Q4 2025 Powell Industries Inc Earnings Call
Welcome to the Powell Industries earning conference call. All participants will be in a listen-only mode. Should you need assistance? Please signal a conference specialist by pressing the star and zero on your telephone keypad.
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I would now like to turn the conference over to Ryan Coleman, Alpha Investor Relations. Please go ahead.
Thank you, and good morning everyone. Thank you for joining us for Powell Industries conference call today to review fiscal year 2025 fourth quarter and full year results. With me on the caller Brett, cope, polish, chairman, and CEO and Mike metcalfei, Powell CFO. There will be a replay of today's call and it will be available via webcast by going to the company's website. Powell nd.com or a telephonic replay will be available until November 26th the information on how to access the replay was provided in yesterday's earnings release.
5 and therefore, you were advised that in the time-sensitive information May no longer be accurate at the time of Replay, listening or transcript reading.
His 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 meeting 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 4 woodlook States.
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, Ryan and good morning everyone. Thank you for joining us today to review. Paul's fiscal 2025 fourth quarter and full year results.
I will make a few comments and then turn the call over to Mike for more financial commentary before we take your questions.
Our fourth quarter marked a solid finish to another record year for Powell.
Compared to the fourth quarter of last year, we achieved gross profit dollar growth of 16%.
Revenue growth of 8% and the generation of $61 million in operating cash flow.
Our teams delivered a record. Quarterly gross profit of 31.4%.
Which was 215 basis points better than the prior year, and a record quarterly earnings per share of 4 dollars in 2022 per diluted share.
Our fourth quarter performance is a testament to the ongoing, high level of project execution across all of our operations combined, with the steady progress against our strategic goals.
The revenue profile of fiscal 2025 was driven by the strong growth and our non-industrial markets including both the electric utility and our commercial and other industrial sectors.
These 2 markets accounted for 41% of our Revenue in fiscal 2025 and currently comprise 48% of our total backlog.
5 years ago, these 2 Market sectors, accounted for just under 20% of our backlog as our focused effort to diversify, the business and grow. In these strategic markets has produced important results for the future of Paulo.
The light rail traction Market also had notable contributions during the year with Revenue, nearly doubling compared to the prior year as we experienced increased levels of commercial activity in this end Market throughout fiscal 2025 versus the prior year.
We booked 271 million of new orders in the quarter, which was roughly 1% higher than the prior year.
There were no mega projects in the quarter as our order book was comprised of a higher volume of small and medium-sized projects
For the full year, we booked 1.2 billion dollars of new orders, 9% higher than fiscal 2024.
We finished the year with a backlog of 1.4 billion dollars and registered a book to Bill of 1.0 times for the full year.
Today, our backlog and project schedules are well, balanced across the markets and geographies. We serve
We also benefit from a healthy mix of large projects as well as core smaller and medium-sized projects that help maximize productivity across our manufacturing plants.
With that said, we have begun to see some divergence emerge as we close out Q4 2025 across our Ken markets.
We believe this is reflective of a global economic environment that is operating at very different speeds driven by country region and sector imbalances.
Overall the quality and visibility into future order. Activity continues to be very good with strength driven by electric utility
Data Center and natural. Gas market opportunities, including large-scale, LNG and related natural gas projects.
Which is offsetting some softness in portions of our traditional oil and gas.
And petrochemical markets such as refineries and polyethylene and polypropylene facilities.
We continue to actively review and evaluate our available manufacturing capacity in August. We announced the next phase of our 1 2. 4, 3, 5,
The production and export of us LNG is clearly going to play a critical role in the global energy landscape. And this investment ensures that we continue to advance our industry-leading role in the fabrication of engineered to order power distribution solutions for critical applications.
This announcement brings our cumulative investment at the at the gentle Port fabrication yard to approximately 20 million over the past 8 years and nearly 40 million dollars. Across our 3 Houston manufacturing facilities to support our organic growth plans.
We expect this phase of the just so justo port expansion to be completed by the second half of fiscal 2026.
We continue to evaluate our entire manufacturing footprint for opportunity, supporting growth and expansion along with options that may further improve productivity
We believe that Investments like these are the best use of our Capital as the project, timelines and execution return on Capital and payback periods are highly compelling for our shareholders.
