GRAHAM CORP

Previous wording

We are a global leader in the design and manufacture of mission critical fluid, power, heat transfer and vacuum technologies for the defense, space, energy and process industries. For the defense industry, our equipment is used in nuclear and non-nuclear propulsion, power, fluid transfer, and thermal management systems. For the space industry, our equipment is used in propulsion, power and energy management systems, and for life support systems. We supply equipment for vacuum, heat transfer, and fluid transfer applications used in energy and new energy markets including oil refining, cogeneration, and multiple alternative and clean power applications including hydrogen. For the chemical and petrochemical industries, our equipment is used in fertilizer, ammonia, ethylene, methanol, and downstream chemical facilities.

Current wording

We are a global leader in the design and manufacture of mission critical fluid, power, heat transfer and vacuum technologies for the Defense, Energy & Process, and Space industries. We design and manufacture custom-engineered vacuum, heat transfer, cryogenic pump and turbomachinery technologies. For the Defense industry, our equipment is used in nuclear and non-nuclear propulsion, power, fluid transfer, and thermal management systems. For the Energy & Process industries we supply equipment for vacuum, heat transfer and fluid transfer applications used in oil refining, downstream chemical facilities, fertilizers, ethylene, methanol, edible oil, food & beverage, pulp & paper, and multiple alternative energy applications such as hydrogen, small modular nuclear, concentrated solar, lithium extraction, and geothermal processes. For the Space industry, our equipment is used in propulsion, power and thermal management systems, and for life support systems.

Previous wording

Our corporate headquarters is located with our production facilities in Batavia, New York, where surface condensers and ejectors are designed, engineered, and manufactured for the defense, energy, and petrochemical industries. Our wholly-owned subsidiary, Barber-Nichols, LLC ("BN"), based in Arvada, Colorado, designs, develops, manufactures and sells specialty turbomachinery products for the space, aerospace, cryogenic, defense, and energy markets. In November 2023, we acquired P3 Technologies, LLC ("P3"), located in Jupiter, Florida (See "Acquisition" below). We also have wholly-owned foreign subsidiaries, Graham Vacuum and Heat Transfer Technology Co., Ltd. ("GVHTT"), located in Suzhou, China and Graham India Private Limited ("GIPL"), located in Ahmedabad, India. GVHTT provides sales and engineering support for us throughout Southeast Asia. GIPL provides sales and engineering support for us in India and the Middle East.

Current wording

Our corporate headquarters is located with our production facilities in Batavia, NY, where surface condensers and ejectors are designed, engineered, and manufactured for the Defense and Energy & Process industries. Our wholly-owned subsidiary, Barber-Nichols, LLC ("BN"), based in Arvada, CO, designs, develops, manufactures, and sells specialty turbomachinery products for the Space, Aerospace, Cryogenic, Defense, and Energy markets. Our wholly-owned subsidiary, P3 Technologies, LLC ("P3"), located in Jupiter, FL is a custom turbomachinery engineering, product development, and manufacturing business that serves the Space, New Energy, Defense, and Medical industries. P3 is managed through BN and is highly complementary to BN's technology and enhances its turbomachinery solutions. We also have wholly-owned foreign subsidiaries, Graham Vacuum and Heat Transfer Technology Co., Ltd. ("GVHTT"), located in Suzhou, China and Graham India Private Limited ("GIPL"), located in Ahmedabad and Pune, India. GVHTT provides sales and engineering support for us throughout Southeast Asia. GIPL provides sales and engineering support for us in India and the Middle East.

Previous wording

Gross profit and margin for the third quarter of fiscal 2025 were $11,686 and 24.8%, respectively. The 260 basis point improvement in gross profit margin over the comparable period of fiscal 2024 reflected increased leverage on fixed overhead costs due to the higher volume of sales discussed above, as well as better execution, and improved pricing, partially offset by higher incentive compensation in comparison with the prior year. Additionally, third quarter fiscal 2025 gross profit benefited $255 due to a $2,100 grant received from the BlueForge Alliance to reimburse us for the cost of our defense welder training programs in Batavia and related equipment. To date we have received $1,460 of funding under this grant.

Current wording

Gross profit and margin for the first quarter of fiscal 2026 was $14,721 and 26.5%, respectively. The 170 basis point improvement in gross profit margin over the comparable period of fiscal 2025 reflected increased leverage on fixed overhead costs due to the higher volume of sales discussed above, as well as an improved mix of sales related to higher margin aftermarket sales, and better execution and pricing on defense contracts. For the first quarter of fiscal 2026, the impact of tariffs was not material to our consolidated financial statements in comparison to the prior year. However, we still estimate the range of potential impact of increased tariffs for the full year to be between $2,000 to $5,000.

