Full Transcript: Graham Q4 2026 Earnings Call

On Monday, Graham (NYSE:GHM) discussed fourth-quarter financial results during its earnings call. The full transcript is provided below.

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The full earnings call is available at https://viavid.webcasts.com/starthere.jsp?ei=1764167&tp_key=5eab9b9464

Summary

Graham Corporation reported record annual revenue of $245 million, record orders of $359 million, and a record backlog of $533 million for fiscal 2026.

Strategic growth initiatives included capacity and technical capability expansions, new automation and manufacturing technologies, and the acquisitions of XDOT and Flacktech.

Strong demand in defense and space markets contributed to growth, with significant progress in naval programs and a transition from development to production in space programs.

The company guided fiscal 2027 revenue to be between $285 million and $295 million, with adjusted EBITDA expected between $35 million and $40 million.

Management highlighted a strong balance sheet, disciplined execution, and a focus on operational excellence as key drivers for future growth.

Full Transcript

OPERATOR

Greetings and welcome to the Graham Corporation fiscal 4Q26 earnings call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press Star zero on your telephone keypad. It is now my pleasure to introduce your host, Tom Cook of Investor Relations. Thank you. You may be

Tom Cook (Investor Relations)

thank you Shamali and good morning everyone. Welcome to Graham's fiscal, fourth quarter and full year 2026 earnings call. With me on the call today is Matt Malone, President and CEO and Chris Dolan, Chief Financial Officer. This morning we released our financial results.

Our earnings release and accompanying presentation for today's call are available on our [email protected] youm should be aware that we may make forward looking statements during the formal discussion as well as during the Q and A session. These statements apply to future events that are subject to risks and uncertainties as well as other factors that could cause actual results to differ materially from what is stated here today.

These risks and uncertainties and other factors are provided in the earnings release as well as with other documents that are filed by the Company with the securities and Exchange Commission. You can find these documents on our website [email protected] during today's call we will also discuss non GAAP financial measures. We believe these will be useful in evaluating our performance.

However, you should not consider the presentation of this additional information in isolation or as a substitute for results prepared in accordance with gaap. We have provided reconciliations of non GAAP measures with comparable GAAP measures in the tables that accompany today's release and slides. We also use key performance indicators to help gauge the progress and performance of the company.

These key performance metrics are ROIC orders, backlog and book to bill ratio. These are operational measures and a quantitative reconciliation of each is not required or provided. You can find a disclaimer regarding our use of KPIs at the back of today's presentation. So with that, if you'll please advance to slide three, I'll turn it over to Matt to begin. Matt

Matt Malone

thank you Tom and good morning everyone. We appreciate you joining us to review our fourth quarter and full fiscal 2026 results. The foundation is strong, momentum is building and we are just getting started. Fiscal 2026 was another year of strong execution and continued progress against the strategic objectives we have consistently communicated to investors. We delivered record annual revenue of $245 million, record orders of $359 million and record backlog of $533 million and a book to bill of 1.5 times.

These results reflect the strength of our diversified business model and the long term

demand environment across our core markets. With disciplined execution across our entire team. We accomplished this while making substantial investments to strengthen Graham's long term competitive moat. During the year, we advanced strategic growth initiatives across the company, expanded capacity and technical capabilities, implemented new automation and manufacturing technologies, enhanced our testing infrastructure, and completed

the acquisitions of XDOT and flaktech. These investments combined with our continued focus on talent, operational excellence and scalable systems further enable Graham to capture future growth opportunities and create enduring shareholder value.

Turning to our end markets and starting with defense Demand remains very strong as

validated by the record backlog. Throughout fiscal 2026, we benefited from continued execution across key naval programs, growth in existing platforms and contributions from new programs.

The strategic investments we have made over the last several years are translating into tangible operating advantages.

Our newly opened Navy facility in Batavia is operational, our automated welding systems have been commissioned and our vertically integrated X

ray capabilities are executing first inspections. These investments improve throughput, enhance quality, and position us to support increasing production requirements across critical Navy programs for many years to come. The demand environment remains favorable.

