Good day, and welcome to the Powell Industries Fiscal First Quarter 2026 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key, then zero, on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one. To withdraw your question, please press star, then two. This event is being recorded. I would now like to turn the conference over to Ryan Coleman of Investor Relations. Please go ahead.

Thank you, Operator, and good morning, everyone. Thank you for joining us for Powell Industries' conference call today to review fiscal year 2026 first quarter results. With me on the call are Brett Cope, Powell's Chairman and CEO, and Mike Metcalf, Powell's There will be a replay of today's call, and it will be available via webcast by going to the company's website, powellind.com, or a telephonic replay will be available until February 11th. 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, February 4th, 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 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 forward-looking statements. These risks and uncertainties include, but are not limited to, competition in 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 or the Securities and Exchange Commission. With that, I'll now turn the call over to Brett.

Thank you, Ryan. Good morning. Thank you for joining us today to review Powell's fiscal 2026 first 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. Our fiscal year is off to a strong start. As our first quarter results continue to demonstrate Powell's unique and advantaged position against a backdrop of what are secular and increasingly durable growth trends. The growing and broad investment in power generation and grid modernization to support data center and AI capacity growth. Domestic manufacturing, electrification, and the nationally important export of energy resources like LNG are validating our now nearly decade-long strategic effort to transform Powell into a more diversified manufacturer of electrical distribution products and systems. During the first quarter, we saw revenue grow 4% compared to the prior year, and as a reminder, our first fiscal quarter typically exhibits some level of seasonal disruptions associated with fewer working days. while ongoing high levels of project execution drove improved profitability compared to the prior year. Gross profit expanded 20% to drive a gross margin of 28.4%, an improvement of 380 basis points year over year. We recorded $439 million of new orders, the highest quarterly total in over two years, as activity was widespread across oil and gas, specifically LNG, data centers, and the electric utilities markets. Within our total bookings number, we were awarded a contract for a large LNG project that exceeds $100 million to support gas liquefaction and export along the U.S. Gulf Coast. As the permitting process for LNG restarted a year ago, activity in support of new Greenfield and Brownfield trains resumed, and Powell has and continues to support this strategic market. We anticipate activity within the LNG market to continue in 2026 relative to the more modest activity levels throughout 2024 and most of 2025. Commercial dynamics within our commercial and other industrial market have accelerated in recent quarters as we continue to see increased demand within the data center market. During the first quarter, our commercial and other industrial market accounted for nearly one-half of the order total and included our first mega project order for a single data center, which totaled roughly $75 million. Our commercial and other industrial market now comprises 22% of our backlog as of quarter end, with data centers accounting for roughly 15% of our total backlog, both of which are record levels for Powell. Over the past few quarters, we have continued to experience increasing levels of interest among a growing list of data center customers. The increasing power demand driving greater compute power and the desire to expedite construction timelines creates a value proposition that is well aligned to an increasing portfolio of Powell's electrical distribution products and automation solutions, including our first orders in the United States for our newest team members at Ramzac Limited in the UK. In response to the growing market demand, we continue to take measures to expand productive capacity, including adding additional leased facilities to support the expansion of production lines, increased inventory needs, broader collaboration with our supply base to ramp supply and improve cycle times, as well as rebalancing and reallocating the manufacture of select products across our facilities in North America to further optimize capacity. Meanwhile, order trends in our electric utility segment remain very encouraging as we experience another solid quarter of award activity from this end market. Overall, the oil and gas and petrochemical business remains healthy. We are experiencing some degree of divergence across markets and geographies that we compete, with some performing very well and others exhibiting softer activity levels in areas such as refineries and polyethylene and polypropylene facilities. We finished the quarter with a backlog of $1.6 billion, dollars, which was sequential growth of 14 percent compared to the September quarter and is the highest in Powell's history. The growth in our backlog over the past year has been primarily driven by booking trends in the electric utility and commercial and other industrial markets, as these two markets now account for the majority of our backlog for the first time ever. Overall, our backlog is well balanced across the markets we serve, and we continue to benefit from a healthy mix of large projects, as well as small and medium-sized core projects that help maximize productivity across our manufacturing plants. We also benefit from project visibility that now extends into our fiscal 2028. The expansion of our Jacinto port facility is progressing on schedule and remains on track to be completed during the second half of our fiscal 2026. This incremental capacity will be critical to ensuring our ability to support all of our end markets, but specifically our oil and gas customers, as we anticipate the wave of LNG project development work that is projected to come to market over the next three to five years. 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. We continue to actively review and evaluate our total manufacturing capacity to ensure the delivery and execution of our project backlog. This includes the potential for future investments in plant and equipment, along with actions noted earlier in my comments where we are now adding lease properties to support near and midterm growth in our medium voltage distribution products. As we look ahead through the remainder of 2026, the commercial environment for each of our major end markets remains positive. We continue to have robust activity in support of the North American gas market. The fundamentals of the U.S. natural gas market continue to support investments in LNG, and the funnel of projects that we are tracking compares favorably to past cycles in terms of the total number of projects moving forward. 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. Lastly, we are increasingly encouraged by order trends and demand levels within our commercial and other industrial market. The acceleration of order activity driven by data centers leaves us confident in our ability to continue to grow our presence in this dynamic market. Overall, we are very pleased with our first quarter performance and our outlook for fiscal 2026. Demand trends remain robust and we are well positioned to execute our backlog and grow within our targeted markets. With that, I'd like to turn the call over to Mike to walk us through our financial results in greater detail.

