Q1 2026 Power Solutions International Earnings Call

May 11, 2026

Operator: Good afternoon, welcome to Power Solutions International Q1 2026 Earnings Conference Call. Currently, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference call is being recorded. I would now like to hand the conference over to Matthew Thomas, VP Corporate Controller, PSI. You may begin.

Speaker #1: As a reminder, this conference call is being recorded. I would now like to hand the conference over to Kim Jank, VP Corporate Controller, PSI.

Speaker #1: You may begin. Good afternoon, and welcome to Power Solutions International's first quarter 2026 earnings conference call. Joining me on today's call are Dino Zeikis, Chief Executive Officer; Ken Lee, Chief Financial Officer; and Dorothy Du, General Counsel.

Matthew Thomas: Good afternoon, and welcome to Power Solutions International's First Quarter 2026 Earnings Conference Call. Joining me on today's call are Dino Xykis, Chief Executive Officer, Kenneth Li, Chief Financial Officer, and Dorothy Du, General Counsel. Statements made in today's discussion, as well as information provided from time to time by Power Solutions International, Inc., will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on current expectations and assumptions and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied. Among the factors that could cause actual results to differ materially are the timing and ultimate conversion of power systems orders, including data center-related orders, quarterly variability in our product mix and corresponding gross margin, and the cost, pace, and outcome of capacity ramp-up activities at our Wisconsin operations.

Speaker #1: Statements made in today's discussion, as well as information provided from time to time by POWER SOLUTIONS INTERNATIONAL, Inc., will include forward-looking statements within the meaning of the private securities litigation reform act of 1995.

Speaker #1: Forward-looking statements are based on current expectations and assumptions and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied.

Speaker #1: Among the factors that could cause actual results to differ materially are the timing and ultimate conversion of power systems orders including data center-related orders, quarterly variability in our product mix and corresponding gross margin, the cost, pace, and outcome of capacity ramp-up activities at our Wisconsin operations, demand in the oil and gas end market, supply chain, and component availability, macroeconomic regulatory and trade conditions, pending litigation and regulatory inquiries, and the other risks and uncertainties described in our most recent annual report on Form 10-K.

Matthew Thomas: Demand in the oil and gas end market, supply chain, and component availability. Macroeconomic, regulatory, and trade conditions. Pending litigation and regulatory inquiries. The other risks and uncertainties described in our most recent annual report on Form 10-K, our quarterly reports on Form 10-Q, and other filings with the SEC. All of which are incorporated by reference for purposes of today's call. The company undertakes no obligation to update any forward-looking statements except as required by law. We will also reference certain non-GAAP financial measures on today's call. Reconciliations to the most directly comparable GAAP measures are available in our earnings release and SEC filings. With that, I will turn the call over to Dino.

Speaker #1: Our quarterly reports on Form 10-Q and other filings with the SEC. All of which are incorporated by reference for purposes of today's call. The company undertakes no obligation to update any forward-looking statements except as required by law.

Speaker #1: We will also reference certain non-GAAP financial measures on today's call. Reconciliations to the most directly comparable GAAP measures are available in our earnings release and SEC filings.

Speaker #1: With that, I will turn the call over to Dino. Good afternoon, everyone, and thank you for joining us. We appreciate your time today and your continued interest in PSI.

Dino Xykis: Good afternoon, everyone, and thank you for joining us. We appreciate your time today and your continued interest in PSI. For many of you, this is the first earnings conference call you have heard from PSI since our December 2024 uplisting to the Nasdaq stock market. I will start with a brief overview of our company and will then turn the call over to Ken to walk through our financial performance and our outlook. Company overview. Power Solutions International, founded in 1985 and headquartered in Wood Dale, Illinois, designs and manufactures emission-certified engines and integrated power systems across natural gas, propane, diesel, gasoline, and biofuels. The company has produced more than 1.5 million engines over its history and operates manufacturing and engineering facilities across Illinois, Wisconsin, Texas, and Michigan.

Speaker #1: For many of you, this is the first earnings conference call you have heard from PSI since our December 2024 uplisting to the Nasdaq Stock Market.

