GRAHAM CORP (GHM) Business

Item 1. Business

Graham Corporation ("we," "us," "our" or the "Company") 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. For the Defense industry, our equipment is used in nuclear and non-nuclear propulsion, power, fluid transfer, thermal management, and advanced mixing systems. For the Energy & Process industries we supply equipment for vacuum, heat transfer, advanced mixing, and fluid transfer applications used in 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. For the Space industry, our equipment is used in propulsion, power, thermal management, advanced mixing, and life support systems.

Our brands are built upon engineering expertise and close customer collaboration to design, develop, and produce mission critical equipment and systems that enable our customers to meet their economic and operational objectives. Continual improvement of our processes and systems to ensure qualified and compliant equipment are hallmarks of our brand. Our early engagement with customers and support until the end of service life are values upon which our brands are built.

Our corporate headquarters is co-located with our production facilities in Batavia, NY, and we have wholly-owned subsidiaries in Arvada, CO, Greenville, SC, Jupiter, FL, and Louisville, CO and have sales and engineering offices in Houston, TX, Suzhou, China and Ahmedabad and Pune, India.

We were incorporated in Delaware in 1983 and are the successor to Graham Manufacturing Co., Inc., which was incorporated in New York in 1936. Our stock is traded on the New York Stock Exchange ("NYSE") under the ticker symbol "GHM".

Our fiscal year ends on March 31 of each year. We refer to our fiscal year, which ended March 31, 2026, as fiscal 2026. Likewise, we refer to our fiscal years that will end or have ended March 31, 2027, March 31, 2025, and March 31, 2024 as fiscal 2027, fiscal 2025, and fiscal 2024, respectively.

Acquisitions

On October 20, 2025, we completed our acquisition of Xdot Bearing Technologies ("Xdot"), a specialized consulting, design, and engineering firm focused on foil bearing technology. Xdot has been integrated into Barber-Nichols, LLC ("BN"). We believe that combining Xdot's foil bearing technology with BN's turbomachinery expertise will significantly expand our ability to design and deliver high-speed rotating machines into new markets and applications.

On January 23, 2026, we acquired FlackTek Manufacturing, LLC and FlackTek Sales, LLC (collectively, "FlackTek"), a provider of advanced mixing and material processing solutions. FlackTek's patented technology platform delivers highly repeatable, precision mixing with faster cycle times, minimal entrained air, reduced downtime between batches, consistency in production, and ultimately can achieve higher levels of product homogeneity when compared to traditional bladed methods. FlackTek's systems are used by a global customer base that includes leading original equipment manufacturers ("OEMs"), research and development centers, defense laboratories, and industrial manufacturers serving adhesives, sealants, functional coatings, composites, electronics, and other advanced materials markets. FlackTek adds a proven product portfolio with a shared customer base and an installed footprint that extends across the full value chain, from upstream to downstream production and quality control. Its mixing systems are process-critical and market-agnostic, serving defense, energetics, oil & gas, food, battery, aerospace and space, medical, and other industrial applications where precision, repeatability, and consistency drive value. FlackTek has built a growing installed base that generates recurring demand for consumables, accessories, and services, enhancing revenue visibility and durability.

Our Products, Customers and Markets

We manufacture high quality, highly reliable custom-engineered products for critical applications to the Defense, Energy & Process and Space industries. Our product offerings include the following:

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Defense

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Power plant systems - ejectors, surface condensers

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Torpedo ejection, propulsion & power systems - turbines, alternators, regulators, pumps, blowers

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Thermal management systems - pumps, blowers, drive electronics

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Advanced mixing systems - Bladeless centrifugal mixers, accessories, services, and consumables

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Energy & Process

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Heat transfer & vacuum systems - ejectors, process condensers, surface condensers, liquid ring pumps, heat exchangers, nozzles

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Power generation systems - turbines, generators, compressors, pumps

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Thermal management systems - pumps, blowers, electronics

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Advanced mixing systems - Bladeless centrifugal mixers, accessories, services, and consumables

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Space

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Rocket propulsion systems - turbopumps, fuel pumps, cryogenic pumps, nuclear propellant pump

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Cooling systems - pumps, compressors, fans, blowers

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Life support systems - fans, pumps, blowers

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Advanced mixing systems - Bladeless centrifugal mixers, accessories, services, and consumables

Our products are used in a wide range of applications, including:

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Defense

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Aircraft carrier program (CVN)

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Virginia fast-attack submarine program (SSN)

