GRAHAM CORP

Graham Corporation is a global leader in the design and manufacture of mission critical fluid, power, heat transfer, vacuum, and advanced mixing technologies for the Defense, Energy & Process, and Space industries. The company's equipment is used in nuclear and non-nuclear propulsion, power, fluid transfer, thermal management, and advanced mixing systems for the Defense industry; vacuum, heat transfer, advanced mixing, and fluid transfer applications for the Energy & Process industries across oil refining, downstream chemical facilities, fertilizers, ethylene, methanol, energetics, edible oil, food & beverage, pulp & paper, medical, and multiple alternative energy applications such as hydrogen, small modular nuclear, concentrated solar, lithium extraction, and geothermal processes; and propulsion, power, thermal management, advanced mixing, and life support systems for the Space industry. The company has transitioned from a highly cyclical Energy business to a diversified company serving multiple markets with strong tailwinds including Defense, Energy & Process, and Space, with sales to the Defense industry accounting for approximately 60% of total sales in fiscal 2026 compared with approximately 25% in fiscal 2021, while sales to the Energy & Process markets represented approximately 34% of revenue in fiscal 2026 compared with approximately 75% in fiscal 2021.

The company's business is highly competitive, with principal bases of competition including technology, price, performance, reputation, delivery, and quality. Competitors listed by market include DC Fabricators, PCC, Triumph Aerospace, and Xylem in the North America Defense market; Croll Reynolds Company, Inc., Gardner Denver, Inc., GEA Wiegand GmbH, Korting Hannover AG, and Schutte & Koerting in the Energy & Process market; Ametek, Inc., Collins Aerospace, Concepts NREC, Curtiss Wright, Honeywell, Kratos Defense & Security Solutions, and L3Harris Technologies, Inc. in the Turbomachinery OEM – Defense and Space market; Donghwa Entec Co., Ltd., KEMCO, Nikkiso Co., Ltd., and Oeltechnik GmbH in the Turbomachinery OEM – Energy & Process market; Holtec, KEMCO, Maarky Thermal Systems, and Thermal Engineering International (USA), Inc. in the Turbomachinery OEM – power and power producer market; and Hauschild SpeedMixer, Mazerustar Planetary Mixers, Thinky Corporation, and Resodyn Acoustic Mixers in the Advanced Mixing Systems market. International competitors include Croll Reynolds Company, Inc., Edwards, Ltd., Gardner Denver, Inc., GEA Wiegand GmbH, Korting Hannover AG, Schutte & Koerting, and Westlake in the Energy & Process market; Chem Process Systems, Donghwa Entec Co., Ltd., Hangzhou Turbine Equipment Co., Ltd., KEMCO, Mazda (India), and Oeltechnik GmbH in the Turbomachinery OEM – Energy & Process market; Chem Process Systems, Holtec, KEMCO, Mazda (India), SPX Heat Transfer, and Thermal Engineering International in the Turbomachinery OEM – power and power producer market; and Hauschild SpeedMixer, Mazerustar Planetary Mixers, and Thinky Corporation in the Advanced Mixing Systems market. The company believes its customer-facing platform of technical sales, project estimating and application engineering, strong capabilities to handle complex custom orders, responsive flexible production environment, capability to manage outsourced production, robust technical support, highly trained workforce, and capability to manufacture to tight tolerances are competitive advantages.

The company generates revenue through the design, manufacture, and sale of highly reliable custom-engineered products for critical applications to the Defense, Energy & Process, and Space industries. The company's product offerings include power plant systems (ejectors, surface condensers), torpedo ejection, propulsion & power systems (turbines, alternators, regulators, pumps, blowers), thermal management systems (pumps, blowers, drive electronics), and advanced mixing systems (bladeless centrifugal mixers, accessories, services, and consumables) for Defense; heat transfer & vacuum systems (ejectors, process condensers, surface condensers, liquid ring pumps, heat exchangers, nozzles), power generation systems (turbines, generators, compressors, pumps), thermal management systems (pumps, blowers, electronics), and advanced mixing systems (bladeless centrifugal mixers, accessories, services, and consumables) for Energy & Process; and rocket propulsion systems (turbopumps, fuel pumps, cryogenic pumps, nuclear propellant pump), cooling systems (pumps, compressors, fans, blowers), life support systems (fans, pumps, blowers), and advanced mixing systems (bladeless centrifugal mixers, accessories, services, and consumables) for Space. Products are sold by a team of sales engineers employed directly by the company. Two customers each accounted for more than 10% of revenue in fiscal 2026. Domestic sales accounted for approximately 85% of total sales in fiscal 2026, while sales to the Defense industry were 60%. The company's funded and unfunded backlog at March 31, 2026 was $532,637 ¹ compared to $412,335 ² at March 31, 2025.

