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.

• Gross margin improved by 260 basis points to 24.8%, with net income rising to $1.6 million ($0.14 per diluted share), and adjusted net income at $2.0 million ($0.18 per share).

• Backlog at quarter-end was $384.7 million, with 80% related to defense and a year-to-date book-to-bill ratio of 1.0x.

• Leadership succession plan announced: Matt Malone to become CEO in June 2025, with Daniel Thoren transitioning to Executive Chairman and new President & COO appointed.

• Strong balance sheet with no debt, $30 million in cash, and $43 million available on revolving credit facility.

Financial highlights

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

• Gross profit for Q3 FY2025 was $11.7 million (24.8% margin), up 20% year-over-year.

• SG&A expenses increased to $9.7 million due to investments in people, processes, technology, and ERP implementation.

• Effective tax rate for Q3 was 29%; year-to-date rate is 20%.

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

Outlook and guidance

• Fiscal 2025 net sales 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 prior year, with a 9.5% margin at midpoint.

• SG&A expense guidance increased to 18–19% of sales; CapEx expected at $15–$19 million for FY2025.

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

• Effective tax rate expected at 20–22% for FY2025.