Group 1 - Gabelli Funds, LLC is hosting the annual Aerospace & Defense Symposium on September 4, 2025, at The Harvard Club in New York City, focusing on strong demand outlook and high barriers to entry in the industry [1] - The symposium will feature top executives from over ten companies, discussing themes such as large aftermarket opportunities, growth exceeding GDP, defense spending, and M&A potential [1] - Attendees will have the opportunity for one-on-one meetings with management, enhancing networking and investment insights [1] Group 2 - Featured companies at the symposium include AIRO Group Holdings, Elbit Systems, Albany International, Graham Corporation, and several others, indicating a diverse representation within the Aerospace and Defense sector [2] - The event is set to start at 8:30 am, providing a structured schedule for discussions and networking [3]

Core Viewpoint - Graham reported a significant improvement in profitability for Q1 FY2026, with non-GAAP EPS of $0.45 exceeding analyst estimates, but GAAP revenue fell short of expectations at $55.5 million [1][2]. Financial Performance - Non-GAAP EPS increased by 36% year-over-year, from $0.33 in Q1 FY2025 to $0.45 in Q1 FY2026 [2][6]. - GAAP revenue was $55.5 million, which was below the expected $63.4 million, despite an 11% year-over-year increase [2][5]. - Gross margin improved to 26.5%, up 1.7 percentage points from the previous year, while operating margin rose to 8.9% compared to 6.5% in Q1 FY2025 [2][5]. - Adjusted EBITDA climbed 33% to $6.8 million [2][6]. Orders and Backlog - The total order figure reached $125.9 million, more than doubling compared to the same quarter last year, resulting in a record book-to-bill ratio of 2.3x [7][11]. - Backlog increased by 22% year-over-year to $482.9 million, with approximately 87% tied to Defense projects [7][11]. Business Strategy - Graham focuses on expanding into new markets, innovation, and deepening ties to U.S. defense programs while maintaining financial discipline [4][3]. - The integration of P3 Technologies has enhanced capabilities in turbomachinery, allowing for novel project pursuits [12]. Future Guidance - The company maintains its FY2026 guidance, projecting net sales between $225 million and $235 million and adjusted EBITDA of $22 million to $28 million [14]. - Capital expenditures for FY2026 are planned between $15 million and $18 million, targeting 8-10% annual organic revenue growth [14].

Financial Data and Key Metrics Changes - Revenue increased by 11% to $55.5 million, driven by strong performance in energy and process markets, particularly refining and petrochemical sectors [6][17] - Adjusted EBITDA rose by 33% year over year to $6.8 million, with an adjusted EBITDA margin of 12.3%, reflecting operational excellence [7][20] - Net income for the quarter was $4.6 million, or $0.42 per diluted share, a 56% increase compared to the prior year [20] - The company achieved a record backlog of $483 million, a 22% increase year over year, with a book to bill ratio of 2.3 times [21][22] Business Line Data and Key Metrics Changes - Sales to the energy and process market increased by $5.7 million, driven by commercial projects in chemical and petrochemical sectors, as well as momentum in new energy markets [18] - Aftermarket sales for energy and process and defense markets totaled $10.4 million, up 33% from the prior year, indicating robust demand [18] Market Data and Key Metrics Changes - Approximately 87% of the backlog is for the defense industry, with 35% to 40% expected to convert to revenue over the next twelve months [22] - The company continues to see strong momentum in U.S. Navy programs, including a $25.5 million follow-on order for the MK-48 Mod 7 torpedo program [8][9] Company Strategy and Development Direction - The company is focused on strategic capital investments, including a new 30,000 square foot manufacturing facility to support U.S. Navy programs, expected to be operational by the end of Q3 [13][14] - The company aims for 8% to 10% organic revenue growth per year and low to mid-teen adjusted EBITDA margins as it transitions to a growth phase [16][24] - The company is pursuing acquisition opportunities that align with its strategic initiatives to supplement organic growth [15] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about growth prospects in the energy and process markets, particularly in small modular nuclear reactors and cryogenics [11][12] - The company is actively monitoring the impact of tariffs, estimating a potential impact of $2 million to $5 million for the full year, but did not see a material impact in the first quarter [19][82] Other Important Information - The company is implementing an ERP system to streamline workflows and improve efficiency, expected to come online by the end of 2025 [14] - The company has a strong balance sheet with $10.8 million in cash and no debt, providing a solid foundation for future growth [22] Q&A Session Summary Question: Regarding EBITDA margins and potential headwinds - Management noted that the high aftermarket sales mix contributed to the strong margins, but they expect a normalization in the future [28][29] Question: Opportunities in aftermarket sales - Management highlighted opportunities in fleet maintenance and spare support for torpedo programs as key growth areas [31][32] Question: Clarification on recent torpedo order - The entire order will be recognized in Q2, as it was finalized after the quarter ended [35] Question: Growth in small modular nuclear reactors - Management discussed supplying helium circulators and molten salt pumps for small modular nuclear systems, indicating significant growth potential [38][39] Question: Space segment traction - Management explained that while the space market is in early development phases, they are seeing increased interest and traction in low-rate production programs [52][54] Question: Tariff impacts and mitigation strategies - Management detailed their strategies to mitigate tariff impacts through in-country manufacturing partnerships and favorable contract terms [81][82] Question: International growth strategy - The company is focusing on a nationalistic approach in markets like India and China, aiming to leverage local production capabilities [84][85]

