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].

Financial Performance Highlights - Revenue for the fourth quarter of fiscal year 2025 was $59.3 million, up 21% compared to the prior-year period[10, 35] - Full-year fiscal 2025 revenue reached a record $209.9 million, a 13% increase from the previous year[10, 36] - Gross margin for the fourth quarter of fiscal year 2025 was 27%, an increase of 110 bps[10, 43] - Full-year fiscal 2025 gross margin was 25.2%, a 330 bps expansion[10, 43] - Adjusted EBITDA for fiscal year 2025 was $22.4 million, resulting in a 10.7% margin[10, 45] - Net income for fiscal year 2025 was $12.2 million[10] Orders and Backlog - Record backlog reached $412.3 million[10, 55] - Fiscal year 2025 orders totaled $231.1 million[10] - The book-to-bill ratio for fiscal year 2025 was 1.1x[10] - Defense sector accounted for 83% of the Q4 backlog[54] Fiscal Year 2026 Outlook - Net sales are projected to be between $225 million and $235 million[59] - Adjusted EBITDA is expected to range from $22 million to $28 million[59]

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]

Core Viewpoint - Graham Corporation (NYSE: GHM) was highlighted for its strong performance at the beginning of the year, significantly outperforming other small-cap and industrial stocks [1] Group 1 - The company was noted for being in "dazzling form" at the start of the year [1] - Graham Corporation's performance was described as a "hefty margin" above its peers in the small-cap and industrial sectors [1]

Core Viewpoint - The article highlights Graham (GHM) as a promising growth stock, emphasizing its strong earnings growth, efficient asset utilization, and positive earnings estimate revisions, making it a solid choice for growth investors [2][10]. Earnings Growth - Graham has a historical EPS growth rate of 23.6%, with projected EPS growth of 154.8% this year, significantly outperforming the industry average of 10.7% [5]. Asset Utilization Ratio - The company has an asset utilization ratio (sales-to-total-assets ratio) of 0.81, indicating it generates $0.81 in sales for every dollar in assets, which is higher than the industry average of 0.75, showcasing better efficiency [6]. Sales Growth - Graham's sales are expected to grow by 11.8% this year, compared to the industry average of 3.2%, indicating strong sales growth potential [7]. Earnings Estimate Revisions - There has been a positive trend in earnings estimate revisions for Graham, with the Zacks Consensus Estimate for the current year increasing by 3.9% over the past month, suggesting favorable near-term stock price movements [8]. Overall Assessment - Graham has achieved a Growth Score of A and a Zacks Rank 1 (Strong Buy), indicating it is a potential outperformer and a strong candidate for growth investors [10].

Safe Harbor Statement Safe Harbor Regarding Forward Looking Statements G r a h a m C o r p o r a t i o n Third Quarter FY25 Teleconference February 7, 2025 Daniel J. Thoren, Chief Executive Officer Matthew J. Malone, President and Chief Operating Officer Christopher J. Thome, Vice President - Finance and Chief Financial Officer www.GrahamCorp.com 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 Securitie ...

Financial Data and Key Metrics Changes - Sales for the quarter totaled $47 million, a 7.3% increase over the prior year [22] - Gross margin improved by 260 basis points to 24.8% of sales, driven by higher sales volume and better execution [25] - Adjusted EBITDA increased 36% over the prior year, totaling $4 million, with an adjusted EBITDA margin of 8.6% [29][40] Business Line Data and Key Metrics Changes - The defense sector saw notable growth, with an 11% increase contributing to overall performance [8] - Aftermarket revenue increased by 2.4% over record levels from the previous year, indicating strong demand [23] - The company reported a significant backlog of $385 million, with 80% attributed to the defense business [38] Market Data and Key Metrics Changes - Orders for the quarter declined to $24.8 million, but the nine-month period saw orders totaling $144.2 million, maintaining a book-to-bill ratio of one [35][36] - The space backlog increased by 59% over the previous year, reflecting growing opportunities in that sector [39] Company Strategy and Development Direction - The company is focused on expanding its manufacturing capabilities, including a new facility in Batavia, expected to enhance naval defense work [19] - Strategic investments in R&D and operational excellence are prioritized to drive long-term growth [18][44] - The leadership transition plan aims to ensure continuity and leverage internal talent for future growth opportunities [11][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term demand environment, emphasizing the company's ability to capture additional opportunities [10] - The company is optimistic about ongoing discussions with customers regarding new programs and expansions, despite challenges in the shipbuilding market [54] - Management highlighted the importance of maintaining strong customer relationships and operational excellence to navigate market dynamics [18] Other Important Information - The effective tax rate for the quarter was 29%, with expectations for the full year to be between 20% and 22% [31] - Capital expenditures for the quarter totaled $7.3 million, with projections for the full year now expected to be between $15 million and $19 million [33][34] Q&A Session Summary Question: Challenges in the shipbuilding market and potential opportunities - Management indicated that customers are focused on maintaining production schedules and are not experiencing slowdowns, leading to positive discussions about future opportunities [52][54] Question: Strength in aftermarket revenue - The aftermarket growth is primarily driven by energy and chemical sectors, with increasing inquiries from international customers for new technology [56][58] Question: Ideal book-to-bill ratio - The company aims for a book-to-bill ratio of 1.1 to support 8% to 10% organic revenue growth, despite current lumpiness in order flow [67][68] Question: Supply chain and labor challenges - Management is optimistic about continued government funding for supplier development, which will support capacity expansion [72][73] Question: Exposure to potential supplemental defense budgets - The company is involved in strategic programs that may benefit from increased defense spending, but the impact of a continuing resolution is uncertain [81][82] Question: M&A activity - The company is actively pursuing M&A opportunities, focusing on engineered products with strong IP and technology moats [101]