Powell Industries, Inc. Q2 FY2026 earnings call

• Powell had solid quarter with 6% revenue growth, $490 million new orders, backlog at $1.8 billion. • Notable strength in liquefied natural gas, electric utility, and data center projects. • Awarded two mega projects over $75 million, including a $400 million+ data center project. • Backlog balanced across markets, provides visibility into fiscal 2028. • Expanding manufacturing capacity, leased space in Houston, evaluating lease and greenfield facilities. • Strategic sourcing and supply chain efforts, M&A activity with REMSDAC progressing well, investing in government-related work. • Teams rising to meet growth challenge, focusing on continuous improvement and efficiencies.

In the second quarter of fiscal 2026, total revenue was $297 million, up 6% from the prior year. New orders were $490 million, with backlog at $1.8 billion, 12% higher than prior quarter and 33% higher than one year ago. Revenue breakdown by market: domestic up $4 million (2%), international up $14 million to $64 million. Market sectors: commercial and other industrial up 35%, electric utility up 14%, oil and gas up 11%, petrochemical down 37%, light rail traction power down 10%. Gross profit $88 million, gross margin 29.6%.

• Encouraged by sustained commercial activity across core end markets. • Well-positioned to deliver strong cash flows and earnings performance for remainder of fiscal 2026. • The $400 million+ data center order will be included in fiscal third quarter reported numbers.

• 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.

Q: Given strong orders and $400 million-plus data center order, how to think about order outlook and managing SG&A/R&D?

A: Outlook strong, activity entering Q3 no letup. SG&A costs trend in upper single digits, increase due to higher compensation and REMSDAC acquisition. R&D trending higher at ~1.4% of revenues.

Q: About $400 million-plus order, is it all outside and potential for additional phases?

A: Initial award all outside data center, sizable with couple of gigawatts initial phase, hopeful for additional phases over time.

Q: On pricing power, why not more pricing despite strong markets?

A: Getting some price, pushing in constrained demand supply curve areas, will see more as efficiency gains and plans for 2027 develop.

Q: Handling spike in metal prices and impact on gross margin?

A: Proactive with metals, hedging program for copper to protect margins, proactive with supply chain for other core commodities.

Q: Turn down any orders?

A: Not turning down, but not able to meet all schedules, engaging in sequencing and constructability conversations with clients.