Financial Performance - Revenue for Q1 FY26 increased by $55 million, or 11%, reaching $555 million[11, 18] - Gross profit for Q1 FY26 increased by $24 million, or 19%, with gross margin expanding by 170 bps to 265%[11, 24] - Adjusted EBITDA for Q1 FY26 increased by 33% to $68 million, resulting in an Adjusted EBITDA margin of 123%[11, 26] - Net income for Q1 FY26 increased by 55% to $46 million[11] Orders and Backlog - Q1 FY26 orders totaled $1259 million, leading to a book-to-bill ratio of 23x[11] - Record backlog reached $4829 million[11] - Defense sector accounts for 87% of the backlog, while Energy & Process represents 11%, and Space comprises 3%[39] Financial Outlook for FY26 - Net sales are projected to be between $225 million and $235 million[44] - Adjusted EBITDA is expected to be in the range of $22 million to $28 million[44] - Capital expenditures are estimated at $15 million to $18 million[44]

Part I. FINANCIAL INFORMATION [Unaudited Condensed Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) The company's unaudited statements show increased net income and sales, including detailed notes on various accounting policies Condensed Consolidated Statements of Operations (Three Months Ended June 30) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net sales | $55,487 | $49,951 | $5,536 | 11.1% | | Gross profit | $14,721 | $12,368 | $2,353 | 19.0% | | Operating income | $4,964 | $3,224 | $1,740 | 53.9% | | Income before provision for income taxes | $5,013 | $3,294 | $1,719 | 52.2% | | Net income | $4,595 | $2,966 | $1,629 | 54.9% | | Basic Net income per share | $0.42 | $0.27 | $0.15 | 55.6% | | Diluted Net income per share | $0.42 | $0.27 | $0.15 | 55.6% | Condensed Consolidated Balance Sheets (As of) | Metric | June 30, 2025 (in thousands) | March 31, 2025 (in thousands) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total current assets | $127,523 | $141,372 | $(13,849) | -9.8% | | Total assets | $252,339 | $264,110 | $(11,771) | -4.5% | | Total current liabilities | $121,059 | $136,150 | $(15,091) | -11.1% | | Total liabilities | $128,955 | $144,533 | $(15,578) | -10.8% | | Total stockholders' equity | $123,384 | $119,577 | $3,807 | 3.2% | Condensed Consolidated Statements of Cash Flows (Three Months Ended June 30) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change ($) | | :--- | :--- | :--- | :--- | | Net cash (used) provided by operating activities | $(2,259) | $8,716 | $(10,975) | | Net cash used by investing activities | $(7,004) | $(3,148) | $(3,856) | | Net cash used by financing activities | $(1,614) | $(889) | $(725) | | Net (decrease) increase in cash and cash equivalents | $(10,824) | $4,672 | $(15,496) | | Cash and cash equivalents at end of period | $10,753 | $21,611 | $(10,858) | [Basis of Presentation](index=8&type=section&id=NOTE%201%20%E2%80%93%20BASIS%20OF%20PRESENTATION) The interim financial statements are prepared according to GAAP and include all wholly-owned subsidiaries - The unaudited condensed consolidated financial statements include wholly-owned subsidiaries in Colorado, Florida, China, and India, prepared in accordance with GAAP for interim financial information and SEC rules[19](index=19&type=chunk) - Results for the three months ended June 30, 2025, are **not necessarily indicative** of the full fiscal year ending March 31, 2026[20](index=20&type=chunk) [Revenue Recognition](index=8&type=section&id=NOTE%202%20%E2%80%93%20REVENUE%20RECOGNITION) Revenue is recognized upon satisfaction of performance obligations, with detailed disaggregation by market, region, and method - Revenue is recognized when performance obligations are satisfied, either upon shipment or over time, depending on contract terms[21](index=21&type=chunk) - Remaining unsatisfied performance obligations (backlog) as of June 30, 2025, totaled **$482,860**, with **35% to 40%** expected to be recognized within one year[27](index=27&type=chunk) Revenue Disaggregated by Market (Three Months Ended June 30) | Market | 2025 (in thousands) | 2024 (in thousands) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Defense | $29,535 | $29,094 | $441 | 1.5% | | Energy & Process | $22,574 | $16,910 | $5,664 | 33.5% | | Space | $3,378 | $3,947 | $(569) | -14.4% | | **Net sales** | **$55,487** | **$49,951** | **$5,536** | **11.1%** | Revenue Disaggregated by Geographic Region (Three Months Ended June 30) | Geographic Region | 2025 (in thousands) | 2024 (in thousands) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Asia | $3,283 | $5,304 | $(2,021) | -38.1% | | Canada | $3,510 | $996 | $2,514 | 252.4% | | Middle East | $1,346 | $983 | $363 | 36.9% | | South America | $393 | $55 | $338 | 614.5% | | U.S. | $46,322 | $40,930 | $5,392 | 13.2% | | All other | $633 | $1,683 | $(1,051) | -62.5% | | **Net sales** | **$55,487** | **$49,951** | **$5,536** | **11.1%** | Revenue Recognition Method (Three Months Ended June 30) | Method | 2025 | 2024 | | :--- | :--- | :--- | | Revenue recognized over time | 80% | 82% | | Revenue recognized at shipment | 20% | 18% | [Inventories](index=12&type=section&id=NOTE%203%20%E2%80%93%20INVENTORIES) Inventories are valued at the lower of cost or net realizable value using the average cost method - Inventories are valued at the lower of cost or net realizable value using the average cost method[28](index=28&type=chunk) Major Classifications of Inventories (in thousands) | Classification | June 30, 2025 | March 31, 2025 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Raw materials and supplies | $5,806 | $5,859 | $(53) | -0.9% | | Work in process | $30,069 | $32,579 | $(2,510) | -7.7% | | Finished products | $1,511 | $1,587 | $(76) | -4.8% | | **Total** | **$37,386** | **$40,025** | **$(2,639)** | **-6.6%** | [Intangible Assets](index=12&type=section&id=NOTE%204%20%E2%80%93%20INTANGIBLE%20ASSETS) The company's intangible assets primarily consist of customer relationships, technology, tradenames, and goodwill - Intangible amortization