8-K: Graham Corp. Soars on Strong Q3, Boosts FY26 Outlook

Graham Corporation reported a 21% revenue increase and 79% diluted EPS growth in Q3 FY26, driven by robust Defense and Space markets, and raised its full-year fiscal 2026 guidance.

Summary

• Revenue increased 21% to $56.7 million for Q3 FY26.
• Net income per diluted share increased 79% to $0.25; adjusted net income per diluted share increased 72% to $0.31.
• Adjusted EBITDA increased 50% to $6.0 million, with an Adjusted EBITDA margin of 10.7%.
• Orders were $71.7 million, resulting in a book-to-bill ratio of 1.3x and a record backlog of $515.6 million.
• Acquired FlackTek Manufacturing, LLC and FlackTek Sales, LLC on January 23, 2026, for $35.0 million (85% cash, 15% common stock) plus potential $25 million in future performance-based cash earnouts.
• Updated and increased full-year fiscal 2026 guidance for net sales to $233 million to $239 million (from $225 million to $235 million) and Adjusted EBITDA to $24 million to $28 million (from $22 million to $28 million).
• Maintained a strong balance sheet with $22.3 million in cash and no debt outstanding at December 31, 2025, with $43.0 million available under its revolving credit facility.
• Following the FlackTek acquisition, the company's pro forma leverage ratio is approximately 1.2x with $20 million in debt, and the revolving credit facility limit was increased from $50 million to $80 million.

Sentiment

Score: 9

Explanation: StockSavvy.ai views this as a highly positive report, driven by strong financial performance, record backlog, strategic acquisition, and increased full-year guidance, indicating robust operational execution and future growth potential.

Positives

• Q3 FY26 revenue increased 21% to $56.7 million compared to the prior-year period.
• Net income per diluted share surged 79% to $0.25, and adjusted net income per diluted share increased 72% to $0.31.
• Adjusted EBITDA grew 50% to $6.0 million, with the Adjusted EBITDA margin expanding 210 basis points to 10.7%.
• Orders of $71.7 million resulted in a strong book-to-bill ratio of 1.3x.
• Record backlog of $515.6 million provides significant revenue visibility, representing a 34% increase over the prior-year period.
• Sales to the Defense market contributed $8.3 million to growth, and sales to the Energy & Process market increased $2.1 million (13%), driven by Aftermarket sales and momentum in New Energy markets, particularly small modular reactors (SMRs).
• Strong balance sheet with $22.3 million in cash and no debt outstanding as of December 31, 2025.
• Increased full-year fiscal 2026 guidance for both net sales and Adjusted EBITDA, reflecting strong momentum and the contribution from the FlackTek acquisition.
• The acquisition of FlackTek meaningfully expands the company's technology portfolio, establishing advanced mixing and materials processing as a third core platform.
• Selling, general and administrative expense (SG&A) as a percentage of sales decreased 200 basis points to 18.6%, reflecting higher sales and continued financial discipline.

Negatives

• Gross profit margin decreased 100 basis points to 23.8% in Q3 FY26, primarily due to the mix of sales and a higher level of material receipts which carry lower profit margins.
• The benefit from a BlueForge Alliance grant for defense welder training programs, which contributed $0.3 million in Q3 FY25 and $1.5 million in YTD FY25, did not repeat in fiscal year 2026.
• The estimated impact of tariffs for the full fiscal 2026 is expected to be an incremental $1.0 million to $1.5 million compared to the prior year.
• Total Aftermarket orders for Q3 FY26 decreased $5.2 million to $8.0 million from the record levels of the prior year.
• Sales to the Space market decreased $690 thousand, or 18%, compared to Q3 FY25.

Risks

• Profitability of future projects and the business may vary.
• Ability to deliver to plan and continue to strengthen relationships with customers in the Defense industry.
• Ability to secure future projects and applications.
• Changes in market conditions in the industries in which the company operates.
• Changes in general economic conditions and customer behavior.
• Forecasts regarding the timing and scope of the economic recovery in its markets.
• Realization of benefits from the acquisition of FlackTek and the challenges associated with its integration and operation.
• Forward-looking non-GAAP measures are preliminary estimates and subject to risks and uncertainties, including changes in connection with purchase accounting, quarter-end, and year-end adjustments.

