Powell Industries, Inc. (NASDAQ:POWL) Q2 2026 Earnings Call Transcript

Powell Industries, Inc. (NASDAQ:POWL) Q2 2026 Earnings Call Transcript May 5, 2026

Operator: Welcome to the Powell Industries, Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. After today’s presentation, there will be an opportunity to ask questions. To ask a question, please press star and then one on your touch-tone phone. To withdraw your question, please press star and then two. Please note this event is being recorded. I would like to turn the conference over to Ryan Coleman, Investor Relations. Thank you, and over to you.

Ryan Coleman: Thank you, and good morning, everyone. Thank you for joining us for Powell Industries, Inc.’s conference call today to review fiscal year 2026 second quarter results. With me on the call are Brett A. Cope, Powell Industries, Inc.’s Chairman and CEO, and Michael W. Metcalf, Powell Industries, Inc.’s CFO. There will be a replay of today’s call available via webcast by going to the company’s website, powellind.com. A telephonic replay will be available until May 12. The information on how to access the replay was provided in yesterday’s earnings release. Please note that the information reported on this call speaks only as of today, May 5, 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 will turn the call over to Brett.

Brett A. Cope: Thank you, and good morning, everyone. Thank you for joining us today to review Powell Industries, Inc.’s fiscal 2026 second 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. The Powell Industries, Inc. team delivered another solid quarter of operational efficiency and order growth, as the momentum we experienced at the start of our fiscal year continued through the second quarter. Activity levels across each of our core end markets remained healthy, with notable strength in the quarter from liquefied natural gas projects, a mix of electric utility distribution and generation projects, and also data center projects within our commercial and other industrial market sector.

Revenue in the quarter grew a steady 6% compared to the prior year, and continued solid project execution across the company delivered a gross margin of 29.6%. We recorded $490 million of new orders in the quarter, bringing our midyear total to nearly $1 billion in new awards. I would also note that our order book in the quarter continued to be very well balanced across the markets in which we compete. During the quarter, we were awarded two mega projects, one for a data center and a second for an electric utility generation project. Each of these projects is in excess of $75 million in value. The balance of the order book in the quarter was comprised of a higher number of small- and medium-sized projects. Our backlog now sits at $1.8 billion, 12% higher than the prior quarter and 33% higher than one year ago.

The growth in our backlog now provides visibility well into our fiscal 2028. The composition remains healthy with a mix of projects of varying sizes that will help maximize productivity across our manufacturing plants. As of quarter end, the electric utility market represented 30% of our total backlog, while the oil and gas market, excluding petrochemical, and the commercial and other industrial markets each accounted for 29%. The diversification of the business in the electric utility market and more recent expansion of our commercial and other industrial market, anchored by a demand driver from data centers, are contributing to reduced cyclicality in the business, allowing us to plan beyond the current cycle and invest more broadly alongside our customers with greater visibility.

At the same time, our outlook for our core oil and gas market remains strong. We are in the initial phase of a multiyear buildout of LNG export capacity. We believe the structural cost and competitive advantages possessed by U.S.-based exporters has been elevated by the risk of multiyear-long capacity impairments across the international markets and the need for importers to diversify and replace those volumes. We are cautiously optimistic that the petrochemical market is in the early stages of a cyclical inflection after several years of lower activity levels. We are seeing some activity in the gas-to-chemicals market and are further encouraged by recent upward price revisions within the global polyethylene market. I would like to take a moment to mention a commercial development that took place subsequent to quarter end.

I am very pleased to share that Powell Industries, Inc. was awarded a mega project for the first phase of a new greenfield data center. The scope of this award is in support of a behind-the-meter design for the first phase of a planned multiphase campus. This project award is in excess of $400 million. This project now marks the largest project award in Powell Industries, Inc.’s history. This award is a testament to our employees, our culture, and the entire Powell Industries, Inc. team across the company as we assembled a multidivision, multicountry execution plan to meet the demanding timeline on this project. To that end, recent order trends, our market outlook, and our continued organic product development continue to support prudent additions in manufacturing capacity.