expense was **$499** for the three months ended June 30, 2025, down from $554 in the prior year period[31](index=31&type=chunk) Intangible Assets (Net Carrying Amount, in thousands) | Asset Type | June 30, 2025 | March 31, 2025 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Customer relationships | $12,874 | $13,159 | $(285) | -2.2% | | Technology and technical know-how | $10,121 | $10,310 | $(189) | -1.8% | | Tradename (amortized) | $133 | $158 | $(25) | -15.8% | | Goodwill (not amortized) | $25,520 | $25,520 | $0 | 0.0% | | Tradename (not amortized) | $6,700 | $6,700 | $0 | 0.0% | [Equity-Based Compensation](index=13&type=section&id=NOTE%205%20%E2%80%93%20EQUITY-BASED%20COMPENSATION) The company utilizes an equity incentive plan for granting stock options, RSUs, and stock awards - The 2020 Graham Corporation Equity Incentive Plan allows for grants of stock options, restricted stock units (RSUs), and stock awards[32](index=32&type=chunk) Equity-Based Compensation Expense (Three Months Ended June 30, in thousands) | Type | 2025 | 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Restricted stock awards | $0 | $27 | $(27) | -100.0% | | Restricted stock units | $489 | $288 | $201 | 69.8% | | Employee stock purchase plan | $43 | $29 | $14 | 48.3% | | **Total** | **$532** | **$344** | **$188** | **54.7%** | [Income Per Share](index=14&type=section&id=NOTE%206%20%E2%80%93%20INCOME%20PER%20SHARE) This note provides the calculation and components of basic and diluted net income per share Income Per Share Data (Three Months Ended June 30) | Metric | 2025 | 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Basic Net income per share | $0.42 | $0.27 | $0.15 | 55.6% | | Diluted Net income per share | $0.42 | $0.27 | $0.15 | 55.6% | | Weighted average common shares outstanding (Basic) | 10,927 | 10,862 | 65 | 0.6% | | Weighted average common and potential common shares outstanding (Diluted) | 11,033 | 10,958 | 75 | 0.7% | [Product Warranty Liability](index=14&type=section&id=NOTE%207%20%E2%80%93%20PRODUCT%20WARRANTY%20LIABILITY) This note details the changes in the company's product warranty liability during the period Product Warranty Liability Reconciliation (Three Months Ended June 30, in thousands) | Metric | 2025 | 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Balance at beginning of period | $786 | $806 | $(20) | -2.5% | | (Income) expense for product warranties | $(2) | $23 | $(25) | -108.7% | | Product warranty claims paid | $(53) | $127 | $74 | -58.3% | | **Balance at end of period** | **$731** | **$702** | **$29** | **4.1%** | [Cash Flow Statement](index=16&type=section&id=NOTE%208%20%E2%80%93%20CASH%20FLOW%20STATEMENT) This note provides supplemental information related to the consolidated statements of cash flows Supplemental Cash Flow Information (Three Months Ended June 30, in thousands) | Metric | 2025 | 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Interest paid | $63 | $51 | $12 | 23.5% | | Income taxes paid | $29 | $46 | $(17) | -37.0% | | Capital purchases recorded in accounts payable | $660 | $423 | $237 | 56.0% | [Commitments and Contingencies](index=16&type=section&id=NOTE%209%20%E2%80%93%20COMMITMENTS%20AND%20CONTINGENCIES) The company discloses its legal proceedings, investigations, and significant lease commitments - The Company is a co-defendant in asbestos-related lawsuits but believes their resolution will **not materially impact** financial position or results of operations[38](index=38&type=chunk) - An investigation into a whistleblower complaint at Graham India Private Limited (GIPL) identified misconduct totaling **$150** over four years, leading to employee terminations and strengthened internal controls[39](index=39&type=chunk) - Fixed minimum lease payments to Ascent Properties Group, LLC were **$252** for Q1 FY26, with future payments of **$4,544** as of June 30, 2025[41](index=41&type=chunk) [Income Taxes](index=16&type=section&id=NOTE%2010%20%E2%80%93%20INCOME%20TAXES) This note details the effective tax rate and the potential impact of recent tax legislation - The effective tax rate for Q1 FY26 was **8.3%**, compared to **10%** for Q1 FY25, primarily due to increased discrete tax benefits from restricted stock awards[45](index=45&type=chunk) - The Company is analyzing the One Big Beautiful Bill Act (OBBB) but does **not anticipate a material impact** on its financial statements or effective tax rate[46](index=46&type=chunk) [Changes in Accumulated Other Comprehensive Loss](index=18&type=section&id=NOTE%2011%20%E2%80%93%20CHANGES%20IN%20ACCUMULATED%20OTHER%20COMPREHENSIVE%20LOSS) This note reconciles the changes in each component of accumulated other comprehensive loss - Net current-period other comprehensive income was **$212 thousand** for the three months ended June 30, 2025, compared to $122 thousand in the prior year[47](index=47&type=chunk) Accumulated Other Comprehensive Loss (in thousands) | Component | April 1, 2025 | June 30, 2025 | Change ($) | | :--- | :--- | :--- | :--- | | Pension and Other Postretirement Benefit Items | $(6,671) | $(6,509) | $162 | | Foreign Currency Items | $(316) | $(266) | $50 | | **Total** | **$(6,987)** | **$(6,775)** | **$212** | [Debt](index=18&type=section&id=NOTE%2012%20%E2%80%93%20DEBT) The company details its revolving credit facility, outstanding letters of credit, and compliance with financial covenants - As of June 30, 2025, the Company had a **$50,000** revolving credit facility with **$44,254 available**[48](index=48&type=chunk)[49](index=49&type=chunk)[52](index=52&type=chunk) - The Company was in compliance with financial covenants, including a consolidated total leverage ratio not exceeding **3.50:1.00** and a fixed charge coverage ratio of at least **1.20:1.00**[50](index=50&type=chunk) - Total letters of credit outstanding as of June 30, 2025, were **$10,648**, down from $10,997 at March 31, 2025[54](index=54&type=chunk) [Segment Information](index=20&type=section&id=NOTE%2013%20%E2%80%93%20SEGMENT%20INFORMATION) The company operates as a single reporting segment and uses Adjusted EBITDA to evaluate performance - The Company operates