Previous wording

Orders booked in the third quarter of fiscal 2025 decreased to $24,786 compared with $123,267 in the third quarter of fiscal 2024. This decrease was primarily due to a record level of orders in the third quarter of fiscal 2024 as a result of follow-on orders for critical U.S. Navy programs related to the Columbia Class submarine and Ford Class carrier programs. After-market orders for the refining, petrochemical, and defense markets for the third quarter of fiscal 2025 increased 51% to $13,013 compared with the prior-year period. Note that our orders tend to be lumpy given the nature of our business (i.e. large capital projects) and in particular, orders to the defense industry, which span multiple years and are larger in size. For more information on this key performance indicator see "Orders and Backlog" below.

Current wording

Orders booked in the first quarter of fiscal 2026 were $125,898. As a result, backlog increased $70,525 during the quarter to $482,860 at June 30, 2025. Orders for the first quarter of fiscal 2026 included $86,500 of follow-on orders to support the U.S. Navy's Virginia Class Submarine program, and strong aftermarket orders for the Energy & Process and Defense markets, which increased 16% to $10,491 compared with the prior year. Note that our orders tend to be lumpy given the nature of our business (i.e. large capital projects) and in particular, orders to the Defense industry, which span multiple years and can be significantly larger in size. For the first quarter of fiscal 2026, our book-to-bill ratio was 2.3x. For additional information on this key performance indicator see "Orders, Backlog, and Book-to-Bill Ratio" below.

Previous wording

Cash and cash equivalents at December 31, 2024 were $30,046, compared with $16,939 at March 31, 2024. This increase was primarily due to cash provided by operating activities of $27,873, partially offset by capital expenditures of $13,800 as we continue to invest in process improvement and longer-term growth opportunities. Cash flow from operations during the quarter was primarily driven by cash net income and a reduction in working capital as a result of strong cash management and favorable contract terms.

Current wording

Cash and cash equivalents at June 30, 2025 were $10,753, compared with $21,577 at March 31, 2025. This decrease, as expected, was primarily due to cash used by operating activities of $2,259 and $7,004 of capital expenditures as we continue to invest in process improvement and longer-term growth opportunities. Cash flow used by operations during the fiscal 2026 first quarter was primarily driven by the payment of fiscal 2025 bonuses during the quarter, including the BN Performance Bonus of $4,300, partially offset by cash net income.

Previous wording

In February 2025, we announced a leadership change to provide for executive succession, strengthen our core leadership team, and support continued growth. As part of our established succession plan, President & CEO, Daniel J. Thoren is expected to transition to Executive Chairman and Strategic Advisor effective June 2025. With this change, Jonathan W. Painter, Chairman of the Board of Directors, will transition to Lead Independent Director. Additionally, Matthew J. Malone, current Vice President and General Manager of BN, was appointed to President & COO effective February 2025 and is expected to assume the CEO role of Graham Corporation in June 2025. Michael E. Dixon, current Director of Sales and Marketing of BN, was promoted to General Manager of BN effective February 2025 and is expected to assume the role of Vice President of Graham Corporation and General Manager of BN in June 2025.

Current wording

In February 2025, we announced a leadership change to provide for executive succession, strengthen our core leadership team, and support continued growth. As part of our established succession plan, CEO, Daniel J. Thoren transitioned to Executive Chairman and Strategic Advisor effective June 10, 2025. With this change, Jonathan W. Painter, Chairman of the Board of Directors, transitioned to Lead Independent Director. Additionally, Matthew J. Malone assumed the CEO role of Graham Corporation and Michael E. Dixon, assumed the role of Vice President of Graham Corporation and General Manager of BN in June 2025.

Previous wording

Demand for our equipment and systems for the defense industry is expected to remain strong and continue to expand, based on defense budget plans, accelerated ship build schedules, increased geopolitical tensions, the projected build schedules of submarines, aircraft carriers, and undersea propulsion and power systems, and the solutions we provide. We also don't believe that changes made by the new U.S. presidential administration will materially impact our defense business. In addition to U.S. Navy applications, we also provide specialty pumps, turbines, compressors, and controllers for various fluid and thermal management systems used in U.S. Department of Defense radar, laser, electronics, and power systems. We have built a leading position, and in most instances a sole source position, for certain systems and equipment for the defense industry.

Current wording

Defense - Demand for our equipment and systems for the Defense industry is expected to remain strong and continue to expand, based on Defense budget plans, accelerated ship build schedules due to geopolitical tensions, the projected build schedule of submarines, aircraft carriers and undersea propulsion and power systems, and the solutions we provide. We also don't believe that changes made by the new U.S. presidential administration will materially impact our Defense business. In addition to U.S. Navy applications, we also provide specialty pumps, turbines, compressors, and controllers for various fluid and thermal management systems used in Department of Defense radar, laser, electronics, and power systems. We have built a leading position, and in most instances a sole source position, for certain systems and equipment for the Defense industry.