On the inorganic side, we closed the acquisition of Rums Deck during the fiscal fourth quarter.
We continue to be incredibly excited around the future of our electrical automation strategy as we now work to complete the integration of the remac team into the larger Powell family.
We are already experiencing commercial, interests around, Remax products across the multiple markets that we serve, including electric utility, as well as data center applications within our commercial and other industrial Market sector.
Our teams began quoting, Remax products and technology in North America during the fourth quarter.
Introducing these products to customers on this side of the Atlantic, as well as integrating their existing commercial efforts in the UK with Paul's customer base there.
We are confident in our ability to scale. Our total power automation, offering at margin a creative economics in the coming years.
As we enter our fiscal 2026, the commercial environment for each of our end markets remains positive.
As we are optimistic, that the momentum we built throughout our fiscal 2025 will continue into the new year.
The fundamentals in the oil and gas markets. Support our expectation for continued order strength.
Specific to the fundamentals of the U.S. natural gas market, the pipeline of LNG projects that we are tracking continues to support our expectation for continued momentum for both Greenfield and Brownfield orders.
Activity within our commercial and other industrial market also remains healthy, and our progress to further penetrate this market is progressing well.
Recent data points and Industry, commentary by data center. Operators continued to identify power, availability and reliability as key constraints to capacity growth and AI data center expansion.
As a critical supplier of power distribution and control equipment, we continue to see elevated levels of activity as operators execute their capacity growth plans.
Opportunities are growing in both size and volume as well as product applications. As we expand our presence in this strategic Market,
the outlook for our electric utility Market remains robust and balanced across the customers and geographies that we serve.
The growing wave of investment in electrical infrastructure to meet growing demand levels is broad and durable, and we expect another strong year of activity in 2026.
I want to thank the entire Paul team for another record year for their commitment to Powell and our customers and suppliers alike.
by helping to further our unique position as a supplier of critical electrical distribution components to a growing array of applications.
With that, I'd like to turn the call over to Mike to walk us through our financial results in more detail.
Thank you, Brett and good morning everyone.
I will begin first with the fiscal fourth quarter business results, and then move to the total fiscal year 2025 results.
Revenues for the fourth fiscal quarter of 2025 increased by 8% to 298 million compared to the same quarter in fiscal 2024 of 275 million.
And was also higher sequentially by 12 million driven per predominantly on the strength of our electric utility sector.
That orders for the fourth fiscal quarter were 271 million 4 million higher than the same period 1 year ago driven by strong year-over-year activity in our commercial and other industrial. Light Rail, traction, Power, and electric utility sectors, which was offset by lower commercial activity across our petrochemical and oil and gas sectors.
Overall, we remain encouraged by the level of commercial activity across all the unmarked markets that we participate in.
With the sustained strength of our Top Line performance. The book tovil ratio was 0.9 times for the fiscal fourth quarter and 1.0 times for the full year, fiscal 2025
Reported backlog at the end of fiscal 2025 increased to $1.4 billion, $41 million higher than at the end of fiscal 2024, due to an increasing proportion of electric, utility, commercial, and other industrial and light rail traction power backlog, partially offset by lower petrochemical backlog levels versus the prior year.
As we exit fiscal 2025, our electric utility, and oil and gas sectors each now make up one-third of our total backlog.
Overall, we are a very pleased with both, the execution across the business driving record Revenue levels for the year as well as our orders performance, continuing to grow and diversify our backlog position, as we enter fiscal 2026.
Compared to the fourth quarter of fiscal 2024 domestic revenues of 239 million increased by $4 million or 2%, while International revenues increased by 38% to 68 million on higher, volume across most of our International manufacturing and Service locations.
From a market sector perspective. Revenues from our petrochemical and oil and gas sectors were lower by 25%. And 10% respectively on challenging comparisons resulting from the large industrial project orders that were booked in fiscal 2023 and executed predominantly in fiscal 2024.
In the fourth quarter of fiscal 2025, the electric utility sector doubled versus the same period 1 year ago.
While our light rail traction sector increased by 85%, albeit on a smaller Revenue base.
And the commercial and other industrial sector was lower by 9% on Project timing.