Future Outlook

Graham Corporation updated and increased its full-year fiscal 2026 guidance, projecting net sales between $233 million and $239 million and Adjusted EBITDA between $24 million and $28 million. The company remains on track to achieve its strategic goal of 8% to 10% annual organic revenue growth and low to mid-teen Adjusted EBITDA margins by fiscal year 2027, supported by continued disciplined execution, operational efficiency, and strategic investments in automation, advanced testing, and new technical capabilities.

Management Comments

• "Our third quarter results reflect continued strong, disciplined execution across the organization as we progress through the back half of fiscal 2026." Matthew J. Malone, President and CEO.
• "Revenue growth and profitability were driven by solid performance across our end markets and supported by a record backlog, which provides meaningful visibility into future demand." Matthew J. Malone, President and CEO.
• "Activity in our Defense market remains robust, while the Energy & Process and Space markets continue to perform in line with our expectations." Matthew J. Malone, President and CEO.
• "As we move through the remainder of the fiscal year, we remain focused on disciplined execution, operational efficiency, and advancing strategic initiatives that strengthen our competitive position." Matthew J. Malone, President and CEO.
• "The recent acquisition of FlackTek in January 2026 meaningfully expands our technology portfolio and further positions Graham to deliver differentiated, mission-critical solutions to our core end markets." Matthew J. Malone, President and CEO.
• "We are pleased with our performance through the first nine months of fiscal 2026 and continue to see strong demand across most of the markets we serve." Christopher J. Thome, CFO.
• "Reflecting this momentum, including the contribution from the FlackTek acquisition, we are increasing our full-year fiscal 2026 guidance." Christopher J. Thome, CFO.
• "After the acquisition of FlackTek, our balance sheet remains strong with low leverage, a modest amount of debt of $20 million, and increased capacity under our line of credit." Christopher J. Thome, CFO.
• "We believe this increased capacity, along with our strong operating cash flow, provides us ample liquidity to continue to execute our capital allocation strategy and future growth." Christopher J. Thome, CFO.

Industry Context

StockSavvy.ai notes that Graham Corporation's strong performance in the Defense market aligns with ongoing global defense spending trends. The growth in the Energy & Process market, particularly in New Energy and small modular reactors (SMRs), positions the company well within the broader energy transition narrative. The acquisition of FlackTek, establishing advanced mixing as a third core technology, indicates a strategic move to diversify and strengthen its offerings in high-growth, mission-critical sectors, potentially enhancing its competitive edge against peers in specialized industrial technologies.

Stakeholder Impact

• Shareholders: Positive impact due to strong financial performance, increased profitability, record backlog, and raised guidance, potentially leading to increased share value. The FlackTek acquisition also expands the company's technology portfolio and growth opportunities.
• Employees: Positive impact through investments in operations, employees, and technology, as well as higher performance-based compensation due to increased profitability.
• Customers: Continued delivery of mission-critical solutions, with strong demand noted in Defense, Energy & Process (including SMRs), and Space markets. The FlackTek acquisition enhances technology offerings.
• Creditors: The company maintains a strong balance sheet with low leverage (1.2x pro forma post-acquisition) and increased revolving credit facility capacity, indicating strong financial health and ability to meet obligations.

Next Steps

• Continued disciplined execution and operational efficiency across the organization.
• Advancing strategic initiatives to strengthen the company's competitive position.
• Investing in automation, advanced testing, and new technical capabilities to enhance productivity and support margin expansion.
• Integration of the recently acquired FlackTek business into the company's operations.
• Hosting a conference call and live webcast on February 6, 2026, to review financial results, strategy, and outlook.

Key Dates

Recommendation

The strong Q3 FY26 financial results, including significant revenue and EPS growth, coupled with a record backlog providing excellent revenue visibility, indicate robust operational momentum. The strategic acquisition of FlackTek expands the company's core technology platforms and market reach. The upward revision of full-year fiscal 2026 guidance further reinforces a positive outlook. The company's strong balance sheet and low leverage post-acquisition provide ample liquidity for future growth, making it an attractive investment.

Keywords

Graham Corporation, GHM, Q3 FY26 Earnings, Financial Results, Defense Industry, Energy & Process, Space Industry, FlackTek Acquisition, Backlog, Revenue Growth, Adjusted EBITDA, Guidance Update, Small Modular Reactors, SMRs, Heat Transfer, Vacuum Technologies, Advanced Mixing