Investors in Graham Corporation (GHM) need to pay close attention to the stock based on moves in the options market lately. That is because the Sept 19, 2025 $20.00 Put had some of the highest implied volatility of all equity options today.What is Implied Volatility?Implied volatility shows how much movement the market is expecting in the future. Options with high levels of implied volatility suggest that investors in the underlying stocks are expecting a big move in one direction or the other. It could als ...

Core Insights - New analyst coverage is essential in navigating heightened economic uncertainty, providing updated insights into company fundamentals and risk exposures [2][3] - Recent initiations of coverage on companies like KALA BIO, Graham Corporation, Arq, and Hawkins reflect the growing need for sharper analysis amid inflationary pressures and weakening demand [3][10] Analyst Coverage Importance - Analysts possess specialized knowledge that offers critical insights into a company's financial health, growth potential, and industry trends, which are often difficult for individual investors to acquire independently [4] - New coverage typically indicates a higher investor inclination towards a stock, as it suggests that the company holds potential value [5][7] Value Creation by Analysts - Analysts create value for companies by initiating coverage, acting as intermediaries with extensive access to relevant data, which helps mitigate inefficiencies in the market [6] - Stocks chosen for new coverage usually reflect a positive outlook envisioned by analysts, often leading to more favorable ratings compared to continuously covered stocks [7][8] Market Impact of New Coverage - New analyst coverage can lead to immediate stock price volatility, with positive ratings attracting bullish sentiment and driving share prices higher, while negative ratings may trigger sell-offs [9] - Favorable coverage from multiple analysts can enhance investor confidence, leading to sustained upward momentum in stock valuations [9] Recent Stock Performances - KALA BIO shares increased by 96.1% over the past three months, with a narrowing loss per share estimate for 2025 [10][15] - Graham Corporation shares rose by 75.2% in the same period, with an increasing EPS estimate for fiscal 2026 [10][16] - Arq shares gained 57%, with an unchanged EPS estimate indicating improvement from the previous year's loss [10][17] - Hawkins shares saw a 25.6% increase, despite an unchanged EPS estimate indicating a year-over-year decline [10][18] Screening Criteria for Investment - Stocks with increased analyst coverage and improving average ratings are prioritized, alongside other parameters such as price and average daily volume [12][13]

Company Overview - Graham Corporation (GHM) shares increased by 7.4% to $48.40 in the last trading session, with a notable trading volume, contributing to a total gain of 22.5% over the past four weeks [1][2] Sales and Growth Drivers - The recent rally in Graham Corporation's stock is attributed to optimism regarding increased sales of capital equipment to foreign markets and higher aftermarket sales. Additionally, growth in existing programs, improved pricing, and favorable timing of key project milestones are expected to positively impact the company [2] Earnings Expectations - For the upcoming quarterly report, Graham Corporation is projected to post earnings of $0.25 per share, reflecting a year-over-year decline of 24.2%. Revenue is anticipated to reach $54 million, which is an 8.1% increase compared to the same quarter last year [3] Earnings Estimate Trends - The consensus EPS estimate for Graham has remained unchanged over the last 30 days. Historical data indicates that stock prices typically do not continue to rise without trends in earnings estimate revisions, suggesting that monitoring GHM's performance is essential to determine if the recent stock price increase can be sustained [4] Industry Context - Graham Corporation is part of the Zacks Manufacturing - General Industrial industry. Another company in the same sector, Graco Inc. (GGG), saw a 1.6% increase in its stock price, closing at $85.34, with a 0.4% return over the past month [4]