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Columbia and Ohio ballistic submarine program (SSBN)

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U.S. Navy torpedoes (all size classes)

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Refueling, overhaul replacement, and fleet sustainment equipment

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Advanced radar and laser systems

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Munition propellants

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Energy & Process

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Conventional oil refining

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Oil sands extraction and upgrading

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Ethanol plants

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Cogeneration power plants

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Geothermal and biomass power plants with lithium extraction

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Concentrated solar power

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Molten salt reactor development

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Small modular nuclear reactor development

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Hydrogen fuel cell power

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Hydrogen production, transportation, distribution, fueling

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Ethylene, methanol and nitrogen producing plants

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Urea and fertilizer plants

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Plastics, resins and fibers plants

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Downstream petrochemical plants

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Coal-to-chemicals plants

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Gas-to-liquids plants

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Edible oil plants

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Food & beverage plants

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Pulp & paper plants

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Batteries

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Personal care

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Pharmaceuticals

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Space

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NASA xEMU next-generation space suit and commercial derivatives

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In-space nuclear thermal propulsion turbomachinery

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Propellant recirculation pumps

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Space exploration blowers

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Satellite active cooling pumps

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Various commercial space propulsion, fluid and heat transfer applications

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Space simulation chambers

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Rocket ablative material and coatings

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Our 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 our customers include: 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.

Our products are sold by a team of sales engineers whom we employ directly. Two customers each accounted for more than 10% of our revenue in the fiscal 2026. As a result of our diversification efforts to more extensively support the U.S. Navy we have increased our concentration in domestic and Defense sales. Domestic sales accounted for approximately 85% of total sales in fiscal 2026, while sales to the Defense industry were 60%.

Our funded and unfunded backlog at March 31, 2026 was $532,637 compared to $412,335 at March 31, 2025. For more information on this performance indicator see "Orders, Backlog and Book-to-Bill Ratio" below.

Our Strengths

Our core strengths include:

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We have a value-enhancing engineering sales and product development platform. We believe our customer-facing platform of technical sales, project estimating and application engineering are competitive advantages. We have tools and capabilities that we believe allow us to move quickly and comprehensively to meet the unique needs of our customers. We believe that our early and deep involvement in our customers' projects adds significant value and is an important competitive differentiator in the industries we serve. We believe customers need our engineering and fabrication expertise early in a project life cycle to understand how best to utilize our equipment in the optimization of their systems.

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We are known for our strong capabilities to handle complex, custom orders. The orders we receive are extremely complex. In our markets, we believe that order administration, risk management, cost containment, quality control and engineering documentation are as important as the equipment itself. We have developed order management capabilities to enable us to deliver high quality, engineered-to-order, as well as build-to-spec, process-critical equipment in a timely manner. For our customers’ complex, custom orders we typically manage very rigorous interaction between our project management teams and the end user or its engineering firm, as product design and quality requirements are finalized. Customers' supplier selection process begins by assessing these order management capabilities.

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We maintain a responsive, flexible production environment. Our operations teams are experienced at handling low volume, high mix orders of highly customized solutions. While certain equipment in a product group may look similar, there are often subtle technical differences which are required to deliver the desired specification. Also, during production it is not uncommon for customer-driven engineering changes to occur that alter the configuration of what had been initially released into production. The markets we serve demand this flexible operating model.

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We have the capability to manage outsourced production. Effectively accessing the global fabrication supply chain expands our market reach, increases execution capacity and can improve competitiveness. We use this capability for three primary reasons: 1. delivering a lower cost manufacturing option; 2. expanding capacity to execute an order to meet customer timing requirements; and 3. addressing localized content requirements. We have proven capability to deliver our specialized product designs with outsourced fabrication that meets our high quality standards.

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We provide robust technical support. Our engineering and performance improvement personnel work with our customers to optimize the performance of our equipment, provide operator training and troubleshoot performance issues. Technical expertise is important to our customers throughout the full product lifecycle and we believe their focus is on leveraging our equipment to maximize their systems' productivity.

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We have a highly trained workforce. We maintain a long-tenured, highly skilled and flexible workforce. We support the development of our employees through programs such as our internal weld school, our partnerships with community colleges, our apprenticeship programs, and other external training programs. We continually strive to enhance our corporate culture, develop our employees and improve employee engagement.

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We have the capability to manufacture to tight tolerances. Our manufacturing abilities include the capability to fabricate to tight tolerances. Additionally, we possess highly specialized manufacturing and electrochemical milling expertise on turbomachinery equipment. We believe this, combined with our strong quality control with objective quality evidence, provides us a unique competitive advantage.