Last quarter, we signed a lease for incremental space located near our Ohio facility. This past quarter, we leased office space in the Houston metro area, which will serve as a second satellite engineering center. This center complements our initial satellite engineering office that we announced and opened last year. This second center is geographically located to further enhance our ability to add critical members to our world-class electrical and mechanical engineering and design teams. In response to the growth of our backlog, we are evaluating a smaller leased facility of approximately 50 thousand square feet near our Moseley campus. This space would help support a new $8 million investment in fabrication equipment for short-term rapid expansion of our metal fabrication capacity.

We have previously shared our efforts to evaluate a larger investment in a facility that would require $70 million to $100 million of capital and provide upwards of an additional 250 thousand to 300 thousand square feet of factory capacity. While we continue this assessment, we are currently evaluating complementary options for bridging between short-term requirements via a leased facility versus a somewhat longer term of a greenfield facility buildout. We are being very thoughtful throughout this process and expect a decision within the next few quarters. Meanwhile, the expansion of our Jacinto Port facility is progressing on schedule. This incremental 335 thousand square feet will be critical to ensuring our ability to support all of our end markets, but specifically by providing our oil and gas customers with a premier domestic facility to produce engineered-to-order power distribution solutions for both on- and near-shore projects as well as continued support for offshore applications.

Operationally, our teams across our facilities are rising to meet the challenge of accelerating growth. We remain disciplined on the commitments we have made to our customers while staying focused on continuous improvement and driving incremental efficiencies throughout every step of our operations. As noted earlier in my comments around the recent large data center award, Powell Industries, Inc. has a market-leading strength that is inherent in our people and internal collaboration. When our teams across our North American facilities come together, we are able to leverage our substantial footprint to tackle large challenges either for a single project or a broad step-up in market demand as we are currently experiencing. Critically important to our growth and future needs, I would also like to call out the increased efforts of our strategic sourcing and supply chain teams.

It is essential that our team engages our partners to both broaden and deepen those relationships and optimize our supply chain in support of our future growth. On the M&A front, we continue to evaluate a growing pipeline of inorganic opportunities that complement our organic initiatives and better position us within key markets. Candidates include complementary products and/or capabilities to our current portfolio or are oriented toward building out our services franchise. Along these lines, our recent acquisition of REMSDAQ continues to progress well and has quickly proven synergistic and accretive across the company. Lastly, pursuant to our ongoing efforts to build a stronger, more diversified business, we have recently begun investing in resources to build a wider funnel of government-related work, including U.S. military and defense applications.

These are markets with secular, long-term growth drivers that typically carry recurring revenue profiles, which would be conducive to growing our services franchise. We are in the early days of this effort but believe our U.S.-centric supply chain, operations, and workforce leave us well positioned to play a critical role within the markets that support our national security and defense. On a related note, I would like to briefly commend the White House’s recent presidential determination under Section 303 of the Defense Production Act, which formally designated both substations and switchgear, among other electrical products and their upstream supply chains, as essential to national defense. Ensuring the domestic production of critical electrical gear is essential to America’s ability to deploy large-scale grid infrastructure, and the presidential memorandum authorizes the Department of Energy to expedite procedural requirements and immediately deploy federal capital to expand domestic grid manufacturing capacity.

In summary, we remain very pleased with our financial performance for the first half of the year and are encouraged by the commercial dynamics that we continue to see across the markets we serve. With that, I would like to turn the call over to Mike to walk us through our financial results in greater detail.

Michael W. Metcalf: Thank you, Brett, and good morning, everyone. In the 2026 second quarter, we reported total revenue of $297 million compared to $279 million, or 6% higher versus the same period in fiscal 2025. New orders booked in the 2026 second quarter were $490 million, which was nearly double the orders booked in the same period one year ago, and included two mega orders, each with an order value exceeding $75 million. The first mega order reflects the largest utility order that the business has ever recorded and is for a large generation facility in the Eastern United States. The second mega order in the quarter for medium-voltage electrical distribution equipment is destined for a data center in the Central United States.