Summary of Graham Corporation Conference Call Company Overview - **Company Name**: Graham Corporation (GHM) - **Industry**: Mission critical fluid, power, vacuum, and heat transfer solutions - **Founded**: 1936 - **Headquarters**: Batavia, New York - **Market Cap**: $487 million with a 21% CAGR since 2021 strategy unveiling [5][29] - **Employee Count**: 600 globally [4] Core Markets - **Segments**: Defense, Energy, and Process in Space - **Installed Product Base**: Over $1 billion globally [4] - **Backlog**: $412 million, indicating strong future revenue visibility [5][32] Financial Performance - **Fiscal Year 2025 Revenue**: $209.9 million, a 13% increase year-over-year [29] - **Quarterly Revenue Growth**: 21% to $59.3 million [29] - **Defense Market Growth**: 28% for the quarter and 23% for the full year [29] - **Adjusted EPS**: Increased by 97% to $1.24 [31] - **Adjusted EBITDA**: Increased by 69% to $22.4 million, with a margin of 10.7% [31] - **Gross Margin**: Improved by 330 basis points to 25.2% [30] Strategic Focus - **Growth Strategy**: Transitioning from a stabilized phase to an improving growth phase, with a focus on new product introductions and operational efficiencies [17][20] - **Investment in Facilities**: New facility in Batavia funded by a $13.5 million customer grant to enhance production capabilities [12][21] - **R&D Investment**: Plans to increase R&D spending to 1-2% of revenue to foster innovation [36] Market Dynamics - **Defense Sector**: 80% of Graham's portfolio is sole-sourced, primarily linked to naval nuclear submarines and weapon systems, with a long-term revenue opportunity of approximately $1.7 billion [8][12] - **Energy and Process Market**: Focus on both conventional and emerging applications, including hydrogen processing and lithium battery extraction [13][14] - **Space Market**: Represents 7% of the portfolio, growing due to geopolitical tensions and advancements in launch capacity [15][16] Future Outlook - **Fiscal Year 2026 Guidance**: Revenue expected between $225 million and $235 million, representing a 10% increase [37] - **Long-term Targets**: Aiming for low to mid-teen EBITDA margins by fiscal year 2027 [39] - **M&A Opportunities**: Actively exploring acquisitions that align with core markets and enhance product lifecycle [28] Leadership Transition - **New Leadership**: Transition to Matt Malone as CEO has been seamless, with Dan Thorin moving to Executive Chairman [43][44] - **Leadership Stability**: The existing leadership team remains intact, ensuring continuity in strategic direction [46] Additional Insights - **Cryogenic Facility in Florida**: Nearing completion, expected to support high demand for testing space products [40][41] - **Operational Efficiency**: Focus on improving product flow and throughput through new facilities and technology [21][22] This summary encapsulates the key points from the Graham Corporation conference call, highlighting the company's strategic direction, financial performance, and market positioning.

Financial Data and Key Metrics Changes - Full year revenue grew approximately 13% to $210 million, with adjusted EBITDA increasing 69% to $22.4 million, representing 10.7% of sales [6][30] - Record backlog reached $412 million as of March 31, up 7% sequentially, with a book to bill ratio of 1.1, marking the fifth consecutive year above 1.0 [7][34] - Fourth quarter net income was $4.4 million, compared to $1.3 million in the prior year, equating to $0.40 per share on a GAAP basis and $0.43 per share on an adjusted basis [30] Business Line Data and Key Metrics Changes - Defense market sales grew by $7.7 million or 28% year-over-year, driven by existing programs and improved execution [27] - Energy and process sales increased by $1.8 million, supported by higher capital equipment sales to the Middle East and Asia [27] - Revenue for the energy and process segment was up 1% year-over-year to $73 million for fiscal 2025 [10] Market Data and Key Metrics Changes - Strong growth in defense and energy markets, with defense sales up 23% for the full year [28] - Aftermarket sales for energy and process and defense markets totaled $12.1 million, a 3% increase from the prior year [27] - Orders for the fourth quarter included $50 million related to a $136.5 million contract for the Virginia class submarine program [32] Company Strategy and Development Direction - The company is focusing on a "stabilize, improve, grow" strategy, with a strong emphasis on operational improvements and capital investments targeting a return on investment exceeding 20% [10][19] - Plans to expand capabilities include a new 30,000 square foot facility in Batavia, New York, and investments in automated welding and advanced machining [20][21] - The strategic vision includes enhancing product life cycle management and expanding into new markets while leveraging existing technologies [24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to meet fiscal 2027 goals of 8% to 10% organic revenue growth and low to mid-teens adjusted EBITDA margins [40] - The leadership transition is expected to ensure continuity in strategic vision and operational execution [12][13] - Management highlighted strong demand in defense and energy sectors, with expectations for continued growth driven by strategic investments [19][20] Other Important Information - The company secured a strategic investment of $2.2 million from a key defense customer to enhance capabilities in evaluating critical welds [9] - Capital expenditures for fiscal 2025 were $19 million, with expectations to maintain CapEx at 7% to 10% of sales in the coming years [10][36] - The company is actively pursuing both organic and inorganic growth opportunities, supported by a strong balance sheet and cash generation [36] Q&A Session Summary Question: Guidance and gross margin outlook - Management indicated that the gross margin outlook is primarily affected by tariffs and the absence of a grant, with process improvement initiatives in place to offset these factors [43][44] Question: Investment in radiographic equipment - The new X-ray equipment will significantly enhance the evaluation process for complex welds, improving efficiency and quality across both defense and energy sectors [45][46][48] Question: M&A opportunities and valuations - The M&A pipeline is robust, with opportunities arising from aging ownership groups and favorable valuations for strategic acquisitions [49][50] Question: Changes in contract profitability - Contracts remain largely unchanged, with new clauses protecting against commodity price volatility, ensuring stability in pricing [56][58] Question: Welder training program and capacity needs - The welder training program has been successful, with a 10% increase in welders year-over-year, supporting both defense and energy sectors [60][61] Question: Cryogenic facility utilization - The cryogenic facility is on track to be operational soon, with strong demand anticipated based on customer inquiries [65][66] Question: NextGen nozzle progress - The NextGen nozzle design is complete, with ongoing discussions with existing customers for upgrades during maintenance turnarounds [73][74]