Speaker #1: I will start with a brief overview of our company and will then turn the call over to Ken to walk through a financial performance and our outlook.

Speaker #1: Company overview. POWER SOLUTIONS INTERNATIONAL, founded in 1985 and headquartered in Wooddale, Illinois, designs and manufactures emission-certified engines and integrated power systems across natural gas, propane, diesel, gasoline, and biofuels.

Speaker #1: The company has produced more than 1.5 million engines over its history and operates manufacturing and engineering facilities across Illinois, Wisconsin, Texas, and Michigan. PSI serves OEM customers across power systems, industrial and transportation, and markets, including data centers, standby power, oil and gas, material handling, and specialized vehicles.

Dino Xykis: PSI serves OEM customers across power systems, industrial and transportation end markets, including data centers, standby power, oil and gas, material handling, and specialized vehicles. Over the past several years, PSI has improved profitability, reduced its debt, strengthened its balance sheet, refinanced its credit facility, and uplisted to Nasdaq in December 2024. In 2025, the company was added to the Russell 3000, Russell 2000, Russell Microcap, and MSCI USA Small Cap indices. The Q1. Turning to the quarter, as Ken will describe in more detail, our Q1 results were below the strong prior year period, which had benefit from significant growth in our power systems business. The year-over-year declines in sales and profitability primarily reflected softer oil and gas demand, the timing of certain power system shipments, and elevated production costs associated with a capacity ramp-up in our Wisconsin operation.

Speaker #1: Over the past several years, PSI has improved profitability, reduced its debt, strengthened its balance sheet, refinanced its credit facility, and uplisted to Nasdaq in December 2024.

Speaker #1: In 2025, the company was added to the Russell 3000, Russell 2000, Russell Micro Cap, and MSCI USA Small Cap indices. The first quarter. Turning to the quarter, as Ken will describe in more detail, our first quarter results were below the strong prior-year period, which had benefited from significant growth in our power systems business.

Speaker #1: The year-over-year declines in sales and profitability primarily reflected softer oil and gas demand, the timing of certain power system shipments, and elevated production costs associated with the capacity ramp-up in our Wisconsin operation.

Speaker #1: At the same time, demand related to data center applications remained solid. Gross margin improved sequentially from the fourth quarter of 2025, owing in part to the company's efforts to improve operational efficiency in Wisconsin, but partially offset by unfavorable product mix.

Dino Xykis: At the same time, demand related to data center application remained solid, and gross margin improved sequentially from Q4 2025, owing it in part to the company's efforts to improve operational efficiency in Wisconsin, but partially offset by unfavorable product mix. With that, I will turn the call over to Ken.

Speaker #1: With that, I will turn the call over to Ken. Thank you, Dino. And good afternoon, everyone. I will walk through our financial performance for the first quarter, then provide some operational context, and update on liquidity, and our outlook framework for the balance of the year.

Kenneth Li: Thank you, Dino. Good afternoon, everyone. I will walk us through our financial performance for Q1, then provide some operational context and updates on liquidity and our outlook framework for the balance of the year. Net sales for Q1 were $128.6 million, representing a decline of approximately 5% year-over-year. This decrease was primarily driven by lower sales in our power systems end market, reflecting uneven customer ordering patterns and the continued softness in the oil and gas market. These declines were partially offset by growth in our industrial and the transportation end markets. Gross profit for Q1 was $29.4 million, compared to $40.3 million in the prior year, and the gross margin was 22.9%, compared to 29.7% in the prior year period.

Speaker #1: Net sales for the first quarter were $128.6 million, representing a decline of approximately 5% year over year. This decrease was primarily driven by lower sales in our power systems end market.

Speaker #1: Reflecting uneven customer ordering patterns and the continued softness in the oil and gas market. This decline was partially offset by growth in our industrial and transportation end markets.

Speaker #1: Gross profit for the quarter was $29.4 million, compared to $40.3 million in the prior year. And the gross margin was 22.9%, compared to 29.7% in the prior year period.

Speaker #1: The year-over-year decline in gross margin reflects a less favorable product mix in the period. Including lower contributions from oil and gas products. Together with elevated production costs, associated with capacity ramp-up activities, supporting data center-related applications.

