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01/11 04:08
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The company reported strong financial performance with significant year-over-year growth in revenue, EBITDA, and net income. Despite competitive pressures and some regulatory and supply chain risks, the management provided optimistic guidance for fiscal 2026. The Q&A session highlighted robust M&A opportunities and successful integration efforts. However, the absence of a share repurchase program and some lack of clarity on facility utilization rates slightly tempered the outlook. Overall, the strong financial results and optimistic guidance suggest a positive stock price movement.
Full Year Revenue $210 million, up 13% year-over-year due to strong demand and execution of the business plan.
Adjusted EBITDA $22.4 million, up 69% year-over-year, representing 10.7% of sales, driven by improved operational execution and higher sales volume.
Gross Margin 25.2% for the year, up 330 basis points year-over-year, attributed to leverage on higher volume, better execution, and improved pricing.
Net Income $12.2 million, up from $4.6 million in the prior year, reflecting improved operational performance.
Earnings Per Share (EPS) $1.11 GAAP, up 97% year-over-year, driven by increased net income.
Fourth Quarter Revenue $59.3 million, up 21% year-over-year, with growth across all markets.
Fourth Quarter Adjusted EBITDA $7.7 million, up 159% year-over-year, with a margin of 12.9%.
Fourth Quarter Net Income $4.4 million, compared to $1.3 million in the prior year.
Orders for Fiscal 2025 $231 million, down from $268 million in fiscal 2024, primarily due to the lumpiness of defense market orders.
Backlog $412 million, up 7% sequentially, indicating strong market position.
Cash Provided by Operating Activities $24.3 million, driven by strong cash earnings.
Capital Expenditures (CapEx) $19 million, focused on capacity expansion and productivity improvements.
New Product Innovations: Graham Corporation is advancing innovations like a next-gen nozzle for vacuum distillation towers, which can reduce steam consumption by up to 10% or increase throughput, potentially generating $50 million in revenue over the next 5 to 10 years.
Market Expansion: Graham secured a $136.5 million contract for the Virginia-class submarine program, enhancing its position in the defense market. Additionally, they are expanding their global footprint to support customers in cost-sensitive regions.
Operational Efficiencies: Graham deployed $19 million in capital expenditures in fiscal 2025, focusing on capacity expansion and productivity improvements, with all major projects on time and on budget, targeting a return on investment exceeding 20%.
Strategic Shifts: Graham is transitioning to a growth phase, focusing on product life cycle expansion, commercialization, global reach, and digital transformation, while also evaluating M&A opportunities to accelerate their strategy.
Competitive Pressures: The company faces competitive pressures in the defense and energy markets, which may impact pricing and market share.
Regulatory Issues: Potential regulatory changes and tariffs could affect financial results, with an estimated impact of $2 million to $5 million for fiscal 2026.
Supply Chain Challenges: The company may encounter supply chain challenges that could affect production timelines and costs, particularly in the context of ongoing global trade policy fluidity.
Economic Factors: Economic fluctuations and uncertainties in global markets could impact demand for the company's products and services.
Investment Risks: The company is making significant capital investments, which carry risks related to achieving the expected return on investment exceeding 20%.
Record Backlog: Graham Corporation reported a record backlog of $412 million as of March 31, 2025, up 7% sequentially, indicating strong market position.
Defense Contracts: The company secured a $136.5 million contract for the Virginia-class submarine program, providing stable recurring revenue and visibility into future revenue.
Strategic Investment: A strategic investment of $2.2 million from a defense customer will enhance capabilities for submarine programs, with Graham contributing $1.4 million.
CapEx Plans: In fiscal 2025, Graham deployed $19 million in capital expenditures, with future CapEx expected to be 7% to 10% of sales.
R&D Investment: Graham plans to gradually increase R&D spending to 1% to 2% of revenue to support long-term growth.
Leadership Transition: A leadership transition is underway with Matt Malone becoming President and CEO, ensuring continuity in strategic vision.
Growth Strategy: The company is moving into the 'improve' and 'growth' phases of its strategy, focusing on high ROIC projects and expanding its market reach.
Revenue Guidance: For fiscal 2026, Graham expects revenue between $225 million and $235 million, a 10% increase over fiscal 2025.
Adjusted EBITDA Guidance: Adjusted EBITDA for fiscal 2026 is projected to be between $22 million and $28 million, reflecting a 12% increase over fiscal 2025.
Gross Margin Guidance: Gross profit margins are expected to be between 24.5% and 25.5% for fiscal 2026.
Long-term Goals: The company aims for 8% to 10% organic revenue growth and low to mid-teens adjusted EBITDA margins by fiscal 2027.
Share Repurchase Program: None
The earnings call reveals strong financial performance with a 15% increase in aftermarket sales and a 12% rise in gross profit. Despite maintaining guidance, the company has strategic investments and new facilities that are expected to drive growth. The Q&A section indicates healthy backlog and customer interest, minimal impact from government shutdowns, and promising developments in various markets. While some details were vague, the overall sentiment is positive due to strong revenue growth, strategic investments, and diversified defense orders.
The earnings call summary indicates strong financial performance, strategic growth initiatives, and optimistic guidance, despite some uncertainties in margin sustainability. The Q&A highlights robust aftermarket sales, a growing defense backlog, and promising opportunities in nuclear and space sectors. While management is cautious about future margins, the overall sentiment is positive with a record backlog and strategic investments. The absence of significant hiring challenges and a clear strategy for international growth further support a positive outlook. These factors suggest a likely stock price increase of 2% to 8% over the next two weeks.
The company reported strong financial performance with significant year-over-year growth in revenue, EBITDA, and net income. Despite competitive pressures and some regulatory and supply chain risks, the management provided optimistic guidance for fiscal 2026. The Q&A session highlighted robust M&A opportunities and successful integration efforts. However, the absence of a share repurchase program and some lack of clarity on facility utilization rates slightly tempered the outlook. Overall, the strong financial results and optimistic guidance suggest a positive stock price movement.
The earnings call presents a mixed picture: positive aspects include a 7.3% sales increase and improved margins, but EPS fell short of expectations. Raised EBITDA guidance and a strong backlog offer optimism, yet competitive pressures and economic uncertainties pose risks. The Q&A indicates cautious optimism but lacks clarity on key issues like M&A and budget impacts. With no share repurchase program, the sentiment remains mixed, leading to a neutral outlook for stock price movement.
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