As a result of the strong commercial activity across our key end markets, book-to-bill ratio for both the second quarter as well as the 2026 first half is 1.7 times. The continued momentum across all end markets, particularly domestically, and the resulting orders volume in the second fiscal quarter elevated our backlog to $1.8 billion, a 33% increase, or $438 million higher versus the same period one year ago and $189 million higher sequentially. The composition of our backlog continues to diversify, with our core industrial end markets across petrochemical and oil and gas representing 33% of the total backlog, while the electric utility and commercial and other industrial markets represent 30% and 29% of the $1.8 billion of backlog, respectively.

As Brett mentioned, in early April, after the close of our second fiscal quarter, the business secured a mega order in the data center end market with a value in excess of $400 million. This order value is not reflected in either the orders or backlog numbers for the 2026 second quarter, and will be included in our fiscal third quarter reported numbers. Turning to revenue, compared to the 2025 second quarter, domestic revenues were higher by $4 million, or 2%, while international revenues were up by $14 million to $64 million, primarily driven by the offshore projects that are being executed in the Far East and Africa as well as an uptick in project volume across our U.K. operation. From a market sector perspective, revenues increased 35% in the commercial and other industrial market versus the 2025 second quarter, while the electric utility and the oil and gas markets increased 14% and 11%, respectively.

Offsetting these increases, the petrochemical market declined by 37% versus the same period one year ago on the softness across this end market over the past several quarters. The light rail traction power market was lower by 10% on relatively light volume as a percentage of the total business revenue. Gross profit increased by $5 million to $88 million in the 2026 second quarter versus the same period one year ago. Gross profit as a percentage of revenue was slightly lower by 30 basis points to 29.6% of revenue versus the same period a year ago, and was 120 basis points higher sequentially. Margin rates exiting backlog continued to benefit from strong execution and volume leverage across all of the Powell Industries, Inc. divisions, with favorable project closeouts contributing roughly 90 basis points of margin tailwind in the 2026 second quarter.

Selling, general, and administrative expenses were $20 million in the current period, an increase of $4 million compared to the same period a year ago, primarily driven by higher compensation expenses across the business. SG&A as a percentage of revenue increased by 90 basis points year over year to 8.7% in the current fiscal quarter, but declined sequentially by 130 basis points reflecting a higher revenue base in the 2026 second quarter. In the 2026 second quarter, we reported net income of $45.9 million, generating $1.25 per diluted share, compared to net income of $46.3 million, or $1.27 per diluted share, in the 2025 second quarter. On 04/02/2026, the company effected a three-for-one forward split of its common stock and proportionally increased the number of shares of authorized common stock from 30 million to 90 million shares.

This was at market open on 04/06/2026. Share and per share amounts disclosed have been retroactively adjusted to reflect the stock split. During the 2026 second quarter, we generated $51 million of operating cash flow, principally driven by higher earnings generated in the second fiscal quarter. Investments in property, plant, and equipment in the fiscal second quarter totaled $1.8 million, reflecting modest capital spending on equipment maintenance and production assets, as well as capital expenditures related to the Jacinto Port expansion project. The majority of the $12 million to $13 million planned investment to upgrade the Jacinto Port fabrication yard is expected to be incurred during the 2026 fiscal year. At 03/31/2026, we had cash and short-term investments of $545 million compared to $476 million at 09/30/2025, and $501 million at 12/31/2025.

The company does not hold any debt. Looking forward, as we move into the back half of 2026, we remain encouraged by sustained commercial activity across our core end markets. Coupled with our continued focus on execution, our ability to leverage volume across our global manufacturing footprint, and the size and quality of our backlog, Powell Industries, Inc. is well positioned to deliver strong cash flows and earnings performance. We will now open the call for questions.

Q&A Session

Operator: To ask a question, please press star and then one on your telephone keypad. If you are using a speakerphone, 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 and then two. At this time, we will pause momentarily to assemble the roster. We are showing the first question from Tomo Sano with JPMorgan. Please go ahead.

