Core Insights - Graham Corporation (GHM) has experienced significant price appreciation, with an increase of nearly 40% year-to-date and 6.71% over the last month, driven by enhanced profitability, strong order flow, and improved guidance over the past 11 months [1] Financial Performance - The company's profitability has shown a notable increase, contributing to the overall positive market performance [1] - Strong orders have been a key factor in the company's growth trajectory, indicating robust demand for its products [1] Market Outlook - The company has provided increased guidance, suggesting a positive outlook for future performance and potential for continued growth [1]

Core Insights - Graham Corporation (GHM) is recognized as an impressive transition and growth story, particularly in its shift towards supplying defense applications and providing mission-critical solutions, supported by accelerating order intake [1]. Company Overview - Graham Corporation has transitioned into a supplier for various defense applications, indicating a strategic pivot that aligns with current market demands [1]. - The company has experienced a notable increase in order intake, suggesting strong demand for its products and services in the defense sector [1]. Investment Opportunities - The premium service "Value in Corporate Events" offers insights into major corporate events such as earnings reports, M&A, and IPOs, providing actionable investment ideas [2]. - The service aims to identify the best opportunities by covering approximately 10 major events each month, focusing on catalytic company events [2].

Core Insights - Graham Corporation (GHM) is recognized as an impressive transition and growth story, particularly in its shift towards supplying defense applications and providing mission-critical solutions, supported by accelerating order intake [1]. Company Overview - Graham Corporation has successfully transitioned into a supplier for various defense applications, indicating a strategic pivot that aligns with current market demands [1]. - The company has experienced a notable increase in order intake, which is a positive indicator of its growth trajectory [1]. Investment Opportunities - The service "Value in Corporate Events" offers insights into major corporate events such as earnings reports, M&A, and IPOs, providing actionable investment ideas [2]. - The focus is on identifying the best opportunities through coverage of significant events, with an emphasis on finding value in corporate transitions [2].

Group 1 - Graham Corporation (GHM) is a small-cap industrial machinery stock with a market capitalization of close to $700 million [1] - The company specializes in producing critical equipment and technologies for the Defense, Energy, and Space Industries [1]

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Financial Data and Key Metrics Changes - Revenue grew 23% to $66 million, driven by solid performance across all end markets [5][14] - Adjusted EBITDA increased 12% to $6.3 million, with an adjusted EBITDA margin of 10.8%, up 40 basis points year-over-year [5][16] - Book-to-bill ratio was 1.3 times, resulting in a record backlog of $500.1 million, up 23% year-over-year [5][18] Business Line Data and Key Metrics Changes - Defense market sales increased by $9.9 million, or 32%, due to project milestones and growth in new and existing programs [14][16] - Energy and process market sales rose by $2 million, driven by large capital projects [14] - Aftermarket sales for energy and process and defense markets were $9.8 million, reflecting resilient demand [15] Market Data and Key Metrics Changes - Strong momentum in the U.S. Navy programs, including a $25.5 million follow-on order for the MK 48 Mod 7 heavyweight torpedo program [6][14] - Increased sales in the space market, with $22 million in new orders from commercial space launch customers [10][14] Company Strategy and Development Direction - The company is focused on diversifying its portfolio across high-growth, innovation-driven end markets, including defense, energy, and space [11][12] - Recent acquisition of X-Dot Bearing Technologies aims to enhance competitive positioning in high-speed rotating machinery [12][13] - Continued investment in advanced manufacturing technologies and facilities to support growth in defense and space sectors [8][11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to achieve fiscal 2027 targets of 8-10% organic revenue growth and low to mid-teen adjusted EBITDA margins [21] - The company remains well-positioned despite potential impacts from government shutdowns, with minimal disruption expected [33][34] Other Important Information - The company ended the quarter with $20.6 million in cash and no debt, providing significant flexibility for future growth investments [19] - Capital expenditures were $4.1 million, focused on capacity expansion and advanced technologies [19] Q&A Session Summary Question: Clarification on $22 million in space and aerospace orders - $15 million of orders were recognized in Q2, while $7 million will be recognized in Q3 [24] Question: Reason for maintaining guidance instead of raising it - Guidance was maintained due to consistent tracking with expectations and timing of project milestones [26] Question: Update on cryogenic facility and customer bookings - The cryogenic facility is on track, with testing expected to begin soon, and customer bookings are healthy [27] Question: Impact of government shutdown on business - Minimal impact is expected, with long-standing programs continuing to progress [33] Question: Customer feedback on X-Dot transaction and technology applications - Positive feedback received, with technology enabling entry into new markets like small modular nuclear [36] Question: Size and timing of investments in the space market - Additional lathes and mills will be purchased, factored into CapEx guidance for the year [38] Question: Momentum in small modular reactors - The company is in early development phases for small modular reactors, with potential for scaling in the future [42] Question: Breakdown of defense revenue growth - A significant portion of the $9.9 million growth was due to unusually high material receipts impacting gross margin [46]

