Graham(US:GHM)2026-02-06 12:30Financial Performance - Net sales for Q3 fiscal 2026 were $56,701, up 21% compared to Q3 fiscal 2025, with a 31% increase in sales to the Defense industry[78]. - Gross profit for Q3 fiscal 2026 was $13,469, a 15% increase from Q3 fiscal 2025, but gross profit margin declined by 100 basis points to 23.8%[81]. - Net income for Q3 fiscal 2026 was $2,845, or $0.25 per diluted share, compared to $1,588, or $0.14 per diluted share in Q3 fiscal 2025[81]. - Adjusted net income for the first nine months of fiscal 2026 was $11,881 million, up from $8,965 million in the same period of fiscal 2025, representing a 32.4% increase[117]. - Adjusted net income per diluted share increased to $1.07 for the first nine months of fiscal 2026, compared to $0.81 for the same period in fiscal 2025, a rise of 32.1%[118]. - Net sales for the first nine months of fiscal 2026 were $178,215 million, compared to $150,551 million in the prior year, reflecting an 18.4% growth[117]. - Adjusted EBITDA for the first nine months of fiscal 2026 was $19,177 million, up from $14,779 million in the same period of fiscal 2025, marking a 29.5% increase[117]. - Adjusted EBITDA for fiscal 2026 is expected to be between $24,000 and $28,000, reflecting an increase from the previous estimate of $22,000 to $28,000[134]. Orders and Backlog - Orders booked in Q3 fiscal 2026 increased to $71,671 from $24,786 in Q3 fiscal 2025, resulting in a record backlog of $515,633[81]. - Total orders for the third quarter of fiscal 2026 were $71,671, representing a 1.3x book-to-bill ratio, while total orders for the first nine months were $280,769, or 1.6x net sales for the period[131]. - Backlog increased by $15,561 (3%) during the quarter and $103,298 (25%) for the first nine months of fiscal 2026, reaching $515,633 at December 31, 2025[131]. - Total backlog at December 31, 2025, was $515,633, a 34% increase from the prior year, with 35% to 40% expected to be recognized as revenue within one year[132]. - Defense market orders increased by 73% year-over-year to $203,565 for the first nine months, while Space market orders rose by 132% to $22,711[131]. Cash and Liquidity - Cash and cash equivalents at December 31, 2025, were $22,254, up from $21,577 at March 31, 2025[81]. - The company's working capital increased to $9,145 million as of December 31, 2025, compared to $5,222 million at March 31, 2025, indicating improved liquidity[119]. - The company entered into a five-year revolving credit facility with a $50,000 million line of credit, with $6,971 million in letters of credit outstanding as of December 31, 2025[123]. - The effective tax rate for the third quarter of fiscal 2026 was 11%, a decrease from 29% in the same quarter of fiscal 2025[109]. - The company anticipates cash tax savings of approximately $8,000 over the next two years due to new tax provisions[108]. Market Trends and Expectations - The company anticipates strong demand in the Defense industry due to increased defense budgets and geopolitical tensions[86]. - The company expects long-term growth in alternative and clean energy opportunities, particularly in hydrogen production and small modular reactors[89]. - The NextGen™ steam ejector nozzle is projected to have a total market opportunity exceeding $50,000 over the next 5 to 10 years[90]. - Sales to the Energy & Process market increased by $9,786 or 19% for the first nine months of fiscal 2026, driven by increased sales in China[101]. - The company aims for 8% to 10% average annualized organic revenue growth and adjusted EBITDA margins in the low to mid-teens by fiscal 2027[135]. Acquisitions - The acquisition of FlackTek added approximately $30,000 in annualized revenue and enhances revenue visibility and durability[76]. - The acquisition of Xdot is expected to be slightly accretive to fiscal 2026 net income, with annual sales of approximately $1,000[75]. Expenses and Capital Expenditures - SG&A expenses for the third quarter of fiscal 2026 increased by $868, representing 18.6% of sales, down from 20.6% in the prior year[104]. - Capital expenditures for the first nine months of fiscal 2026 were $13,328 million, slightly down from $13,800 million in the same period of fiscal 2025[120]. - The company expects capital expenditures for fiscal 2026 to be between $15,000 million and $18,000 million, with approximately two-thirds allocated to growth initiatives[121]. International Sales and Tariffs - International sales accounted for 16% of total sales in the first nine months of fiscal 2026, with foreign currency fluctuations increasing cash balances by $141[145]. - The company anticipates a tariff impact of approximately $1,000 to $1,500 for the full year compared to the prior year, due to increased costs in raw materials and supply chain[147]. Debt and Interest Rates - The company reported no variable rate debt outstanding on its Revolving Credit Facility[150]. - There are no interest rate derivatives outstanding as of the reporting date[150]. - Additional information about the company's outstanding debt can be found in Note 13 of the Condensed Consolidated Financial Statements[150].