Previous wording

Our traditional energy markets are undergoing significant transition. While we expect that fossil fuels will continue to be an important component in the global energy industry for many years to come, there are significant changes in the priorities for capital investments by our customers and the regions in which those investments are being made. We expect that the systemic changes in the energy markets, which are influenced by the increasing use by consumers of alternative fuels and government policies to stimulate their usage, may lead to demand growth for fossil-based fuels that is less than the global growth rate. The timing and catalyst for a recovery in this market remain uncertain. Accordingly, we believe that in the near term the quantity of projects available for us to compete for will remain low and that new project pricing will remain challenging. Additionally, we believe that the majority of new capital investment orders in our traditional energy markets will be outside the U.S., such as India and the Middle-East. Finally, over the last few years we have experienced an increase in our energy and chemical aftermarket orders primarily from the domestic market as our customers continue to maintain and invest in the facilities they currently operate. We expect this trend to continue for the foreseeable future.

Current wording

Energy & Process - Our traditional Energy markets are undergoing significant transition. While we expect that fossil fuels will continue to be an important component in the global Energy industry for many years to come, there are significant changes in the priorities for capital investments by our customers and the regions in which those investments are being made. We expect that the systemic changes in the Energy markets, which are influenced by the increasing use by consumers of alternative fuels and government policies to stimulate their usage, will likely lead to demand growth for fossil-based fuels that is less than the global growth rate. Accordingly, we believe that in the near term the quantity of projects available for us to compete for will remain low and that new project pricing will remain challenging. Additionally, we believe that the majority of new capital investment orders in our traditional Energy markets will be outside the U.S., such as India and the Middle-East. Finally, over the last few years we have experienced an increase in our Energy & Process aftermarket orders primarily from the domestic market as our customers continue to maintain and invest in the facilities they currently operate. Although these orders remained strong in the first quarter of fiscal 2026, the recent decrease in oil prices combined with the economic uncertainty caused by the increase in tariffs may impact future order volumes.

Previous wording

Over the long-term, we expect that population growth, an expanding global middle class, and an increasing desire for improved quality of life and access to consumer products will drive increased demand for industrial goods within the plastics and resins value chain along with fertilizers and related products. As such, we expect investment in new global chemical and petrochemical capacity will continue and drive growth in demand for our products and services.

Current wording

Over the long-term, we expect that population growth, an expanding global middle class, and an increasing desire for improved quality of life and access to consumer products will drive increased demand for industrial goods within the plastics and resins value chain along with fertilizers and related Process markets. As such, we expect investment in new global process capacity will improve and drive growth in demand for our products and services.

Previous wording

The alternative and clean energy opportunities for our heat transfer, power production, and fluid transfer systems are expected to continue to grow. We assist in designing, developing and producing equipment for hydrogen production, distribution and fueling systems, concentrated solar power and storage, small modular nuclear systems, bioenergy products, and geothermal power generation with lithium extraction. We are positioning the Company to be a more significant contributor as these markets continue to develop.

Current wording

The alternative and clean energy opportunities for our heat transfer, power production, and fluid transfer systems are expected to continue to grow. We assist in designing, developing, and producing equipment for hydrogen production, distribution and fueling systems, concentrated solar power and storage, lithium extraction, SMRs, bioenergy products, and geothermal power generation. As a result of increased energy demands driven by population growth, crypto-currency mining, and artificial intelligence ("AI") data centers, we have seen an increase in activity and orders related to SMRs which we expect to continue for the foreseeable future. We believe we are positioned to be a significant contributor as these markets continue to develop.

Previous wording

We intend to stay competitive in our traditional energy and chemical/petrochemical markets by investing in technology such as our NextGen steam ejector nozzle, which has been engineered to reduce steam consumption, lower operating costs, and increase system capacity, allowing refineries and process plants to enhance throughput while minimizing their carbon footprint. We estimate that the total market opportunity for our NextGen nozzle exceeds $50 million over the next 5 to 10 years.

Current wording

We intend to stay competitive in our traditional Energy & Process markets by investing in technology such as our NextGen™ steam ejector nozzle, which has been engineered to reduce steam consumption, lower operating costs, and increase system capacity, allowing refineries and process plants to enhance throughput while minimizing their carbon footprint. We estimate that the total market opportunity for our NextGen™ nozzle exceeds $50,000 over the next 5 to 10 years.

Previous wording

Our turbomachinery, pumps, and cryogenic products and market access provide revenue and growth potential in the commercial space/aerospace markets. The commercial space market has grown and evolved rapidly, and we provide rocket engine turbopump systems and components to many of the launch providers for satellites. We expect that in the long-term, extended space exploration will become more prevalent, and we anticipate that our thermal/fluid management and environmental control and life support system turbomachinery will play important roles. We are also participating in future aerospace power and propulsion system development through supply of fluid and thermal management systems components. Small power dense systems are imperative for these applications, and we believe our technology and expertise will enable us to achieve sales growth in this market. Sales and orders to the space industry are variable in nature and many of our customers, who are key players in the industry, have yet to achieve profitability and may be unable to continue operations without additional funding. As a result, future revenue and growth to this market can be uncertain and may negatively impact our business.