as **one reporting segment**, designing and manufacturing technologies for the Defense, Energy & Process, and Space industries[55](index=55&type=chunk) - The CEO, as CODM, evaluates performance based on **Adjusted EBITDA**, a non-GAAP measure, to assess operating performance and earnings power[55](index=55&type=chunk) Adjusted EBITDA Reconciliation (Three Months Ended June 30, in thousands) | Metric | 2025 | 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net income | $4,595 | $2,966 | $1,629 | 54.9% | | Adjusted EBITDA | $6,838 | $5,137 | $1,701 | 33.1% | | Net income as a % of revenue | 8.3% | 5.9% | 2.4% pts | 40.7% | | Adjusted EBITDA as a % of revenue | 12.3% | 10.3% | 2.0% pts | 19.4% | [Accounting and Reporting Changes](index=20&type=section&id=NOTE%2014%20%E2%80%93%20ACCOUNTING%20AND%20REPORTING%20CHANGES) The company is currently evaluating the impact of newly issued accounting standards updates - The FASB issued ASU 2023-09 (Income Taxes) effective for annual periods after December 15, 2024, requiring additional income tax disclosures[60](index=60&type=chunk) - The FASB issued ASU No. 2024-03 (Expense Disaggregation Disclosures) effective for fiscal years after December 15, 2026, requiring additional income statement expense disclosures[61](index=61&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes financial condition and results, covering market performance, liquidity, backlog, and future outlook - Graham Corporation is a global leader in mission-critical technologies for Defense, Energy & Process, and Space industries, with key subsidiaries including Barber-Nichols, LLC[62](index=62&type=chunk)[64](index=64&type=chunk) - Orders booked in Q1 FY26 were **$125,898**, leading to a backlog increase of $70,525 to **$482,860** at June 30, 2025, with a book-to-bill ratio of **2.3x**[70](index=70&type=chunk) - Cash and cash equivalents decreased by **$10,824** to **$10,753** at June 30, 2025, primarily due to cash used by operating activities ($2,259) and capital expenditures ($7,004)[70](index=70&type=chunk) - Leadership changes were announced, with Daniel J. Thoren transitioning to Executive Chairman and Matthew J. Malone assuming the CEO role, effective June 10, 2025[70](index=70&type=chunk) Key Financial Highlights (Three Months Ended June 30) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net sales | $55,487 | $49,951 | $5,536 | 11% | | Gross profit | $14,721 | $12,368 | $2,353 | 19% | | Gross profit margin | 26.5% | 24.8% | 1.7% pts | 6.9% | | SG&A expenses | $9,833 | $9,274 | $559 | 6% | | SG&A as a percent of sales | 17.7% | 18.6% | -0.9% pts | -4.8% | | Net income | $4,595 | $2,966 | $1,629 | 55% | | Income per diluted share | $0.42 | $0.27 | $0.15 | 56% | [Overview](index=23&type=section&id=Overview) The company designs and manufactures custom-engineered technologies for various critical industries worldwide - Graham Corporation specializes in custom-engineered vacuum, heat transfer, cryogenic pump, and turbomachinery technologies for Defense, Energy & Process, and Space industries[62](index=62&type=chunk) - Key subsidiaries include Barber-Nichols, LLC (turbomachinery), P3 Technologies, LLC (turbomachinery engineering), and operations in China and India[64](index=64&type=chunk) [Summary of Highlights](index=23&type=section&id=Summary) The first quarter of fiscal 2026 saw significant growth in sales, gross profit, net income, and backlog - Energy & Process sales increased by **$5,664 (33%)** due to Chemical/Petrochemical and New Energy markets, with strong aftermarket sales up **33%**[66](index=66&type=chunk) - Backlog increased by **$70,525** to **$482,860**, driven by **$125,898** in new orders, including **$86,500** for the U.S. Navy's Virginia Class Submarine program[70](index=70&type=chunk) - Cash and cash equivalents decreased by **$10,824** to **$10,753**, primarily due to **$2,259** cash used in operations and **$7,004** in capital expenditures[70](index=70&type=chunk) Q1 FY26 Financial Highlights (vs. Q1 FY25) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net sales | $55,487 | $49,951 | $5,536 | 11% | | Gross profit | $14,721 | $12,368 | $2,353 | 19% | | Gross profit margin | 26.5% | 24.8% | 1.7% pts | 6.9% | | SG&A expenses | $9,397 | $8,838 | $559 | 6% | | Net income | $4,595 | $2,966 | $1,629 | 55% | | Diluted EPS | $0.42 | $0.27 | $0.15 | 56% | [Cautionary Note Regarding Forward-Looking Statements](index=25&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) This report contains forward-looking statements that are subject to various risks and uncertainties - The report contains forward-looking statements subject to known and unknown risks that may cause actual results to differ materially from expectations[67](index=67&type=chunk)[68](index=68&type=chunk) - Readers should not place undue reliance on forward-looking statements and should consider risk factors detailed in the Form 10-K[68](index=68&type=chunk) [Current Market Conditions](index=25&type=section&id=Current%20Market%20Conditions) The company anticipates strong demand in Defense, a transition in Energy & Process, and growth potential in Space - End market disclosures have been updated, consolidating several markets into "Energy & Process"[70](index=70&type=chunk)[71](index=71&type=chunk) - Demand in the **Defense market** is expected to remain strong and expand due to budget plans and accelerated ship build schedules[72](index=72&type=chunk) - The **Energy & Process market** faces transition, with long-term growth expected from industrial goods and alternative/clean energy[73](index=73&type=chunk)[74](index=74&type=chunk)[75](index=75&type=chunk) - The Company is investing in technology like the **NextGen™ steam ejector nozzle**, with an estimated market opportunity exceeding **$50,000** over 5-10 years[76](index=76&type=chunk) - The **Space market** offers growth potential, but revenue can be uncertain due to the variable nature of sales[77](index=77&type=chunk) - The Defense market comprised **87% of total backlog** at June 30, 2025, reflecting a strategic focus on this market[78](index=78&type=chunk) [Results of