We continue to see strong activity across our core naval platforms and we believe the long term outlook remains supported by fleet modernization initiatives, submarine production requirements and the strategic importance of these programs we support. In addition to our naval defense programs, we are transitioning from development to production on several high profile directed aircraft energy

laser platforms and radar programs where we supply cooling pumps and motor controllers. Our modular power dense product offering enables our customers to optimize their system think, more capability in a smaller footprint, enabling

our customers complex mission critical systems to do more than ever before. Importantly, many of these programs extend over multiple years providing durable revenue, visibility and and helping drive our record backlog today.

Moving to Space While revenue was consistent

year over year, the underlying indicators within the space market continue to build momentum. Throughout fiscal 2026 we experienced significant growth in orders and backlog reflecting strong customer demand and increasing activity across both commercial and government funded programs. We continue to see customers transition from development and qualification phases to higher rate production. This trend supports demand for highly engineered turbomachinery cryogenic systems and precision components that Graham provides.

To support this opportunity, we continued investing in our testing and manufacturing capabilities. Throughout the year, our liquid nitrogen testing

capability is operational and our new cryogenic test facility in Florida is actively commissioning our internal product. These investments expand our ability to support customers as they scale production and strengthen Graham as a critical supplier across the growing space ecosystem.

The Long term fundamentals of this market remain attractive and we believe our technology portfolio, engineering expertise and customer relationships will drive future durable growth.

Turning to energy and process, we delivered

a strong year despite continued uncertainty in this market and large capital project spending revenue increased 14% during fiscal 2026 supported by strong aftermarket activity, growth within new energy applications and contributions from the recently acquired flaktech. Customer demand remains healthy across our install base as aftermarket activities continues to demonstrate the value of Graham's mission, critical equipment and global service capabilities.

We also remain encouraged by the opportunities we see developing within new energy applications, including small modular nuclear reactors and cryogenic technologies.

While customers remain cautious regarding large capital expenditures in global refining and petrochemical facilities, we believe our diversified exposure, growing install base and increasing participation in emerging energy markets positions us well. Turning now to flaktech, which we acquired

at the end of January, flaktech establishes advanced mixing and materials processing as our third core platform alongside vacuum and heat transfer and turbo machinery. The business brings highly differentiated technology, a

strong intellectual property portfolio, an attractive reoccurring revenue component, and exposure to several markets where we already have established customer relationships. Strategically, flaktech expands our ability to solve increasingly complex customer challenges and creates opportunities to provide more integrated solutions across defense, energy and process in space.

We are particularly excited about the long term potential of the MEGA platform and the opportunity to commercialize advanced materials processing solution across the broader customer base. Although we are still in the early integration process, significant progress has been made. The long term commercialization strategy has been

developed, teams are working well together, critical hires have been made and customer engagement is strong. Now more than ever, I remain excited about the future growth prospects of this business.

We continue to believe Flacktech meets all

of the criteria we have outlined for strategic acquisitions and will create meaningful long term value for shareholders. Turning to operational excellence and investments Beginning

on slide 4, over the last several years we have made deliberate investments to improve our capabilities, increase capacity, enhance productivity

and product offerings to support our future growth. Many of those investments are now complete or entering their final phases of implementation.

Several examples the Batavia Navy facility is occupied and flowing production.

It's outfitted with automated welding systems, 3D inspection scanning and high power X ray inspection capability to reduce cycle time.

The Arvada assembly and overhaul facility and

liquid nitrogen test facility are fully operational and actively shipping validated products to our end customers. The Jupiter Cryogenic Facility is actively testing our cryogenic pump and motor controller that will be used for a critical lunar lander program. Lastly, the Batavia ERP implementation is nearing its final go live milestones that will upgrade us from a legacy as 400 system.

Importantly, these investments, just to name a few, were made with a disciplined capital allocation framework and are expected to generate returns above our 20% ROIC hurdle rate. While these initiatives create some near term pressure on profitability as we invest ahead of our growth, they will enable the business to achieve approved operating leverage and margin expansion over time.

Turning to Orders, Backlog and visibility fiscal

2026 represented another exceptional year from a bookings perspective, orders reached a record 395 million, resulting in a book to bill ratio of 1.5 times. Backlog increased 29% year over year to a record $533 million. This backlog reflects continued strength across both defense and space and provides substantial visibility into future revenue generation. Approximately 35 to 40% of backlog is expected to convert to revenue over the

next 12 months with the remainder extending over multiple years.

Importantly, the quality of our backlog remains strong. Many of our programs are long cycle mission critical applications that support essential customer priorities and provide durable demand visibility. Combined with our active pipeline, continued momentum in our end markets and active customer engagement, we are well positioned for continued growth.

