Graham Corporation's Strong Q3 Results Reflect Strategic Positioning and Operational Execution

Graham Corporation (NYSE: GHM) reported robust financial results for its third quarter of fiscal 2025, reflecting the company's strategic positioning and operational execution. Revenue increased by 7.3% to $47.0 million, driven by continued strength in key end-markets. Gross profit margin expanded by 260 basis points to 24.8%, net margin rose by 300 basis points to 3.4%, and adjusted EBITDA margin grew by 180 basis points to 8.6%. Net income per diluted share surged 600% to $0.14, while adjusted net income per share increased by 38% to $0.18. The company's strong cash flow generation, increased capital expenditure guidance, and substantial backlog provide a solid foundation for growth initiatives and potential strategic acquisitions.



Graham's revenue growth was particularly impressive given the high-margin mix, with defense sales growing by 11.1% and strong aftermarket performance. The 24.8% gross margin expansion reflects both pricing power and operational efficiencies. The company's strong cash flow generation of $27.9 million year-to-date shows excellent working capital management. The increased capital expenditure guidance to $15-19 million indicates confidence in growth opportunities, particularly in defense capabilities. The $385 million backlog, while slightly down, provides multi-year revenue visibility with 45-50% convertible within 12 months.



Graham's balance sheet strength is noteworthy, with $30.0 million in cash and access to $43 million under its revolving credit facility, providing ample firepower for both organic growth and potential strategic acquisitions. The BlueForge Alliance grant for defense welder training demonstrates proactive investment in capabilities and workforce development. While Q3 orders of $24.8 million were lower, this reflects the lumpy nature of large capital projects rather than underlying weakness, evidenced by the strong 51% growth in high-margin aftermarket orders. The 1.0x book-to-bill ratio year-to-date indicates sustainable growth momentum.

Graham's Q3 FY2025 results demonstrate robust operational execution and strategic positioning. The company's revenue growth, margin improvements, strong cash flow generation, and increased capital expenditure guidance provide a solid foundation for growth initiatives and potential strategic acquisitions. The company's proactive investment in capabilities and workforce development, as well as its strong balance sheet and access to credit, position Graham well for both organic growth and potential strategic acquisitions.