Graham Corporation ((GHM)) has held its Q2 earnings call. Read on for the main highlights of the call.
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Graham Corporation’s recent earnings call painted a picture of robust growth and strategic advancements, tempered by some challenges. The overall sentiment was positive, with significant revenue growth and a record backlog, particularly in the defense and space markets. However, concerns were raised about the impact of tariffs and extended decision cycles on large projects, which could affect future performance.
Strong Revenue Growth
Graham Corporation reported a remarkable 23% increase in revenue, reaching $66 million. This growth was driven by solid performance across all end markets, showcasing the company’s ability to capitalize on opportunities in various sectors.
Record Backlog
The company achieved a record backlog of $500.1 million, marking a 23% increase year-over-year. This substantial backlog underscores Graham’s strong market position and the sustained demand for its products and services.
Defense Market Success
Sales to the defense market surged by $9.9 million, or 32%, highlighting Graham’s successful penetration and growth in this critical sector. This increase is a testament to the company’s strategic focus and execution in defense-related projects.
New Space Orders
Graham’s subsidiary, Barber-Nichols, secured $22 million in new orders from six leading customers in the commercial space launch market. This development signifies Graham’s expanding footprint in the burgeoning space industry.
Strategic Acquisition
The acquisition of Xdot Bearing Technologies is a strategic move that enhances Graham’s capabilities in high-speed rotating machinery. This acquisition is expected to bolster the company’s technological edge and market reach.
Gross Margin Impact
The gross margin was impacted by 180 basis points due to an unusually high level of material receipts carrying lower margins. This factor is a point of concern as it affects overall profitability.
Impact of Tariffs
Tariffs are projected to impact costs by approximately $1 million for the first half of fiscal 2026. This external challenge could pose a risk to the company’s cost structure and margins.
Extended Decision Cycles
Graham observed extended decision cycles on certain large global capital projects. This delay could potentially affect the timing of revenue recognition and project execution.
Forward-Looking Guidance
Graham Corporation provided optimistic forward-looking guidance, reaffirming its full-year outlook. The company expects 35% to 40% of its record backlog to convert to revenue over the next 12 months, with a significant portion attributed to the defense market. Notable developments include a $25.5 million follow-on order for the MK48 Mod 7 Heavyweight Torpedo program and the opening of a new advanced manufacturing facility in New York. The strategic acquisition of Xdot Bearing Technologies is anticipated to be slightly accretive to fiscal 2026 results, supporting Graham’s expansion into high-speed rotating systems.
In conclusion, Graham Corporation’s earnings call reflects a strong performance with strategic growth initiatives, despite facing some challenges. The company’s robust revenue growth, record backlog, and strategic acquisitions position it well for future success, although the impact of tariffs and extended decision cycles warrant attention. Investors will be keenly watching how these factors play out in the coming quarters.