Kenneth Li: The year-over-year decline in gross margin reflects a less favorable product mix in the period, including lower contributions from oil and gas products, together with elevated production costs associated with capacity ramp-up activities supporting data center-related applications. On a sequential basis, gross margin was approximately 100 basis points higher than Q4 2025, which we believe shows early progress in reducing operational inefficiencies. The gain was partially offset by an unfavorable product mix in Q1. We caution that the capacity ramp-up activities at our Wisconsin operations are continuing, and we expect elevated product costs raised to that ramp-up to persist with the trajectory of any further sequential improvements subject to product mix, slot parts, and other operational factors.

Speaker #1: On a sequential basis, gross margin was approximately 100 basis points higher than the fourth quarter of 2025, which we believe shows early progress in reducing operational inefficiencies.

Speaker #1: So the gain was partially offset by an unfavorable product mix. In the first quarter. We caution that the capacity ramp-up activities at our Wisconsin operations are continuing, and we expect elevated product costs, related to that ramp-up to persist.

Speaker #1: Further sequential improvements, subject to product mix, slow pot, and other operational factors. Operating expense was $18 million, up approximately 15% year over year, reflecting continued investments in research and development to support new product initiatives, as well as increased selling and administrative expense to support goals.

Kenneth Li: Operating expense was $80 million, up approximately 15% year-over-year, reflecting continued investments in research and development to support new product initiatives as well as increased selling and administrative expense to support growth. Operating income for the quarter was $11.4 million, compared to $20.6 million in the prior year period. Net income was $7.3 million, or $0.32 per diluted share, compared to $19.1 million, or $0.83 per diluted share in the five year. Adjusted EBITDA was $13.9 million, reflecting the same underlying operational dynamics impacting profitability. Turning to cash flow, we generated $18.7 million of operating cash flow in the quarter, more than doubling compared to the 5-year period, and driven primarily by favorable working capital dynamics.

Speaker #1: Operating income for the quarter was $11.4 million, compared to $20.6 million in the prior year period. Net income was $7.3 million, our 32 cents per diluted share, compared to $19.1 million, our 83 cents per diluted share in the prior year.

Speaker #1: Adjusted EBITDA was $13.9 million, reflecting the same underlying operational dynamics impacting profitability. Turning to cash flow, we generated $18.7 million of operating cash flow in the quarter.

Speaker #1: More than doubling compared to the prior year period, and driven primarily by favorable working capital dynamics. From a balance sheet perspective, we ended the quarter with $45.1 million of cash and cash equivalents, and approximately $103.4 million of total debt.

Kenneth Li: From a balance sheet perspective, we ended the quarter with $45.1 million of cash and cash equivalents and approximately $103.4 million of total debts. Our balance sheets remain solid, and we continue to generate positive cash flow. From a liquidity standpoint, we are well-positioned. Our cash generation, combined with access to our $135 million revolving credit facility, provides flexibility to support our operations and ongoing investments. We believe our current liquidity position is sufficient to meet our anticipated cash needs for at least the next 12 months. Turning to our priorities for 2026. Our team is focused on operational execution, ongoing margin recovery, reliable delivery against the customer commitments, and consistent communication with our investors. Given ongoing variability in order timing and market conditions, the company is not providing formal full year guidance at this time.

Speaker #1: Our balance sheet remains solid, and we continue to generate positive cash flow. For our liquidity standpoint, we are well positioned. Our cash generation, combined with access to our 135 million revolving credit facility, provides flexibility to support our operations and ongoing investments.

Speaker #1: We believe our current liquidity position is sufficient to meet our anticipated cash needs for at least the next two governments. Turning to our priorities for 2026, our team is focused on operational execution, ongoing margin recovery, reliable delivery against the customer commitments, and consistent communication with our investors.

Speaker #1: Given ongoing viability in order timing and market conditions, the company is not providing formal four-year guidance at this time. Based on current visibility, the company currently expects second quarter 2026 revenue to be generally consistent with the first quarter on sequential basis.