Analyst: Hey, good morning. Congrats on the quarter. Given the strong $490 million in orders booked in Q2, and then with the addition of the $400 million-plus data center orders, how should we think about your order outlook for Q3 and beyond? And also, in light of this, how do you plan to manage the associated increases in SG&A and R&D expenses, please?

Brett A. Cope: Tomo, I will take the first part of that and have Mike jump in on the SG&A side. The outlook is strong. Activity entering Q3 shows no letup, just as in the prepared comments. We started at the beginning of the year with Q1 flowing into Q2. We feel good about all three of our core drivers in the commercial and other industrial market, which has really blossomed over the last two years; oil and gas, which we are built for with a very solid outlook; and I love the utility space, and we are hunting hard in that space. It has always been the distribution side, but now with the uptick in generation, that is business that we want as well. The capacity adds that we are doing, the incremental so far, and the larger one that is under evaluation, align with that.

The data center order noted in the prepared comments was a team effort. It has roughly a two-year burn; it will run through fiscal 2028. As we typically share, we are very thoughtful about our schedules, and we feel good about how it lays in across all of our facilities and meeting the commitments we have made on that job. On the cost side, we are making some investments in the business. We have largely invested in some of the strategic pillars that you find on the investor slides, especially around service and automation. On the heels of the acquisition of REMSDAQ, we have added resources in the United States to start expanding that business, along with some synergistic adds we found in the data center market in the short term. We are still progressing our medium- and long-term plans that align with the reason we bought the business to begin with, which was to expand in the utility market.

Michael W. Metcalf: Good morning, Tomo. With respect to SG&A costs, they continue to trend in the upper single digits as a percentage of revenues as we invest in some of these new programs that Brett alluded to. The increase on a year-over-year basis is driven by higher base and, to a lesser extent, variable incentive compensation expenses in the first half, in addition to the REMSDAQ acquisition. Remember, for the first half of last year, we did not have REMSDAQ in the numbers; this year we do. As we focus on growing the business organically and standing up some of these new capacity adds to address the market demand, while in addition investing in new initiatives such as the government initiative that Brett talked about in his prepared comments, these are investments that we are making in SG&A from a people and infrastructure perspective that we feel will generate a positive return as we look forward.

On R&D, it is trending higher, which we view as favorable. We finished the quarter at about 1.4% of revenues, and you can expect this to probably hold in the range between 1% and 1.5% as the team ramps up the organic initiatives to develop and commercialize new products.

Analyst: Thank you, Brett and Mike. And just one follow-up, if I may. Your strong core engineering capabilities, along with execution strengths such as ETO and key systems, have clearly earned customer trust. How do you view the evolving competitive landscape given increasing demand and expanding supply? What steps are you taking to maintain your competitive edge?

Brett A. Cope: It has become much more competitive the last couple of years. There are a lot of new entrants, some new private equity money coming in and trying to build up new models. They are slightly different than what we do, but everyone is playing in the same general area. Powell Industries, Inc. takes pride in the fact that we have a long-tenured group and a very family approach in the way we compete. As noted in the prepared comments, we are adding a second center here in Houston to attract additional talent to the team, and we think that will prove fruitful in the next couple of quarters. We are also reengaging our offshore centers, expanding their capability, doing training, and investing there to ensure that we have options offshore as well.

Buried within the whole model, in the data center and discrete commercial markets, we have talked about what the engineering load will mean to power this cycle that is going to be a lot more product-centric. We are still in the early innings, but we are starting to see that around the company. Mike and I just finished our spring operational tours, and I can share that we are seeing some nice engineering efficiency on these large jobs in the data center market, which will reduce the burden and allow us to make some adjustments in how we allocate our resources going forward on these different segments. That is an encouraging sign we suspected, and we are starting to see early returns to that thesis.

Analyst: Hey, thanks for taking the question. Maybe a follow-up on that $400 million-plus order you got in April—fantastic. Is that all outside, or is there some inside the four walls as well? And you mentioned first phase and potential for additional phases—maybe start there.