Thank you, Brett, and good morning, everyone. In the first quarter of fiscal 2026, we reported net revenue of $251 million, compared to $241 million, or 4% higher versus the same period in fiscal 2025. New orders booked in the first fiscal quarter of 2026 were $439 million, which was 63% higher than the same period one year ago, and included two mega orders. The first mega-order is for a large domestic liquefied natural gas project valued at greater than $100 million, which is being constructed on the Gulf Coast. In addition to this LNG mega-order, the business also secured a number of orders during the quarter supporting the electrical infrastructure for various data center projects. Collectively, these data center orders totaled more than 100 million dollars in the first quarter of fiscal 2026 these data center orders booked in our commercial and other industrial sector included a notable mega order for electrical distribution equipment and was valued at approximately 75 million dollars that will be deployed at a single data center notwithstanding these significant wins the orders cadence across most of of our reported market sectors continues to be active, particularly across our domestic end markets. As a result of this commercial activity, the book to bill ratio in the period was 1.7 times. Reported backlog at the end of the first quarter of fiscal 2026 was $1.6 billion, 219 million higher than one year ago, and 191 million higher sequentially on continued strength across the oil and gas, utility, and commercial and other industrial sectors. As we exited the first fiscal quarter, backlog across our oil and gas and utility sectors each represent roughly 30% of the total backlog, while the commercial and other industrial sector has grown to 22% of the backlog, increasing substantially on both a sequential and year-over-year basis. Compared to the first quarter of fiscal 2025, domestic revenues were slightly lower by 1% or $3 million to $195 million, while international revenues were up 29% or $13 million to $44 million in the current fiscal quarter. The increase in our international revenues during the quarter was driven in large part through the projects that we're currently executing in the Middle East and Africa, Asia Pacific, and Europe regions. From a market sector perspective, revenues across our utility sector marked the most substantial increase during the quarter, higher by 35% compared to the same period one year ago, while revenues from the oil and gas sector increased by 2%, offset to some degree by the petrochemical sector, lower by 31% versus the first quarter of fiscal 2025. Lower revenue in the petrochemical sector was mainly driven by the completion of a large project booked in fiscal 2023, coupled with softer commercial activity in this market. In addition, the commercial and other industrial sector was 8% lower on project timing, while the light rail traction power sector was 5% higher on a relatively small revenue base. Gross profit in the current period increased by $12 million to $71 million in the first fiscal quarter versus the same period one year ago. Gross profit as a percentage of revenue was higher by 380 basis points versus the same period one year ago at 28.4% of revenues, primarily driven by strong project execution generating a higher level of project closeouts versus the prior year. Sequentially, gross profit was lower by 300 basis points on the predicted seasonal softness. As we noted in our fourth quarter release, we anticipated a challenging sequential comparison considering that our first fiscal quarter is historically the softest quarter across our fiscal year due to the holiday period. Selling, general, and administrative expenses were $25.2 million dollars in the current period and were higher by 3.7 million on increased compensation expenses across the business versus the same period a year ago. SG&A as a percentage of revenue increased 110 basis points to 10% in the current fiscal quarter. In the first quarter of fiscal 2026 we reported net income of $41.4 million, generating $3.40 per diluted share, which is a 19% increase compared to a net income of $34.8 million, or $2.86 per diluted share in the same period of fiscal 2025. During the first quarter of fiscal 2026, we generated $43.6 million of operating cash flow on favorable income generation through the period. Investments in property, plant, and equipment totaled $2 million in the quarter, with the capital deployed primarily to address capacity and productivity initiatives. At December 31st, 2025, we had cash and short-term investments of $501 million compared to $476 million at September 30th, 2025, and the company does not hold any debt. As we look ahead to the remainder of fiscal 2026, we remain encouraged by the commercial tailwinds across all of our end markets. Given the current market conditions coupled with a stable pricing environment, we are optimistic that we can sustain the quantity and the quality of our backlog throughout fiscal 2026. Combined with our ongoing focus on optimizing margin levels, increasing product throughput, and the overall strength of our balance sheet, Powell is well-positioned to deliver strong revenue and earnings throughout the rest of fiscal 2026. At this point, we'll be happy to answer your questions. We will now begin