Kenneth Li: Based on current visibility, the company currently expects Q2 2026 revenue to be generally consistent with the Q1 on sequential basis. The company anticipates strong sales growth in H2 2026, approximately in line with sales in H2 2025 as larger power system orders move into production and are recognized as revenue. However, the timing and ultimate volume of those shipments remains subject to customer scheduling, manufacturing slot parts, supply chain factors, and other variables. There can be no assurance that those orders will translate to a uniformly strong H2. Continued softness in oil and gas end market is expected to weigh on quarterly revenue trends and the capacity ramp-up activities at the company's Wisconsin operations and their related cost effects on gross margin are expected to continue.

Speaker #1: The company anticipates strong sales growth in the second half of 2026. Approximately in line with sales in the second half of 2025, as larger power system orders move into production, and are recognized as revenue.

Speaker #1: However, the timing and ultimate volume of those shipments remain subject to customer scheduling, manufacturing slow pots, supply chain factors, and other variables. There can be no assurance that those orders will translate to a uniformly strong second half.

Speaker #1: Continued softness in the oil and gas end market expects to weigh on quarterly revenue trends. And the capacity ramp-up activities, as the company's Wisconsin operations, and their related cost effects on gross margin are expected to continue.

Speaker #1: We continue to see ongoing demand for power infrastructure, particularly in data center and distributed power applications, and to invest in our manufacturing footprints and product platforms in support of that demand.

Kenneth Li: We continue to see ongoing demand for power infrastructure, particularly in data center and distributed power applications, and to invest in our manufacturing footprints and products platforms in support of that demand. Converting that demand into revenue depends on the operational and market factors I have described, and we will continue to update investors as the year progresses. With that, operator, please open the line for questions.

Speaker #1: Converting that demand into revenue depends on the operational and market factors, I have described, and we will continue to update investors, as the year progresses.

Speaker #1: With that operate, please open the line for questions. Thank you. To ask a question, please press star 11 on your telephone and wait for your name to be announced.

Operator: Thank you. To ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Eric Stine with Craig-Hallum Capital Group. Your line is now open.

Speaker #1: To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Eric Stein with Craig Hallam Capital Group.

Speaker #1: Your line is now open.

Speaker #2: How do you know I can?

Eric Stine: Hi, Dino. Hi, Ken.

Speaker #3: Hi, Eric.

Kenneth Li: Hi, Alec.

Speaker #2: Hello. I'm wondering, so on Q1, if you're able to, could you just give a little detail on specifically power systems and maybe not exact, but talk about kind of the contribution from oil and gas? Clearly, that is something that you've talked about since late last year.

Eric Stine: Hello. You know, I'm wondering, on Q1, if you're able to, could you just give a little detail on specifically power systems and, you know, maybe not exact, but, you know, talk about kind of the contribution from oil and gas. You know, clearly that is something that you've talked about since late last year. Have seen it, not really a surprise, but curious, how do we view that? View that you are ramping up the enclosure business. Curious what that enclosure business, you know, are you expecting more of a ramp-up in Q2? You know, what kind of goes into your Q2 view as well?

Speaker #2: Have seen it not really a surprise, but curious how do we view that? And then also view that you are ramping up the enclosure business.

Speaker #2: And then curious what that enclosure business, are you expecting more of a ramp-up in Q2? What kind of goes into your Q2 view as well?

Kenneth Li: Mm-hmm. Alec, you know, for the power system, the Q1 sales is about $96 million versus last year, like $107 million. As we mentioned, we start to notice the softness in the oil and gas data last year, right? This softness extended to Q1 this year. Most of the sales decrease, you know, this quarter versus last year driven by the power system, the oil and gas, the softness, and also the uneven customer demand for other data center-related products. Right now, in the near term, we still assume the oil and gas will remain soft throughout the year. If there's some pickup, definitely it will be favorable for the sales and also margin perspective. Right. Now, for the Wisconsin operation, the company, you know, adding resource to support the Wisconsin operation.

Speaker #3: So Eric, for the power system, the 1Q sales is about 96 million, and versus last year, like 107 million. And as we mentioned, we start to notice the softness in the oil and gas later last year, right?