Operations](index=28&type=section&id=Results%20of%20Operations) The company achieved higher sales, improved gross profit margin, and significant growth in net income for the quarter - Gross profit margin improved by **170 basis points to 26.5%** in Q1 FY26, driven by higher sales volume and better execution[85](index=85&type=chunk) - SG&A expenses increased by **$559 (6%)** to **$9,833**, reflecting investments, but decreased as a percentage of sales from 18.6% to **17.7%**[86](index=86&type=chunk) - Net income for Q1 FY26 was **$4,595 ($0.42 diluted EPS)**, up from $2,966 ($0.27 diluted EPS) in Q1 FY25[90](index=90&type=chunk) Net Sales by Market (Three Months Ended June 30) | Market | 2025 (in thousands) | % of Total | 2024 (in thousands) | % of Total | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Defense | $29,535 | 53% | $29,094 | 58% | $441 | 2% | | Energy & Process | $22,574 | 41% | $16,910 | 34% | $5,664 | 33% | | Space | $3,378 | 6% | $3,947 | 8% | $(569) | -14% | | **Net sales** | **$55,487** | **100%** | **$49,951** | **100%** | **$5,536** | **11%** | Net Sales by Geographic Region (Three Months Ended June 30) | Geographic Region | 2025 (in thousands) | % of Total | 2024 (in thousands) | % of Total | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | United States | $46,322 | 83% | $40,930 | 82% | $5,392 | 13% | | International | $9,165 | 17% | $9,021 | 18% | $144 | 2% | | **Net sales** | **$55,487** | **100%** | **$49,951** | **100%** | **$5,536** | **11%** | [Non-GAAP Measures](index=31&type=section&id=Non-GAAP%20Measures) Management uses non-GAAP measures like Adjusted EBITDA and adjusted net income to assess performance - Adjusted EBITDA, adjusted net income, and adjusted net income per diluted share are non-GAAP measures used to assess financial and operating performance[91](index=91&type=chunk)[92](index=92&type=chunk) - These non-GAAP measures exclude charges and credits not directly related to operating performance, such as depreciation, amortization, and acquisition costs[93](index=93&type=chunk) Adjusted Net Income Reconciliation (Three Months Ended June 30, in thousands) | Metric | 2025 | 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net income (GAAP) | $4,595 | $2,966 | $1,629 | 54.9% | | Adjusted net income (Non-GAAP) | $4,938 | $3,584 | $1,354 | 37.8% | | GAAP net income per diluted share | $0.42 | $0.27 | $0.15 | 55.6% | | Adjusted net income per diluted share | $0.45 | $0.33 | $0.12 | 36.4% | [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity was impacted by bonus payments and increased capital expenditures, while maintaining a strong credit facility - Net cash used by operating activities was **$2,259** in Q1 FY26, compared to **$8,716** provided in Q1 FY25, primarily due to bonus payments[97](index=97&type=chunk) - Capital expenditures increased to **$7,004** in Q1 FY26, driven by investments in new manufacturing and testing facilities[98](index=98&type=chunk) - Fiscal 2026 capital expenditures are projected to be **$15,000 to $18,000**[99](index=99&type=chunk) - The Company has a **$50,000** revolving credit facility with **$44,254 available** as of June 30, 2025, and was in compliance with all financial covenants[101](index=101&type=chunk)[102](index=102&type=chunk) Liquidity Metrics (in thousands) | Metric | June 30, 2025 | March 31, 2025 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $10,753 | $21,577 | $(10,824) | -50.2% | | Working capital | $6,464 | $5,222 | $1,242 | 23.8% | | Working capital ratio | 1.1 | 1.0 | 0.1 | 10.0% | [Orders, Backlog, and Book-to-Bill Ratio](index=35&type=section&id=Orders%2C%20Backlog%2C%20and%20Book-to-Bill%20Ratio) Significant new orders, particularly in Defense, drove a substantial increase in total backlog and a strong book-to-bill ratio - Orders, backlog, and book-to-bill ratio are key operational metrics used to track current and future business performance[105](index=105&type=chunk) - Orders booked in Q1 FY26 were **$125,898**, including **$86,500** for the U.S. Navy's Virginia Class Submarine program, resulting in a book-to-bill ratio of **2.3x**[109](index=109&type=chunk) - Backlog increased **22%** year-over-year to **$482,860** at June 30, 2025, with **35% to 40%** expected to be recognized within one year[111](index=111&type=chunk) Orders by Market (Three Months Ended June 30, in thousands) | Market | 2025 | % of Total | 2024 | % of Total | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Defense | $106,690 | 85% | $28,617 | 51% | $78,073 | 273% | | Energy & Process | $18,795 | 15% | $25,796 | 46% | $(7,001) | -27% | | Space | $413 | 0% | $1,354 | 2% | $(941) | -69% | | **Total orders** | **$125,898** | **100%** | **$55,767** | **100%** | **$70,131** | **126%** | Backlog by Market (in thousands) | Market | June 30, 2025 | % of Total | June 30, 2024 | % of Total | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Defense | $417,768 | 87% | $327,827 | 83% | $89,941 | 27% | | Energy & Process | $51,975 | 11% | $60,890 | 15% | $(8,915) | -15% | | Space | $13,117 | 3% | $8,058 | 2% | $5,059 | 63% | | **Total backlog** | **$482,860** | **100%** | **$396,775** | **100%** | **$86,085** | **22%** | [Outlook](index=36&type=section&id=Outlook) The company reiterates its full-year fiscal 2026 guidance and remains on track to achieve its fiscal 2027 goals - The Company reiterates its full-year fiscal 2026 guidance, including Net Sales of **$225,000-$235,000** and Adjusted EBITDA of **$22,000-$28,000**[112](index=112&type=chunk)[113](index=113&type=chunk) - The Company is on track to achieve fiscal 2027 goals of **8% to 10%** average annualized organic revenue growth and low to mid-teens Adjusted EBITDA margins[114](index=114&type=chunk) [Contingencies and Commitments](index=37&type=section&id=Contingencies%20and%20Commitments) The company does not expect asbestos litigation or misconduct at its India subsidiary to materially impact financial results - The Company is a defendant in asbestos-related lawsuits but believes the resolution will **not have a material adverse effect** on its financial position[116](index=116&type=chunk) - An investigation into