Current wording

Space - Our turbomachinery, pumps, and cryogenic products and market access provide revenue and growth potential in the commercial Space/Aerospace markets. The commercial Space market has grown and evolved rapidly, and we provide rocket engine turbopump systems and components to many of the launch providers for satellites. We expect that in the long-term, extended space exploration will become more prevalent, and we anticipate that our thermal/fluid management and environmental control and life support system turbomachinery will play important roles. We are also participating in future aerospace power and propulsion system development through supply of fluid and thermal management systems components. Small, power dense systems are imperative for these applications, and we believe our technology and expertise will enable us to achieve sales growth in this market. Sales and orders to the Space industry are variable in nature and many of our customers, who are key players in the industry, have yet to achieve profitability and may be unable to continue operations without additional funding. As a result, future revenue and growth in this market can be uncertain and may negatively impact our business.

Previous wording

As illustrated below, we have succeeded over the last several years with our strategy to increase our participation in the defense market, which comprised 80% of our total backlog at December 31, 2024.

Current wording

As illustrated below, we have succeeded over the last several years with our strategy to increase our participation in the Defense market, which comprised 87% of our total backlog at June 30, 2025.

Previous wording

*Note: "FYE" refers to fiscal year ended March 31

Current wording

*Note: "FYE" refers to fiscal year ended March 31. For additional information on this key performance indicator see "Orders, Backlog, and Book-to-Bill Ratio" below.

Previous wording

To better understand the significant factors that influenced our performance during the periods presented, the following discussion should be read in conjunction with our Unaudited Condensed Consolidated Financial Statements and the notes to our Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1, of this Form 10-Q.

Current wording

To better understand the significant factors that influenced our performance during the periods presented, the following discussion should be read in conjunction with our Unaudited Condensed Consolidated ("Condensed Consolidated") Financial Statements and the notes to our Condensed Consolidated Financial Statements included in Part I, Item 1, of this Form 10-Q.

Previous wording

Domestic sales as a percentage of aggregate sales were 84% for the first nine months of fiscal 2025, comparable to the 83% for the same period of fiscal 2024, reflecting our continued presence in the defense industry, which is U.S. based. Sales for the nine months ended December 31, 2024 were 58% to the defense industry compared to 53% for the comparable quarter in fiscal 2024. Fluctuation in sales among markets, products and geographic locations varies, sometimes significantly, from quarter-to-quarter based on timing and magnitude of projects. See also "Current Market Conditions," above. For additional information on anticipated future sales and our markets, see "Orders and Backlog" below.

Current wording

Domestic sales as a percentage of net sales increased to 83% in the first quarter of fiscal 2026 compared with 82% in the first quarter of fiscal 2025. These sales were primarily to the U.S. Defense market, which represented 53% of net sales for the first quarter of fiscal 2026. Fluctuation in sales among markets, products and geographic locations varies, sometimes significantly, from quarter-to-quarter based on timing and magnitude of projects. See also "Current Market Conditions," above. For additional information on anticipated future sales and our markets, see "Orders, Backlog, and Book-to-Bill Ratio" below.

Previous wording

Changes in SG&A expense, including amortization expense, for the three and nine months ending December 31, 2024 versus the comparable prior year period is as follows:

Current wording

Changes in SG&A expense, including amortization expense, for the three months ending June 30, 2025 versus the comparable prior year period is as follows:

Previous wording

Selling, general and administrative expenses ("SG&A"), including intangible amortization, for the third quarter of fiscal 2025 increased $884 over the same period of fiscal 2024 and reflects the investments we are making in our people, our processes, and our technology. More specifically, SG&A increased $419 over the prior year quarter due to bad debt reserves related to foreign and smaller space customers, which was offset by lower professional fees of $420. The increase in SG&A is also due to costs related to the implementation of a new enterprise resource planning ("ERP") system at our Batavia facility, incremental costs related to P3, increased research and development investment, and increased personnel costs in connection with our growth and strategic initiatives. In connection with the acquisition of BN, we entered into a Performance Bonus Agreement to provide employees of BN with a supplemental performance-based award based on the achievement of BN performance objectives for the fiscal years ending March 31, 2024, 2025, and 2026, which can range between $2,000 to $4,000 per year (the "BN Performance Bonus). During the third quarter of fiscal 2025, we recorded $1,076 related to the BN Performance Bonus, a $188 decrease from the prior year.

Current wording

The increase in SG&A expense reflects the investments we are making in our operations, our employees, and our technology, as well as continued cost discipline as SG&A costs represented 17.7% of sales for the first quarter of fiscal 2026 compared to 18.6% in fiscal 2025. In connection with the acquisition of BN, we entered into a Performance Bonus Agreement to provide employees of BN with a supplemental performance-based award based on the achievement of BN performance objectives for fiscal 2024, 2025, and 2026, which can range between $2,000 to $4,000 per year. During the first quarter of fiscal 2025 and 2026, we recorded $1,076 related to the BN Performance Bonus inclusive of applicable payroll taxes. ERP implementation costs related to the new ERP system at our Batavia facility, which is expected to go live in the third quarter of fiscal 2026.

