Powell Industries, Inc. Q4 FY2025 earnings call

Management Statement and Operational Highlights

• Fourth Quarter Performance: Marked a solid finish to a record year with 16% gross profit growth, 8% revenue growth, and $61 million operating cash flow. Record quarterly gross profit margin of 31.4% and record EPS of $4.22.
• Revenue Profile: Driven by nonindustrial markets, with Electric Utility and Commercial and Other Industrial accounting for 41% of 2025 revenue and 48% of backlog. Light Rail Traction revenue nearly doubled in 2025.
• Orders and Backlog: Booked $271 million in Q4 2025 (1% higher than prior year), $1.2 billion full year (9% higher). Backlog at year-end was $1.4 billion.
• Manufacturing and Acquisition: $12.4 million investment in Jacintoport facility for Oil and Gas, and acquisition of Remsdaq in fiscal fourth quarter.
• Market Outlook: Global economic environment impacts, strength in Electric Utility, data center, natural gas; softness in traditional oil and gas/petrochemical.

Segment Performance

• Fourth Quarter 2025: Revenues were $298 million, up 8% from $275 million in Q4 2024. Gross profit was $94 million, up 16% from $81 million. Gross profit margin was 31.4%, a 215 basis point increase from the prior year. Electric Utility sector doubled, Light Rail Traction increased 85%, while Commercial and Other Industrial was down 9%.
• Full Year 2025: Revenues were $1.1 billion, up 9% from 2024. Gross profit margin was 29.4%, a 240 basis point increase. Backlog increased to $1.4 billion. Electric Utility and Oil and Gas each made up 1/3 of backlog. Light Rail Traction revenue nearly doubled, and nonindustrial markets (Electric Utility, Commercial and Other Industrial) accounted for 41% of 2025 revenue and 48% of backlog.

Guidance

• Fiscal 2026 expected to continue strong commercial momentum. Backlog composition and profitability to support performance. Strong liquidity and balance sheet provide financial flexibility for another successful year.

Risks

• Competition and competitive pressures.
• Sensitivity to general economic and industry conditions.
• International, political, and economic risks.
• Availability and price of raw materials.
• Execution of business strategies.

Question and Answer

Q: Congratulations on another impressive quarter. Can you talk a little bit about if there's been any meaningful change in the competitive landscape or maybe the pricing environment today versus, say, a year ago?

A: Brett Cope noted different scenarios regionally by sectors; Oil and Gas has varying price sensitivity.

Q: I'm kind of also curious about your thoughts about seasonality, especially considering the backlog profile. How would you kind of characterize how should we expect the upcoming first quarter to kind of lay out given the current job outlook?

A: Michael Metcalf said first quarter is seasonally softer due to holidays, but optimistic about total year 2026.

Q: Regarding the SG&A, you mentioned there is maybe some onetime M&A expenses in the quarter. How big were those expenses, just so I can maybe rightsize SG&A on a go-forward basis?

A: Michael Metcalf said on a discrete 4Q basis, up about $5 million year-over-year, roughly $3 million due to compensation and $2 million acquisition-related.

Q: Maybe just first for me, C&I, it sounds like you feel very good about the trends there. I think you called out opportunities growing and maybe some urgency on price. Just with the modest decline in the quarter, was that largely timing or anything to call out there? And then on the go forward, how are you viewing the opportunity in some of the newer products you're offering there?

A: Brett Cope said quarter decline was timing, C&I opportunities growing including data centers, mining, pulp and paper.

Q: Brett, a question on the LNG market. It's been about 9 months, 10 months since the pause has ended. And as you look at those projects, is there -- are you surprised they haven't reached -- some haven't reached FID yet? Or is there a little bit of a hang up for some reason?

A: Brett Cope said LNG market is active, took more time to spin back up, but investment in offshore is well-timed.

Q: A couple of questions on the end markets. In the C&I segment, beyond data centers, what might be active in that area? And then also in the Traction area, orders were up significantly. What are you seeing there that's driving the business in Traction?

A: Brett Cope said C&I includes mining, pulp and paper; Traction is driven by DC switchgear expertise and ongoing projects.

Q: I guess I'm still thinking about the closeouts. And I'm wondering how you would characterize 2025 compared to prior years. Is this kind of a normal level of activity, maybe on a percent of revenue basis or how we should think about it?

A: Michael Metcalf said closeouts in 2025 were a bit heavier, running at 1.7% of total revenue, expect execution to continue in 2026.

Q: Regarding the uptick in R&D, can you talk a little bit about maybe where the spend is going? And when do you expect to see the commercialization of some of these projects?

A: Brett Cope said R&D spend to continue, expect tangible results in 2026, with products hitting market.

Q: In light of the capacity expansion, can you give us an updated CapEx budget for 2026?

A: Michael Metcalf said $12.4 million for Jacintoport expansion, plus $5-7 million for maintenance and productivity projects.

Q: How much of the backlog is deliverable in the coming 12 months?

A: Michael Metcalf said about 60% is convertible in 2026.

Q: Data center revenue, I mean, maybe for all of fiscal 2025 as a percentage basis? And how does that comp to like 2024?

A: Michael Metcalf said backlog for C&I is about 15%, half of that is data centers, roughly 100-200 basis points higher than 2024.

Q: Mike, just a question on the incentive comp. Was that sort of a catch-up number in the fourth quarter?

A: Michael Metcalf said it was a catch-up, about $3 million due to variable compensation and $2 million acquisition-related.