管理層發言
Welcome to the Powell Industries Earnings Conference Call. Please note, this event is being recorded. I would now like to turn the conference over to Mr. Robert Winters, Investor Relations. Thank you. Please go ahead.
Thank you, operator, and good morning, everyone. Thank you for joining us for Powell Industries conference call today to review fiscal year 2026 third quarter results. With me on the call are Brett Cope, Powell's Chairman and CEO; and Mike Metcalf, Powell's CFO. There will be a replay of today's call, and it will be available via webcast by going to the company's website powellind.com, or a telephonic replay will be available until August 11. The information on how to access the replay was provided in yesterday's earnings release. Please note that information reported on this call speaks only as of today, August 4, 2026, and therefore, you are advised that any time-sensitive information may no longer be accurate at the time of replay listening or transcript reading. This conference call includes certain statements, including statements related to the company's expectations of its future operating results that may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risks and uncertainties and that actual results may differ materially from those projected in these forward-looking statements. These risks and uncertainties include, but are not limited to, competition and competitive pressures, sensitivity to general economic and industry conditions, international, political and economic risks, availability and price of raw materials; and execution of business strategies. For more information, please refer to the company's filings with the Securities and Exchange Commission. With that, I'll now turn the call over to Brett.
Thank you, Bobby, and good morning, everyone. Thank you for joining us today to review Powell's fiscal 2026 third quarter results. I will make a few comments and then turn the call over to Mike for more financial commentary before we take your questions. Powell delivered a very strong third quarter, highlighted by a record for new orders in a single quarter, which in turn has elevated our backlog to over $2 billion for the first time in our 79-year history. Revenue grew 9% compared to the prior year and our continued focus on productivity delivered a gross margin of 30.6%. Revenue growth in the quarter was once again driven by our commercial and other industrial and electric utility markets with continued strong results in the oil and gas sector. Each of our core end markets are exhibiting high levels of activity and the nature and scope of these projects are central to Powell's core competencies. The electric utility market remains very active, underwritten by structurally undersupplied power demand, while data center order activity for Powell has clearly inflected higher relative to just one year ago. Meanwhile, in our industrial end markets, the growing importance of U.S. LNG exports in the global energy landscape remains supportive of demand for the electrical infrastructure required across the natural gas supply chain. Overall, Powell was awarded a record $934 million of new orders in the third quarter which is nearly three times higher than the prior year and nearly double the order total from last quarter. Included in this order total is the previously announced mega data center order which is in excess of $400 million for Phase 1 of a multi-phase behind-the-meter design of on-site generation assets. In addition, Powell was awarded $75 million for the electrical distribution equipment supporting a new petrochemical facility for the production of fertilizer, and we received an award of approximately $60 million for a new LNG liquefaction facility. Both of these projects are located along the U.S. Gulf Coast. Outside of these three mega awards, our order book in the quarter was comprised of more than $350 million of new awards balanced across the market verticals in which we compete and a testament to the volume and diversity of our order intake. Our backlog is now nearly $2.4 billion, again, the highest in Powell's history and it is notable that we have booked over $1.8 billion of new awards over the past three quarters. The visibility provided by our backlog continues to extend as we are booking awards that we'll be executing deep into our fiscal 2028. The order book also remains balanced across the Powell footprint, which, combined with actions we are taking to create incremental capacity will improve opportunities to further drive productivity across our facilities. Those actions include a lease that we entered into late last year, providing an incremental 30,000 square feet of manufacturing capacity near our Ohio facility. Part of that agreement included the option to expand that lease, which we expect to execute in response to accelerating order activity. And in April, we entered into a lease agreement for a facility near our Houston facilities that is providing another 50,000 square feet of manufacturing capacity. We are now operating two satellite engineering offices around the Houston metro area to add critical engineering talent to our world-class electrical and mechanical engineering and design teams. These facilities are strategically located in the energy