Previous wording

Our effective tax rate for the third quarter of fiscal 2025 was 29%, compared with (200)% in the third quarter of fiscal 2024. Our effective tax rate for the first nine months of fiscal 2025 was 20%, compared with 22% for the first nine months of fiscal 2024. Our effective tax rate can vary significantly from quarter to quarter depending on the level of projected pre-tax income, the amount of projected income derived from our higher tax rate foreign subsidiaries, as well as the timing of discrete tax items, primarily related to the vesting of restricted stock awards. The decrease in our effective tax rate for the first nine months of fiscal 2025 versus the prior year was primarily due to a discrete tax benefit recognized in the first quarter of fiscal 2025 related to the vesting of restricted stock awards and the Company's improved stock price over the prior year, partially offset by return to provision adjustments recognized in the third quarter of fiscal 2025 due to changes in estimates. For fiscal 2025, we expect our effective tax rate to be between 20% and 22%, as the impact of these discrete tax items on our full year effective tax rate lessens over the course of the year.

Current wording

Our effective tax rate in the first quarter of fiscal 2026 was 8.3%, compared with 10.0% in the first quarter of fiscal 2025. This decrease was primarily due to a higher discrete tax benefit recognized in the first quarter of fiscal 2026 related to the vesting of restricted stock awards and the Company's improved stock price in comparison to the prior year. Our expected effective tax rate for fiscal 2026 is 20% to 22%, as the impact of these discrete tax items on our effective tax rate will lessen over the course of the year.

Previous wording

The result of the above is that net income and income per diluted share for the third quarter of fiscal 2025 were $1,588 and $0.14, respectively, compared with $165 and $0.02, respectively, for the third quarter of fiscal 2024. Adjusted net income and adjusted net income per diluted share for the third quarter of fiscal 2025 were $1,966 and $0.18, respectively, compared with adjusted net income and adjusted net income per diluted share of $1,451 and $0.13, respectively, for the third quarter of fiscal 2024. See "Non-GAAP Measures" below for a reconciliation of adjusted net income and adjusted net income per diluted share to the comparable GAAP amount.

Current wording

The net result of the above is that net income and income per diluted share for the first quarter of fiscal 2026 were $4,595 and $0.42 per share, respectively, compared to $2,966 and $0.27 per share, respectively, for the first quarter of fiscal 2025. Adjusted net income and adjusted net income per diluted share for the first quarter of fiscal 2026 were $4,938 and $0.45 per share, respectively, compared with adjusted net income and adjusted net income per diluted share of $3,584 and $0.33 per share, respectively, for the first quarter of fiscal 2025, an increase of 38% and 36%, respectively. See "Non-GAAP Measures" below for a reconciliation of adjusted net income and adjusted net income per diluted share to the comparable GAAP amount.

Previous wording

Adjusted net income before interest (income) expense, income taxes, depreciation and amortization ("EBITDA"), adjusted net income, and adjusted net income per diluted share are provided for informational purposes only and are not measures of financial performance under accounting principles generally accepted in the U.S. ("GAAP").

Current wording

Adjusted net income before interest (income) expense, income taxes, depreciation and amortization ("EBITDA"), adjusted net income, and adjusted net income per diluted share are provided for informational purposes only and are not measures of financial performance under the U.S.'s generally accepted accounting principles ("GAAP").

Previous wording

Management believes the presentation of these financial measures reflecting non-GAAP adjustments provides important supplemental information to investors and other users of our financial statements in evaluating the operating results of the Company. In particular, those charges and credits that are not directly related to our operating performance, and are not reflective of our underlying business particularly in light of their unpredictable nature. These non-GAAP disclosures have limitations as analytical tools, should not be viewed as a substitute for net income or net income per diluted share determined in accordance with GAAP, and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. In addition, supplemental presentation should not be construed as an inference that our future results will be unaffected by similar adjustments to net income or net income per diluted share determined in accordance with GAAP. Adjusted EBITDA, adjusted net income and adjusted net income per diluted share are key metrics used by management and our board of directors to assess the Company’s financial and operating performance and adjusted EBITDA is a basis for a significant portion of management's performance-based compensation.

Current wording

Management believes the presentation of these financial measures reflecting non-GAAP adjustments provides important supplemental information to investors and other users of our financial statements in evaluating the operating results of the Company. In particular, we excluded those charges and credits that are not directly related to our operating performance, and are not reflective of our underlying business particularly in light of their unpredictable nature. These non-GAAP disclosures have limitations as analytical tools, should not be viewed as a substitute for net income or net income per diluted share determined in accordance with GAAP, and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. In addition, supplemental presentation should not be construed as an inference that our future results will be unaffected by similar adjustments to net income or net income per diluted share determined in accordance with GAAP. Adjusted EBITDA, adjusted net income and adjusted net income per diluted share are key metrics used by management and our board of directors to assess the Company’s financial and operating performance and adjusted EBITDA is a basis for a significant portion of management's performance-based compensation.

Previous wording

Adjusted EBITDA excludes charges for depreciation, amortization, interest (income) expense, income taxes, acquisition related (income) expenses, equity-based compensation, ERP implementation costs, and other unusual/nonrecurring items. Adjusted net income and adjusted net income per diluted share exclude intangible amortization, acquisition related (income) expenses, other unusual/nonrecurring items, and the related tax impacts of those adjustments.