Speaker #3: And this softness extended to 1Q this year. So most of the sales decrease this quarter versus last year 1Q is driven by the poor system, the oil and gas, the softness, and also the uneven customer demand for other data center-related products.

Speaker #3: So we right now in the near term, we still assume the oil and gas will remain soft throughout the year. And if there's some pickup, definitely it will be favorable for the sales and also margin perspective.

Speaker #3: Now for the Wisconsin operation, the company is adding resources to support the Wisconsin operation, and we are doing lots of process study. We see some notable improvements in the cost structure and labor overhead in the manufacturing cost if we compare this quarter versus Q4 last year.

Kenneth Li: We, you know, we are doing lots of process improvements, time study. You know, we see some notable improvements in the cost structure, labor overhead in the manufacturing cost if we compare this quarter versus, you know, Q4 last year. The improvements is also reflects the, you know, our margin, gross margin improvements, you know, 100 basis points this quarter versus last quarter, right? Now, for the orders regarding to the data center products, as we, you know, indicate in the press release, we anticipate strong activity in H2, this based on some order we already received. Now we expect H2 sales will be the same level as we had last year for H2.

Speaker #3: And the improvements is also reflected in our margin gross margin improvements 100 basis points. This quarter versus last quarter. Now for the orders, regarding to the data center products, as we indicate in the price release, we anticipate strong activity in the second half.

Speaker #3: And this is based on some order we already received. So now we expect the second half, the sales will be the same level as we had last year for the second half.

Speaker #3: But again, the actual shipment timing and the volume are subject to the customer schedule, our slow spots, and also the supply chain, right?

Kenneth Li: Again, the actual, you know, shipments timing and the volume is subject to the customer schedule, our slot parts.

Eric Stine: Right

Kenneth Li: Also the supply chain. Right.

Speaker #2: Yep. No, of course. So then if I think about the second quarter, I mean, are you because obviously you're coming out of this period where you're now starting to ramp up the enclosure business after doing you've got a number of ongoing improvements, so I get that.

Eric Stine: Yep. No, of course.

Kenneth Li: Yeah.

Eric Stine: If I think about Q2, I mean, you're coming out of, you know, this period where you're now starting to ramp up the enclosure business after doing, you know, you've got a number of ongoing improvements, so I get that. If you're looking for a flat sequential quarter, looking for enclosure growth, I mean, that would imply that you are expecting further weakening of oil and gas in Q2. Curious if that is your intention or, 'cause I mean, it sounds like you haven't really seen an improvement there and don't expect to, even if oil, you know, is certainly, you know, has appreciated given what's going on.

Speaker #2: But if you're looking for a flat sequential quarter, looking for enclosure growth, I mean, that would imply that you are expecting further weakening of oil and gas in Q2.

Speaker #2: Curious if that is your intention or because, I mean, it sounds like you haven't really seen an improvement there and don't expect to even if oil is certainly has appreciated given what's going on in the Middle East.

Eric Stine: in the Middle East. It sounds like you don't necessarily think that that has a positive impact anytime soon.

Speaker #2: But it sounds like you don't necessarily think that that has a positive impact anytime soon.

Speaker #3: No, right. Eric, even though the oil price is very high and we are now seeing a significant ordering for oil and gas products, so for the second quarter, we expect it will be the same level as Q1.

Kenneth Li: You're right, Alex. You know, even though the oil price is very high, and we are now seeing a significant ordering for oil and gas products, for Q2, you know, we expect it will be the same level as Q1.

Eric Stine: Yeah. Okay.

Speaker #2: Okay. I may have missed it, but just on gross margins, can you talk about I don't know if you said it, but I think you might have said that you expect that you're starting to see a little bit of improvement given all the steps that you took in Q4 and early in Q1.

Kenneth Li: Yeah.

Eric Stine: I may have missed it, but just on gross margins, can you talk about, I don't know if you said it, but I think you might have said that you expect that you're starting to see a little bit of improvement given all the steps that you took in Q4 and early in Q1, and that expect continued improvement throughout the year, and I'm not sure if you gave any indications of the magnitude?