Finally, turning to fiscal 2027 and as Chris will cover in more detail shortly, our guidance reflects another year of meaningful

growth with revenue expected to be between 285 and $295 million in adjusted EBITDA expected to be between 35 and $40 million, both in line with our long term goals.

The outlook is supported by our record

backlog, continued strength across defense, increasing space and new energy activity, contributions from Flacktech,

and the benefits of operational and capacity investments made over the last several years. We also expect profitability to improve as

volume increases, recent investments begin to contribute more fully to integration activities mature and

operational initiatives continue to drive productivity improvements throughout the organization. As we have discussed previously, our strategy remains straightforward. We will continue to invest in differentiated

technologies, strengthen our operational capabilities, pursue disciplined, organic and inorganic growth opportunities, and maintain

a relentless focus on execution.

As we get better every day, the

foundation we have built over the last several years continues to strengthen.

Our end markets remain attractive, our backlog is at record levels, our capabilities continue to expand and our teams remain focused

on creating long term value for customers and shareholders. With that, I'll turn the call over to Chris for a detailed review of our financial results.

Chris Dolan (Chief Financial Officer)

thanks Matt and good morning everyone. Turning to our fourth quarter and full

year results starting on Slide 6, fiscal

2026 was a record year for Graham as we delivered record revenue, record orders

and record backlog, all while continuing to

invest in capacity expansion, operational excellence, advanced

manufacturing capabilities and many other strategic initiatives

designed to support long term profitable growth. Starting with the fourth quarter, revenue increased 13% to a record 67.1 million. The growth was driven by continued strength

in our defense market, building momentum across

our space and new energy programs, and contributions from the recently acquired flaktech business. Defense revenue benefited from strong execution capability

and capacity expansion and continued demand across

key naval defense programs. Base revenue increased 14% year over year

as existing programs begin to ramp within.

Energy and process revenue was consistent with the prior year period as strong aftermarket demand. Continued activity in new energy applications, including

small modular reactor opportunities and the recent acquisition of Flaktech, which contributed 2.8 million to sales during the quarter, helped offset

continued softness in large capital project spending in global refining and petrochemical facilities.

For the full fiscal year, revenue increased

17% to a record 245 million. This increase was driven by 21% growth

in defense, which benefited from new program wins, capacity and capabilities expansion, growth on existing programs and a higher level of material receipts.

Energy and process revenue increased 14% year over year supported by strong aftermarket activity,

new energy applications and the contributions from Flaktech. Turning to Slide 7, fourth quarter gross

profit was 15.3 million, representing a gross

margin of 22.7% compared with 27% in

the prior year period.

The year over year decline primarily reflects our change in sales mix, including a higher proportion of defense revenue that carries greater material content and lower margin characteristics as well as lower aftermarket sales compared with the prior year. Additionally, flacktech results for the quarter were burdened by purchase accounting amortization, which is expected to be lower going forward and the margin is expected to improve as volume increases.

These factors were partially offset by continued improvements in operational execution productivity initiatives. For the full year, gross profit increased 9% to 57.8 million. Gross margin was 23.5% compared with 25.2%

in fiscal 2025, while higher production volumes,

pricing discipline and operational efficiencies continued to support profitability. Margins were impacted by the higher mix

of defense revenue and material receipts, incremental

tariff impacts and the absence of the Blue Forge Alliance Welder training grant benefit that positively impacted fiscal 2025 results.

Moving to Slide 8, selling general and

administrative expenses increased during the quarter and year to date periods, primarily due to

acquisition and integration activities, incremental costs associated with flacktech, and continued investments in our

people, processes, technologies and other strategic initiatives that will drive future growth. Net income for the fourth quarter was 2 million or $0.18 per diluted share compared with 4.4 million or $0.40 per diluted share in the prior year period. Adjusted net income for the quarter was 3.7 million or $0.33 per diluted share compared with 4.8 million or $0.43 per

diluted share in the prior year.

For the full year, net income increased

to 12.5 million or $1.12 per diluted share, compared with 12.2 million or $1.11 per diluted share. In fiscal 2025, adjusted net income increased 14% to 15.6 million or $1.40 per diluted share compared with $1.24 per diluted share last year.