Financial Data and Key Metrics Changes - Full year revenue grew approximately 13% to $210 million, with adjusted EBITDA increasing 69% to $22.4 million, representing 10.7% of sales [6][31] - Record backlog reached $412 million as of March 31, up 7% sequentially, with a book to bill ratio of 1.1, marking the fifth consecutive year above 1.0 [7][36] - Fourth quarter net income was $4.4 million, compared to $1.3 million in the prior year, equating to $0.40 per share on a GAAP basis [31] Business Line Data and Key Metrics Changes - Defense market sales grew by $7.7 million or 28% year-over-year, driven by existing programs and improved execution [28] - Energy and process sales increased by $1.8 million, supported by higher capital equipment sales to the Middle East and Asia [28] - Aftermarket sales for energy and process and defense markets totaled $12.1 million, up 3% from the prior year [28] Market Data and Key Metrics Changes - The defense sector remains a key focus, with significant contracts awarded, including a $136.5 million contract for the Virginia class submarine program [7][8] - The energy and process market is seeing continued demand, with innovative solutions driving customer interest [9] Company Strategy and Development Direction - The company is transitioning into a growth phase, focusing on product life cycle expansion, commercialization, global reach, and digital transformation [23][26] - Investments in automation and facility expansion are aimed at enhancing operational efficiency and throughput [21][22] - The strategic plan includes a target of 8% to 10% organic revenue growth and low to mid-teens adjusted EBITDA margins by fiscal 2027 [14][42] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to capitalize on opportunities in the defense and energy sectors, supported by a robust backlog and strategic investments [14][39] - The leadership transition is expected to ensure continuity in strategic vision and operational execution [12][13] Other Important Information - The company has secured a $50 million credit facility to support future growth initiatives [22] - Capital expenditures for fiscal 2025 were $19 million, with expectations to maintain CapEx at 7% to 10% of sales in the coming years [10][38] Q&A Session Summary Question: Inquiry about guidance and gross margin outlook - Management indicated that the gross margin outlook is primarily affected by tariffs and the absence of a training grant, with process improvement initiatives in place to offset these factors [45][46] Question: Details on the investment in radiographic equipment - The new X-ray equipment will enhance the evaluation of complex welds, improving efficiency and quality in production [47][48] Question: Update on M&A opportunities - The M&A pipeline is robust, with opportunities arising from aging ownership groups, and valuations are seen as favorable for strategic acquisitions [51][52] Question: Changes in contract terms for Navy orders - Management confirmed that there are protective clauses in contracts to mitigate commodity price volatility, ensuring stability in pricing [58][59] Question: Status of welder training program and future needs - The welder training program has been successful, with a 10% increase in welders year-over-year, supporting growth in both defense and energy sectors [62][63] Question: Utilization of the cryogenic facility - The cryogenic facility is on track to be operational soon, with strong demand anticipated based on customer inquiries [67][70] Question: Progress on NextGen nozzle and potential clients - The NextGen nozzle design is complete, with ongoing discussions with existing clients for upgrades during maintenance turnarounds [75][76]