Financial Performance - Revenue for Q2 FY26 increased by $12.5 million, a 23% increase compared to the prior-year period[23] - Q2 FY26 gross profit increased by $1.5 million, a 12% increase[29] - The gross margin decreased by 220 bps to 21.7%[29] - Q2 FY26 GAAP Net Income was $3.1 million[11] - Adjusted EBITDA for Q2 FY26 was $6.3 million, a 12% increase[11] - The company expects net sales between $225 million and $235 million for FY26[47] Orders and Backlog - Q2 FY26 orders totaled $83.2 million[11] - The book-to-bill ratio for Q2 FY26 was 1.3x[11] - Record backlog reached $500.1 million[11] - Defense accounted for 85% of the backlog, Energy & Process 10%, and Space 5%[42] Strategic Investments and Acquisition - A new Navy Facility in Batavia, NY was completed in Q2 FY26, backed by a $13.5 million customer grant as part of a $17.6 million expansion[13] - Graham Corporation acquired Xdot Bearing Technologies for $1.5 million, including earn-outs[19]

Core Insights - Graham (GHM) reported quarterly earnings of $0.31 per share, missing the Zacks Consensus Estimate of $0.33 per share, representing an earnings surprise of -6.06% [1] - The company posted revenues of $66.03 million for the quarter ended September 2025, exceeding the Zacks Consensus Estimate by 12.67% and up from $53.56 million year-over-year [2] - Graham shares have increased approximately 39.7% year-to-date, outperforming the S&P 500's gain of 14.3% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.27 on revenues of $52.61 million, and for the current fiscal year, it is $1.42 on revenues of $230.61 million [7] - The estimate revisions trend for Graham was mixed ahead of the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6] Industry Context - The Manufacturing - General Industrial industry, to which Graham belongs, is currently ranked in the bottom 38% of over 250 Zacks industries, suggesting potential challenges ahead [8]

Financial Performance - Net sales for Q2 fiscal 2026 were $66,027, an increase of $12,464 or 23% compared to Q2 fiscal 2025, with a 32% increase in defense industry sales[70]. - Gross profit for Q2 fiscal 2026 was $14,306, up $1,507 or 12% from Q2 fiscal 2025, but gross profit margin declined by 220 basis points to 21.7%[70]. - Net income for Q2 fiscal 2026 was $3,090, with diluted earnings per share of $0.28, compared to $3,281 and $0.30 in Q2 fiscal 2025[74]. - Net income for the first six months of fiscal 2026 was $7,685 million, an increase of $1,438 million or 23% from $6,247 million in the prior year[97]. - Adjusted net income for the first six months of fiscal 2026 was $8,367 million, compared to $6,999 million in the same period of fiscal 2025[97]. - The effective tax rate for the second quarter of fiscal 2026 was 27%, up from 24% in the same quarter of fiscal 2025[95]. - Net income for the three months ended September 30, 2025, was $3,090 million, a decrease from $3,281 million in the same period of 2024, while net income for the six months ended September 30, 2025, was $7,685 million compared to $6,247 million in 2024[102]. - Adjusted EBITDA for the three months ended September 30, 2025, was $6,295 million, representing 9.5% of net sales, compared to $5,615 million and 10.5% in the same period of 2024[102]. Orders and Backlog - Orders booked in Q2 fiscal 2026 increased to $83,200 from $63,678 in Q2 fiscal 2025, resulting in a record backlog of $500,072[74]. - The company reported a book-to-bill ratio of 1.3 for the three months ended September 30, 2025, and 1.7 for the six months ended September 30, 2025, indicating strong order growth relative to sales[116]. - Total orders for the three months ended September 30, 2025, were $83,200 million, a 31% increase from $63,678 million in the same period of 2024, while total orders for the six months ended September 30, 2025, were $209,098 million, up 75% from $119,445 million in 2024[116]. - Backlog increased by $17,212 million (4%) during the quarter and $87,837 million (21%) for the first six months of fiscal 2026, reaching $500,072 million at September 30, 2025[116]. - Total backlog reached $500,072, representing a 23% increase from $407,009 in the prior year, with defense orders making up 85% of the backlog[117]. - The company expects to recognize revenue on approximately 35% to 40% of the backlog within one year[117]. Market and Sales Insights - The defense market comprised 85% of the total backlog at September 30, 2025, indicating strong demand driven by defense budget plans and geopolitical tensions[82]. - Domestic sales accounted for 83% of total sales in the second quarter of fiscal 2026, slightly down from 85% in the same quarter of fiscal 2025[87]. - Aftermarket sales to the Energy & Process and Defense markets increased by 15% year-over-year, totaling $20,230 million[88]. - The defense industry saw a 32% increase in sales, contributing $9,853 million to the overall growth, driven by project milestones and new programs[86]. - The company expects continued growth in alternative and clean energy opportunities, particularly in hydrogen production and small modular reactors[79]. Capital and Cash Management - Cash and cash equivalents at September 30, 2025, were $20,579, down from $21,577 at March 31, 2025, with no debt outstanding[74]. - Capital expenditures for the first six months of fiscal 2026 were $11,148 million, with expectations for total capital expenditures for fiscal 2026 to be between $15,000 million and $18,000 million[105]. - Cash and cash equivalents decreased to $20,579 million at September 30, 2025, from $21,577 million at March 31, 2025, primarily due to capital expenditures[106]. - The company entered into a five-year revolving credit facility with Wells Fargo providing a $50,000 million line of credit, with $5,319 million in letters of credit outstanding as of September 30, 2025[107]. - The company did not pay any dividends during the six months ended September 30, 2025, and currently has no intention to pay dividends for the foreseeable future[109]. Future Outlook - Fiscal 2026 outlook projects net sales between $225,000 and $235,000, with adjusted EBITDA estimated at $22,000 to $28,000[118]. - SG&A expenses are expected to be 17.5% to 18.5% of sales, including $6,000 to $7,000 for performance bonuses and ERP conversion costs[118]. - The company anticipates an increase in tariffs impacting financials by approximately $2,000 to $4,000 compared to the prior year[118]. - 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[120]. Tariffs and Foreign Currency - The company estimates the impact of tariffs on its financial statements to be approximately $1,000 million for the first six months of fiscal 2026[90]. - The estimated impact of tariffs for the first six months of fiscal 2026 is approximately $1,000, with a full-year range of $2,000 to $4,000[134]. - International sales constituted 17% of total sales in the first six months of fiscal 2026, with foreign currency fluctuations increasing cash balances by $65[131]. - The company has limited exposure to foreign currency purchases, representing about 4% of the cost of products sold[132].