Speaker #2: And that expect continued improvement throughout the year. And I'm not sure if you gave any indications of the magnitude.

Kenneth Li: The Q1 gross margin, 22.9%, and the full Q was 21.9%, so it is about 100 basis point improvements, right? We, as I said, you know, we did see some notable improvements for our Wisconsin operation. Going forward, you know, we expect the gross margin will be flat or slight better than Q1. Again, you know, this also, you know, subject to the product mix and also, you know, our cost structure improvements. The Q1, the gross margin, you know, was kind of, you know, negatively impacted by product mix. Usually our oil and gas products carry a high gross margin, so this impacted by the oil and gas also for the Q1.

Speaker #3: So the Q1 gross margin was 22.9%, and the Q4 was 21.9%. So it's about a 100 basis point improvement, right? But we, as I said, did see some notable improvements for our Wisconsin operation.

Speaker #3: And going forward, we expect the gross margin will be flat or slight better than 1Q. Again, this also subject to the product mix. And also our cost structure improvement.

Speaker #3: And the 1Q, the gross margin was kind of negatively impacted by product mix. Usually, our oil and gas products carry a high gross margin.

Speaker #3: So this impacted by the oil and gas also, for the 1Q.

Speaker #2: Yeah. Okay. Last one for me, just curious. I mean, I know you're about a quarter in or a little bit over, but just would love some thoughts on the MTL acquisition.

Eric Stine: Oh, okay. Last one for me, just curious, I mean, I know you're about a quarter in or a little bit over, but, just would love some thoughts on the MTL acquisition.

Eric Stine: You know, some of the benefits you're seeing, why you did it. I mean, it's pretty straightforward, but would just love you to kinda give your thoughts on that acquisition in its early days.

Speaker #2: Some of the benefits you're seeing, why you did it. I mean, it's pretty straightforward, but would just love you to kind of give your thoughts on that acquisition in its early days.

Speaker #3: Sure. So we competed the MTL acquisition on January 9th. This year, and the MTL specialized in fabrication, welding, painting, and assembly of metal components.

Kenneth Li: Sure. We completed the MTL acquisition on January 9, you know, this year.

Eric Stine: Yeah.

Kenneth Li: MTL specializes in fabrication, welding, painting, and assembly of metal components, and it also makes the data center parts. MTL has been PSI supplier for a long time, more than 10 years. They have been, you know, supplying us the fuel tank, right? This acquisition definitely helps us to vertically integrate our supply chain, helps us to reduce the lead time, and also PSI can have access to its UL certification. Since the acquisition, the integration is underway and we are exploring different opportunities to leverage the MTL asset base to help us to do other fabrication for the data center, right, the components. The revenue contribution from MTL is expected to be pretty modest in 2026.

Speaker #3: And it also makes the data center parts. And MTL has been a PSI supplier for a long time—more than 10 years. They have been supplying us the fuel tank, right?

Speaker #3: And this acquisition definitely help us to vertically integrate our supply chain help us to reduce the lead time and also PSI can have access to its UI UL certification.

Speaker #3: So the things acquisition, the integration is underway. And we are exploring different opportunities to leverage the MTL asset base to help us to do other fabrication for the data center rates, the components.

Speaker #3: So the revenue contribution from MTL is expected to be pretty modest in 2026. And in the near term, the team focus will be on operational execution, slow pot collaboration, and production consistency.

Kenneth Li: In the near term, the team focus will be on the operational execution, slot parts correlation, and production, you know, consistency.

Speaker #2: Okay. Thank you very much.

Eric Stine: Okay. Thank you very much.

Kenneth Li: Yeah. Thank you, Alex.

Speaker #3: Thank you. Eric.

Speaker #1: Our next question comes from the line of Alan Lau with Jefferies. Your line is now open.

Operator: Our next question comes from the line of Alan Lau with Jefferies. Your line is now open.

Alan Lau: Thanks for taking my question. Would like to understand more on the growth outlook, especially from the enclosure business, as the company ramps up the production. Would like to know if you might share what's the capacity in dollar terms for enclosure business and are getting orders from major clients? Thanks.