Our Strategy

Our 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. We expect to accomplish this by pursuing niche applications in markets with enduring tailwinds that reward differentiated engineered product and full lifecycle scope of work with higher margins. We have transitioned from a highly cyclical Energy business to a diversified company serving multiple markets with strong tailwinds including Defense, Energy & Process, and Space. We intend to develop a full product lifecycle model serving multiple markets while leveraging our technology across our markets and driving business unit synergies to optimize profitability and stability. Additionally, we believe we must develop a highly engaged team that will drive continual improvement for the long term. Executed effectively, we expect our strategy to create more enduring, recurring opportunities and profitable growth.

Fiscal 2023 through 2026 were characterized by continual improvement and increasing profitability, and formed the initial steps along our path to achieve our fiscal 2027 goals through investments in our business. We remain focused on disciplined execution and strategic investments that enhance our capabilities and support long-term profitable growth. Our priorities are our targeted markets, operational excellence, leveraging the investments we have made, and serving our stakeholders. We will maintain strong capital discipline with smart capital deployment. We plan to:

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Pursue clearly defined markets with significant barriers to entry

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Optimize processes and tools to deliver superior performance

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Engage all stakeholders to multiply our efforts

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Prioritize capital investments that fuel growth and maximize shareholder value

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Supplement our organic growth opportunities with strategic acquisitions

Competition

Our business is highly competitive. The principal bases on which we compete include technology, price, performance, reputation, delivery, and quality. Our competitors listed in alphabetical order by market include:

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Intellectual Property

Our success depends in part on our ability to protect our proprietary technologies. We rely on a combination of patent, copyright, trademark, trade secret laws, and contractual confidentiality provisions to establish and protect our proprietary rights. We also depend heavily on the brand recognition of the Graham, Barber-Nichols, and FlackTek names in the marketplace.

With the acquisition of FlackTek we added scalable and adaptable patent-protected intellectual property that we intend to leverage across its customer base. This includes the MEGA™ system, enabling customers to scale advanced materials processing from R&D through pilot and into production environments. The MEGA™ System Delivers 24x production throughput versus conventional planetary bladed mixers, reducing mixing cycles from hours to minutes and enabling true high-volume industrial scale.

With the acquisition of P3 Technologies, LLC ("P3"), we added scalable and adaptable patent-protected intellectual property that we are leveraging across our customer base. This includes P3's patented multi-channel diffuser ("MCD") and self-contained actuating magnetic pump ("SCAMP"). P3's MCD technology improves the efficiency of pumps and compressors by increasing pressure recovery and measurably increasing operating range. The MCD can be used in new designs or retrofit applications and can work with any pump or compressor that utilizes a centrifugal impeller. SCAMP is a family of positive displacement pumps for low flow, high pressure cryogenic applications compatible with oxygen, hydrogen, methane and nitrogen.

In fiscal 2025, we launched our NextGen™ steam ejector nozzle which was 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. Ultimately these benefits drive profitability, positioning the NextGen™ technology as a critical tool for refineries to optimize both performance and financial returns.

Availability of Raw Materials

As discussed more fully in Item 1A “Risk Factors” of this report, inflation has accelerated in the U.S. and globally due in part to global supply chain issues, a rise in energy prices, labor shortages, tariffs, and strong consumer demand. Additionally, international conflicts or other geopolitical events, including the on-going Russia and Ukraine war, the Israel-Hamas and Iran conflicts, the changes in Venezuela, and recent trade-related actions, may further contribute to increased supply chain costs due to shortages in raw materials, increased costs for transportation and energy, disruptions in supply chains, increased tariffs, and heightened inflation. The inflationary environment has increased the cost of our raw materials and labor, which impacts our financial results, especially given that a large percentage of our contracts are fixed-price in nature. To help mitigate this risk, we place orders for raw materials when the purchase orders are received from the customer to lock-in raw material pricing and manufacture a large portion of our international sales in-country which helps isolate us from the impacts of tariffs. Additionally, many of our contracts have terms and conditions that help protect us from inflationary increases.

Working Capital Practices

Our business does not require us to carry significant amounts of inventory or materials beyond what is needed for work in process. We negotiate progress payments from our customers on our large projects to finance costs incurred. We do not provide rights to return goods, or payment terms to customers that we consider to be extended in the context of the industries we serve. We do provide for warranty claims, which historically have not had a material impact on our results of operations. Over the last several years, we have renegotiated some of our longer-term Defense contracts to accelerate the timing of billings. This has resulted in a significant increase in our customer deposit liability and significantly reduced our working capital, thus increasing our cash flow from operations.