misconduct at Graham India Private Limited (GIPL) concluded, with **no material impact** on consolidated results anticipated[117](index=117&type=chunk) [Critical Accounting Policies, Estimates, and Judgments](index=38&type=section&id=Critical%20Accounting%20Policies%2C%20Estimates%2C%20and%20Judgments) Key accounting estimates involve revenue recognition, contingencies, and business combinations - Critical accounting estimates include labor hour estimates, total cost, and operational milestones for revenue recognition, accounting for contingencies, and business combinations[119](index=119&type=chunk) [New Accounting Pronouncements](index=38&type=section&id=New%20Accounting%20Pronouncements) Management expects no material impact from recently issued accounting pronouncements not yet adopted - Management evaluates new ASUs and accounting pronouncements, expecting **no material impact** from recently issued ones not yet adopted, other than those discussed in Note 14[120](index=120&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company details its exposure to market risks, including foreign currency, price, and interest rate fluctuations - Principal market risks include **foreign currency exchange rates, price risk, and interest rate risk**[121](index=121&type=chunk) [Foreign Currency](index=38&type=section&id=Foreign%20Currency) The company has limited exposure to foreign currency risk, with international sales comprising 17% of the total - International consolidated sales were **17% of total sales** for the first three months of fiscal 2026[123](index=123&type=chunk) - Foreign currency exchange rate fluctuations increased cash balances by **$53** in Q1 FY26[123](index=123&type=chunk) - The Company has limited exposure to foreign currency purchases (approximately **4%** of cost of products sold) and held no forward foreign currency contracts[124](index=124&type=chunk) [Price Risk](index=38&type=section&id=Price%20Risk) The company faces price pressure from global competition and cost inflation in labor, materials, and tariffs - The Company faces competition from global manufacturers with lower production costs, leading to potential price pressure[125](index=125&type=chunk) - Significant cost inflation in labor, raw materials, tariffs, and supply chain costs is a concern[125](index=125&type=chunk) - The estimated impact of increased tariffs over the prior year is **$2,000 to $5,000** for fiscal 2026[126](index=126&type=chunk) [Interest Rate Risk](index=40&type=section&id=Interest%20Rate%20Risk) The company's interest rate risk is minimal as it currently has no variable rate debt outstanding - The Company may borrow under its variable-rate Revolving Credit Facility to fund strategic growth[127](index=127&type=chunk) - As of June 30, 2025, there was **no variable rate debt outstanding** on the Revolving Credit Facility and no interest rate derivatives[127](index=127&type=chunk) [Controls and Procedures](index=40&type=section&id=Item%204.%20Controls%20and%20Procedures) Management confirms the effectiveness of disclosure controls and procedures with no material changes to internal controls - Disclosure controls and procedures were evaluated as **effective in all material respects** as of June 30, 2025[128](index=128&type=chunk) - **No material changes** to internal control over financial reporting occurred during the quarter[129](index=129&type=chunk) [Conclusion regarding the effectiveness of disclosure controls and procedures](index=40&type=section&id=Conclusion%20regarding%20the%20effectiveness%20of%20disclosure%20controls%20and%20procedures) The CEO and CFO concluded that disclosure controls and procedures were effective as of the end of the period - The CEO and CFO concluded that disclosure controls and procedures were **effective in all material respects** as of June 30, 2025[128](index=128&type=chunk) [Changes in internal control over financial reporting](index=40&type=section&id=Changes%20in%20internal%20control%20over%20financial%20reporting) No material changes were made to the company's internal control over financial reporting during the quarter - **No material changes** to internal control over financial reporting occurred during the quarter covered by this Form 10-Q[129](index=129&type=chunk) Part II. OTHER INFORMATION [Risk Factors](index=41&type=section&id=Item%201A.%20Risk%20Factors) No material changes have occurred to the risk factors previously disclosed in the company's Annual Report on Form 10-K - No material changes from the risk factors previously disclosed in the Company's Form 10-K for fiscal year ended March 31, 2025[130](index=130&type=chunk) [Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities](index=41&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%2C%20Use%20of%20Proceeds%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) This section confirms no issuer purchases of equity securities occurred and reiterates the company's current dividend policy - No purchases of equity securities by the issuer were made during the period[131](index=131&type=chunk) [Purchase of Equity Securities by the Issuer](index=41&type=section&id=Purchase%20of%20Equity%20Securities%20by%20the%20Issuer) The company did not purchase any of its equity securities during the reporting period - No equity securities were purchased by the issuer[131](index=131&type=chunk) [Dividend Policy](index=41&type=section&id=Dividend%20Policy) The company has no current intention to pay dividends and may be restricted by its credit facility - The revolving credit facility may restrict the ability to declare or pay dividends[132](index=132&type=chunk) - **No dividends were paid** during the three months ended June 30, 2025, or during fiscal 2025, and there is no current intention to pay dividends[132](index=132&type=chunk) [Exhibits](index=42&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including certifications and interactive data files - The report includes certifications from the Principal Executive Officer and Principal Financial Officer (Exhibits 31.1, 31.2, 32.1)[134](index=134&type=chunk) - Material contracts referenced include the Annual Stock-Based Long-Term Incentive Award Plan and the Annual Executive Cash Bonus Program[134](index=134&type=chunk) - Interactive Data Files (XBRL) are embedded within the Inline XBRL document[134](index=134&type=chunk) [Index of Exhibits](index=42&type=section&id=INDEX%20OF%20EXHIBITS) The index lists material contracts, officer certifications, and interactive data files filed with the report - Lists material contracts, certifications (Rule 13a-14(a)/15d-14(a) and Section 1350), and Interactive Data Files (XBRL)[134](index=134&type=chunk) [Signatures](index=43&type=section&id=Signatures) The report is duly signed by the Vice President-Finance and Chief Financial Officer on behalf of the corporation - The report was signed by Christopher J. Thome, Vice President-Finance, Chief Financial Officer, Chief Accounting Officer and Corporate Secretary, on August 5, 2025[137](index=137&type=chunk)