Speaker #4: Thanks for taking my question. So we'd like to understand more on the growth outlook, especially from the enclosure business as the company ramps up the production.

Speaker #4: So we'd like to know if you might share what's the capacity in dollar terms for the enclosure business. And are you getting orders from major clients?

Speaker #4: Thanks.

Speaker #3: Thank you, Alan. So Alan, we serve our customer mainly in three kind of industry and markets. Basically, industrial, power system, and also transportation. And for the power system, we provide a product micrograde standby power plant power and also data center-related products like enclosure.

Kenneth Li: Thank you, Alan. Alan, you know, we sell our customer, you know, mainly in 3 kind of industry end markets. You know, basically industrial power system, and also transportation. For the power system, we provide the products, you know, microgrid, standby power, prime power, and also data center related products like enclosure. In our financial statements, you know, we do not break down the sales related to the enclosure business. It's within our power system, you know, in the power system, you know, the end user market. We will say is, you know, we received some orders from our customer, and we anticipate strong activity in H2 of the year. We expect the H2 sales will be at the level we had, you know, H2 last year, right?

Speaker #3: So in our financial statements, we do not break down the sales rates to the enclosure business. So it's within our power system. In the power system, the end user markets.

Speaker #3: So we will say we receive some orders from our customer, and we anticipate strong activity in the second half of the year. And we expect the second half sales will be at the level we had second half last year, right?

Speaker #3: And we still have some pretty solid demand from our customer, our products. And certainly, as I said, the actual shipment timing and the volume still subject to the customer schedule and our capability our power successful, we can convert the orders to sales.

Kenneth Li: You know, we still have some pretty solid demand from our customer, our products. You know, certainly, you know, as I said, you know, the actual shipments timing and the volume still subject to the customer schedule and our capability, you know, our, how successful we can convert the orders to sales.

Speaker #4: Okay. Understood. So we'd like to.

Alan Lau: Okay. Understood. we'd like to fo-.

Kenneth Li: Mm-hmm. Go ahead.

Speaker #3: Go ahead.

Speaker #4: So, we'd like to follow up on oil and gas, because you mentioned that you expect second half revenue would be similar to last year.

Alan Lau: We'd like to follow up on oil and gas because you mentioned that you expect H2 of the revenue will be similar to last year. Would like to know if it's in terms of absolute terms, which means because H2 last year, I think the revenue in total is roughly $4 billion. Do you mean you expect H2 the revenue is approximately at $4 billion level?

Speaker #4: So we'd like to know if it's in terms of absolute terms, which means bigger second half last year, I think the revenue in total is roughly 4 billion.

Speaker #4: So are you do you mean you expect second half the revenue is approximately at 4 billion level?

Speaker #3: So, the second half, right now, our kind of general outlook is the second half sales will be similar to last year, second half, right? Because we anticipate this strong demand for our products and activity in the second half.

Kenneth Li: Right now our kind of, you know, general outlook in H2 sales will be similar, you know, last year H2. We anticipate a strong demand of our products, you know, and activity in H2. That's our, you know, outlook based on the orders, you know, we have right now from our customer and also our forecast. The oil and gas-

Speaker #3: Right? So that's our outlook. Based on the orders we have right now from our customer and also our forecast.

Speaker #4: The oil and gas.

Alan Lau: Understood. One thing.

Speaker #2: Okay. So thank you.

Alan Lau: thank you. What's the mix of oil and gas in H2 last year?

Speaker #4: So what's the mix of oil and gas in second half last year?

Kenneth Li: We do not provide, you know, the mix information, you know, particular, you know, products in the end market group. Yeah.

Speaker #3: We do not Alan, we do not provide the mix information particular products in the end market group. Yeah.

Kenneth Li: We do not provide, you know, the mix information, you know, particular, you know, products in the end market group. Yeah.

Speaker #5: So, we have never provided that split. It's under Power System.

Dino Xykis: We have never provided that mix. It's company policy.

Alan Lau: Then would like to know if, like any major clients that I understand maybe a bit sensitive, but like any major orders you get from hyperscalers or key contractors for hyperscalers?