Brett A. Cope: Hey, Chip. Good morning. Fantastic opportunity. As you have gotten to know our model, when you get in earlier, given our strong engineering capability and our ability to work with our clients and really effect a great solution regardless of the market, that is exactly what this was. We were brought in early on a behind-the-meter project. It is not a simple job—they are generating on-site and there is some complexity around that. Again, that fits us very well. The initial award is all outside the data center. It is sizable—gigawatts in the initial phase—and there are multiple planned phases that we are anxious to see progress over time. We are certainly hopeful that they will. It is in the NeoCloud space.

We think we will get a shot at the internal side of the data center on this one. There is no guarantee today, but we will do everything we can to put our best foot forward as this evolves now that we are on the early phases. We are following that commercially to see if we can get that over the line.

Analyst: Excellent. And, Brett, two more on that one. Margin implications, given it is such a large order, and then the timeline being pretty quick—how are you thinking about execution risks and how will you manage that?

Brett A. Cope: I think the margin potential fits with the comments made today and on earlier calls. I definitely believe there is opportunity here as we unlock our product-centric models as they develop across the company. Once you do the initial design, it is a multiproduct program. It is quite wide-reaching across the different products we offer at Powell Industries, Inc.—a mix of voltages, quite a bit of 15 kV, a lot of 38 kV, both primary switchgear as well as secondary switches that we produce here, along with the CableOS product in Chicago. It touches just about every division in the company in the North American footprint, which is why in the prepared comments we highlighted how we put the team together. For each one of the divisions, we will unlock some potential as we ramp up volumes.

On timing, it is not $400 million over the next five years; it is a two to two-and-a-half-year buildout because we were able to use the incredible footprint that we have in the company. It was a real team effort. We came together and broke the order apart. We have done that in the past on other jobs. I go back to Hurricane Harvey where a job came in and the client needed it really quick. That is a super exciting competitive advantage that Powell Industries, Inc. has—our footprint is so similar from factory to factory with metal fab and our processes that we can lever that in times of need or market demand, as we are seeing now. That is absolutely what we have done here. We are excited to have earned the award and anxious to make it a success and, as you noted, see the additional phases in future years.

Analyst: If I could sneak one last one in—around capacity, you outlined where you are going and the potential to grow capacity. Given strength across all your markets and data center in particular, if you were to see similarly sized opportunities, what is your ability to meet those as they come along?

Brett A. Cope: We are definitely reacting, thus the comments in the prepared remarks. Along with any job, when we evaluate schedule, we look at everything all the way down to supply chain. We are clearly adding short-term capacity here in Houston, especially around what we can control on the metal fab side. While the organic build continues, we are looking at a pivot in the near term to maybe add a larger leased space that is a little bit more efficient. There are a lot of builds in different locales, including here in Houston and some other commercial centers in North America, where things are already there, and with minimal modification, we can get them productive quicker. If and when the next one comes, we could follow the same model.

The constraints would be people and supply chain, which are not easily unlocked, but we would attack it with the same vigor that we attacked this one. Mike and I are very involved in the supply chain side, and the whole team has gone out over the last couple of quarters to really engage it much better, to ensure that as we make our schedules on our proposals and make firm commitments, we are backed by supply chain so we do not have a miss there. As long as we can unlock that, it will come back to just attracting talent and getting them trained and into the Powell Industries, Inc. model to execute. That would be the number one concern moving forward.

Analyst: Yes, thank you. Good morning. My first question is on pricing power. Brett and Mike, you talked quite a bit about strong markets, but in your commentary, you mentioned pricing is stable, broadly keeping in line with inflation. Why are we not getting more pricing if the markets are as strong as they are?