For the Defense industry, the company's equipment is used in applications including the aircraft carrier program (CVN), Virginia fast-attack submarine program (SSN), Columbia and Ohio ballistic submarine program (SSBN), U.S. Navy torpedoes (all size classes), refueling, overhaul replacement, and fleet sustainment equipment, advanced radar and laser systems, and munition propellants. For the Energy & Process industry, applications include conventional oil refining, oil sands extraction and upgrading, ethanol plants, cogeneration power plants, geothermal and biomass power plants with lithium extraction, concentrated solar power, molten salt reactor development, small modular nuclear reactor development, hydrogen fuel cell power, hydrogen production, transportation, distribution, fueling, ethylene, methanol and nitrogen producing plants, urea and fertilizer plants, plastics, resins and fibers plants, downstream petrochemical plants, coal-to-chemicals plants, gas-to-liquids plants, edible oil plants, food & beverage plants, pulp & paper plants, batteries, personal care, and pharmaceuticals. For the Space industry, applications include NASA xEMU next-generation space suit and commercial derivatives, in-space nuclear thermal propulsion turbomachinery, propellant recirculation pumps, space exploration blowers, satellite active cooling pumps, various commercial space propulsion, fluid and heat transfer applications, space simulation chambers, and rocket ablative material and coatings.

The company's principal customers include tier one and tier two suppliers to the Defense and Aerospace industry, refineries, petrochemical plants, large engineering companies that build installations for companies in the Energy & Process industries (or Engineering Procurement Contractors), and OEMs. A representative list of customers includes 3M, Air Liquide, Anduril, Applied Research Laboratory at Pennsylvania State University, Aramco, Axiom Space, Bechtel Plant Machinery Inc., Blue Origin, Boeing, CERN, China State-owned Refiners, Cummins, Dow Chemical, DuPont, Echogen Power Systems, General Atomics, General Dynamics, GE Vernova, ExxonMobil, Fluor Corporation, Intuitive Machines, Jacobs Engineering Group Inc., Kairos Power, Koch Fertilizer ENID LLC, L3Harris, Lockheed Martin, MHI Compressor International Corporation, NASA, Newport News Shipbuilding, Northrop Grumman, Oak Ridge National Laboratory, Radiant Nuclear, Raytheon Technologies, Relativity, Rolls-Royce North America, SAIC, SES, Sierra Space, SpaceX, U.S. Navy, and United Launch Alliance. Sales to the top ten customers accounted for 60% ³ of consolidated net sales in fiscal 2026, 60% ⁴ in fiscal 2025, and 57% ⁵ in fiscal 2024.

On October 20, 2025, the company completed its acquisition of Xdot Bearing Technologies, a specialized consulting, design, and engineering firm focused on foil bearing technology, which has been integrated into Barber-Nichols, LLC. On January 23, 2026, the company acquired FlackTek Manufacturing, LLC and FlackTek Sales, LLC, a provider of advanced mixing and material processing solutions. FlackTek's patented technology platform includes the MEGA™ system, which delivers >24x ⁶ production throughput versus conventional planetary bladed mixers, reducing mixing cycles from hours to minutes and enabling true high-volume industrial scale. The company also acquired P3 Technologies, LLC on November 9, 2023, adding patented multi-channel diffuser (MCD) and self-contained actuating magnetic pump (SCAMP) technologies. In fiscal 2025, the company launched its NextGen™ steam ejector nozzle. During fiscal 2026, fiscal 2025, and fiscal 2024, the company spent $6,354 ⁷, $4,039 ⁸, and $3,944 ⁹, respectively, on research and development activities, with new product development R&D of $1,204 ¹⁰, $1,124 ¹¹, and $904 ¹², respectively. As of March 31, 2026, the company had 732 ¹³ employees, of which 23 ¹⁴ are located outside of the U.S. The company had $13,000 ¹⁵ outstanding under its revolving credit facility with Wells Fargo Bank, National Association as of March 31, 2026.

The company's strategy is to build a diversified business that provides mission critical, high compliance products requiring exceptional engineering know-how and a highly-skilled and engaged workforce, pursuing niche applications in markets with enduring tailwinds that reward differentiated engineered product and full lifecycle scope of work with higher margins. The company has transitioned from a highly cyclical Energy business to a diversified company serving multiple markets with strong tailwinds including Defense, Energy & Process, and Space. Fiscal 2023 through 2026 were characterized by continual improvement and increasing profitability, forming the initial steps along the path to achieve fiscal 2027 goals through investments in the business. The company plans to pursue clearly defined markets with significant barriers to entry, optimize processes and tools to deliver superior performance, engage all stakeholders to multiply efforts, prioritize capital investments that fuel growth and maximize shareholder value, and supplement organic growth opportunities with strategic acquisitions.

The company expects its new product development R&D spend that is not customer funded to gradually increase to 1% to 2% ¹⁶ of revenue and expects to offset a portion of this increase through process improvement and operational efficiencies.

The company intends to develop a full product lifecycle model serving multiple markets while leveraging its technology across its markets and driving business unit synergies to optimize profitability and stability. The company plans to supplement its organic growth opportunities with strategic acquisitions. With the acquisition of FlackTek, the company added scalable and adaptable patent-protected intellectual property that it intends to leverage across its customer base, including the MEGA™ system enabling customers to scale advanced materials processing from R&D through pilot and into production environments. The company believes that combining Xdot's foil bearing technology with BN's turbomachinery expertise will significantly expand its ability to design and deliver high-speed rotating machines into new markets and applications. The company expects to increase the amount of its R&D spend on new product development in order to meet its organic growth goals, maintain its technological competitive advantage, and disrupt the markets it serves, but only if those opportunities have the proper return on investment.