Adjusted EBITDA for the fourth quarter was 6.8 million, representing a margin of 10.2% compared with 7.7 million and a margin

of 12.9% in the prior year period.

For the full year, adjusted EBITDA increased 16% to $26 million and was in line with our previously raised guidance.

For fiscal 2026, adjusted EBITDA margin was

10.6% consistent with the prior year. Despite the mix related pressures I discussed earlier and the investments we continue to

make to support future growth, overall, we

believe these results demonstrate the resiliency of our business model and the effectiveness of our long term strategy.

We continue to successfully balance growth investments

with profitability while positioning the company to

capitalize on future opportunities.

Turning to Slide nine Orders remained strong

throughout the year and further reinforced the favorable demand environment across our core markets. Fourth quarter orders were 78.7 million, resulting in a book to bill ratio of 1.2 times. For the full fiscal year, orders reached a record 359 million, representing a book to bill ratio of 1Point5 times. These results reflect continued strength in defense and building momentum in space and new energy. As a result, backlog increased to a

record 533 million at year end, up

29% from the prior year. We expect approximately 35 to 40% of backlog to convert into revenue over the

next 12 months, providing substantial visibility into our fiscal 2027 revenue and supporting our

confidence in the outlook we are providing today. Turning to slide 10 our balance sheet remains strong and provides the flexibility to continue executing our strategic priorities. Cash provided by operating activities during fiscal 2026 was 15.9 million and reflected strong

earnings generation, partially offset by higher working

capital balances associated with growth and program execution.

Additionally, fourth quarter fiscal 2026 cash flow from operations was negatively impacted by approximately 4 million of transaction bonuses assumed in

the Flacktech acquisition that were awarded by

the previous owners of Flacktech but paid by the company and was a reduction to the cash purchase price at the time of close. During the year, we continue to deploy capital towards strategic growth initiatives.

Net Capital expenditures totaled $15.8 million for fiscal 2026 and we're focused on capacity expansion, productivity improvements, automation, advanced manufacturing technologies and infrastructure investments designed to support future growth and margin expansion. Additionally, $27 million of cash was deployed in connection with the XDOT and flacktech

acquisitions which was funded by cash flow

from operations and capacity under our $80 million revolving credit facility facility.

Subsequent to year end, we further strengthened

our balance sheet through a $50 million strategic investment from accounts advised by T. Rowe Price and was based upon the 20 day average closing price of the company's stock.

On April 13, 2026, we utilized approximately

13 million of the proceeds to repay our outstanding debt and expect to use the remaining proceeds to support future organic and inorganic growth initiatives. Combined with our revolving credit facility, we currently have over $100 million of available liquidity providing significant flexibility to execute our strategic, organic and inorganic growth plans.

Turning to our guidance on Slide 11, we expect revenue to be in the range of $285 million to $295 million

for fiscal 2027 representing 18% growth at

the midpoint and is supported by a

record backlog, the strong demand environment and

having a full year of flack tech as well as continued execution across our businesses. We expect gross margin to be between 24.5% and 25.5% reflecting the benefits of

higher volume operational and productivity initiatives and

an improved mix versus fiscal 2026. SGA expense is expected to be between

16.5% and 17.5% of sales and includes

the impact of approximately 2.5 million of

incremental investments in people, technology and commercialization initiatives to enable our future growth.

Additionally embedded within our outlook are approximately 4 to 5 million of equity based

compensation, acquisition and integration costs and ERP

conversion costs included in SGA as well as a higher level of SGA as

a result of the Flacktech acquisition which

is currently a 10% adjusted EBITDA margin

business but is expected to quickly improve

to levels more in line with our

businesses in line with our other businesses as revenue scales.

Based on these assumptions, we expect adjusted EBITDA to be between 35 million and 40 million, representing 44% growth over fiscal

2026 at the midpoint and is in

line with our long term profitability objectives. We also expect our effective tax rate

to be between 18% and 20% and

capital expenditures to be between 18 million and 22 million as we continue investing in strategic organic growth initiatives, operational capabilities

and productivity enhancing projects, including the construction

of a new 30,000 square foot manufacturing

facility on our Arvada Colorado campus.

Finally, we will provide an update to our long term guidance at our upcoming

Analyst and Investor Day on June 18.