Current wording

Adjusted EBITDA excludes charges for depreciation, amortization, interest (income) expense, income taxes, acquisition related (income) expenses, equity-based compensation, ERP implementation costs, and other unusual/nonrecurring items. Adjusted net income and adjusted net income per diluted share exclude intangible amortization, acquisition related (income) expenses, ERP implementation costs, other unusual/nonrecurring items, and the related tax impacts of those adjustments.

Previous wording

Acquisition and integration (income) expense are incremental costs that are directly related to and as a result of the P3 acquisition. These costs (income) may include, among other things, professional, consulting and other fees, system integration costs, and contingent consideration fair value adjustments. ERP implementation costs primarily relate to consulting costs (training, data conversion, and project management) incurred in connection with the ERP system being implemented throughout our Batavia, New York facility in order to enhance efficiency and productivity and are not expected to recur once the project is completed. Debt amendment costs consist of accelerated write-offs of unamortized deferred debt issuance costs and discounts, prepayment penalties, and attorney fees in connection with the amendment of our credit facility in October 2023.

Current wording

Acquisition and integration (income) expense, net are incremental costs that are directly related to and as a result of the P3 acquisition or the subsequent accounting for the contingent earn-out liability. These costs (income) may include, among other things, professional, consulting and other fees, system integration costs, and contingent consideration fair value adjustments. ERP implementation costs primarily relate to consulting costs (training, data conversion, project management) incurred in connection with the ERP system being implemented throughout our Batavia, NY facility in order to enhance efficiency and productivity and are not expected to recur once the project is completed.

Previous wording

The following discussion should be read in conjunction with our Unaudited Condensed Consolidated Balance Sheets and Unaudited Condensed Consolidated Statements of Cash Flows:

Current wording

The following discussion should be read in conjunction with our Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Cash Flows:

Previous wording

Capital expenditures for the first nine months of fiscal 2025 were $13,800 compared to $5,193 for the comparable period in fiscal 2024. Capital expenditures for fiscal 2025 were primarily for machinery and equipment, land, buildings and leasehold improvements to support our growth and productivity improvement initiatives and included expenditures related to the expansion of defense production capabilities at our Batavia facility, which is primarily being funded by a $13,500 strategic grant from one of our defense customers. We have increased our expected fiscal 2025 capital expenditures to be in the range of $15,000 to $19,000 from our previous expectations of $10,000 to $15,000 at the beginning of the year due to an opportunistic land purchase in Arvada, Colorado and our plans to construct a cryogenic propellant (LH2, LOX, LCH4) testing facility in Florida to support future growth and customer needs, and were not contemplated at the beginning of the year. Approximately half of our planned capital expenditures for fiscal 2025 are discretionary, with the other half being related to the Batavia facility defense expansion. We estimate that our maintenance capital spend is approximately $2,000 per year. However, for the next several years we expect capital expenditures to be approximately 7% to 10% of sales as we continue to invest in our business in order to support our long-term organic growth goals.

Current wording

Capital expenditures for the first quarter of fiscal 2026 were $7,004 compared to $2,978 for the comparable period in fiscal 2025. Capital expenditures for the first quarter of fiscal 2026 relate to machinery and equipment, buildings, and leasehold improvements to support our growth and productivity improvement initiatives and were primarily related to the following:

Previous wording

Cash and cash equivalents were $30,046 at December 31, 2024 compared with $16,939 at March 31, 2024, up $13,107 primarily due to cash provided by operations, offset by capital expenditures. At December 31, 2024, $4,603 of our cash and cash equivalents was used to secure our letters of credit and $4,377 of our cash was held by foreign subsidiaries.

Current wording

Cash and cash equivalents were $10,753 at June 30, 2025 compared with $21,577 at March 31, 2025, down $10,824 primarily due to cash used by operations and capital expenditures as discussed above. At June 30, 2025, approximately $3,844 of our cash and cash equivalents is used to secure our letters of credit and $4,370 of our cash is held by our China and India subsidiaries.

Previous wording

On October 13, 2023, we terminated our revolving credit facility and repaid our term loan with Bank of America, and entered into a new five-year revolving credit facility with Wells Fargo that provides a $50,000 line of credit (the "New Revolving Credit Facility"). As of December 31, 2024, there were no borrowings and $7,202 letters of credit outstanding on the New Revolving Credit Facility and the amount available to borrow was $42,798, subject to interest and leverage covenants.

Current wording

On October 13, 2023, we entered into a five-year revolving credit facility with Wells Fargo that provides a $50,000 line of credit (the "Revolving Credit Facility"). As of June 30, 2025, there were no borrowings and $5,746 letters of credit outstanding on the Revolving Credit Facility and the amount available to borrow was $44,254, subject to interest and leverage covenants.