Speaker #4: So then, we'd like to know if any major clients that, I understand, may be representative, but any major orders you get from hyperscalers or key contractors for hyperscalers?

Alan Lau: Then would like to know if, like any major clients that I understand maybe a bit sensitive, but like any major orders you get from hyperscalers or key contractors for hyperscalers?

Speaker #5: We do not name individual customers. We never have.

Dino Xykis: We do not name individual customers. We never have.

Speaker #3: Yeah, we do not provide information on any specific customers. Yeah.

Kenneth Li: Yeah. We do not provide.

Alan Lau: Oh. Understood.

Kenneth Li: information on any specific customers. Yeah.

Alan Lau: Understood. I wonder then, would you share the updates on gas engine? Because, I think this, gas engines for prime power is an upcoming trend. Wonder if you might share a update on that front.

Speaker #4: Got it. So then would you share the updates on gas engine? Because I think this gas engine is for prime power is not coming trend.

Speaker #4: So I wonder if you might share updates on that front?

Speaker #3: Yeah. So at PSI, we provide a variable output portfolio of engines, right? Starting from 1 liter all the way to 88 liters. And the 110 liters.

Kenneth Li: You know, the PSI, we've provided, you know, a variable other portfolio of engines, right? Starting from 1 liter all the way to 8 liter and 110 liters. We're using multiple fuel source such as, you know, gas, propane, propylene, gasoline, diesel, and biofuel. We spend R&D, you know, to develop the products, right? For the Q1, we spend about, you know, $4.8 million. We continue to spend, you know, R&D to develop new products and emission certification and also develop a special, you know, special application for our customers, right? What I say is, you know, there's definitely activities going on, you know, on the gas side. We are working to develop the products to meet the industry demand.

Speaker #3: And we are using multiple fuel cells such as gas, propane, propylene, gasoline, diesel, and biofuel. So we spend R&D to develop the products, right? For the one kilo, we spend about $4.8 million.

Speaker #3: And we continue to spend R&D to develop a new product and emission certification, and also develop special applications for our customers. Right? So what I say is there are definitely activities going on on the gas side.

Speaker #3: And we are working to develop the products to meet the industry demand. That's what I'm doing. And I will say the current we have lots of current engineering activity.

Kenneth Li: That's, you know, what we are doing. I will say we have lots of current engineering activity, you know, includes ongoing work related to the emission compliance, thermal management, packaging optimization, and all kind of, you know, customer specific application requirements. We're also, you know, doing R&D to develop a larger diesel engine for the data center market. Yeah.

Speaker #3: Includes ongoing work related to the emission compliance. Thermal management, packaging optimization, and all kind of customer-specific application requirements. And we also doing R&D to develop a larger diesel engine for the data center market.

Speaker #3: Yeah.

Alan Lau: By bigger, diesel engines, I wonder if it's above 3 MW.

Speaker #4: So by bigger diesel engines, I wonder if it's above three megawatts?

Alan Lau: By bigger, diesel engines, I wonder if it's above 3 MW.

Speaker #3: I'm sorry. Could you repeat that question again?

Dino Xykis: I'm sorry, could you repeat that question again?

Alan Lau: I wonder if the bigger diesel engines are above the typical 2 to 3 megawatts.

Speaker #4: I wonder if the bigger diesel engines are above the typical two to three megawatts?

Alan Lau: I wonder if the bigger diesel engines are above the typical 2 to 3 megawatts.

Speaker #3: So I think right now we have our eight-eight liters. It's about three megawatt, three megawatts.

Kenneth Li: I think right now we have our 8 liter. It's above 3MW. Yeah.

Alan Lau: Okay. Understood. Thank you. I'll pass on. Thank you.

Speaker #4: Understood. So, thank you—I'll pass on. Thank you.

Speaker #3: Yeah. Thank you.

Kenneth Li: Yeah. Thank you.

Operator 2: Thank you. This concludes the Q&A session. Thank you all for your participation. This does conclude today's call. You may now disconnect.

Operator: Thank you. This concludes the Q&A session. Thank you all for your participation. This does conclude today's call. You may now disconnect.