Brett A. Cope: We are getting some price, Manish, for sure. In certain product areas that have become constrained in the demand–supply curve, we are absolutely moving up price incrementally in those markets across all three verticals. We are very sensitive to where you can push price and where you need to hold your ground. Between price and efficiency gains, as we start to build our plans for 2027 and beyond, we will get a good feel in Q4. I do not think it will come out so much in the numbers in Q4, but internally we will start to see it. Going back to the earlier question on our operations reviews, we are seeing efficiency build, and I think that will come out as price. We will be able to better report on it as we hit the end of this fiscal year and prepare into 2027.

Analyst: My other question pertains to you taking on larger, more complex projects. How should we think about the cadence for margins going forward? And then more specifically on the $400 million-plus award for the data center—was that a solo award, and how does that change your perspective on the TAM for Powell Industries, Inc. in the data center market? What percentage of market share is reasonable that you can achieve?

Brett A. Cope: Those questions go together. On this particular job, we really do well on the complex power story problem, and this one has a degree of complexity that we had not seen in some of the other data center jobs that we have been building our market segment on. We got involved early. There is a unique complexity beyond the behind-the-meter design that is akin to a power island that we might see on an industrial facility or even an offshore platform, where you are generating and distributing load locally. These behind-the-meter projects have a higher degree of complexity around the gear and the automation, and that fits us very well. So the TAM on behind-the-meter is going up for Powell Industries, Inc., beyond a straight utility connect.

We are interested in both—it is not that we will not pursue both models—but the behind-the-meter opportunity for Powell Industries, Inc. is clearly going up with this complexity equation. Depending on how they are generating—whether it is a mix of resources or renewable—there are a lot of ideas we are seeing commercially. Our excitement for that potential is growing. And yes, the $400 million award we got post quarter end was one purchase order.

Analyst: Thank you.

Operator: We have the next question from the line of Alex Rygiel from Texas Capital. Please go ahead.

Analyst: Thank you. Just a maintenance item here first. Backlog as a percentage of total by market—could you provide that once again?

Michael W. Metcalf: Yes, sure, Alex. As we deconstruct the backlog segmentation for Q2, roughly 5% was petrochemical, 30% was utility, 6% was traction, and 29% was commercial and other industrial, which includes data center, which is in the low twenties as a percentage of that 29%. The rest is other industrial and energy-related categories.

Analyst: Very helpful. And then as you look into the data center market more broadly, how many customers are you working for right now, and how many customers are you talking to right now? You can generalize, but I am trying to get a sense of how broad your sales effort is into that segment.

Brett A. Cope: Hey, Alex. It is becoming broader every quarter. If you go back a couple of years ago when data center was 7% of the backlog and then 15%, 22%, and now jumping the next couple of quarters, it started through different channels—in what I would call indirect channels through distribution or through partners where we were getting a piece of the scope, not really getting a look at the whole opportunity, whether outside the data center or inside the data center. Over the last couple of years, we have been adding resources—front-end, applications, folks from the industry—to help us better understand how to attack that market more thoughtfully, and that is clearly delivering a return. Today, we still have that indirect OEM and partner model, which has grown, but we are clearly driving our own direct destiny where we are getting in earlier and having direct conversations with the contractor or the ultimate end client, or a combination of the two, and that is starting to grow.

We like both channels to market and will continue to thoughtfully invest where it makes sense to support the broader buildout of the market.

Analyst: Hi, guys, and thanks for taking the questions. I am curious about how you are handling the spike in metal prices in 2026, and how that impacts the gross margin profile on a go-forward basis?

Michael W. Metcalf: Good morning, John. We are very proactive with our metals, specifically copper. As you know, we use a lot of copper, and we do have a hedging program for copper. It essentially acts as an insurance policy to protect the margins that we have in backlog. We stay on top of steel and aluminum as well, and we are pretty proactive with the supply chain for those core commodities.

Analyst: Got it. And I think in the prepared comments, you said something about small- to mid-sized projects being a net benefit in the quarter. Can you drill down a little on what is going on there?