corridor and North Houston to expand our coverage of the metro area. Lastly, the expansion of our Jacintoport facility that we announced one year ago is nearing completion. This investment will add 335,000 square feet of capacity to initially meet the accelerating demand for custom power control rooms for the LNG market. However, over the long term, this capacity is fungible and can be utilized to serve our customers across any of our markets. We expect the work at Jacintoport to be completed in the next month or two and for utilization to ramp fairly quickly. When fully utilized, we would expect the expanded yard to support well in excess of $100 million of incremental annualized revenue. Each of the incremental initiatives that we have taken across the company over the last 12 to 18 months will result in an expansion of our total footprint of manufacturing, office and warehouse facilities of over 20% by the end of fiscal 2026 as compared to the end of our fiscal 2025. Further, during our third quarter, the Board has authorized the acquisition of the lease facility that will support approximately 300,000 square feet of manufacturing space. Over the last several quarters, our manufacturing and service leadership teams have progressed several options in proximity to our existing facilities. We are planning to have this future facility available for manufacturing activity late in our second or early third quarter of our fiscal 2027. The facility will be supported by increased fabrication throughput and as part of a previously announced $8 million investment in new equipment and upgrades at our Mosley facility. We continue to evaluate the prospect of a greenfield Powell-owned facility that would require $70 million to $100 million of capital, to provide upwards of an owned 250,000 to 300,000 square foot factory which would also support increased fabrication. This planning process continues to progress, and we expect to make a decision in the near future. Our M&A pipeline also remains healthy and growing, and we are evaluating a number of opportunities to better position us within key growth markets. These include complementary products and/or capabilities to our current portfolio, or oriented toward building out our growing services franchise. Our efforts here are tempered in part by what we regard as rich valuations across the space, though we continue to engage where we see value and a strategic fit. In closing, we are very pleased with our third quarter results. Commercial activity in our core end markets remain strong, underpinned by durable and secular demand drivers that should continue our momentum as we close fiscal 2026 and prepare for our fiscal 2027. With that, I'll turn the call over to Mike to walk us through our financial results in greater detail.
Thank you, Brett, and good morning, everyone. In the third quarter of fiscal 2026, we reported total revenue of $312 million compared to $286 million, or 9% higher versus the same period in fiscal 2025. New orders booked in the third fiscal quarter of 2026 reached a record high of $934 million, which was anchored by the $400 million plus data center order that was awarded in April and discussed in our prior quarter release as well as two additional core industrial mega orders booked during the third fiscal quarter, one for an LNG project for roughly $60 million and the second for a petrochemical project totaling about $75 million. With these wins, orders in the third fiscal quarter were higher by $572 million versus the same period in the prior year, and higher sequentially by $445 million. The resulting book-to-bill ratio for the third fiscal quarter is 3.0x while this ratio on a fiscal year-to-date basis is 2.2x, with reported backlog reaching a new high of $2.4 billion at the end of the third fiscal quarter, $967 million higher versus one year ago and $619 million higher sequentially. At the close of our third fiscal quarter, our core industrial end markets across petrochemical and oil and gas represent 30% of the total backlog while the electric utility and commercial and other industrial markets each represent 24% and 40% of the $2.4 billion of backlog, respectively. Now turning to revenue. Compared to the third quarter of fiscal 2025, domestic revenues were higher by $26 million or 12% while international revenues were slightly lower by $1 million to $61 million on the softer Canadian market. From a market sector perspective, revenues were higher by $27 million or 54% in the commercial and other industrial market versus the third quarter of fiscal 2025, while the electric utility market increased by $14 million or 18% versus the prior year. Across our core industrial end markets, the oil and gas sector was relatively flat versus the prior year while the petrochemical market was lower by 49%. The light rail traction power sector was 7% lower versus the same period one year ago on light volume levels relative to the total business. Gross profit increased by $7 million to $95 million in the third fiscal quarter of 2026 versus the same period one year ago. Gross profit as a percentage of revenue was roughly flat versus the same period one year ago at 30.6% of revenue and was 90 basis points higher sequentially versus the same period one year ago, the mix