Overall, we are pleased with our results and consistent performance. We are entering fiscal 2027 from a

position of strength with record backlog, strong demand across our end markets, disciplined execution and a strong balance sheet, all of

which provide us with confidence in our ability to deliver another year of profitable

growth while continuing to invest in our

long term opportunities ahead of us.

With that, we are now ready for questions.

OPERATOR

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press Star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press Star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment please while we pull for questions. Our first question comes from the line of Russell Stanley with Beacon Securities.

Please proceed with your question.

Russell Stanley (Analyst at Beacon Securities)

Good morning and thank you for the questions. My first is around orders 79 million in the quarter. Congrats on that. I think it's your fifth straight quarter with orders better than 70 million. There seems to be less quarter to quarter volatility here than we saw in prior years, so I'm understanding we should still expect to see some variability going forward. But do you sense you're now into a new normal in terms of the steadiness of order flow?

Matt Malone

Yeah, Russ, you know, I would still say that our business as a whole is susceptible to volatility and lumpiness with regards to orders. As you know, the contracts received could be anywhere from 75 to 100 million dollars. So although we wish we could book orders like that every quarter, it doesn't always happen. But to your point, given the diversification of our businesses across the many markets, it is becoming more stabilized as we diversify our business.

But no, I would still expect some lumpiness. And you know, 2026, fiscal 2026 was a record year for us, but there still could be some lumpiness in the future.

Russell Stanley (Analyst at Beacon Securities)

Thanks. I understood on the revenue mix, I guess following up on that really strong order growth in both defense and space. And in the past you've talked about where your ideal revenue mix would be. But I'm wondering if you might, you know, how you're thinking about your ideal revenue mix. Given the momentum, particularly in space and defense, might you relax those guardrails or that target mix and let those two segments in particular run as hard as they will over the next few years?

Matt Malone

Yeah, Ross, I appreciate that question. I think you hit it perfect right at the end. We do love the split between defense and commercial. And the reason being is, you know, they augment each other. When one's up, the other one can be slightly sluggish. In this particular case, like discussed over time, our technology and core competencies are market agnostic. And so you hit it perfect. What we're intending to do is follow the tail markets, follow the tailwinds of the end markets and ensure that our capabilities and technology align to them.

And then, yes, we will shift that percentage mix as we move forward. So right now we're seeing that in the defense side as well as space. And with the orders booked on the space side, we do see that revenue ramping over the next year, the next years. And so. But I don't want to lose sight of something really important aftermarket. On the energy and process side, we're going to continue to invest in. We've got the small modular nuclear footprint, which is in the early phases of development, and then we've got quite a bit of activity in just commercial nuclear more broadly that's coming online.

And so we don't want to lose sight of that because it will have its time to really shine in Graham's future. So it's a balanced portfolio that has market agnostic technology and competencies. But yes, we will follow the tailwinds of the end markets.

Russell Stanley (Analyst at Beacon Securities)

Got it. Maybe one more question for me and I'll hop back in the queue just around flat tech, I guess. What are the major milestones left in terms of integration before you would call it substantially complete? And I guess following up on that until then, should we think about your acquisition activity perhaps as being fairly limited until you complete Flacktech, or are you still out there hunting, so to speak?

Matt Malone

Yeah. So first and foremost, Flaktech, it's going quite well. The strategic plan we were that we closed the acquisition just in time to get a strategic plan laid and get it built into our budget for this year. With that, we made commitments to grow key areas within that business and specifically our primary focus is commercialization of that technology through market adoption. We're seeing that pay dividends even early on. So, Russ, I Think at this point integration is going exactly per plan, if not accelerated and we just need to let it play out.

So the corporate team continues to still support Flacktech, but I can feel it minimizing as we move forward. We've got a great leader there, we've got a great team there and our focus right now is commercialization of the technology that they have in the portfolio. The second question specific to M and A, the strategic placement of capital by T. Rowe, our continued revolver. We do have a healthy portfolio of businesses that we're looking at for our acquisition portfolio.

And what I'll say is while we need to make sure that we finish solid integration of the current businesses, that doesn't preclude us from continuing to ensure that we follow one, a disciplined approach, two, and a selective approach. And as always, because our organic pipeline is so strong, we want to make sure that it's accretive to the business.

Russell Stanley (Analyst at Beacon Securities)

That's excellent color. I'll hop back in the queue. Thank you.

OPERATOR

Thank you. Our next question comes from the line of Bobby Brooks with Northland Capital Markets. Please proceed with your question.

