Powell Industries, Inc. Q1 FY2026 earnings call

Key Points

• Fiscal year started strong with revenue growth and improved gross profit.
• New orders at $439 million, including large LNG and data center projects.
• Backlog at $1.6 billion, driven by electric utility and commercial/industrial markets.
• Expanding capacity through leased facilities, supply base collaboration, and plant reallocation.
• Data center market growing, with commercial and other industrial now 22% of backlog and data centers 15% of backlog.
• Jacintoport facility expansion on track to support LNG projects.

In fiscal 2026 1st quarter, net revenue was $251 million, up 4% from prior year. New orders booked were $439 million, the highest in over 2 years. Backlog was $1.6 billion, a 14% sequential growth and the highest in Powell's history. Utility sector revenues increased 35% year-over-year, oil and gas up 2%, petrochemical down 31%, commercial and other industrial down 8%, and light rail traction power up 5%. Gross profit was $71 million, up $12 million, with a gross margin of 28.4%, a 380 basis points improvement year-over-year.

Forward-Looking Statements

• Management encouraged by commercial tailwinds across end markets.
• Optimistic to sustain backlog and margins throughout fiscal 2026.
• Confident in executing backlog and growing in targeted markets like data centers and utilities.

Risks Identified

• Competition and competitive pressures.
• Sensitivity to general economic and industry conditions.
• International, political, and economic risks.
• Availability and price of raw materials.
• Concerns about backlog firmness and skilled labor shortage.

Q: Comment on sustaining gross margin based on backlog?

A: Mike Metcalf states strong project closeouts, including change orders, contributed to margin improvement, with trailing 12-month margins around 30%.

Q: Concerns about backlog firmness?

A: Brett Cope says backlog is durable, but monitoring new customer shift and potential cancellations.

Q: Pricing and raw materials?

A: Brett Cope on pricing stability, Mike Metcalf on hedging copper and locking engineered components to manage input costs.

Q: LNG competition and margins?

A: Brett Cope on competitive environment, expecting potential margin upside from efficiency in data center projects.

Q: Cash on balance sheet and working capital?

A: Brett Cope and Mike Metcalf discuss capital allocation for new facilities and working capital deployment for backlog.

Q: Remsdaq update?

A: Brett Cope on Remsdaq's role in data center market, service opportunities in commercial and industrial sectors.

Q: Skilled labor shortage?

A: Brett Cope on labor concerns, solving engineering needs to address growth-related labor challenges.