We reported 94 million of gross profit in the fiscal fourth quarter of 2025, which was 13 million or 16% higher than the same period of fiscal 2024.
Gross profit as a percentage of revenues increased by 215 basis points to 31.4% of revenues in the current fiscal quarter.
The higher quarterly margin rate is primarily attributable to continued, strong project execution across the business. Delivering, favorable project, Closeouts resulting in an incremental 100 basis points to the fourth fiscal quarter margin rate.
Additionally, we have maintained pricing levels, and combined with strong throughput across the business, which is driving incremental volume, leverage, and productivity. These variables have created a tailwind emergence across most of our operating divisions.
Selling General and administrative expenses increased by 5.5 million or 25% on higher levels of compensation expense expenses as well as the remack acquisition costs.
Sgna expenses for 27 million in the fiscal fourth quarter or 9.1% of Revenue, compared to 7.8% of revenues a year ago.
In the fourth quarter of fiscal 2025, we reported net income of 51.4 million generating $4.22 per diluted share compared to net income of 46 million or 3 dollars per diluted share in the fourth quarter of fiscal 2024.
We generated 61 million of operating cash flow in the fiscal. Fourth quarter driven mainly on higher earnings During the period.
In August, we completed our recently announced business acquisition of Ren stack limited for a total consideration of 18.4 million, which includes cash acquired of 4.6 million.
This transaction had a net cash impact of 11.5 million in the fiscal fourth quarter, with contingent payments of roughly dollars to a current future periods.
In addition, investments in property, plant, and equipment totaled $1.8 million during the fiscal fourth quarter, as we invest in capacity and productivity projects across the business.
As we recently announced, we've embarked on a critical project that will expand our capacity at our offshore yard in Houston further. Strengthening Powell's position in supporting the production and export of us LNG.
Confidently fulfill delivery commitments to our customers.
now, recapping our total year, fiscal 2025
Revenues of 1.1 billion dollars increased by 92 million or 9% compared to fiscal 2024.
Notably, our electric utility and the commercial and other industrial sectors were higher versus fiscal 2024 by 50% and 19%, respectively. While the petrochemical sector was lower versus the prior year by 19%.
Orders were 1.2 billion 9% or 94 million higher versus fiscal 2024.
overall, we've been very pleased with the activity across, all the end markets that we serve and the resulting orders mix through fiscal 2025
Gross profit is a percentage of revenues, grew 240 basis, points year-over-year to 29.4% or 51 million higher than fiscal 2024.
The margin rate continues to benefit from a stable pricing environment, exceptional project execution. Coupled with the incremental volume leverage and successful operational and Commercial strategies that continue to address the macro inflationary challenges across the supply chain.
Selling, general, and administrative expenses were higher by $11 million compared to the prior year.
Overall net sgna expenses as a percentage of revenues were higher versus the prior year by 20 basis points at 8.6% of revenues in fiscal 2025 versus 8.4% in the prior year.
In fiscal 2025 research and development spending, increased 2 million, or 17% versus the prior fiscal year, as we continue to make progress on new product, design and development.
Total R&D spend in fiscal 2025 was $11 million or 1% of revenues.
We reported net income of 180.7 million or 14 dollars and 806.86 cents per diluted. Share in fiscal 2025 compared to 1 4, 9. 8, 2 9
Operating cash flow generated in fiscal 2025 was 168. Million versus 109 million in the prior year, driven by higher income generated versus the prior year.
In addition to the acquisition of Remec, which was a net cash usage of $11.5 million in fiscal 2025,
Total Capital spending on property. Plant and equipment was 13 million in fiscal 2025.
1 million higher than the prior year as we completed the expansion of our breaker. Manufacturing facility in Houston which spanned across. Both both fiscal 2024 and fiscal 2025.
At the end of fiscal 2025, we held Cash Cash equivalents and short-term Investments of 476 million 118 million higher than our fiscal 2024 year, end position reflecting the sustained level of commercial activity. Across our end markets coupled with the strong execution across the business.
The company holds zero debt.