Bobby Brooks (Analyst at Northland Capital Markets)

Hey, good morning team and thank you for taking my questions. You mentioned new program wins within defense and I was just curious to hear more on that and if you could share what programs those were or just maybe some more context around that. And separately could you discuss what drove those new program wins? Just the Navy suppliers being more comfortable with you, your expanded capabilities attack, or maybe a bit of all three.

Just curious to hear more.

Matt Malone

Yeah, Bobby, thanks for the question. They're not necessarily new programs. I want to characterize it slightly differently. These are programs that have been in development phase for a number of years with what I'll call smaller platforms.

So think more power dense solutions. And so one I can talk high level about is a radar platform that goes from, you know, single direction radar visibility to now 360 degrees on the battlefield. And that particular asset has to be able to do more cooling in actually a smaller package to accommodate that additional capability. And that's really where the Graham portfolio comes into play is for these very high power, high density applications we have the ability to design end product solutions that come from our commercial pedigree that allow for improved system value and so think more in a smaller package.

And so with that these programs have been under, under development for a number of years and they're finally moving into the production lens. And so yes, we're seeing additional production volumes as a result of those programs. And just to expand, one last topic. So these are on critical radar platforms as well as directed energy laser platforms.

And the other one that, Bobby, that just to add on to what Matt said that we've publicly disclosed last year was, you know, that we were awarded the air turbine pump for the Columbia class submarine, which was a competitively bid award that we did win. And that was new.

Bobby Brooks (Analyst at Northland Capital Markets)

Got it. Very helpful there. Something I've been also really excited about just throughout this year was the testing facilities that you stood up during your fiscal 26 and so wanted to hear, have those already led to new. Have those already led to you getting in conversations with new customers? And then secondly, are they both. It seems like some of them, the cryogenic one, is just doing internal testing. Just was hoping for more sense on that.

Thank you.

Matt Malone

Yep. So the first is, I want to touch on the facilities at Barbara Nichols specifically. We right now have rig testing as well as the liquid nitrogen testing, where we are actively testing and shipping production programs.

And Bobby, why that's so important is now we can validate these designs that are quite complex for our customer. And instead of having them do the validation testing for us, we can do it for them and provide a fully ready for integration in their final asset product. And we are seeing great value from that. The second that you mentioned, and I think the core of your question is around the cryogenic facility down in Jupiter.

Great news with that facility, it's up and running. Number one most important is safety. We have liquid oxygen and liquid hydrogen on that facility. So we needed to ensure that we followed all those safety protocols. We have successfully flowed both fluids through the test facility. And right now we are actively integrating our internal pump, which is called scamp, and that is being used for a lunar lander program.

We are now testing that in parallel with our customer testing on their final integrated engine solution. And so, Bobby, what we're seeing there is, yes, a mix of exciting pipeline conversations and proving our existing product portfolio. Just to characterize that more broadly though, the primary reason for investing that facility was to validate our internal solutions before they go to our customer.

But we will use it as a service facility for our customers for programs that we see viable production opportunity longer term.

Bobby Brooks (Analyst at Northland Capital Markets)

That's super helpful, Colin. Thank you very much, Matt. And then last one for me is space orders up this year. Very impressive. 132% year over year. Just wanted to get some more context around that. Was it, Was it driven by new customer wins? Current customers expand? You have talked about customers expanding from more pilots to production phases, so maybe that's part of it.

Maybe some wallet share expansion mixed in there or maybe I'm just completely off base. So just wanted to hear a little bit more discussion on that order. Strength in space and maybe your outlook for in 27.

Matt Malone

Yep, yeah, space is strong and we've been alluding to that. What we're seeing is a few things. It is both new customers as well as existing. I want to focus in on new for a second. When we go with new customers, we are pretty selective on what, what end users we're providing equipment to. And the reason why is we want to make sure we take a disciplined approach to where we invest our resources. With that we're seeing strong demand. Multiple launch providers, you can see scaling launch cadence is increasing across a number of large platform launch providers.

All of this is transitioning to then getting to a healthy cadence of launch. And so we're seeing, you know, in Florida and Texas a whole bunch of different providers. There's a pretty limited number, I shouldn't say a whole bunch but we have critical equipment on both of those, on a lot of those assets. And now the conversation, Bobby is moving to what do we do in space? And so we're seeing our backlog grow from two vectors. The first is launch and getting to a reliable cadence where we have either a asset or critical assets on several different providers.