The company's strategy is to pursue niche applications in markets with enduring tailwinds that reward differentiated engineered product and full lifecycle scope of work with higher margins. The company intends to develop a full product lifecycle model serving multiple markets while leveraging its technology across its markets and driving business unit synergies to optimize profitability and stability. Executed effectively, the company expects its strategy to create more enduring, recurring opportunities and profitable growth.

The company's operations teams are experienced at handling low volume, high mix orders of highly customized solutions. The company maintains a long-tenured, highly skilled and flexible workforce and supports employee development through programs such as its internal weld school, partnerships with community colleges, apprenticeship programs, and other external training programs. The company's ERP at its Batavia, NY operations is aging and the company began implementing a new ERP during fiscal 2024, scheduled to go live in fiscal 2027. The company currently has plans to expand its Arvada, CO campus by constructing a new 30,000 ¹⁷ square foot manufacturing facility.

The company expects its new product development R&D spend that is not customer funded to gradually increase to 1% to 2% ¹⁸ of revenue. The company plans to prioritize capital investments that fuel growth and maximize shareholder value. The company will maintain strong capital discipline with smart capital deployment.

The company's Energy & Process business is highly cyclical as it depends on the willingness of customers to invest in major capital projects. The company's traditional Energy markets are undergoing significant transition due to concern over the risk of climate change, and a number of countries have adopted or are considering regulatory frameworks to reduce greenhouse gas emissions that may affect customers' ability and willingness to invest in new facilities or reinvest in current operations. The company faces potential impacts from changes in U.S. and foreign energy policy regulations, including the elimination of or changes in rules and regulations that could create a regulatory environment making end users less likely to purchase products. The company also faces risks from potential reductions in U.S. federal government Defense spending or shifts in focus in Defense spending, as well as disruptions in government funding which could impact the ability to continue production activity on Defense orders that have order-to-shipment time periods of three to seven years ¹⁹.

The company faces risks from macroeconomic impacts including rising inflation, a slowdown in the economy, or a recession, which may result in increased costs of operations. An inflationary environment can increase the cost of labor and other operating costs, especially given that a large percentage of contracts are fixed-price in nature. The company also faces risks from disruptions or delays in supply chains, including from the continuation of the war between Ukraine and Russia, the conflict related to Hamas/Israel and the situation in the Red Sea including tensions with Iran, which fuels uncertainty and risk to the supply chain through which the company sources many raw materials. The company faces risks from potential changes in customs and trade policies and tariffs imposed by the U.S. and those imposed in response by other countries, including China, which could add significant costs and make products more expensive.

The company faces customer concentration risk related to strategic growth for U.S. Navy projects, with sales to the Defense industry representing 60% ²⁰ of business in fiscal 2026 compared with 58% ²¹ and 54% ²² in fiscal 2025 and 2024, respectively, and the end customer for these projects, primarily the U.S. Navy, being the same. Sales to the top ten customers accounted for 60% ²³ of consolidated net sales in fiscal 2026. The company's exposure to fixed-price contracts, which involve long-term commitments with order-to-shipment periods that can exceed five years ²⁴ for Defense projects, could result in estimating errors, cost overruns, supplier failures, and customer disputes that negatively impact profitability. The company's acquisition of FlackTek on January 23, 2026 for an undisclosed amount subjects the company to integration risks, unknown liabilities, and dependence on the commercial performance of the MEGA™ product platform, which was recently launched and has a limited history of market performance. The company's Energy & Process revenue is derived from highly cyclical petroleum refining and petrochemical industries dependent on volatile crude oil and natural gas prices, and the company had one material project cancelled in fiscal 2026 and one material contract on hold at March 31, 2026. The company's backlog of $532,637 ²⁵ at March 31, 2026 contains a number of funded and unfunded large Defense orders with order-to-shipment time periods of three to seven years ²⁶ that are subject to annual government funding, and a disruption in funding could materially and adversely impact the business.

Management's message emphasizes that the company has transitioned from a highly cyclical Energy business to a diversified company serving multiple markets with strong tailwinds including Defense, Energy & Process, and Space. Management states that fiscal 2023 through 2026 were characterized by continual improvement and increasing profitability, and formed the initial steps along the path to achieve fiscal 2027 goals through investments in the business. The strategic priorities emphasized for the period ahead are: pursuing clearly defined markets with significant barriers to entry, optimizing processes and tools to deliver superior performance, engaging all stakeholders to multiply efforts, prioritizing capital investments that fuel growth and maximize shareholder value, and supplementing organic growth opportunities with strategic acquisitions. Management expects new product development R&D spend that is not customer funded to gradually increase to 1% to 2% ²⁷ of revenue and expects to offset a portion of this increase through process improvement and operational efficiencies.