of projects and the associated margin rates exiting backlog remain very consistent and are continuing to benefit from strong execution and volume leverage across Powell's global footprint. Selling, general and administrative expenses were $27 million in the current period, an increase of $1.6 million compared with the same period a year ago, primarily driven by the higher compensation expenses across the business, which is inclusive of the current year impact of the Remsdaq acquisition. SG&A as a percentage of revenue was lower by 20 basis points year-over-year to 8.6% in the current fiscal quarter and lower sequentially by 10 basis points. In the third quarter of fiscal 2026, we reported net income of $52.2 million, generating $1.42 per diluted share compared to net income of $48.2 million or $1.32 per diluted share in the third quarter of fiscal 2025. During the third quarter of fiscal 2026, we generated $100 million of operating cash flow, principally driven by higher earnings generated in the third fiscal quarter while also benefiting from favorable working capital resulting from the strong booking activity. Investments in property, plant and equipment in the fiscal third quarter totaled $6.5 million reflecting an uptick in capital deployed for the offshore fabrication yard expansion project, but also strategic spending for CapEx to accommodate the increased throughput resulting from commercial activity. At June 30, 2026, we had cash, cash equivalents and short-term investments of $634 million compared to $476 million at September 30, 2025, and $545 million at March 31, 2026. The company does not hold any debt. Looking forward, we remain encouraged by the sustained commercial activity across our core end markets, as highlighted by record bookings in the third quarter and a record backlog at quarter end. The continued momentum we are seeing in the electric utility and data center markets, coupled with early signs of a recovery in the petrochemical market reinforces our confidence in the quality and the durability of future demand. These achievements reflect both the strength of customer investment and our ability to secure and execute large strategic projects, providing meaningful momentum as we enter fiscal 2027. Considering this backdrop, together with a stable pricing environment, disciplined project execution and a strong liquidity position, we believe that Powell is well positioned to deliver another year of strong financial performance in fiscal 2027. At this point, we'll be happy to answer your questions.
分析師問答
The first question comes from John Franzreb with Sidoti & Company.
I'd really like to start with the gross margin profile. It continues to be elevated and impressive. I'm curious, can you talk a little bit about what the competitive landscape is like and what kind of ability you have maybe to be more aggressive on pricing given this incredible demand that you have?
John, it's Brett. Let me take the second part first, and I'll have Mike jump in on some of the color on the margin. We are seeing some opportunity for price in the market. On the commercial side, I think you'll find a theme that delivery speed is still driving the overall value proposition to the market. But that's not across all the sectors we're in at Powell. So the industrial market is probably a little more price sensitive overall. Margins are good and equivalent, but more opportunity on the commercial market, I'd say, of the three verticals that we chase. And I'd say the competition follows the same sort of theme. So a little bit more sensitive in the industrial market, and less so in the commercial market, where it's about speed and capacity and what you can do to serve that market as quickly as you can.
John, I'll jump in to add some commentary there on the margins. Overall, we're really pleased about the margin performance in the quarter. Some of the core pillars driving margins in the quarter were the product mix across the business and continued operating leverage across our footprint. And as Brett said, the pricing stability in the markets continues to meet our expectations. Combined, we were just over 30% gross profit for the quarter and on a year-to-date basis just shy of that 29.6%. We are watching inflation closely. We are seeing moderate inflation on core commodities, copper, aluminum, steel, things of that nature, and engineered components. We have actions in place, whether it's commodity hedging or strong commercial discipline practices that are helping offset some of this, but we are seeing a little bit of a headwind from an inflation perspective. And then finally, project closeouts. With respect to project closeouts on a year-to-date basis, project closeouts have contributed roughly 100 basis points through the first nine months. That compares to about 130 basis points a year ago on a year-to-date basis. So we are still seeing strong project execution through the system and across the footprint.
Got it. Got it. And it's great to see you leaning into capacity expansion. I'm actually curious, maybe you can provide a little color: if you decide to do a new greenfield facility, what's going into that thought process? And maybe talk a little bit about what you're seeing on available labor as you expand the capacity.