The second is now we have the

ability to launch additional satellites, astronaut backpacks, lunar landers, etc. Etc. And we have content, a lot of those end assets.

So really it's an ecosystem that's coming to life.

It's not just a single end user or end application, if that makes sense.

You know the only other thing I

would add to that is just to remind everybody that you know, Flacktech did come with 10%, a 10% space business. So that will be, you know, driving space growth in fiscal 27 as well as our flaktech business.

Bobby Brooks (Analyst at Northland Capital Markets)

That's super helpful. Color Maddie. Chris, thank you very much. I'll turn back to the queue and congrats on a record breaking year. Very impressive.

OPERATOR

Thank you. Our next question comes from the line of Christopher Glenn with Oppenheimer and company. Please proceed with your question.

Christopher Glenn (Analyst at Oppenheimer and Company)

Thank you. Good morning. Matt and Chris had a question about the subs and carriers progression. What's been a more meaningful progress growth driver in the recent past and prospectively when you look at, you know, build rates on the one hand how those are moving versus you know, new work and content scopes.

Matt Malone

Yeah, so great question. You know, you we continue to hear, read about, I would say Headwinds on the final integration production side for naval, nuclear and more specifically submarines. You know, the government and specifically the Navy continues to claim that we will catch up to build rates. With that being said, we are not seeing any impact on our robust pipeline converting. And so in most cases, you know, the condenser that goes on board the submarine or the aircraft carrier that we provide or the air turbine pump, a lot of these are some of the earliest assets that get integrated.

And so as soon as you know the electric boats and Newport Newses get

their contract awards, typically it's slowing down to us with that we continue to see opportunity as Flaktech comes on board and Barbara Nichols on this munition replacement area. So torpedoes, as we look at energetics for missiles, a lot of these end uses stimulate those two businesses. So we're seeing this tailwinds on the

long cycle strategic programs like the submarines and carriers. But we're also now starting to have a portfolio element where more of the faster moving munitions replenishment is part of Graham. And so it's no one simple answer or one simple commentary, but that's the general architecture.

Christopher Glenn (Analyst at Oppenheimer and Company)

Okay. And then just wanted to check in on the some of the new products you've talked about lately in terms of the aftermarket development. Sounds like you've got a constructive view on aftermarket resuming good growth in 27. But you know, I think he flow heat exchanger and the next gen nozzle for EMP ejectors were a couple of your highlight initiatives. So just want to check in on those.

Matt Malone

Yep. Yeah, so aftermarket, you know, we have a billion dollar install base and so never want to lose sight of ensuring that our customers are well supported both with replenishment upgrades and as well as you know, new capital Helaflow, NextGen continue to nurture into the ecosystem quite well. We're seeing a lot of opportunity as we start to talk about NextGen with our customers both selling next gen and then stimulating additional in kind replacements.

We're seeing that be a great conversation starter. So this modernization approach is working in that sense. The other is I've continued over the years to have the conversation around moving from a reactive aftermarket, which what I mean by reactive is our customer today calls us, we are in this next year and we'll talk about it more at the investor day moving to what is a proactive aftermarket. We go on the offensive. We know where all of our install base is, et cetera, et cetera.

And once we get those established relationships, which we already have, we'll look to bring modernized equipment to that environment and HELA flow next gen and other technology that we're working in, R and D will be a part of that.

Christopher Glenn (Analyst at Oppenheimer and Company)

Great, thanks for that. And a bookkeeping one for Chris. Curious what we should be thinking about for DNA for fiscal 27 and the amortization component alone.

Chris Dolan (Chief Financial Officer)

Yeah, so no problem, Chris, you know, as you saw, you know, there was a higher level of amortization in the current quarter and that's really because of the amortization in connection with the Flacktech acquisition. So that was in there for two months out of the year. So I would expect, you know, Q1 to be a little bit higher in amortization because of that. And then you can kind of annualize it from there.

Okay. So that that doesn't get confused by the one time inventory step up at all. What the explanation you just gave.

Yeah, there was a little bit of one time. So those will probably offset each other a little bit. So

you could just probably take the

current quarter and annualize that and look to what it'll be for next year.

Christopher Glenn (Analyst at Oppenheimer and Company)

Okay, great.