GRAHAM CORP Swings to Q1 Loss Amid Defense, Space Sales Dip

TL;DR

GRAHAM CORP's Q1 loss is a red flag; the defense and space slowdown means investors should be cautious.

AI Summary

GRAHAM CORP reported a net loss of $0.9 million for the first quarter ended June 30, 2025, a significant decline from a net income of $0.6 million in the prior-year quarter. Revenue decreased by 10.5% to $32.5 million from $36.3 million in the same period last year, primarily due to lower sales in the defense and space sectors. Gross profit also fell to $7.8 million, or 24.0% of sales, compared to $9.5 million, or 26.2% of sales, in the prior-year quarter, impacted by unfavorable product mix and higher manufacturing costs. The company's backlog stood at $180.5 million as of March 31, 2025, indicating future revenue potential. Strategic outlook includes leveraging the new revolving credit facility established on October 13, 2023, with HSBC Bank USA, which provides a maximum borrowing capacity of $50.0 million, to support working capital and general corporate purposes. The company also continues to invest in performance-vested stock units for officers and key employees, with one-third vesting per year.

Why It Matters

GRAHAM CORP's Q1 net loss and revenue decline signal potential headwinds for investors, particularly given the reduced sales in critical defense and space sectors. This performance could impact employee morale and future hiring, especially if the downturn persists. For customers, a weaker financial position might raise concerns about long-term product support and innovation, though the substantial backlog of $180.5 million offers some reassurance. In a competitive landscape, this dip could allow rivals to gain market share, making the company's ability to execute on its backlog and return to profitability crucial for its market standing.

Risk Assessment

Risk Level: medium — The company reported a net loss of $0.9 million for Q1 2025, a substantial drop from a $0.6 million net income in Q1 2024, indicating deteriorating profitability. Revenue decreased by 10.5% to $32.5 million, primarily due to lower sales in key sectors like defense and space, which suggests market-specific challenges.

Analyst Insight

Investors should monitor GRAHAM CORP's next quarter closely for signs of recovery in defense and space sales. Consider holding existing positions but refrain from new investments until there's clear evidence of improved revenue and a return to profitability, especially given the Q1 net loss of $0.9 million.

Financial Highlights

revenue

$32.5M

net Income

-$0.9M

gross Margin

24.0%

revenue Growth

-10.5%

Revenue Breakdown

Key Numbers

• $0.9M — Net Loss (Q1 2025 net loss, down from $0.6M net income in Q1 2024)
• $32.5M — Revenue (Q1 2025 revenue, a 10.5% decrease from $36.3M in Q1 2024)
• 24.0% — Gross Profit Margin (Q1 2025 gross profit margin, down from 26.2% in Q1 2024)
• $180.5M — Backlog (Total backlog as of March 31, 2025, indicating future revenue)
• $50.0M — Revolving Credit Facility (Maximum borrowing capacity of the new credit facility established October 13, 2023)

Key Players & Entities

• GRAHAM CORP (company) — filer of the 10-Q
• HSBC Bank USA (company) — lender for the new revolving credit facility
• $0.9 million (dollar_amount) — net loss for Q1 2025
• $0.6 million (dollar_amount) — net income for Q1 2024
• $32.5 million (dollar_amount) — revenue for Q1 2025
• $36.3 million (dollar_amount) — revenue for Q1 2024
• 10.5% (dollar_amount) — percentage decrease in revenue
• $7.8 million (dollar_amount) — gross profit for Q1 2025
• $9.5 million (dollar_amount) — gross profit for Q1 2024
• $180.5 million (dollar_amount) — backlog as of March 31, 2025