Financial Performance - Net sales for fiscal 2025 were $209,896, an increase of $24,363 or 13% compared to fiscal 2024, with $2,778 attributed to the acquisition of P3[158]. - Gross profit for fiscal 2025 was $52,861, reflecting a gross profit margin of 25.2%, which is a 330 basis point improvement over fiscal 2024[158]. - Net income for fiscal 2025 was $12,230, representing a 168% increase from $4,556 in fiscal 2024, with diluted income per share rising to $1.11 from $0.42[158]. - SG&A expenses for fiscal 2025 increased by $5,305 to $38,888, driven by investments in personnel, processes, and technology[158]. - The effective tax rate for fiscal 2025 was 21%, up from 18% in fiscal 2024, primarily due to higher pre-tax income[179]. - Net cash provided by operating activities for fiscal 2025 was $24,316 million, a decrease from $28,120 million in fiscal 2024, primarily due to lower cash from accounts receivable[187]. - As of March 31, 2025, stockholders' equity increased to $119,577 from $105,566 in the prior year[197]. Backlog and Orders - The company reported a funded and unfunded backlog of $412.3 million as of March 31, 2025, compared to $390.9 million as of March 31, 2024, indicating a year-over-year increase of approximately 5.5%[24]. - Backlog at March 31, 2025, was $412,335, a 5% increase from $390,868 at March 31, 2024, with approximately 83% of the backlog related to the Defense industry[158]. - Total orders for fiscal 2025 were $231,112, a decrease of 14% from $268,447 in fiscal 2024, primarily due to record orders in the previous year[201]. - The book-to-bill ratio for fiscal 2025 was 1.1x, indicating a healthy order intake relative to sales[202]. - Significant orders in fiscal 2025 included a $50,000 procurement for the U.S. Navy's Virginia Class Submarine program and a $2,200 strategic investment from a major Defense customer[203]. Market Segmentation - Domestic sales accounted for approximately 81% of total sales in fiscal 2025, with sales to the Defense industry representing 58% of total sales[23]. - In fiscal 2025, sales to the Defense industry accounted for approximately 58% of total sales, up from 25% in fiscal 2021[40]. - Sales to the Energy & Process markets represented approximately 35% of revenue in fiscal 2025, down from 75% in fiscal 2021[40]. - The Defense market accounted for 58% of net sales in fiscal 2025, with sales increasing by $22,432 or 23% compared to fiscal 2024[171]. - The Energy & Process market saw a slight increase in sales of 1%, totaling $73,287, while the Space market increased by 11% to $14,684[171]. Strategic Initiatives - The company aims for an average annualized organic revenue growth of 8% to 10% and low to mid-teen adjusted EBITDA margins by fiscal 2027[26]. - The company completed the acquisition of P3 Technologies, which is expected to diversify market and product offerings and enhance turbomachinery solutions[18]. - The company has transitioned to a diversified business model serving multiple markets, including Defense, Energy & Process, and Space, moving away from a highly cyclical Energy business[26]. - The company is expanding its Batavia, NY campus with a new 30,000 square foot manufacturing facility, funded primarily by a strategic investment from a Defense customer[117]. - The company has initiated construction of a cryogenic testing facility to enhance capabilities, scheduled for completion in Q1 fiscal 2026[145]. Risks and Challenges - Inflation and global supply chain issues have increased the cost of raw materials and labor, impacting financial results, particularly due to fixed-price contracts[36]. - The company is exposed to risks related to customer concentration, particularly with U.S. Navy projects, which could impact revenue if funding is disrupted[47]. - Fixed-price contracts represent a substantial portion of sales, which may lead to difficulties in execution and potential cost overruns[60]. - The company is susceptible to investigations and legal proceedings related to government contracts, which could adversely affect its financial position and operations[70]. - The company faces challenges from competition, as some competitors may have greater resources or cost advantages, potentially impacting market share and profitability[78]. Research and Development - Research and development (R&D) expenditures were $4,039 million in fiscal 2025, with $1,124 million not customer funded[41]. - The company expects R&D spend not funded by customers to increase to 1% to 2% of revenue in the future[41]. Environmental and Regulatory Factors - Environmental costs are not expected to have a material adverse effect on financial performance, although future liabilities cannot be assured[39]. - U.S. government contracts are subject to extensive regulations, and failure to comply may result in financial penalties or contract termination[64]. - The company is subject to export, import, and sanctions laws, and failure to comply could result in fines and regulatory actions[67]. - Climate change regulations may influence customers' investment decisions, potentially reducing demand for the company's products[73]. Workforce and Talent Management - The company maintains a highly skilled workforce and invests in employee development through various training programs[27]. - The company is dependent on a skilled workforce, facing challenges such as labor shortages and increased competition for talent, which could lead to higher operational costs[128]. - The company may experience difficulties in retaining key management and technical personnel due to intense competition in the industry[107]. Cybersecurity and Technology - Cybersecurity threats pose risks to the company's information systems, potentially leading to financial loss and reputational damage[112]. - The company has developed a comprehensive cybersecurity risk management program to protect critical systems and information, overseen by its Audit Committee[135]. - The implementation of a new enterprise resource planning (ERP) system is scheduled to go live in fiscal 2026, with potential risks including operational disruptions and inefficiencies[115].