[Executive Summary & Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Highlights) Graham Corporation achieved strong Q1 FY26 results with 11% revenue growth, 56% EPS increase, robust orders, and a record backlog, driven by Energy & Process and Defense sectors Key Financial Highlights | Metric | Q1 FY26 | Change | | :--- | :--- | :--- | | Revenue | $55.5 million | +11% | | Gross Profit | $14.7 million | +19% | | Gross Margin | 26.5% | +170 bps | | Net Income per Diluted Share | $0.42 | +56% | | Adjusted EBITDA | $6.8 million | +33% | | Adjusted EBITDA Margin | 12.3% | +200 bps | | Orders | $125.9 million | - | | Book-to-Bill Ratio | 2.3x | - | | Backlog | $482.9 million | - | - The company's performance was driven by strong growth in **Energy & Process markets**, particularly in commercial projects and aftermarket demand, as well as momentum in emerging segments like **small modular reactors (SMRs)** and **cryogenics**[4](index=4&type=chunk) - The **Defense business** continues to perform well, bolstered by significant follow-on orders, including **$86.5 million** for the **Virginia Class submarine program** and **$25.5 million** for the **MK48 Mod 7 Heavyweight Torpedo program**[4](index=4&type=chunk) - Graham is pursuing high-return initiatives, such as **automated welding** and a new **cryogenic testing facility**, to improve margins and create new revenue streams. The expansion of the **Batavia defense facility** was completed in August 2025[4](index=4&type=chunk) [Financial Performance Review (Q1 FY2026)](index=2&type=section&id=Financial%20Performance%20Review%20%28Q1%20FY2026%29) Q1 FY2026 saw 11% net sales growth to $55.5 million, with gross profit up 19% and operating income up 54%, driven by Energy & Process market strength Q1 FY2026 Financial Performance Summary | ($ in thousands except per share data) | Q1 FY26 | Q1 FY25 | % Change | | :--- | :--- | :--- | :--- | | Net sales | $55,487 | $49,951 | 11% | | Gross profit | $14,721 | $12,368 | 19% | | Gross margin | 26.5% | 24.8% | +170 bps | | Operating income | $4,964 | $3,224 | 54% | | Operating margin | 8.9% | 6.5% | +240 bps | | Net income | $4,595 | $2,966 | 55% | | Net income per diluted share | $0.42 | $0.27 | 56% | [Revenue and Gross Profit](index=2&type=section&id=Revenue%20and%20Gross%20Profit) Net sales increased by $5.5 million, primarily from Energy & Process and strong aftermarket sales, leading to a gross margin improvement to 26.5% - Sales to the **Energy & Process market** increased by **$5.7 million**, driven by a surface condenser order for a North American **net-zero carbon emissions ethylene cracker** and increased sales to the **hydrogen** and **SMR markets**[7](index=7&type=chunk) - **Aftermarket sales** to both Energy & Process and Defense markets grew **33%** year-over-year, reaching **$10.4 million**[8](index=8&type=chunk) - **Gross margin expansion** was driven by **higher sales volume**, an improved mix of **higher-margin aftermarket sales**, and **better execution and pricing on defense contracts**[9](index=9&type=chunk) [Operating Expenses and Profitability](index=3&type=section&id=Operating%20Expenses%20and%20Profitability) SG&A expenses rose to $9.8 million due to investments but decreased to 17.7% of sales, reflecting improved financial discipline - **SG&A expenses**, including amortization, rose to **$9.8 million** from **$9.2 million** in the prior year, due to investments in operations, employees, and technology[10](index=10&type=chunk) - Despite the absolute increase in SG&A, its ratio to sales improved, decreasing from **18.6%** to **17.7%** year-over-year[10](index=10&type=chunk) [Orders and Backlog](index=3&type=section&id=Orders%20and%20Backlog) Q1 FY2026 saw strong orders of $125.9 million, a 2.3x book-to-bill ratio, and a record $482.9 million backlog, primarily from defense Orders and Backlog Summary | ($ in millions) | Q1 FY25 | Q1 FY26 | | :--- | :--- | :--- | | Orders | $55.8 | $125.9 | | Backlog | $396.8 | $482.9 | - The **book-to-bill ratio** for Q1 FY2026 was **2.3x**, driven by large defense orders[14](index=14&type=chunk) - Approximately **35% to 40%** of the current backlog is expected to convert to sales in the **next twelve months**. The **Defense industry** constitutes about **87%** of the total backlog[15](index=15&type=chunk) [Cash Flow and Balance Sheet](index=3&type=section&id=Cash%20Flow%20and%20Balance%20Sheet) Operating activities used $2.3 million cash, ending with $10.8 million cash and no debt, while investing $7.0 million in capital expenditures - **Cash and cash equivalents decreased** to **$10.8 million** from **$21.6 million** at the end of the previous quarter, mainly due to a **$4.3 million bonus payment** and **$7.0 million in capital expenditures**[11](index=11&type=chunk)[12](index=12&type=chunk) - The company remains **debt-free** and has **$44.3 million** available under its revolving credit facility[12](index=12&type=chunk) [Fiscal 2026 Outlook](index=4&type=section&id=Fiscal%2026%20Outlook) Graham Corporation reiterates FY2026 guidance, projecting $225-235 million in net sales and $22-28 million Adjusted EBITDA, aligning with long-term growth and margin targets Fiscal 2026 Guidance | Metric | Fiscal 2026 