Looking forward. We are confident that the strong commercial momentum. We experienced across our Keon markets. In fiscal 2025 will carry into fiscal 2026
We believe that the composition and the quality of the current backlog combined with the sustained business profitability supported by a stable pricing environment, volume leverage and discipline pro project execution will provide meaningful Tailwind for continued performance.
in addition, the company's strong liquidity position and solid balance sheet, support significant financial flexibility, positioning power, for another successful year in 2026,
At this point, we'll be happy to answer your questions.
We will now begin the question and answer session to ask a question. You may press star then 1 on your touchtone phone,
If you are using a speaker-phone, please pick up your handset before pressing the keys.
if at any time your question has been addressed and you would like to withdraw your question, please press star then 2
At this time, we will pause momentarily to assemble our roster.
And your first question today will come from John Fran's with Sidonian Company. Please go ahead.
Uh, good morning. Brett and Mike and congratulations on another impressive quarter.
I I'd like, I'd like to start with the um, current operating environment. Can you talk a little bit about if there's been any meaningful change in the competitive landscape? Or maybe the pricing environment uh, today versus say a year ago,
uh,
John, thanks again, it's Brett. Um,
so, if you try to answer in each of our 3 main sectors, um, as I noted in the prepared comments, oil and gas,
It's still a very good, healthy market for Powell. We are seeing...
uh, some parts of that sub sector that market like in Canada, the North Sea of the UK,
Um, you know, with with policy and the in the UK, um, a little, a little softer. Not as much as we might see day-to-day, but then other parts of the market.
Um, you know, the gas is, is we've talked a lot about in the last couple years. Um, but more recently utility taking another step up, you know, that's a market. We strategically have been pursuing for years and now, with the increased demand part and then the cni part with data center,
Uh, I would say that the market is more demand-driven speed, maybe a little less price-sensitive, whereas the other part of the market that I, you know, before mentioned sub-sectors of oil and gas.
Because it's a little softer, you know, a little bit more price sensitive. So it's it's a tale of different scenarios regionally.
By different sectors right now. And so it is, it's a little, a little different, not just kind of, you know, 1 1, uh, ubiquitous Market uh, across the board.
That makes sense. That makes sense. Um, I'm kind of also curious about your thoughts about seasonality. Um, especially considering the backlog profile. I know in years past it's been diminished to Valles. You know, how would you kind of characterize, how should we expect, you know, the upcoming first quarter to kind of lay out giving, you know, the, the current job outlook
Yeah, good morning Jim. This is Mike. I'll I'll address that 1, um, as, as we always see in, uh, in every fiscal year. You know, our first quarter of fiscal is the October November December, uh, with the with the holidays and such. Um, we do anticipate that sequentially as we, we exit fourth quarter and and Report. Our first quarter it seasonally is is softer due to. Uh, what I, what I just mentioned, um, that said is, as we look forward on a total year basis. Um, you know, we we still we still are very optimistic about uh, about next year.
Okay. All right and uh, just 1 more question, I'll get back into Q. Um regarding the sgna you mentioned, there is um, maybe some 1 time m&a expenses in the quarter. Um, how big were those expenses just so I can maybe right size sgna and on a go forward basis.
Yeah, sure. So on, uh, on the discrete 4 q basis. Jen, you know, we were up about 5 million dollars, uh, year-over-year, roughly 3 million of that was due to compensation, uh, variable compensation, uh, items. And, um,
The 2 million 2 million, a little less than 2 million was uh acquisition related legal valuation services.
Great mic. Uh, thanks, I'm going to get back into you.
Okay.
The next question will come from Chip Moore with Roth Capital. Please go ahead.
Mr. Moore, you might be muted. You're live on our end.
Hey, sorry about that. Can you hear me now?
Yes, we can. Hey, great. Hey, Brett and Mike. Thanks for thanks for taking the question. Um, maybe just first for me. Um,
CNI. It sounds like, uh, you feel very good about.
the trends there, I think you called out, you know, opportunities growing and, and maybe some urgency on on price, just
with uh,
You know, the, the modest decline in the quarter was that largely timing or or anything to call out there and and then on the go forward, um, how are you doing the opportunity? And and some of the newer, uh,
products, you're offering their
Uh yeah I think on the quarter just timing, if you look at that sector chips, spread by the way um the opportunities are clearly growing. Um both for things that we
Have noted on the earlier calls that we were aspiring to bring to Market to get inside the 4 Walls of the data center. But also on the outside we continue, you know, that's an area. We are always able to play but on both fronts we're making. We're making good progress and
The size and breadth of the opportunity for Paul is clearly growing. Um,
I just look at the last quarters activity. It's um,
um,
There's, there's a lot of people, a lot of conversations going on a lot of what ifs and so, uh, and we're quoting some pretty big things today. And it's, it's
It's grown really nicely over the last 2 years for us.