Previous wording

The New Revolving Credit Facility contains customary terms and conditions, including representations and warranties and affirmative and negative covenants, as well as financial covenants for the benefit of Wells Fargo, which require us to maintain (i) a consolidated total leverage ratio not to exceed 3.50:1.00 and (ii) a consolidated fixed charge coverage ratio of at least 1.20:1.00, in both cases computed in accordance with the definitions and requirements specified in the New Revolving Credit Facility. As of December 31, 2024, we were in compliance with the financial covenants of the New Revolving Credit Facility and our leverage ratio as calculated in accordance with the terms of the New Revolving Credit Facility was 0.6x.

Current wording

The Revolving Credit Facility contains customary terms and conditions, including representations and warranties and affirmative and negative covenants, as well as financial covenants for the benefit of Wells Fargo, which requires us to maintain (i) a consolidated total leverage ratio not to exceed 3.50:1.00 and (ii) a consolidated fixed charge coverage ratio of at least 1.20:1.00, in both cases computed in accordance with the definitions and requirements specified in the Revolving Credit Facility. As of June 30, 2025, we were in compliance with the financial covenants of the Revolving Credit Facility and our leverage ratio as calculated in accordance with the terms of the Revolving Credit Facility was 0.3x.

Previous wording

The New Revolving Credit Facility contains terms that may, under certain circumstances as defined in the agreement, restrict our ability to declare or pay dividends. Any determination by our Board of Directors regarding dividends in the future will depend on a variety of factors, including our future financial performance, organic and inorganic growth opportunities, general economic conditions, and financial, competitive, regulatory, and other factors, many of which are beyond our control. We did not pay any dividends during the first nine months of fiscal 2025 or during fiscal 2024 and currently have no intention to pay dividends for the foreseeable future.

Current wording

The Revolving Credit Facility contains terms that may, under certain circumstances as defined in the agreement, restrict our ability to declare or pay dividends. Any determination by our Board of Directors regarding dividends in the future will depend on a variety of factors, including our future financial performance, organic and inorganic growth opportunities, general economic conditions and financial, competitive, regulatory, and other factors, many of which are beyond our control. We did not pay any dividends during the three months ended June 30, 2025 or during fiscal 2025 and we currently have no intention to pay dividends for the foreseeable future. There can be no guarantee that we will pay dividends in the future.

Previous wording

We believe that cash generated from operations combined with the liquidity provided by our New Revolving Credit Facility will be adequate to meet our cash needs for the immediate future.

Current wording

We believe that cash generated from operations, combined with the liquidity provided by available financing capacity under the Revolving Credit Facility, will be adequate to meet our cash needs for the immediate future.

Previous wording

In addition to the non-GAAP measures discussed above, management uses the following key performance metrics to analyze and measure our financial performance and results of operations: orders, backlog, and book-to-bill ratio. Management uses orders and backlog as measures of current and future business and financial performance and these may not be comparable with measures provided by other companies. Orders represent written communications received from customers requesting us to provide products and/or services. Backlog is defined as the total dollar value of net orders received for which revenue has not yet been recognized. Management believes tracking orders and backlog are useful as it often times is a leading indicator of future performance. In accordance with industry practice, contracts may include provisions for cancellation, termination, or suspension at the discretion of the customer.

Current wording

In addition to the non-GAAP measures discussed above, management uses the following key performance metrics to analyze and measure the Company’s financial performance and results of operations: orders, backlog, and book-to-bill ratio. Management uses orders and backlog as measures of current and future business and financial performance and these may not be comparable with measures provided by other companies. Orders represent definitive agreements with customers to provide products and/or services. Backlog is defined as the total dollar value of orders received for which revenue has not yet been recognized. Total backlog can include both funded and unfunded orders under government contracts. Management believes tracking orders and backlog are useful as it often times is a leading indicator of future performance. In accordance with industry practice, contracts may include provisions for cancellation, termination, or suspension at the discretion of the customer.

Previous wording

The book-to-bill ratio is an operational measure that management uses to track the growth prospects of the Company. The Company calculates the book-to-bill ratio for a given period as net orders divided by net sales.

Current wording

The book-to-bill ratio is an operational measure that management uses to track the growth prospects of the Company. The Company calculates the book-to-bill ratio for a given period as net orders divided by net sales. Over the long-term our goal is to have a book-to-bill ratio of 1.1x, which can vary significantly from quarter to quarter given the nature of our business.

Previous wording

The following tables provide our orders by market and geographic region including the percentage of total orders and change in comparison to the prior year for each category and period presented. Percentages may not sum to the total due to rounding:

Current wording

The following table provides our orders by market and geographic region including the percentage of total orders and change in comparison to the prior year for each category and period presented. Percentages may not sum to the total due to rounding:

Previous wording

Orders booked in the third quarter of fiscal 2025 decreased to $24,786 compared with $123,267 in the third quarter of fiscal 2024. This decrease was primarily due to a record level of orders in the third quarter of fiscal 2024 as a result of follow-on orders for critical U.S. Navy programs related to the Columbia Class submarine and Ford Class carrier programs. After-market orders for the refining, petrochemical, and defense markets for the third quarter of fiscal 2025 increased 51% to $13,013 compared with the prior-year period. Note that our orders tend to be lumpy given the nature of our business (i.e., large capital projects) and in particular, orders to the defense industry, which span multiple years and are larger in size. Orders for the first nine months of fiscal 2025 benefited from a contract to provide cryogenic pumps for a space launch vehicle and a contract to provide the MK19 Air Turbine Pump for the U.S. Navy Columbia-class submarine, which is a new program for the Company. Additionally, orders for the first nine months of fiscal 2025 included follow-on orders for the second option year of alternators and regulators for the U.S. Navy MK48 Torpedo program, as well as an order for a three surface condenser system for the world's first net-zero carbon emissions integrated ethylene cracker and derivatives site located in North America. After-market orders for the refining and petrochemical markets for the first nine months of fiscal 2025 were $34,773, consistent with the prior-year period. Orders for the first nine months of fiscal 2024 included $9,100 for a vacuum distillation system for a refinery in India, $22,000 related to a strategic investment by one of our larger defense customers, and the follow-on defense orders discussed above. For the first nine months of fiscal 2025 our book-to-bill ratio was 1.0x.

Current wording

Orders booked in the first quarter of fiscal 2026 were $125,898 or 227% of net sales for the quarter. Orders for the first quarter of fiscal 2026 included $86,500 of follow-on orders to support the U.S. Navy's Virginia Class Submarine program, and strong aftermarket orders for the Energy & Process and Defense markets, which increased 16% to $10,491 compared with the prior year. Orders for the first quarter of fiscal 2025 benefited from follow-on orders for the second option year of alternators and regulators for the MK48 Mod 7 Heavyweight Torpedo program, as well as an order for three surface condenser systems for the world's first net-zero carbon emissions integrated ethylene cracker and derivatives site located in North America. Note that our orders tend to be lumpy given the nature of our business (i.e. large capital projects) and in particular, orders to the Defense industry, which span multiple years and can be significantly larger in size. For the first quarter of fiscal 2026, our book-to-bill ratio was 2.3x.

Previous wording

Orders to the U.S. represented 76% of total orders for the first nine months of fiscal 2025 compared to 88% for the prior year. These orders were primarily to the defense market, which are U.S. based, and tend to be lumpy given their large size and are long-term in nature.

Current wording

Orders to the U.S. represented 97% of total orders for the first quarter of fiscal 2026 compared to 65% in the first quarter of the prior year. These orders were primarily to the defense market which represented 85% of orders and are U.S. based.

Previous wording

We expect to recognize revenue on approximately 45% to 50% of the backlog within one year, 35% to 40% in one to two years and the remaining beyond two years. The majority of the orders that are expected to convert beyond twenty-four months are for the defense industry, specifically the U.S. Navy that have a long conversion cycle (up to six years).

Current wording

Backlog was $482,860 at June 30, 2025, a 22% increase over the prior year period. We expect to recognize revenue on approximately 35% to 40% of the backlog within one year, 25% to 30% in one to two years and the remaining beyond two years. The majority of the orders that are expected to convert beyond twenty-four months are for the defense industry, specifically the U.S. Navy that have a long conversion cycle (up to six years).

Previous wording

See "Cautionary Note Regarding Forward-Looking Statement" and "Non-GAAP Measures" above for additional information about forward-looking statements and non-GAAP measures. We have not reconciled non-GAAP forward-looking adjusted EBITDA to its most directly comparable GAAP measure, as permitted by Item 10(e)(1)(i)(B) of Regulation S-K. Such reconciliation would require unreasonable efforts to estimate and quantify various necessary GAAP components largely because forecasting or predicting our future operating results is subject to many factors out of our control or not readily predictable.

Current wording

See "Cautionary Note Regarding Forward-Looking Statements" and "Non-GAAP Measures" above for additional information about forward-looking statements and non-GAAP measures. We have not reconciled non-GAAP forward-looking adjusted EBITDA to its most directly comparable GAAP measure, as permitted by Item 10(e)(1)(i)(B) of Regulation S-K. Such reconciliation would require unreasonable efforts to estimate and quantify various necessary GAAP components largely because forecasting or predicting our future operating results is subject to many factors out of our control or not readily predictable.

Previous wording

We have made significant progress with the advancements in our business, which puts us on schedule in achieving our fiscal 2027 goals of 8% to 10% average annualized organic revenue growth and adjusted EBITDA margins in the low to mid-teens.

Current wording

We have made significant progress with the advancements in our business, which we believe puts us on schedule in achieving our fiscal 2027 goals of 8% to 10% average annualized organic revenue growth and adjusted EBITDA margins in the low to mid-teens.

Previous wording

Our expectations for sales and profitability assume that we will be able to operate our production facilities at planned capacity, have access to our global supply chain including our subcontractors, do not experience significant global health related disruptions, and assumes no further impact from any other unforeseen events.

Current wording

Our expectations for sales and profitability assume that we will be able to operate our production facilities at planned capacity, have access to our global supply chain including our subcontractors, do not experience any global disruptions, and experience no impact from any other unforeseen events.