELMT) 2026년 2분기 실적 발표회: 매출 35% 증가, 수주 잔고 사상 최대 기록

핵심 요약

• 2026 회계연도 2분기 매출은 전년 동기 대비 35.2% 증가한 6,640만 달러를 기록했습니다. 증가분의 약 55%는 항공우주·방산·정부(ADG), 산업, 의료 및 반도체 시장 전반의 수요 증가에서 비롯되었으며, 나머지 증가분은 텅스텐 및 몰리브덴 가격 반영에 따른 것입니다.
• 매출총이익은 1,660만 달러로 63.7% 증가했으며, 매출총이익률은 25.0%로 430bp 확대되었습니다. 중요 소재 부품(CMC) 사업부의 전략적 텅스텐 조달과 생산성 향상이 이러한 실적 개선을 이끌었습니다.
• 조정 EBITDA는 890만 달러로 57.2% 증가했습니다. GAAP 기준 순손실은 450만 달러를 기록했으며, 이는 주로 엘멧 그룹(Elmet Group)의 IPO와 관련된 주식 기반 보상의 영향을 받았습니다.
• 확정 수주 잔고는 전년 동기의 8,460만 달러에서 55% 증가한 사상 최대치인 1억 3,150만 달러를 기록했습니다. 미사일, 항공우주 및 레이더 프로그램의 성장에 힘입어 ADG 수주 잔고는 100.5% 증가했습니다.
• 4월 IPO를 통해 1억 2,540만 달러의 순공모 자금을 확보했습니다. 엘멧은 해당 분기를 6,610만 달러의 현금과 회전한도 대출 유동성을 포함해 총 약 1억 1,070만 달러의 이용 가능한 현금 유동성으로 마감했습니다.
• 경영진은 견적요청서(RFQ) 활동과 소규모 잔여 예산 주문은 증가했지만, 주계약자 대상의 주요 다년도 미사일 방어 사업 수주가 아직 엘멧의 수주 잔고에 유의미한 규모로 반영되지는 않았다고 밝혔습니다.

주요 재무 데이터

영업비용에는 IPO로 인해 발생한 1,290만 달러 규모의 일회성 보상 베스팅이 포함되었습니다. 또한 상장기업 준법 감시 및 성장에 따른 관련 비용이 증가했습니다.

엘멧은 IPO 공모 자금을 사용하여 1,750만 달러의 만기 대출을 상환하고 회전 한도 대출금 중 약 3,100만 달러를 상환했습니다. 분기 말 기준, 회사는 보유 현금 외에 4,460만 달러의 회전 한도 대출 여력을 확보하고 있습니다.

사업 및 경영 성과

2분기 수익성 확대의 주요 동인은 CMC 부문이었습니다. 엘멧의 전략적 텅스텐 조달 계약은 1분기 텅스텐 가격의 급등 효과가 손익계산서에 반영됨에 따라 이익으로 이어졌습니다. 시가에 가깝게 판매된 기존 재고자산도 이에 기여했습니다. 경영진은 추가 채용과 외부 기관의 운영 지원에 힘입어 공장 생산성이 향상되었다고 밝혔습니다.

엘멧은 텅스텐과 몰리브덴의 95% 이상을 중국 외 지역에서 조달하고 있습니다. 회사 측은 이를 통해 수출 규제 관련 공급망 교란 위험을 줄일 수 있다고 밝혔습니다. 또한 전략적 협력 및 장기 오프테이크(선구매) 계약에 따라 EQ 리소시스(EQ Resources)의 지분을 확대했습니다.

ADG 수주 잔고는 CERN, 전략 미사일 시스템, PrSM, 스탠다드 미사일(Standard Missile), 패트리어트(Patriot) 등의 프로그램과 상업 및 방산용 항공우주·레이더 프로그램에 힘입어 전년 동기 대비 100.5% 증가했습니다. 전년 대비 수주 잔고 증가분 4,690만 달러 중 약 3,630만 달러는 ADG 부문의 텅스텐 제품에서 발생했으며, 이는 가격과 물량 증가가 모두 반영된 결과입니다.

엘멧은 현대적 요격 미사일 시스템 등 핵심 방산 프로그램에 사용되는 몰리브덴 기반 제품 및 난용성 금속 부품의 국내 생산 능력을 확충하기 위해 430만 달러의 전략 자금을 확보했습니다.

ADG 외 부문의 경우, 대형 고객사 한 곳의 주문 패턴 변화로 인해 의료 관련 수주 잔고가 2025 회계연도 2분기 약 1,200만 달러에서 2026 회계연도 2분기 약 550만 달러로 감소했습니다. 경영진은 불균등한 주문 시점에도 불구하고 해당 고객사의 상반기 수요는 전년도 소진율을 상회했다고 강조했습니다. 산업용 수요는 두 사업부 모두에서 증가한 반면, 반도체 부문은 초기 회복세를 보였습니다. 에너지 부문은 핵융합 및 핵분열 수요가 여전히 개발 주기 단계에 있어 제한적인 수준에 머물렀습니다.

