Graham Raises Gross-Margin Guidance After Margin Expansion

The Tip Desk · November 11, 2026 · 3 min read

Gross profit rose 38% to $19.7 million in the fiscal second quarter as the company lifted full-year gross-margin guidance to 25.0% to 26.0%.

Graham Corporation (GHM), a maker of fluid, power, heat-transfer, vacuum and mixing systems for defense, space and energy customers, reported gross profit of $19.7 million in the second quarter of fiscal 2027, up 38% from a year earlier, and expanded gross margin 650 basis points to 28.2%.

The margin step-up reversed a 150-basis-point decline to 25.0% in the first quarter. The company said the year-over-year increase reflected operational improvements on new and existing programs, the addition of FlackTek, and the mix of Space and Defense programs, as well as a high level of lower-margin material receipts in the year-ago quarter.

Net sales were $69.8 million, up 6% from the year-ago second quarter after a 29% year-over-year increase in the first quarter. FlackTek contributed $9.5 million of revenue. Defense sales rose $5.1 million, or 12%, and accounted for 66% of net sales. Space sales increased $2.4 million, or 59%. Energy & Process sales decreased $3.7 million, or 17%, which the company attributed primarily to softness in large capital-project investment and lower sales to customers outside the U.S., partly offset by New Energy growth and FlackTek.

Adjusted EBITDA increased 64% to $10.3 million, and adjusted EBITDA margin rose 530 basis points to 14.8% from 9.5% a year earlier. Adjusted EBITDA had risen 28% to $8.8 million in the first quarter, with the margin unchanged at 12.3%. GAAP net income per diluted share was $0.39, up 39% from $0.28 a year earlier. Adjusted net income per diluted share was $0.52.

Orders were $73.7 million, compared with $83.2 million in the year-ago second quarter. The book-to-bill ratio was 1.1x. Backlog reached a record $561.3 million, up 12% from a year earlier, marking a seventh consecutive quarter of record quarterly backlog. Defense backlog rose 10% and Space backlog rose 108%. About 83% of backlog as of September 30, 2026, was to the Defense market. Management expects about 30% to 35% of backlog to convert to sales within the next twelve months.

Cash and cash equivalents were $71.4 million at quarter end, with no outstanding debt. Operating cash flow was $46.7 million in the quarter. The company had $74.7 million available under its revolving credit facility.

Graham reaffirmed full-year fiscal 2027 net sales guidance of $285 million to $295 million and adjusted EBITDA guidance of $35 million to $40 million. It raised gross-margin guidance to 25.0% to 26.0% from 24.5% to 25.5%, citing mix and better execution. SG&A expense guidance was raised to 17.5% to 18.5% of sales from 16.5% to 17.5%, reflecting higher acquisition and integration costs. Capital-expenditure guidance was lowered to $15.0 million to $20.0 million from $18.0 million to $22.0 million, based on the timing of major projects.

Chief Financial Officer Christopher J. Thome said the company generated $46.7 million in operating cash flow in the second quarter and ended the quarter with $71.4 million in cash and no outstanding debt. President and Chief Executive Officer Matthew J. Malone said the record backlog provides visibility into future growth and that the company completed its first customer test at a new cryogenic testing facility and broke ground on a new facility in Arvada.