Yes. We talked last quarter about the capacity piece. During the last quarter, we had a really thorough discussion with the Board, so we're pleased to be working towards the leased facility. With the growth of the backlog, certainly accelerating over the last two to three quarters, it is more efficient to do the leased facility. We are going to spend some capital doing some cranes and things that we'll leave there over the term of the lease, and we feel pretty good that we can support that with throughput of our existing fabrication. And so that was one of the discussions that we're having: the efficient use of capital in the lease. But as we bring products out of the R&D pipeline supporting our organic strategy, and depending on what we do M&A-wise, we do see a future need for increased Powell fabrication, and that will drive the owned facility. So near term, we're going to pivot to the lease to handle the backlog growth and grow the company that way, and then we'll time the owned facility to handle the methodical growth of the expanded pipeline for all of our verticals. On the labor side, again, consistent with my comments in prior quarters, I wouldn't tell you we're not looking at it every day. It is interesting to watch our peers in the industry. There's a lot of construction labor being put to work right now. We've seen this cycle before; it's a little bit wider. We used to be really comfortable with what happens in the Gulf from Louisiana around the South Texas down the Mexican border when you get a lot of construction, and how that pulls labor across the contiguous states and even into Canada when it gets really busy. Now we're seeing other parts pull labor—North Texas up to the Midwest and even up to the Northwest parts of the states. It's a slightly different dynamic on craft labor. It hasn't impacted us yet. I do think eventually it will be something we're going to have to deal with creatively. We don't see it in the next couple of quarters. So nothing immediate, but our radar is up, and I do believe it will be a challenge in fiscal 2027 and 2028.
The next question comes from Tomo Sano with JPMorgan.
If you could talk about the modest revenue shortfall versus Street expectations. Could you help us understand the drivers? Was it primarily segment mix coming from the Canadian market, you talk about petrochemical softness versus timing and backlog conversions. Any color on which factors moderate most would be helpful.
Tomo, this is Mike. I'll address that question. First of all, being a project-based business, there's some variability with the ins and outs in the quarter and the timing of some of the big components that are going into our projects. So nothing specific to call out on the revenue cadence. It was a 9% year-over-year increase versus the prior year, which we felt pretty comfortable with. As we build the backlog, that's probably a good barometer to pinpoint that we are not going to see double-digit year-over-year growth given the backlog conversion rate that we've seen over the trailing 12 months or year-to-date anyway. So nothing specific to call out. It's going to be lumpy as we go forward. This quarter was really no exception. As I said, we were very happy with the 9% year-over-year for the quarter.
I appreciate it. And a follow-up on orders and demand trends. Could you share more color like what are you seeing on the demand side by the three verticals going forward?
Yes. I'll take that one, Tomo. All three verticals heading in today are very active. We watch it very closely every week. I dig into the color of our database to see what the activity is going forward and look for any signs of a major concern. In terms of commercial and other, which includes the data center market, for the next couple of quarters there's plenty of activity. The LNG market remains very robust for us. I feel very good about the investment we're making in offshore. The timing of that yard coming online in the next month or so is encouraging; we'll get some revenue laid down there on a proof-of-concept basis fairly quickly. The utility market is again very robust, especially in the United States, a little less so in Canada, generally a bit softer there. Compared to the states, we're able to use some of that capacity to help support ongoing work here in the United States and bring it across the border. So I feel pretty good heading through the back half of the calendar year and into calendar 2027 where we sit today.
The next question comes from Manish Somaiya with Cantor.
A couple of questions. One, maybe for both of you, have margins peaked?
Following up on John's comment, I wouldn't say they've peaked. The opportunity to grow would be continued opportunity in the commercial and data center space driven by speed, and as long as we continue to serve that, margins can improve. That blends into the existing backlog; at Powell, the convertibility takes one to three years, so you have to phase that into any model. Another opportunity is the progress we make in automation and the traction we get in the service strategy. Those strategic pillars are accretive to our current gross margin levels. There's a lot of activity in those strategies across the markets we serve, and so that will continue to blend in higher and help us raise margins. But as Mike noted earlier, we are a chunky business when it comes to reporting, so it could be a bit bumpy quarter-to-quarter. Overall, I think there's still positivity over the long term in our margin profile.
Secondly, there's been a lot of discussions about capacity coming online in the industry. Obviously, it doesn't pertain to each and every part of the business you might be participating in. But more broadly, Brett, how do you think about the capacity that's coming online pertaining to your specific business? At this juncture, clearly it seems that demand is outstripping supply, but at some point, it may catch up. And I guess there's been a lot of debate recently about how that might potentially impact margins for all the companies, including yourselves. So maybe if you can help us understand from a big picture standpoint and how it might be potentially different for you?