엔지니어드 마이크로웨이브 프로덕트(EMP) 사업부는 산업, ADG 및 반도체 애플리케이션 전반에서 사상 최대 수주 잔고를 달성했습니다. 하지만 마진이 높은 ADG 및 반도체 제품을 생산하는 공장의 운영상 문제로 차질이 발생했습니다. 또한 원자재 가격 상승으로 인해 일부 장기 프로그램의 수익성이 압박을 받았습니다.

경영진 전망

경영진은 CMC 조달 계약과 공장 생산성 향상 효과가 2026 회계연도 잔여 기간 동안 지속될 것으로 예상하고 있습니다. 또한 ADG가 장기적인 핵심 성장 동력으로 유지될 것으로 기대하고 있으며, 제품이 사양에 맞춰 제작되는 완제품 형태에 가깝기 때문에 신규 ADG 사업이 일반적으로 더 높은 마진을 제공한다고 설명했습니다.

회사는 향후 4~5년에 걸쳐 전체 마진율 30%를 달성하고 유지하는 것을 실현 가능한 목표로 지속적으로 보고 있습니다. 다만 경영진은 구매 주문 시점, 금속 가격 및 기타 사업 요인으로 인해 분기별 실적이 변동될 수 있다고 당부했습니다.

EMP 사업부 실적은 운영상의 문제가 해결됨에 따라 2분기 수준에서 개선될 것으로 예상되지만, 경영진은 회복에 올해 남은 기간이 소요될 수 있다고 덧붙였습니다.

위험 요소 및 주시해야 할 사항

• 텅스텐과 몰리브덴 가격이 급등한 반면, 수출 규제와 관세 변동성으로 인해 원자재 조달 및 가격 책정이 지속적으로 복잡해지고 있습니다.
• 원자재 가격 상승, 조달 요건 및 물량 증가로 인해 재고자산이 1억 2,400만 달러로 증가했습니다.
• EMP 부문 마진은 운영상의 난관과 일부 장기 계약의 예상보다 빠른 원자재 비용 상승으로 인해 압박을 받았습니다.
• 의료 분야 수주 잔고는 기초 물량이 안정적임에도 불구하고 주요 고객사 한 곳의 불규칙한 주문으로 인해 변동성이 높은 상태를 유지하고 있습니다.
• 엘멧의 분기별 실적은 구매 주문 시점과 금속 시장 가격에 따라 변동될 수 있습니다.
• 주계약자의 대규모 다년도 미사일 방어 수주 계약이 아직 엘멧의 수주 잔고에 유의미한 규모로 내려오지 않았습니다.

애널리스트 Q&A 주요 내용

미사일 방어 사업 기회: 경영진은 방산 주계약자 대상의 최근 대규모 수주건이 수주 잔고에 아직 실질적으로 반영되지 않았음을 확인했습니다. 엘멧은 잔여 프로그램 예산을 통해 자금이 지원된 RFQ 및 일부 소규모 주문을 확인했으나, 신규 예산 배정 주기에서 발생한 대규모 주문은 아직 없는 상태입니다.

궤도 컴퓨팅 및 인공위성: 엘멧은 현재 스페이스X(SpaceX) 관련 주문이 없습니다. 회사는 다른 위성 기업에 공급할 신규 CMC 생산 라인에 약 300만 달러를 투자했으며, 해당 라인은 생산을 시작하고 있습니다. EMP 또한 드론 방어 역량을 우주 기반 애플리케이션으로 확장하고 있습니다.

마진 상승 동인: 경영진은 CMC 부문의 분기 성장 중 절반을 약간 상회하는 수준이 원자재 가격 상승 및 조달 계약 관련 이점 덕분이라고 설명했습니다. 생산성 향상 역시 추가적인 기여를 했으며 이는 당초 예상보다 빠르게 이루어졌습니다.

산업용 수요: EMP는 산업 활동의 증가 및 지식재산권(IP)과 관련된 잠재적 기회를 확인하고 있습니다. CMC는 산업용 애플리케이션으로 판매되는 텅스텐 및 몰리브덴 제품의 수요와 가격 상승 수혜를 동시에 누리고 있습니다.

자금 지원: 경영진은 엘멧이 정부 관계 부문에서 계속 적극적으로 활동하고 있으며, 국내 방위산업 생산 능력을 확충할 수 있는 추가적인 자금 지원 기회를 모색할 계획이라고 말했습니다.

실적발표 컨퍼런스 콜 전문

전체 실적 발표 컨퍼런스 콜 녹취록

경영진 발표

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.

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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.