Graham (GHM) Q3 2025 earnings summary

Executive summary

• Revenue for Q3 FY2025 was $47.0 million, up 7.3% year-over-year, driven by strong performance in defense, space, and chemical/petrochemical markets, with gross margin improving by 260 basis points to 24.8%.

• Net income increased to $1.6 million ($0.14 per diluted share), with adjusted net income per share up 38% to $0.18; EPS surged 600%.

• Backlog at quarter-end was $384.7 million, with 80% related to defense and 45–50% expected to convert to sales within 12 months.

• Leadership succession plan announced: Matt Malone to become CEO in June 2025, with Daniel Thoren transitioning to Executive Chairman.

• Orders for the quarter were $24.8 million, with a year-to-date book-to-bill ratio of 1.0x.

Financial highlights

• Adjusted EBITDA for Q3 FY2025 was $4.0 million (8.6% margin), up 36% year-over-year.

• Gross profit increased 20% to $11.7 million; operating profit up 143% to $2.2 million.

• SG&A expenses rose to $9.7 million (20.6% of sales), reflecting investments in people, processes, technology, and the P3 Technologies acquisition.

• Free cash flow was negative $2.1 million for Q3 FY2025, reflecting $7.3 million in CapEx.

• Effective tax rate was 29% for the quarter and 20% year-to-date, with full-year guidance of 20–22%.

Outlook and guidance

• Fiscal 2025 revenue expected between $200 million and $210 million, with gross margin guidance raised to 24–25%.

• Adjusted EBITDA guidance is $18–21 million, a 47% increase over the prior year, with a 9.5% margin at midpoint.

• CapEx for fiscal 2025 projected at $15–19 million, focused on capacity expansion and productivity enhancements.

• SG&A expected at 18–19% of sales; tax rate guidance at 20–22%.

• Long-term targets: 8–10% organic revenue growth per year and low to mid-teen Adjusted EBITDA margins by fiscal 2027.