Government and Environmental Regulation

We are subject to a variety of laws, rules and regulations in numerous jurisdictions within the U.S. and in each of the countries where we conduct business. We are committed to conducting our business in accordance with all applicable laws, rules and regulations. These laws, rules and regulations cover several diverse areas including government contracting rules, environmental matters, employee health and safety, data and privacy protection, foreign anti-corruption practices, anti-bribery, and anti-trust provisions.

We believe that a focus on environmental stewardship is important to the work we do every day to serve our customers, create value for our stockholders, and benefit our global community. We have taken steps to improve energy efficiencies and air quality and manage water consumption and waste. We do not expect environmental costs or contingencies to be material or to have a material

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adverse effect on our financial performance. Due to risks in these areas, we cannot provide assurance that we will not incur material costs or liabilities in the future, which could adversely affect us.

Seasonality

No material part of our business is seasonal in nature. However, since the majority of our revenue is driven by direct labor hours, our fiscal third quarter, which ends on December 31st, is typically our lowest revenue quarter of the year due to the holidays that fall in that quarter. Additionally, our Energy & Process business is highly cyclical as it depends on the willingness of our customers to invest in major capital projects. To help mitigate this risk, we have taken steps to diversify our business into the Defense industry. For fiscal 2026, sales to the Defense industry accounted for approximately 60% of our total sales compared with approximately 25% in fiscal 2021. Conversely, sales to the Energy & Process markets, which are more cyclical in nature, represented approximately 34% of revenue in fiscal 2026 compared with approximately 75% in fiscal 2021.

Research and Development Activities

During fiscal 2026, fiscal 2025 and fiscal 2024, we spent $6,354, $4,039 and $3,944, respectively, on research and development ("R&D") activities. The majority of our R&D, which is not included in the above numbers, is funded by our customers and is specific to help solve our customers’ problems in order to improve efficiencies, address challenging environments, or redesign for form and function. Additionally, we engineer new products and services for our customers and invest to improve existing products and services that are not customer funded. The portion of R&D that specifically relates to new product development during fiscal 2026, fiscal 2025 and fiscal 2024 was $1,204, $1,124, and $904, respectively. Going forward we expect to increase the amount of our R&D spend on new product development in order to meet our organic growth goals, maintain our technological competitive advantage, and disrupt the markets we serve, but only if those opportunities have the proper return on investment. Going forward we expect our new product development R&D spend, that is not customer funded, to gradually increase to 1% to 2% of revenue and expect to offset a portion of this increase through process improvement and operational efficiencies.

Human Capital Resources

As of March 31, 2026, we had 732 employees of which 23 are located outside of the U.S. We believe that our relationship with our employees is good.

At Graham, we believe our most important asset is our people. We are committed to fostering and embracing a Graham community in which employees share a mutual understanding and respect for each other. We are committed to creating a work environment which embraces inclusion regardless of race, color, religion, gender, sexual orientation, gender identity, national origin, age, genetic information, marital status, pregnancy, childbirth, disability, veteran status, medical conditions, or any protected status.

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Diversity: Our Management recognizes that fostering an inclusive environment helps us compete more effectively for talent, sustain success as a business, and build an engaged employee base. We encourage every one of our team members to form deeper relationships with those around them based on mutual respect, dignity, and understanding.

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Engagement: to encourage productive conversations within our organization, we have implemented employee surveys and active engagement committees.

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Development: We believe that employee development is vital to our continued success, and we support the development of our employees through programs such as our internal weld school training, our partnerships for external weld training, our tuition assistance program, our apprenticeship program, internships and co-op programs, our external partnership with community colleges, six sigma training classes, and our management and leadership development training.

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Health and Safety: We are dedicated to ensuring the health and safety of our team members by supporting the whole person. Our dedicated global health and safety function is executed through our business unit safety committees to ensure that employees are trained and understand our best practices to create a safe and healthy workplace for all.

Corporate Governance and Available Information

We maintain a website located at www.grahamcorp.com. On our website, we provide links that contain the reports, proxy statements and other information we file electronically with the SEC. Printed copies of all documents we file with the SEC are available free of charge for any stockholder who makes a request. Such requests should be made to our Corporate Secretary at our corporate headquarters. The other information found on our website is not part of this or any other report we file with, or furnish to, the SEC.