Got it. And and Brad, I guess the core area on utility that, you know, phenomenal growth this quarter even working on that for a long time, but
I guess sustainability of growth there, the trends you're seeing obviously looks like in backlog, uh,
Demand is is quite healthy. But any any more color there?
Um really uh, this is a this is this particular strategy around utility that we work in hard at for well, over a decade. I'm super pleased with, and I appreciate the question you, you know, Mike and I were just talking before the call today. If you look at oil and gas in the backlog profile to utility they're equal weighted. So, um, we want both, we, we absolutely loved our Oil and Gas customer. We we have Decades of relationships, we're going to own and, and we're going to build that same, uh, profile with the, with the North American, and UK based utility customers. So, uh, we think the demand profile looks good. Uh, that includes both where we're, you know, have been fighting our way into the distribution side of the substation. And now, with this kind of increase in demand, we're going to do everything. We can to grab as much of that as as we can as well. Uh, that this is a great growth.
Sector for Powell on the distribution side with the electrical automation strategy and the service strategy. So all 3 of our strategies play here,
Great, and sorry, maybe, um, 1 more on on cni Data Center and maybe kind of technical but Brett, I'd be curious to get your thoughts. If, if you, if you have any, uh, a lot of Buzz.
Around uh 800 volt DC architectures down down the road. It just
it, you know.
Do you guys play there, or what? What would be a potential role, and how do you see that evolution?
Yeah, we've, uh, a couple of the folks that were meeting have, uh, we've got, you know, we've got the DC switch gear that we provide to traction. So we have a, we have a DC breaker today, that fits, um, we, we have a design on a rectifier. We would have to do some R&D around that.
Uh, to apply it to, to a DC structure, uh, for the data centers at the power levels are talking about. So, uh, you know, if you look at how the future DC might develop you still have the AC tie. So, the at the power levels today we'd have the 38 KV primary switch gear, which would still be the same tomorrow with the DC. Uh, but then, as you as you get inside the DC distribution of the data center potential on the architecture, uh, the Powell, uh, technology would would play. We'd have to do a little, a little, uh, investment around the rectifier as a solution, there are other solutions to as there are frequently when you're doing the distribution scheme into a in any facility. But uh
We've had a few Folks up uh that are in the space, seeing what we do and how we do it and chats about what we'd have to do to, to, um, you know, finish off a few things to, to get it where they want it to be for tomorrow. So, we're we're in that conversation.
Great, uh, appreciate that. And maybe Mike for you just back to the margins and pricing. I I think you called out you know you feel good on
Uh, backlog and sustainability just remind us. Um, I think you called out 100 basis points, this quarter, but how, how should we think about 25 sorties? It's sort of 28%, the right, uh, ballpark or, or how are you viewing that?
Yeah, I I mean look it was another really outstanding quarter operationally. We generated roughly a 100 basis points of margin. Uh, due to project Closeouts and from a year to date perspective. Um, you know, exiting the year at 29.4% and a year to date basis. Um, this this had about 125 uh, basis points of uh of project Closeouts. So uh, you know, when when we we think about uh the sustainability uh and considering the margins that we, we see in backlog, we do anticipate, uh continuation of solid project, execution through uh, through next year, and considering this margins, in the upper 20s, for the total year of fiscal 2026. Are are realistic.
Great. Appreciate the caller. I'll hop back on you. Thanks very much.
Question will come from John Bratz with Kansas City capital? Please go ahead.
And as you look at those projects is is there are you surprised they haven't reached some? Haven't reached FID yet or is there is there a little bit of a hang up for for some reason?
Um,
How to answer this question? It's, uh, very, you know, as I've said in other calls, it's extremely active, it has taken a little more time to your point, John to spin back up. I think given
Again, just sitting as Brett, looking at the macro picture with each model and how.