the question and answer session. Please limit yourself to one question and one follow-up. To ask a question, you may press star then one on your telephone keypad. If you were 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 the question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question comes from John Franz Reb with Sidoti and Company. Please go ahead. Good morning, guys, and congratulations on another

great quarter. I'd like to start with the comments on the gross margin that you can, that based on what your current backlog looks like, that you can sustain the 2025 gross margin profile. I wonder, does that consider potential change orders or short cycle business, or is that

just based on the backlog configuration? Hi, John, this is Mike. I'll address that question. So we had a very strong quarter with respect to project closeouts, as I noted in my prepared comments. 380 basis points overall on reported margin versus prior year. Of that 300 was attributable to project closeouts, which was favorable to last year. And that was really driven by strong execution, risk management, and our ability to recover costs via change orders, et cetera, in the project environment. it. The remainder of that upside was just plain productivity and operating leverage across the business. As a barometer of margin levels over time, I would point to the trailing 12-month performance. If you took a look at the trailing 12 months in the business, our reported margins are running about 30%. And of this, there's approximately 175 basis points of project closeout gains, again, which includes change orders and the like, changes in estimates. So maintaining a base level margin in the upper 20s while continuing to drive for 150 to 200 basis point upside resulting from favorable closeouts is a reasonable assumption. And that reflects what we see, that base assumption is what we see in our backlog.

Got it. Got it. That's very helpful, Mike. And I'm actually kind of curious about the record backlog. It's great to have. It's wonderful to see. But I'm wondering if there's any concerns that customers are just vying to get in line and that the backlog might not be as firm in years past, given maybe a new customer shift. Any thoughts

about that? Hey, John, it's a good question. We've talked about that in the past. Are we open to cancellations? What would that potentially do? I don't think yet. I think the 1.6 is very durable. Some of the new market growth in the commercial and other is, if you look at the timing and our understanding of the project, I feel very good about it. I think as we look out what's going on in that space. Are people talking to us and others about reservations and locking capacity? Yes, those conversations are happening. And Mike and I and the management team are discussing what that might look like in the next couple of quarters, the next couple of fiscal years, as the demand looks like it continues, how to best handle that risk potential. So I think that's a future concern that's on our radar, and we're taking it quarter by quarter, but not currently in the backlog. I feel pretty good with what we've got here today.

Sure, sure. It makes sense. Okay, those are my two questions. I'll go back into queue. Thanks.

Our next question comes from Chip Moore with Ross MKM. Please go ahead.

Hey, thanks for taking the question. I wanted to ask, drilling on data center maybe a little bit more, you know, I think talking about larger and more numerous opportunities and obviously that mega project, great to see. Maybe just can you expand, Brett, maybe on cadence of deliveries in data center? And then I believe many of these facilities are being built in phases, just potential for follow-on orders at some of these sites and, you know, capacity questions. You mentioned adding some leased facilities, just how quickly you can ramp and get the switchgear supply going up.

Yeah. Yeah, I could have probably done a whole script on the data centers, you know, when you look at us and kind of the broader market out there that's involved in this space. Because we are, you know, admittedly learning a lot as it's growing quickly in Powell. First of all, on, you know, the cadence of the activity that's ongoing. There's an interesting dynamic. It is project work, but still a lot of our backlog that we just shared in the prepared comments is still outside the data center. Even this large megaproject, it is a large amount of work for a project to handle a lot of the outside of the work. And it's a lot of design one, build many. So it is supporting more of a product strategy. It's a project as we look at it as Powell. But it's going to create a lot more flow down production lines. We think there's a lot of opportunity there that we're working through and we will be working through the next couple of quarters about efficiency, productivity, and delivery. So we spent a lot of time last quarter, quarter before, working on the supply chain, doing the blocking and tackling on the production line. The prepared comment, we added a 50,000 square foot lease facility, which we're just taking ownership now during the quarter to support this product line flow, to store the inventory that needs to ramp, to match, but it's going to be a lot of that repetitive product build down the line, and we anticipate more of that in the next quarter or two. We're under evaluation right now of some additional facilities. We're challenging whether or not we should go larger, and along with even investment in our model. We like to own our PPE, but right now, the lease makes sense. As we better understand and become more confident, we'll build out more permanent investments, I think, to match not just this, but, of course, the things we've been doing organically to drive, you know, growth in all of our three verticals.

