Graham Corporation’s Earnings Call Highlights Growth and Strategy

Graham Corporation ((GHM)) has held its Q4 earnings call. Read on for the main highlights of the call.

The recent earnings call for Graham Corporation painted a picture of robust performance and strategic foresight. The company reported significant revenue growth, a record backlog, and strategic investments, particularly in the defense sector. Despite these positive developments, there were some concerns about the impact of tariffs and a decrease in annual orders. Overall, Graham Corporation appears to be in a strong position for future growth.

Strong Revenue Growth

Graham Corporation reported a remarkable 13% increase in full-year revenue, reaching $210 million. The adjusted EBITDA also saw a substantial rise of 69%, amounting to $22.4 million. This growth underscores the company’s effective strategies and operational efficiency.

Record Backlog

The company achieved a record backlog of $412 million as of March 31, marking a 7% sequential increase. This backlog reflects the company’s strong order book and positions it well for sustained future growth.

Defense Market Success

Graham Corporation secured a significant $136.5 million contract for the Virginia-class submarine program, reinforcing its strong relationship with the U.S. Navy. This contract highlights the company’s success in the defense market and its ability to deliver mission-critical equipment.

Strategic Investments

The company made strategic investments totaling $3.6 million to enhance capabilities in evaluating critical welds, with a target return on investment exceeding 20%. These investments are part of Graham’s broader strategy to strengthen its operational capabilities.

Improved Gross Margin

Graham Corporation reported an expansion in gross margin by 110 basis points to 27% for the quarter and 330 basis points to 25.2% for the year. This improvement reflects the company’s focus on cost management and operational efficiency.

Positive Book-to-Bill Ratio

For the fifth consecutive year, Graham maintained a positive book-to-bill ratio of 1.1. This metric indicates the company’s ability to secure more orders than it fulfills, supporting its growth trajectory.

Tariff Impact on Future Results

The company anticipates that tariffs could impact its fiscal 2026 results by approximately $2 million to $5 million. This potential impact highlights the external challenges that Graham may face in the coming years.

Decline in Annual Orders

Annual orders decreased to $231 million from $268 million in fiscal 2024. This decline is primarily attributed to fluctuations in defense market orders, indicating some volatility in this sector.

Forward-Looking Guidance

Looking ahead, Graham Corporation has set ambitious goals for growth and investment. The company expects capital expenditures to be 7% to 10% of sales, with an increase in R&D spending to 1% to 2% of revenue. These investments aim to support long-term organic growth goals of 8% to 10% and achieving low to mid-teens adjusted EBITDA margins by fiscal 2027.

In summary, Graham Corporation’s earnings call highlighted a strong performance with strategic initiatives aimed at sustaining growth. While there are challenges such as tariffs and order fluctuations, the company’s robust backlog and strategic investments position it well for future success. Investors and stakeholders can remain optimistic about Graham’s growth trajectory and its ability to navigate market challenges.