Financial Performance - Revenue increased 23% to $66.0 million compared to $53.6 million in the prior year[5] - Gross profit rose 12% to $14.3 million, with a gross profit margin of 21.7%, down 220 basis points from the previous year[5][9] - Net income per diluted share was $0.28, a decrease of 7% from $0.30 in the prior year[5][7] - Adjusted EBITDA increased 12% to $6.3 million, with an adjusted EBITDA margin of 9.5%[5][7] - The company reported a net income of $3.090 million for the three months ended September 30, 2025, a decrease of 6% from $3.281 million in the prior year[38] - Net income for the six months ended September 30, 2025, was $7,685,000, compared to $6,247,000 for the same period in 2024, representing an increase of 23.1%[42] - Adjusted EBITDA for the six months ended September 30, 2025, was $13,133,000, up from $10,752,000 in 2024, reflecting a growth of 22.2%[44] - Net sales for the six months ended September 30, 2025, reached $121,514,000, compared to $103,514,000 in 2024, indicating a year-over-year increase of 17.4%[44] - The net income margin for the six months ended September 30, 2025, was 6.3%, slightly up from 6.0% in 2024[44] Orders and Backlog - Orders totaled $83.2 million, resulting in a book-to-bill ratio of 1.3x and a record backlog of $500.1 million, a 23% increase year-over-year[5][16] - Approximately 85% of the backlog is related to the Defense industry, providing stability and visibility[16] - The book-to-bill ratio is utilized to track growth prospects, calculated as net orders divided by net sales, although specific ratios were not provided[34] Guidance and Projections - The company is reiterating its full-year fiscal 2026 revenue guidance of $225 million to $235 million[19][20] - Capital expenditures for fiscal 2026 are projected to be between $15.0 million and $18.0 million[19] Financial Position - Total current assets increased to $159.448 million as of September 30, 2025, compared to $141.372 million as of March 31, 2025[40] - Total liabilities rose to $159.400 million as of September 30, 2025, up from $144.533 million as of March 31, 2025[40] - The company’s total stockholders' equity increased to $127.590 million as of September 30, 2025, compared to $119.577 million as of March 31, 2025[40] Cash Flow and Expenditures - Cash and cash equivalents decreased to $20.579 million as of September 30, 2025, from $21.577 million as of March 31, 2025[40] - The company reported a net cash provided by operating activities of $11,324,000 for the six months ended September 30, 2025, compared to $22,649,000 in 2024, a decline of 50%[42] - The company incurred $11,148,000 in capital expenditures for property, plant, and equipment during the six months ended September 30, 2025, compared to $6,464,000 in 2024, an increase of 72.5%[42] - Cash and cash equivalents at the end of the period were $20,579,000, down from $32,318,000 at the end of the same period in 2024, a decrease of 36.4%[42] Investments and Initiatives - The company is investing in automation and new technical capabilities, expecting returns above 20% from these initiatives[4] - The estimated impact of tariffs on consolidated financial results is now expected to be between $2.0 million and $4.0 million[18][20] Accounts Receivable - The company reported a decrease in accounts receivable of $7,104,000 for the six months ended September 30, 2025, compared to an increase of $15,387,000 in 2024[42]