Guidance | | :--- | :--- | | Net Sales | $225 million to $235 million | | Gross Margin | 24.5% to 25.5% | | SG&A expense | 17.5% to 18.5% of sales | | Adjusted EBITDA | $22 million to $28 million | | Effective Tax Rate | 20% to 22% | | Capital Expenditures | $15.0 million to $18.0 million | - The company remains on track to reach its strategic goal of **8% to 10% annual organic revenue growth** and **low to mid-teen Adjusted EBITDA margins** by **fiscal 2027**[5](index=5&type=chunk) [Consolidated Financial Statements (Unaudited)](index=7&type=section&id=Consolidated%20Financial%20Statements%20%28Unaudited%29) Unaudited Q1 FY26 statements show 55% net income growth to $4.6 million, a strong balance sheet with $252.3 million in assets, and a $2.3 million operating cash outflow [Consolidated Statements of Operations](index=7&type=section&id=Consolidated%20Statements%20of%20Operations) Q1 FY26 net sales increased 11% to $55.5 million, with gross profit up 19%, operating income up 54%, and net income up 55% to $4.6 million Consolidated Statements of Operations (Unaudited) | ($ in thousands) | Q1 FY26 (2025) | Q1 FY25 (2024) | | :--- | :--- | :--- | | Net sales | $55,487 | $49,951 | | Gross profit | $14,721 | $12,368 | | Operating income | $4,964 | $3,224 | | Net income | $4,595 | $2,966 | [Consolidated Balance Sheet](index=8&type=section&id=Consolidated%20Balance%20Sheet) As of June 30, 2025, total assets were $252.3 million, with $10.8 million cash and $123.4 million in stockholders' equity Consolidated Balance Sheet (Unaudited) | ($ in thousands) | June 30, 2025 | March 31, 2025 | | :--- | :--- | :--- | | Cash and cash equivalents | $10,753 | $21,577 | | Total current assets | $127,523 | $141,372 | | Total assets | $252,339 | $264,110 | | Total current liabilities | $121,059 | $136,150 | | Total liabilities | $128,955 | $144,533 | | Total stockholders' equity | $123,384 | $119,577 | [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Q1 FY26 saw $2.3 million net cash used in operations, $7.0 million in investing, and $1.6 million in financing, leading to a $10.8 million net cash decrease Consolidated Statements of Cash Flows (Unaudited) | ($ in thousands) | Three Months Ended June 30, 2025 | | :--- | :--- | | Net cash (used) provided by operating activities | $(2,259) | | Net cash used by investing activities | $(7,004) | | Net cash used by financing activities | $(1,614) | | Net decrease in cash and cash equivalents | $(10,824) | [Non-GAAP Financial Measures & Reconciliations](index=5&type=section&id=Non-GAAP%20Financial%20Measures%20%26%20Reconciliations) Non-GAAP measures, including Adjusted EBITDA up 33% to $6.8 million and Adjusted Net Income up 38% to $4.9 million, provide insights into operating performance - The company uses **non-GAAP measures** like **Adjusted EBITDA** and **Adjusted Net Income**, which it believes are important for understanding operating performance by excluding items like amortization, acquisition costs, and other non-recurring expenses[25](index=25&type=chunk)[26](index=26&type=chunk)[27](index=27&type=chunk) [Adjusted EBITDA Reconciliation](index=10&type=section&id=Adjusted%20EBITDA%20Reconciliation) Q1 FY26 Adjusted EBITDA reached $6.8 million, reconciled from net income by adding back depreciation, amortization, and equity-based compensation Adjusted EBITDA Reconciliation (Unaudited) | ($ in thousands) | Q1 FY26 (2025) | Q1 FY25 (2024) | | :--- | :--- | :--- | | Net income | $4,595 | $2,966 | | Depreciation & amortization | $1,523 | $1,411 | | Equity-based compensation | $532 | $344 | | **Adjusted EBITDA** | **$6,838** | **$5,137** | | Adjusted EBITDA margin | 12.3% | 10.3% | [Adjusted Net Income Reconciliation](index=11&type=section&id=Adjusted%20Net%20Income%20Reconciliation) Q1 FY26 Adjusted Net Income was $4.9 million, or $0.45 per diluted share, primarily adjusted for intangible asset amortization and acquisition-related income Adjusted Net Income Reconciliation (Unaudited) | ($ in thousands, except per share) | Q1 FY26 (2025) | Q1 FY25 (2024) | | :--- | :--- | :--- | | Net income | $4,595 | $2,966 | | Amortization of intangible assets | $499 | $554 | | **Adjusted net income** | **$4,938** | **$3,584** | | GAAP net income per diluted share | $0.42 | $0.27 | | Adjusted net income per diluted share | $0.45 | $0.33 | [Other Information](index=4&type=section&id=Other%20Information) This section provides conference call details, safe harbor statements for forward-looking information, and definitions of key operational performance indicators - Management will host a conference call and webcast on **August 5, 2025**, at **11:00 a.m. ET** to discuss the results[17](index=17&type=chunk) - The report includes a **Safe Harbor statement**, cautioning that forward-looking statements are subject to **risks and uncertainties** as described in the company's SEC filings[22](index=22&type=chunk)[23](index=23&type=chunk) - **Key Performance Indicators (KPIs)** such as **orders**, **backlog**, and **book-to-bill ratio** are used by management to measure financial performance and are considered **operational metrics**, not **non-GAAP measures**[29](index=29&type=chunk)[30](index=30&type=chunk)[31](index=31&type=chunk)

Group 1 - Investors in Graham Corporation (GHM) should monitor the stock due to significant activity in the options market, particularly the high implied volatility of the Sept 19, 2025 $20.00 Put option [1] - Implied volatility indicates the market's expectation of future price movement, suggesting that investors anticipate a significant change in the stock's price, potentially due to an upcoming event [2] - Graham Corporation currently holds a Zacks Rank 3 (Hold) in the Manufacturing - General Industrial industry, which is in the top 11% of the Zacks Industry Rank, with no changes in analyst estimates for the current quarter [3] Group 2 - The high implied volatility surrounding Graham Corporation may indicate a developing trading opportunity, as options traders often seek to sell premium on options with high implied volatility to capture decay [4]

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.