Graham Corporation's 2026 Q1 Earnings Call: Unpacking Contradictions in Defense Orders, Global Strategy, and AI Integration

Defense order flow and strategic programs, international business strategy and growth, AI and streamlining sales process, defense spending stability and strategic programs, capacity and execution in dry dock space are the key contradictions discussed in Graham Corporation's latest 2026Q1 earnings call.



Revenue and Earnings Growth:
- Graham Corporation reported revenue of $55.5 million for Q1 2026, up 11% from the prior year.
- Adjusted EBITDA increased by 33% year-over-year to $6.8 million or a 12.3% percentage of sales.
- The growth was driven by increased sales in the energy and process markets, particularly refining, petrochemical, and new energy, along with strong aftermarket performance.

Backlog and Order Trends:
- The company achieved a strong book-to-bill ratio of 2.3x, driving the backlog to a record $482.9 million, a 22% increase over the prior year.
- Orders totaled $126 million, primarily reflecting a $86.5 million follow-on order for the Virginia-class submarine program.
- The increased backlog provides excellent visibility into future business, with approximately 35% to 40% expected to convert to revenue over the next 12 months.

Defense Segment Momentum:
- Graham continued to see strong momentum with U.S. Navy programs, receiving a $25.5 million follow-on order for the MK48 Mod 7 heavyweight torpedo program.
- These awards reaffirm the company's position as a trusted supplier, providing stable reoccurring revenue streams and strong visibility into future revenue.
- The strategic investments and partnerships, such as a $2.2 million investment from a key defense customer, further support these capabilities.

Energy and Process Segment Performance:
- Sales to the energy and process market increased by $5.7 million, driven by commercial projects in chemical and petrochemical markets, as well as momentum in new energy markets like hydrogen and SMRs.
- Aftermarket sales to energy and process markets were $10.4 million, up 33% from the prior year, highlighting demand robustness and strong performance in these areas.