Brett A. Cope: Good morning, John. We had the two sizable jobs noted—the data center job we logged in the quarter pre-close of March and the utility job, which I do not want to lose sight of; I love the utility business. When you look at the balance—and you know our model well—when we get that nice mix of having those anchor jobs in the backlog and then being able to put different size jobs—the small zero to $10 million job and then the next step up, the $10 million to $50 million—that mix, given the cycle of a project build, is really advantageous for the Powell Industries, Inc. model. We bring the project in, we schedule it, and there are stop-and-hold points throughout its cycle. Given different job sizes, it gives us leverage to move the crews in and around it.

When we lose that mix, it creates another pressure in the business to manage through the P&L of each of our factory locations. The really healthy bulk of small and mediums that came in Q2—and is continuing in commercial activity as we look forward—is very healthy and very encouraging for how we think about planning the business. We wanted to call that out.

Analyst: Certainly. And is it running above that $50 million threshold, Brett, or no?

Brett A. Cope: No. We see the normal cadence of potential out there going forward in terms of those jobs that are larger than $50 million. There is still a healthy mix across all of our core markets; the timing is the variable.

Analyst: Good morning, Brett and Mike. Brett, the outlook is very strong, and you are considering a potential expansion of $70 million to $100 million. Given the outlook and what you are seeing, what do you need to see more of before you make that commitment? It seems like the business is very good and you could go ahead with it. What else might you need to make that commitment?

Brett A. Cope: John, not too much more. Mike and I have a board meeting in a couple of weeks. We have been talking to the board the last couple of quarters about it. With the active quarter and with the commercial activity maintaining, we had to react on some of the short-term needs—unlock some needs that may be not optimal, if I am completely honest, but they will absolutely get a good return and were needed. I think we are just about there in being able to support not only the market activity but also our intentionality on our strategic builds, which is why we called out some of the work on the service side. That team is maturing; they are doing a great job building sub-strategies within that growth strategy of ours, and they are getting more confident. That adds into the options A, B, and C for the next big chunk of space.

Analyst: If we think about it and, say, in three or four months you make that decision, what kind of timeline would it be to get something like this constructed and up and running? And what might be the revenue capacity or potential of such a new manufacturing space?

Brett A. Cope: A greenfield is probably going to run us, conservatively, two years. The actual build time is less, but the variable is always permitting. That is one of the reasons that, given the rapid growth, we may bridge that with a similar-sized leased facility and have to outlay some capital for the cranes and things we would need for the various activities over a two- to five-year lease term while the other facility is being built. If we go the lease route, there is still some permitting, because no facility is purpose-built. You get the shell and you still have to do some things to it. We would see revenues quicker—we would move inventory to that space, get the cranes, and you would probably be looking at productive capacity within six months.

Analyst: Total revenue of such a facility?

Brett A. Cope: It is going to scale; it depends on the mix of service, projects, and products that we ultimately put into that, but you can run $100 million to $250 million.

Analyst: Have you had to turn down any orders at this point?

Brett A. Cope: I would not say we are turning anything down. Are we able to meet the schedules of everything coming in the door? The answer is no. We have a really broad funnel. We have expanded our process around that funnel with the growing commercial and industrial segment and the growing resources there, plus the growing capacity. The team play, as we noted today, has become much more prevalent day in and week out here at the company, which has been fantastic—seeing the company come together and the team really work across functional areas, geographies, and facilities. We are unlocking every little bit of opportunity, which has been fantastic to see. We are not able to respond positively to all the opportunities, but where we cannot hit exactly what they ask when they come in the door, we engage them on sequencing and constructability of their site and other things we can do to work together.

Those conversations, given our model, are pretty effective at reaching a good solution for both the client and for Powell Industries, Inc.

Operator: Thank you. This concludes our question-and-answer session. I would like to turn the conference back over to Brett A. Cope for any closing remarks.

Brett A. Cope: Thank you. Mike and I thank everyone for joining us this morning. We are very encouraged by the commercial strength we are seeing across each of our core end markets and continue to expect another strong year for Powell Industries, Inc. I would like to thank the entire Powell Industries, Inc. team for their hard work and commitment to both Powell Industries, Inc. and, of course, to our customers. Mike and I look forward to updating you all next quarter.

Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.