I love the question. This is a good discussion we have at the Board as we drive our strategy forward. Mike and I are building a strategy that is 10, 15, 20 years out. There are parts of what we're doing today that are opportunistic and move into strategic areas, particularly in commercial and other. But the rate of this market at some point will attenuate, and what we're doing with the leased facility allows us to pivot while we evaluate a commercially-owned facility. The leased facility supports good organic growth and potential M&A additions to the business, filling portfolio gaps and supporting how we're going to attack the utility market long term. We take a long-term view on distribution, transmission, and urbanization. Yes, there are short-term market dynamics we watch and understand the risks, but we're really focused on building the business long term. We will not invest in a fixed asset factory until we're confident that the products and pipeline support it. The bulk of our investments are still built around industrial and utility markets, and that's where we gain the confidence to make owned fixed asset investments on behalf of our investors.
And just on the backlog, Brett, obviously a very impressive backlog. Perhaps if you can just talk about how we should think about the backlog burn over the next 12 to 18 months? And Mike, just on that, it would be helpful to have the next 12 months backlog number, if you might have it.
Yes. Given the numbers today, it's kind of math. We had a really strong quarter and activity looks robust going out. As a team across Powell, we're very pleased with how well our teams operationally are working together to maximize productivity, find increased capacity, break up projects at different facilities and work with our clients to meet delivery needs. That's been a real positive. On the math side, I'll turn it to Mike.
Yes. Of the $2.4 billion of backlog, roughly just under $1.3 billion will be convertible over the next 12 months, so roughly 54%. As we spoke last quarter, that was in the low 60s, and with this big slug of orders—the $900-plus million order bookings that we recognized this quarter—that convertibility slipped down to about 54%. On the book-and-burn cadence, that's still a very healthy burn; on average it will vary quarter-to-quarter, but on average it's about $75 million a quarter of book and bill.
Next question comes from Alex Rygiel with Texas Capital.
Very nice quarter. Could you more specifically talk to the $400 million data center project—what that revenue recognition cadence looks like over the next few quarters? And what the future phases of work could look like on this project?
Alex, it's Brett. Thanks for joining today. The project came in pretty quickly from initial engagement to closing the award. The burn rate from inception isn't too dissimilar from our other large projects, the jobs we take around $100 million to $150 million. It's roughly a two to two-and-a-half-year burn. The job is broken up into multiple factories; it's touching at least five facilities here in North America, and we worked with the client on the approach, so they're fully transparent on how we're addressing the job. It is going to have some interesting dynamics that we are anxious to put through the system relative to not a lot of design work, so we're anxious to see how it flows through the system from a product standpoint. It is a behind-the-meter generation asset, and there are multiple phases in the future. We're excited, and we believe the future phases will be a copy of the job we just took, assuming we're successful.
And to follow up on that, with this customer or with other similar customers, are you looking at other projects that are in your pipeline of this size for this exact same type of product?
This is a pretty big one. If you look at the $100 million to $200 million or just under $100 million area on the commercial side, there are clearly more of those that have increased in frequency and some of them qualify as mega projects; a fair amount of that has been driven by the commercial sector, though there's still a fair amount of LNG work out there that we're comfortable with as well. But yes, the commercial markets are bringing us more mega jobs over $100 million more frequently. Projects upwards of $400 million are not common in the pipeline other than potential future phases of this particular program. There is potential for that, but nothing in the near term.
Very helpful. And then could you touch up on the Remsdaq acquisition—how that's performing?
Yes. On Remsdaq, I go back to what I said when we announced the acquisition. We always planned to bring the Remsdaq product portfolio into the U.S. and Canadian utility markets. Having Remsdaq on board was very well timed because when the data center market started looking for some of the automation products we offer, instead of buying those automation boxes from other companies, we're able to use our own Remsdaq controllers. We've been bringing their product into the United States commercial market since the end of last calendar year, so effectively the first fiscal quarter of 2026. The core operation of Remsdaq is progressing well. One of the attractions was both the hardware and their technology roadmap. We've integrated their team with ours, understood the road map particulars, and we anticipate the next generation of the controller that attracted us will be out in the market in the next couple of quarters. So we're pretty excited.
The next question comes from Chip Moore with ROTH MKM.