They're um going to Market where they're where their car goes are going to go who they're signing up in their production agreements.
I kind of get a feel for where, you know, why some of the delays are, but I'm not overly worried about it. I still feel really good about the fundamentals.
On many of the projects and um, it is a, you know, I didn't have much in my comments on the prepared side on on the space other than the general comment that we feel still very good about the the sector of gas.
And I just reiterate that, you know, with you on the call on the question here. It's
It's very strong activity and I feel good. The investment we're making it offshore is going to be very well timed.
For.
What's going on, you know, on this next wave.
Okay. Okay a couple questions on the on the end markets um be in the cni uh segment Beyond data centers. Um
What might be active, um, in that area? And then also on the, in the, in the traction area, uh, orders were up significantly. Um, what are you seeing there? That's, uh, driving, uh, driving the business in in traction. Yeah, so on cni. Yeah. Clearly the main driver of that is Data Centers and it's, as I noted earlier, uh, with John Fran's rib, it's it's a very active area and we are we are seeing some, some nice opportunities grow. Um, the the balance of that would be other other industries that we've always had, you know, presence. But never really, I'd say overly hunted mining, uh, has been 1 of note. Uh, we occasionally see a cycle on Pulp and Paper, uh, integrated facilities. They have a lot of power usage and moving a lot of fluids and
And up slurries. And so that uses a lot of medium voltage, and so that kind of rises and falls. You know, and then occasionally, we'll see.
Um, you know, some other commercial activities sneak in through a an e and C or a distributor because because some of that market to distribution that we're getting exposed to we're seeing occasion, we'll see some broader industries that we might not have seen as directly in our pulse sales Channel.
so, mostly mostly
Mostly data center, still.
It is largely driven by data centers, and it is.
It is growing for us, uh, for sure the uh, traction piece. Yeah. It's, it's a nice story look. I always said, uh, we and we talked about in the company. I, I love traction. I think we do it very well. Uh, you know, the DC side we've had, we've done it now for nearly 30 years. Uh, we're good at what we do. There's a lot of people playing this Market, but there's a lot of people that sort of put the fingers in this market and
Um on the Contracting side and and uh, muddy it up. And there's a reason there aren't that many people that play in the gear side because it by the time it gets to a company like Powell it's got all kind of crazy terms and things that just you know, make you wonder. Um, so there was a lull last couple of years. Um it does it takes a long time to get these projects to Market just because of the what I'll call the government side if you will um of the Contracting. But
There is a broader uh set of projects that are getting to market now around the East Coast. Um, you know, LaMotta up through New York over Chicago and even in Canada. Uh, there's a number of projects that are sort of just timing out at the same time and and uh and we see some other things continuing on into next year, quite frankly. So,
Okay. Okay, good. A question for you Mike. Um,
Uh, in terms of sgna as we look forward, obviously in the fourth quarter you had some 1-time items but as you continue to see the robust uh Revenue line and and the progress um that you're seeing there.
Do you think you can leverage s sgna costs or would you would you think that? Maybe we'll still see a little bit? Um, faster, growth than those expenses over over Revenue.
20 basis points above where we ended, uh, 2024, so relatively flat. And, and that also has the, uh, that also has the acquisition, uh, cost in it. So yeah, nothing, nothing crazy that we see going forward. Okay? Any acquisition costs, uh, in 2026, uh, from the the most recent acquisition, obviously know, the those all were incurred. Uh, in 2025. Okay. Thank you, Mike. Okay, thank you.
Next question is a follow-up from John Fran, rib of sidonian Company. Please go ahead.
yeah, I
I guess I'm I'm still thinking about the the Closeouts and I'm wondering how you would characterize 2025 compared to Prior years is is this kind of a normal level of activity, maybe in a percent of Revenue basis on how we should think about it? I just want to, you know, get a better handle on that.