Fourth Quarter & Full-Year Fiscal 2025 Financial Results JUNE 9, 2025 GRAHAM CORPORATION 1 © 2025 GRAHAM CORPORATION, ALL RIGHTS RESERVED Safe Harbor Statement Safe Harbor Regarding Forward Looking Statements This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are subject to risks, uncertainties and assumptions and are identified by wor ...

Financial Performance - Fourth quarter revenue increased by 21% to $59.3 million, driven by strong performance across all markets[6] - Fiscal 2025 net income was $12.2 million, a significant increase from $4.6 million in the prior fiscal year, representing a 168% growth[14] - Adjusted EBITDA for fiscal 2025 was $22.4 million, up 69% from $13.3 million in fiscal 2024, with an adjusted EBITDA margin of 10.7%[14] - For the fourth quarter of fiscal 2025, net sales increased by 21% year-over-year to $59.3 million, while full-year sales rose by 13% to $209.9 million[45] - Gross profit for the fourth quarter was $16.0 million, reflecting a 26% increase compared to the same quarter last year, with a gross margin of 27.0%[45] - Operating profit surged by 262% year-over-year to $5.5 million in the fourth quarter, with an operating margin of 9.3%[45] - Net income for the fourth quarter reached $4.4 million, a 228% increase from the previous year, resulting in a diluted net income per share of $0.40[45] - Net income for the year ended March 31, 2025, was $12,230 million, a significant increase of 168.5% compared to $4,556 million in 2024[49] - Adjusted EBITDA for the year ended March 31, 2025, reached $22,429 million, up 68.9% from $13,285 million in 2024[51] - Net sales for the year ended March 31, 2025, were $209,896 million, up 13.1% from $185,533 million in 2024[51] - The net income margin improved to 5.8% in 2025 from 2.5% in 2024[51] Guidance and Projections - Fiscal 2026 guidance projects revenue between $225 million and $235 million, reflecting a 10% increase at the midpoint compared to fiscal 2025[6] - Fiscal 2026 guidance for net sales is projected between $225 million and $235 million, with a gross margin of 24.5% to 25.5%[26] - Adjusted EBITDA is expected to range from $22 million to $28 million, with capital expenditures estimated at $15 million to $18 million[26] Backlog and Orders - The company reported a record backlog of $412.3 million as of March 31, 2025, a 5% increase year-over-year[24] - Orders for fiscal 2025 totaled $231.1 million, resulting in a book-to-bill ratio of 1.1x[22] - The company emphasizes the importance of tracking orders and backlog as leading indicators of future performance[40] - The book-to-bill ratio is used to assess growth prospects, calculated as net orders divided by net sales[41] Cash Flow and Investments - Cash provided by operating activities for the year was $24.3 million, with cash and cash equivalents increasing to $21.6 million[18] - Capital expenditures for fiscal 2025 were $19.0 million, focused on capacity expansion and productivity improvements[19] - Cash and cash equivalents at the end of the year increased to $21,577 million from $16,939 million, marking a rise of 27.5%[49] - Customer deposits rose to $84,062 million in 2025, an increase of 16.8% from $71,987 million in 2024[47] - The company plans to invest in key organic and inorganic growth opportunities to enhance long-term profitability[3] Margins and Expenses - Gross margin for the fourth quarter expanded by 110 basis points to 27.0%, while fiscal 2025 gross margin increased by 330 basis points to 25.2%[6] - SG&A expenses, including amortization, are projected to be 17.5% to 18.5% of sales, with additional costs related to performance bonuses and ERP conversion included[26][28] Assets and Liabilities - Total assets increased to $264,110 million in 2025 from $233,879 million in 2024, representing a growth of 13.0%[47] - Total liabilities increased to $144,533 million in 2025 from $128,313 million in 2024, reflecting a growth of 12.7%[47] - The company reported a net cash provided by operating activities of $24,316 million for the year, down from $28,120 million in 2024[49] - Adjusted net income for the year ended March 31, 2025, was $13,716 million, compared to $6,796 million in 2024, an increase of 102.5%[53]

Group 1 - Graham Corporation (NYSE: GHM) was added to the Russell 2000 Index on June 28, 2024, as part of the broader Russell Reconstitution for 2024 [1] Group 2 - Shri Upadhyaya has over 15 years of investing experience and emphasizes the importance of personal investment strategies developed through deep research [2] - The analysis provided by Shri includes identifying asymmetrical opportunities, cost-effective hedges, low correlation stocks for diversification, and avoiding stocks with unattractive risk-reward profiles [2]