Brett and Mike, I guess for me, in the data center space today there were some news items around optical equipment and some communications equipment getting clamped down from China. Not that that necessarily extends to switchgear, but curious your thoughts on some of the domestic opportunities for Powell, whether it's defense-centric or public power. What are you seeing there, and how do you like that opportunity?
Yes, I have to look for that specific update. As you know, we don't have strong ties to the Asian supply side for our manufacturing content; it's not something we've historically used much. So we sit in a unique position in that our manufactured content has little tie to that supply. We've talked on previous calls about pursuing defense spending; we have a good story to tell and our opportunity funnel there is growing. I can't report specific results yet, but I anticipate we'll get over the hump in the next couple of quarters and add a solid story to future results. As that effort permeates and serves other secular markets such as utility or even commercial from a supply chain and risk perspective, I feel strong that Powell is in a good position to serve those markets given our supply chain and manufacturing setup.
Great. And maybe for my follow-up, just an update around new products and maybe tie that into some of the potential capacity expansions that you might make? Any color there?
Yes. R&D is trending up. Some of these newer projects require certain testing and certifications, and you have to go to third-party labs for those ratings in switchgear. We've had increased R&D effort to build samples and get ratings, to handle thermal or short-circuit performance around switchgear. As we've grown into these market verticals, we've had to pivot in the short term and divert some R&D resources to address those needs in our portfolio gap. We felt good we could meet the ratings for the jobs we took, but you must go and obtain the ratings. This short-term R&D work pulls some resources away from longer-term organic R&D. However, I feel good that everything we're progressing will support an eventual owned facility, and those two initiatives are closely linked. We will not invest in a facility that requires expanded fabrication support until those products are solid and ready for market release. That's the timing we're working through now.
The next question comes from John Braatz with Kansas City Capital.
Brett, sort of a data center question. We've seen some growing resistance publicly from consumers about data centers and moratoriums and so on. I think it's going to be incumbent upon data centers to improve efficiency, reduce electrical consumption, and so on. I've been reading about 800-volt data centers and so on. My question: what role might Powell and its products have in improving the efficiency of data centers? Could we see an incremental benefit to Powell as data centers evolve—could we see more Powell content possibly?
Possibly. On the utility connection side—whether connecting to the grid or going off the meter—both cases involve equipment in the 38 kV range, which is a strong market for Powell. For behind-the-meter projects like the large one we took, that actually increases our content because it functions more like a power island—similar to an offshore oil and gas platform where they're self-generating and not connected by long cables. That increases Powell's addressable content for switchgear, switches, controls and services—essentially a broader total package. To date, we are not in the interior racks of the data center. The 800-volt designs will happen, and we are watching the progression of the technology. We have our fingers on what's going on and are contemplating pivots into areas that might be AC or DC to support different designs. At the compute level, where we don't compete, the one-megawatt rack and DC distribution are developing. As that moves up the power curve, the outside of the data center will remain largely AC. There's a wide range of DC ideas that will get inside the data center. Yes, I see opportunity for Powell more midterm on the DC side, and we are looking at it.
Okay. All right. And Mike, as we think about the expansion plans over the next couple of years, would you think there would have to be some lift to your SG&A spend to meet those expansion plans?
Yes. I do think there will be some pressure on SG&A as we stand up these new facilities. You can't switch them on immediately; there's a transitional period where you stand them up and get them ready for production. We're doing all that we can to offset any impact to the business—whether to gross profit percentage or SG&A percentage. We're doing everything we can to mitigate impacts. But as we go forward with some of these larger initiatives, like the large leased facility we're preparing for, there will be a transitional period where we're standing it up and spending money for it to actually be productive.
This concludes our question-and-answer session. I would like to turn the conference back over to Brett Cope, CEO, for any closing remarks. Please go ahead.
Thank you, Ashia, and thank you, everyone, for joining us on the call this morning. We are very pleased with the results of our third fiscal quarter, and we are encouraged by the commercial activity across each of our core end markets. We believe the momentum that our team has built throughout the year will continue into our fiscal 2027. I would like to thank our incredible employees; through their talent, leadership and focus they have prepared Powell well for this growth cycle in our business. Thank you to our valued customers and our supplier partners for their continued trust and support of Powell. Mike and I look forward to talking with you all next quarter.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.