On February 7, 2025, Graham Corp (GHM, Financial) released its 8-K filing detailing the financial results for the third quarter of fiscal 2025. The company, a leader in designing and manufacturing critical fluid, power, heat transfer, and vacuum technologies, reported a 7.3% increase in revenue to $47.0 million, falling short of the estimated $49.50 million. However, the company exceeded earnings expectations with a net income per diluted share of $0.14, surpassing the estimated $0.13.
Company Overview and Market Performance
Graham Corp (GHM, Financial) specializes in custom-engineered vacuum, heat transfer, cryogenic pump, and turbomachinery technologies, serving industries such as defense, space, energy, and process. The company's performance in the third quarter was bolstered by strong sales in the defense market, which grew by 11.1% due to new and existing defense programs. Additionally, chemical/petrochemical sales contributed significantly to revenue growth.
Financial Achievements and Challenges
The company's gross profit margin improved by 260 basis points to 24.8%, and the net margin increased by 300 basis points to 3.4%. These improvements were driven by a favorable product mix and operational efficiencies. Despite these achievements, Graham Corp faces challenges such as higher SG&A expenses, which rose to $9.7 million, reflecting investments in personnel and technology for sustainable growth.
Key Financial Metrics and Cash Management
Graham Corp reported a strong balance sheet with no debt and $30.0 million in cash, alongside access to $43 million under its revolving credit facility. Cash provided by operating activities increased to $27.9 million for the nine-month period ending December 31, 2024. Capital expenditures were focused on capacity expansion and productivity improvements, with expectations for fiscal 2025 capital expenditures raised to $15.0 million to $19.0 million.
Orders, Backlog, and Book-to-Bill Ratio
Orders for the third quarter totaled $24.8 million, with a year-to-date book-to-bill ratio of 1.0x. The backlog at quarter-end was $384.7 million, with a significant portion expected to convert to sales within the next two years, primarily driven by defense industry orders.
Analysis and Outlook
Graham Corp's ability to exceed EPS estimates despite missing revenue expectations highlights its operational efficiency and strategic focus on high-margin markets. The company's strong balance sheet and cash position provide a solid foundation for future growth initiatives. However, the increase in SG&A expenses indicates ongoing challenges in managing costs while pursuing long-term growth strategies.
Our strong performance through the first three quarters of our fiscal year reflects continually improving execution across our business. Customer demand for our diversified product portfolio is robust, driving margin expansion through improved product mix and operational efficiency." - Daniel J. Thoren, Chief Executive Officer
For more detailed financial information and analysis, visit the full 8-K filing.
Explore the complete 8-K earnings release (here) from Graham Corp for further details.
