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Graham(GHM) - 2026 Q1 - Quarterly Results
GrahamGraham(US:GHM)2025-08-05 10:45

Executive Summary & Highlights 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 cryogenics4 - 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 program4 - 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 20254 Financial Performance Review (Q1 FY2026) 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 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 markets7 - Aftermarket sales to both Energy & Process and Defense markets grew 33% year-over-year, reaching $10.4 million8 - Gross margin expansion was driven by higher sales volume, an improved mix of higher-margin aftermarket sales, and better execution and pricing on defense contracts9 Operating Expenses and Profitability 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 technology10 - Despite the absolute increase in SG&A, its ratio to sales improved, decreasing from 18.6% to 17.7% year-over-year10 Orders and Backlog 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 orders14 - 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 backlog15 Cash Flow and Balance Sheet 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 expenditures1112 - The company remains debt-free and has $44.3 million available under its revolving credit facility12 Fiscal 2026 Outlook 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 20275 Consolidated Financial Statements (Unaudited) 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 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 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 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 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 expenses252627 Adjusted EBITDA Reconciliation 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 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 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 results17 - 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 filings2223 - 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 measures293031