Graham Corp. Sales Soar 23% on Defense Demand, Net Income Mixed

TL;DR

**GHM's defense-driven sales surge and massive backlog make it a compelling long-term buy despite a slight quarterly net income dip.**

AI Summary

GRAHAM CORP reported a mixed financial performance for the three and six months ended September 30, 2025. Net sales increased significantly, reaching $66.027 million for the three months, up 23.27% from $53.563 million in the prior year, and $121.514 million for the six months, a 17.39% increase from $103.514 million. This growth was primarily driven by the Defense sector, which saw sales rise to $40.750 million (31.89% increase) for the three months and $70.285 million (17.16% increase) for the six months. Despite higher sales, net income for the three months decreased by 5.82% to $3.090 million from $3.281 million, resulting in a diluted EPS of $0.28, down from $0.30. However, net income for the six months increased by 23.02% to $7.685 million from $6.247 million, with diluted EPS rising to $0.69 from $0.57. The company's backlog, or remaining unsatisfied performance obligations, stood at a robust $500.072 million as of September 30, 2025, indicating strong future revenue potential. Cash and cash equivalents decreased by $0.998 million to $20.579 million for the six months ended September 30, 2025, compared to an increase of $15.379 million in the prior year period.

Why It Matters

For investors, the significant increase in net sales, particularly in the Defense sector, signals strong demand and market positioning for Graham Corp. The substantial backlog of $500.072 million provides excellent revenue visibility for the next two years and beyond, which is a key indicator of stability and future growth. While the quarterly net income dip is a concern, the six-month net income growth suggests a positive longer-term trend. This performance positions Graham Corp. favorably against competitors in the specialized industrial equipment and defense markets, potentially attracting more institutional interest and supporting its stock valuation.

Risk Assessment

Risk Level: medium — The company's cash and cash equivalents decreased by $0.998 million for the six months ended September 30, 2025, a notable shift from a $15.379 million increase in the prior year, indicating reduced liquidity. Additionally, the increase in unbilled revenue by $11.619 million and customer deposits by $20.856 million suggests a growing reliance on contract liabilities and assets, which can introduce working capital management complexities and potential revenue recognition risks.

Analyst Insight

Investors should consider GHM for its strong backlog and growth in the defense sector, but monitor cash flow and working capital management closely. The long-term revenue visibility from the $500.072 million backlog suggests a stable future, making it a potential hold or buy for growth-oriented portfolios.

Financial Highlights

revenue

$121.514M

net Income

$7.685M

eps

$0.69

cash Position

$20.579M

revenue Growth

+17.39%

Revenue Breakdown

Key Numbers

• $66.027M — Net sales for three months ended Sep 30, 2025 (Increased 23.27% from $53.563M in 2024)
• $121.514M — Net sales for six months ended Sep 30, 2025 (Increased 17.39% from $103.514M in 2024)
• $3.090M — Net income for three months ended Sep 30, 2025 (Decreased 5.82% from $3.281M in 2024)
• $7.685M — Net income for six months ended Sep 30, 2025 (Increased 23.02% from $6.247M in 2024)
• $0.28 — Diluted EPS for three months ended Sep 30, 2025 (Decreased from $0.30 in 2024)
• $0.69 — Diluted EPS for six months ended Sep 30, 2025 (Increased from $0.57 in 2024)
• $500.072M — Remaining unsatisfied performance obligations (backlog) as of Sep 30, 2025 (Indicates strong future revenue potential)
• $40.750M — Defense sector sales for three months ended Sep 30, 2025 (Increased 31.89% from $30.897M in 2024)
• $20.579M — Cash and cash equivalents at Sep 30, 2025 (Decreased by $0.998M from beginning of period)
• 10,987,954 — Shares of common stock outstanding as of Nov 6, 2025 (Total shares outstanding)

Key Players & Entities

• GRAHAM CORP (company) — registrant
• NYSE (regulator) — exchange where common stock is registered
• U.S. Securities and Exchange Commission (regulator) — promulgates accounting rules
• P3 Technologies, LLC (company) — acquired entity
• Arvada, Colorado (company) — location of wholly-owned subsidiary
• Jupiter, Florida (company) — location of wholly-owned subsidiary
• Suzhou, China (company) — location of wholly-owned subsidiary
• Ahmedabad, India (company) — location of wholly-owned subsidiary

FAQ

Risk Factors

• Dependence on Defense Sector [medium — market]: The company's significant reliance on the Defense sector for revenue growth, as evidenced by a 31.89% increase in defense sales for the three months ended September 30, 2025, exposes it to potential risks associated with government spending, contract awards, and geopolitical factors affecting the defense industry.
• Declining Short-Term Net Income [medium — financial]: Despite a 23.27% increase in net sales for the three months ended September 30, 2025, net income decreased by 5.82% to $3.090 million from $3.281 million. This suggests potential pressure on margins or increased operating costs that are not being fully offset by revenue growth in the short term.
• Decreasing Cash Position [medium — financial]: Cash and cash equivalents decreased by $0.998 million to $20.579 million for the six months ended September 30, 2025, a notable shift from an increase of $15.379 million in the prior year. This trend warrants monitoring to ensure sufficient liquidity for operations and investments.
• Inventory Management [low — operational]: Inventories increased to $42.428 million as of September 30, 2025, from $40.025 million as of March 31, 2025. While this could support higher sales, it also carries the risk of obsolescence or carrying costs if not managed efficiently.