Yeah. Hi Jim. This is Mike. Yeah. Closeouts I would say in 2025 we're uh, a little bit heavier than in in Prior periods. Uh, as you'll see in our our K that will be um, filed this afternoon, the Closeouts ran roughly a little better than 1 and a half percent of total. Total revenue 1.7 to be to be exact
uh, and as I, as I mentioned, uh, in my response to chip, I mean, we we do expect to continue this execution, the the outstanding execution into 2026,
Uh, so we should we should expect to see some project Closeouts and a favorable uh the favorable fashion in 2026.
Got it, got it. And regarding the uptick in R&D, um, you know, can you talk a little bit about maybe where the, where the spends going and when do you expect to see the commercialization of some of these projects?
Uh,
John spread, I'll take this 1 first and I can add color. Uh I think we're going to You'll continue to see spending at this level for the next couple of years. Um, I feel good about the progress, we're making uh, you know, when you bring we're bringing some wholesale.
Products to Market to fill some gaps in our 038 strategy on distribution. Um, so we had some nice wins. We had some learning experiences in 25, but that's normal in the course of uh of getting the engine back up and going and flying the plane at altitude. I think in 26, I expect to see
Some some uh, Market, some products, hit the market that we should see some tangible results.
Uh, to report back to the street. Uh, not done some um and I think there'll be some integrative effort that will continue on in the 27 to 28, just because that's the process. But I do think we'll see more.
More tangible results as we hit get through the fiscal year next year.
Yeah and and I would mention Jen just uh get an appreciation of the lead time as some of these projects, these electrical um distribution equipment projects. They they do have a long uh, you know, a long lead time, uh, well better than a year after they've been tested in the like, so. Yeah. The R&D has, uh, ticked up the last couple years and, uh, you should begin to see some of these projects, uh, exiting the pipeline, but they do take take quite a while.
Got it, got it. Um, and I guess in light of the capacity expansion, can you give us an updated capex budget for 2026?
Well, the uh, the 12.4 million uh for the jinto port, uh expansion that I expect that to hit. Uh and then in its entirety in fiscal 2026 on top of Maintenance and productivity projects that we normally, uh, we normally execute call it the 5 to 7 million dollar range and that's what I would expect in uh, 2026.
Got it. And I might have missed this in the prepared remarks, and I apologize. But how much of the backlog is deliverable in the coming 12 months?
About 60% is uh, convertible in 2026.
Got it, got it. And, and 1 last question, and again, this is just point of clarification, um, data center Revenue. I mean, maybe for all the fiscal 2025 as a percentage basis and how does that comp to like 2024
Just trying to contextualize it.
If you look at our backlog, our backlog for CNI is about 15%. Um, roughly half of that is today, uh, data centers. Um, that's probably, um, you know, 100 to 200 basis points, uh, higher than it was last year.
The, the priority here.
The next question is a follow-up from John Bratz of Kansas City capital? Please go ahead.
Mike, uh, just a question on on, uh, the incentive comp was that
A sort of a catch-up uh, number in the fourth quarter.
Yeah, it is. It is John what, uh, what we typically see is we we will acrew, uh, based on our expected results as we, uh, progress through the year and given the results of uh, our our results that um, that we had this year, we did have a catch-up in the fourth fiscal,
Okay. Can you tell us how much it was? Uh, how much of a catch-up?
Well, as I, as I mentioned to, uh, to Jen's France rib a little earlier, the, the, uh, variable compensation of the $5 million year-over-year increase, uh, variable compensation and compensation in general and which would include headcount ads in the like, was about 3 million dollars. And then,
the legal and valuation Services related to the m&a activity, uh, was just under 2
Okay, thank you.
Yep, you're welcome.
I'll leave you alone. This concludes our question and answer session. I would like to turn the conference back over to Brett Cope, CEO of Powell Industries, for any closing remarks.
Thank you, Nick. As you've heard from Mike and me this morning, we are very pleased with the financial results for our total fiscal 2025 financial performance, and we are very proud of the Powell team that delivered for our shareholders. The markets we serve continue to support our belief that fiscal 2026 will be another strong year for Powell.
I would like to welcome our new team members from Rems deck limited to Powell. I'm very excited to write the next chapter on electrical Automation and how Paul will help drive that future.
With that, thank you for your participate. Participation on today's call, we appreciate your continued interest in Paul and look forward to speaking with you next quarter.
Call Princess. Now concluded, thank you for attending today's presentation. You may now disconnect