Very helpful. Appreciate the color there, Brad. And if I could ask one more, you know, supply-demand environment, I guess, more broadly to the point on margins, a lot of announcements around capacity expansion from a number of equipment suppliers floating out there. Or just maybe, you know, it sounds like things are quite stable right now, but just how you think about the future, you know, several years out, what might take place?

Every quarter, I'm getting more confident. Notwithstanding John Frambrough's question about, you know, the concern on this massive demand environment, I mean, the number of customers we're having more thoughtful strategic discussions with is increasing, and they're engaging Powell in a way that fits us well. And so, you know, I talked early on, maybe a year ago, about finding alignment with clients that meet, you know, well with what we do culturally and how we do it. We'll learn from that and we'll grow. So we're not going to stay static as to who we were. We want to build a part of the company that is quicker on the cycle, can meet the need. There is a lot of demand. We understand the urgency and the return on their capital. But at the same time, we want to make sure we're hitting the dates for all three verticals that we're serving. So the number of customers is increasing. It is going out further in time. And the programmatic approach about your comment about phasing, yes, we see the initial megawatts on the initial design and the potential train, I'll call it train expansion, but the size of the data center potential that could be added onto it is definitely part of the conversation. So that fits our model, right? If we execute and deliver for our client, we absolutely want these relationships to be sticky. just like there are other verticals, and we're very open with them in that approach. And so we use that as an early-on engagement sort of screening discussion of, hey, we'd like to help all of you, but we want to align with those that really match us well.

Perfect. Appreciate it. I'll hop back in queue. Thanks.

Our next question comes from Manj Samaya with Cantor. Please go ahead.

Hi, Michael and Brett. It's Manish Samaya. Just a couple of questions. One is on pricing. Perhaps if you can just give us some color on what you're seeing as far as pricing in your end markets, the intensity of competition pertaining to that. And then related, how should we think about raw material prices and how they get passed along and what you absorb. Perhaps if you can just give us a sense as to how you protect yourself in this era of rising commodity prices.

Good morning, Vinish. Thank you for joining today. I'll take the first part of that. Mike can add some color and jump into the input cost side. On the pricing environment, we've been asked that last couple of quarters. no real change. I think everything's holding pretty steady in all our verticals in terms of the competitive status of the market, if you will. The one dynamic that I would point to that we are learning, and I touched on this with Chip in the last question a little bit, is that on these data center jobs. With how we price in the market, I would say, but that said, the way we're going to build these lines, I anticipate we have some potential upside because in the long cycle in project, when we build a project and they're large, full of products in integrated scope and they're year, two years, three years, these have a much quicker cycle on average compared to some of those on their demand curve to meet the need. And so when we get up to speed and build these products over and over and over, I think that the efficiency factor, you know, something that we don't largely do as Powell today, we're building out that product side of the company. I think we'll see some potential upside in there. I don't know how much yet, but I do think that we see the potential for it. So that, in a sense, would be price if you back-calculate it, and in the next couple quarters, I think that'll become more apparent to our understanding.

And following on that, Manish, good morning. This is Mike. Regarding the input costs, clearly we watch this very closely. We kind of bifurcated into two buckets. The raw materials, as you noted, copper, steel, very volatile. The metals market is very, very volatile today. We do hedge our copper to some extent, and any drastic increases that we see, we roll those into our pricing model. The second bucket I would note are we buy a lot of engineered components, things that we don't make, HVAC, fire systems, things of that nature. And as you know, our projects could range from a year to three years. So we lock those, not those commodities, those engineer components in when we sign the contract. So we're locked into the engineer components, and we watch the commodities very closely and roll those into the pricing model. So that's how we manage those elements of the business to mitigate that.

And then just as a follow-up, how should we think about the lead times on, you know, specific components like switchgear, for example? You know, obviously you have a significant backlog at this moment. You know, what are sort of the potential constraints on the component side that could impact revenues?