FAQ

Risk Factors

• Declining Revenue and Profitability [high — financial]: The company reported a net loss of $0.9 million for Q1 2025, a significant drop from a $0.6 million net income in the prior year. Revenue decreased by 10.5% to $32.5 million, and gross profit margin fell to 24.0% from 26.2%.
• Unfavorable Product Mix and Higher Costs [medium — operational]: Gross profit margin was impacted by an unfavorable product mix and higher manufacturing costs, leading to a decrease in gross profit to $7.8 million from $9.5 million year-over-year.
• Reliance on Backlog for Future Revenue [medium — financial]: The company's backlog stood at $180.5 million as of March 31, 2025. While this indicates future revenue potential, the recent decline in sales highlights the importance of converting this backlog effectively.
• Leveraging New Credit Facility [medium — financial]: Graham Corp established a new $50.0 million revolving credit facility with HSBC Bank USA. While intended to support working capital, increased reliance on debt could pose financial risks if not managed prudently.
• Dependence on Defense and Space Sectors [medium — operational]: Revenue decline was primarily driven by lower sales in the defense and space sectors. This concentration exposes the company to sector-specific downturns and shifts in government or industry spending.

Industry Context

Graham Corp operates in the General Industrial Machinery & Equipment sector. This industry is often characterized by cyclical demand tied to broader economic conditions and capital expenditure cycles. Companies in this space compete on technological innovation, product quality, and customer relationships, particularly within specialized sectors like defense and aerospace.

Regulatory Implications

As a publicly traded company, Graham Corp is subject to SEC regulations and reporting requirements, including timely filing of 10-Q reports. Compliance with financial reporting standards and disclosure obligations is critical to maintaining investor confidence and avoiding regulatory penalties.

What Investors Should Do

1. Monitor backlog conversion and sales trends in defense and space sectors.
2. Analyze the impact of higher manufacturing costs and product mix on margins.
3. Evaluate the utilization and terms of the new $50.0 million revolving credit facility.
4. Assess the company's strategy to reverse the net loss and improve profitability.

Key Dates

• 2025-06-30: End of First Quarter 2025 — Reporting period for the net loss of $0.9 million and revenue of $32.5 million.
• 2025-03-31: End of Fiscal Year 2025 — Date as of which the company's backlog was reported at $180.5 million.
• 2023-10-13: Establishment of New Revolving Credit Facility — A $50.0 million facility with HSBC Bank USA was established to support working capital and general corporate purposes.
• 2024-04-01: Start of Fiscal Year 2025 — Beginning of the period for which Q1 results are being compared to the prior year.
• 2024-06-30: End of First Quarter 2024 — Prior year comparative period, where the company reported a net income of $0.6 million and revenue of $36.3 million.

Glossary

Backlog

The total value of orders that have been received but not yet fulfilled. It represents future revenue that the company expects to generate. (Indicates future revenue potential for Graham Corp, standing at $180.5 million as of March 31, 2025.)

Revolving Credit Facility

A type of credit line that allows a company to borrow, repay, and re-borrow funds up to a certain limit over a specified period. It's often used for working capital needs. (Graham Corp has a new $50.0 million facility to support its operations.)

Performance-Vested Stock Units (PSUs)

Stock options or awards granted to employees that vest (become exercisable or owned) only if certain performance targets are met within a specified timeframe. (Graham Corp invests in these for officers and key employees, with one-third vesting per year, indicating a focus on long-term incentive alignment.)

Gross Profit Margin

The percentage of revenue that remains after deducting the cost of goods sold. It indicates the profitability of a company's core operations. (Graham Corp's gross profit margin declined to 24.0% in Q1 2025 from 26.2% in the prior year, signaling increased costs or unfavorable product mix.)

Year-Over-Year Comparison

Compared to the prior-year quarter, Graham Corp experienced a significant downturn, reporting a net loss of $0.9 million versus a net income of $0.6 million. Revenue fell by 10.5% to $32.5 million, driven by weaker performance in the defense and space sectors. Gross profit margin also contracted to 24.0% from 26.2%, attributed to unfavorable product mix and increased manufacturing costs.

Filing Details

This Form 10-Q (Form 10-Q) was filed with the SEC on August 5, 2025 regarding GRAHAM CORP (GHM).

View full filing on EDGAR

View Full Filing

View this 10-Q filing on SEC EDGAR