Industry Context

Graham Corp operates within the industrial manufacturing sector, with a significant focus on the defense industry. This sector is characterized by long-term contracts, government procurement cycles, and sensitivity to geopolitical events. Competition can be intense, with established players and specialized manufacturers vying for contracts.

Regulatory Implications

As a defense contractor, Graham Corp is subject to stringent government regulations, including compliance with defense procurement standards, export controls, and cybersecurity requirements. Changes in government spending priorities or regulatory frameworks could impact its business operations and profitability.

What Investors Should Do

1. Monitor margin trends closely.
2. Evaluate the sustainability of Defense sector growth.
3. Track cash flow and working capital management.

Key Dates

• 2025-09-30: End of Second Fiscal Quarter — Reporting period for the 10-Q, showing mixed performance with strong revenue growth but a dip in short-term net income.
• 2025-11-06: Shares of common stock outstanding reported — Provides context for EPS calculations and market capitalization.

Glossary

Remaining unsatisfied performance obligations

Represents future revenue that the company has committed to deliver under existing contracts but has not yet earned. (Indicates future revenue visibility and stability, with a backlog of $500.072 million as of September 30, 2025.)

Diluted EPS

Earnings per share calculated by dividing net income by the total number of diluted common shares outstanding, including the effect of stock options and convertible securities. (Reflects the profitability on a per-share basis, considering all potential dilutive securities. It decreased to $0.28 for the three months ended September 30, 2025, from $0.30 in the prior year.)

Unbilled revenue

Revenue that has been earned by the company based on contract progress but has not yet been invoiced to the customer. (Represents a significant portion of current assets ($50.113 million as of September 30, 2025), indicating work in progress that will convert to cash.)

Year-Over-Year Comparison

Compared to the prior year, Graham Corp has demonstrated robust revenue growth, with net sales up 23.27% for the quarter and 17.39% for the six months. However, this top-line improvement was not fully reflected in net income for the shorter period, which saw a 5.82% decrease. While diluted EPS for the six-month period improved to $0.69 from $0.57, the quarterly EPS declined to $0.28 from $0.30. The company's backlog remains strong, but its cash position has weakened, decreasing by $0.998 million in the six-month period, a reversal from the prior year's increase.

Key Financial Figures

• $0.10 — ch registered Common Stock, Par Value $0.10 Per Share GHM NYSE Indicate by ch

Filing Documents

• ghm-20250930.htm (10-Q) — 2378KB
• ghm-ex31_1.htm (EX-31.1) — 14KB
• ghm-ex31_2.htm (EX-31.2) — 14KB
• ghm-ex32_1.htm (EX-32.1) — 12KB
• img103321512_0.jpg (GRAPHIC) — 79KB
• img103321512_1.jpg (GRAPHIC) — 160KB
• img103321512_2.jpg (GRAPHIC) — 178KB
• 0001193125-25-271134.txt ( ) — 10965KB
• ghm-20250930.xsd (EX-101.SCH) — 1164KB
• ghm-20250930_htm.xml (XML) — 2083KB

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 18 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 28 Item 4.

Controls and Procedures

Controls and Procedures 29 Part II. OTHER INFORMATION Item 1A.

Risk Factors

Risk Factors 30 Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities 30 Item 6. Exhibits 31

Signatures

Signatures 32 2 GRAHAM CORPORATION AND SUBSIDIARIES FORM 10-Q SEPTEMBER 30, 2025

– FINANCI AL INFORMATION

PART I – FINANCI AL INFORMATION

Unaudited Condensed Con solidated Financial Statements

Item 1. Unaudited Condensed Con solidated Financial Statements GRAHAM CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS O F OPERATIONS (Dollar amounts in thousands, except per share data) (Unaudited) Three Months Ended Six Months Ended September 30, September 30, 2025 2024 2025 2024 Net sales $ 66,027 $ 53,563 $ 121,514 $ 103,514 Cost of products sold 51,721 40,764 92,487 78,347 Gross profit 14,306 12,799 29,027 25,167 Other operating expenses and income: Selling, general and administrative 9,789 8,723 19,186 17,561 Selling, general and administrative – amortization 437 437 873 873 Other operating income ( 191 ) ( 596 ) ( 267 ) ( 726 ) Operating income 4,271 4,235 9,235 7,459 Other expense, net 116 91 244 182 Interest income, net ( 68 ) ( 153 ) ( 245 ) ( 314 ) Income before provision for income taxes 4,223 4,297 9,236 7,591 Provision for income taxes 1,133 1,016 1,551 1,344 Net income $ 3,090 $ 3,281 $ 7,685 $ 6,247 Per share data Basic: Net income $ 0.28 $ 0.30 $ 0.70 $ 0.57 Diluted: Net income $ 0.28 $ 0.30 $ 0.69 $ 0.57 Weighted average common shares outstanding: Basic 10,985 10,887 10,956 10,875 Diluted 11,135 11,024 11,083 10,995 See Notes to Condensed Consolidated Financial Statements. 3 GRAHAM CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEM ENTS OF COMPREHENSIVE INCOME (Dollar amounts in thousands) (Unaudited) Three Months Ended Six Months Ended September 30, September 30, 2025 2024 2025 2024 Net income $ 3,090 $ 3,281 $ 7,685 $ 6,247 Other comprehensive (expense) income: Foreign currency translation adjustment ( 56 ) 131 ( 6 ) 103 Defined benefit pension and other postretirement plans net of income tax expense of $ 49 and $ 45 for t

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