You know, that's a discussion we have every day, along with comments on the capacity additions that we're working through. You know, I think we're in a good spot. If you look at the mix of products that we make, and if you just kind of go back to data centers, Manish, the power levels have increased. So coming off utility or if they're doing GTG, self-generation on site, or any kind of multifuel, there's a lot going into the 38 kV line, and that is ramping quickly. That's a product that we're really adept at. It actually fits power really well. But when you look at the 5 and 15 and different product levels, they're not as robust. We actually have capacity. And so some designs of data centers out there, if you look at how they're doing their data hauls, not all of them are just massive 1 gigawatt or 3 times 300 gigawatts. There's new designs coming out that are 90 or 100 or 150 megawatt data hauls that we still have really good capacity running 35 to 40 weeks on gear, which is very competitive in the market for, you know, for our 15 KV. So when you get into the mix of how they're doing their power design, we are driving future capacity for those higher levels that are really under demand, but then there are other designs that we still have opportunity to fill out that will benefit, you know, the back half of this year and into the early part of 27. So those are the really thoughtful conversations we're having with those clients that engage us that way. We can build, we can invest, meet their needs, and then we can phase our deliveries to really make a win for both parties.

That's helpful. I'll get back in the queue.

Our next question comes from John Bratz with Kansas City Capital. Please go ahead.

Good morning, everyone. Brett, Mike. Hey, John. Brett, you've spoken a lot about doing things to increase capacity and product flow and so on and so forth. And I guess two questions. Number one, how much might you have to ramp up your CapEx spending to achieve that? And then secondly, when you think about your capacity now and what you want to bring on board in the future, if you could do, let's say, if your top line growth was X percent, what might that new capacity be able to drive revenue growth in the future? Are we talking about mid-teens then, or, you know, what kind of new growth, new top-line expectations might there be with this new capacity?

Well, that's a really good question, John. First on the CapEx side, yes, we've been evaluating for the better part of a year, you know, a new facility owned by Powell. A lot of that started off in support of our organic investment in R&D and some of the products we aspire to bring to market to pursue more share of wallet and utility spend. I really like the utility vertical for Powell long term. We've done really well in there, and I really think the team is, what we've done is really driving value for our client in the utility space and vice versa, and so we don't want to lose focus on that. So add to that what's going on in the market in this newer dynamic, you know, we're considering right now something on the order of another $100 million type facility. We've not pulled the trigger on that. Really active discussions with the board. Meanwhile, we saw an opportunity on the lease side. You know, when you look at both in terms of how they could potentially drive revenue, you know, yeah, I think double digits is possible. We've got to get a few more products organically out, like I noted earlier. And maybe a little bit more, I'd hedge a little to say when, given how many data center companies are engaging us, get inside the data center, it will be a pretty chunky ad. The low-voltage content, even on the AC designs that are going on now, the momentum that's built, because there's a lot of talk on the future DC designs, which we're also involved with, but it will be a step change. And some of that, with the investment we did last year at the breaker plant here in Houston, the 50,000 square foot, we're already prepped for some of that. But we could quickly need some additional facilities beyond that just to hold the inventory. So we can see out there some potential nice steps to add to the growth of the company.

Okay, thank you. And, Brett, on the LNG market, obviously it's a little bit different today than it was three years ago when sort of the initial construction rollout began. Is the competitive environment a little bit different today than four or five years ago?

It's different, but it's no less intense. And my color comment on that would be if you go back four or five years ago and you look at the players that were in the market from the international people that we compete with along with some of the local building makers and integrated partners that our competition would use, you know, there was a set of competitors that was X. If you look at today, five years on, and you look at, like in our investor deck, where we present, you know, who do we think about every day when we get up and compete on the electrical side, what's changed is their strategy, I think. You know, our core strategy around industrial oil and gas, utility, which we've been working at for the better part of, you know, a dozen years, and now this latest piece, we're not going to forget who we are in these first two verticals and we really enjoy that complex industrial hard to do job and so there's still competition it's still intense but there's some new players because because of changes on the other side that happened you know from five years ago maybe the focus is different I don't know you have to listen to their calls but for us we're still focused on that and we really like that business and we're very engaged on on it and you know we we you know the investment we've made in offshore is built for that, and we're out trying to earn all that business that's potentially coming through FID in the next couple of quarters.

So, Brett, when you look at the margin that you achieved a couple of years ago on the new projects, new LNG projects, do you think you can see similar margins going forward?

I think so. I mean, there's, you know, of all the segments, that's the one that is, given the size of the capital investment in these facilities, there's still a lot of focus on the return of the facilities. And so, you know, it's good, but you've got to be careful to be, you know, fair in what you're really looking to do. And so if there's something that's unique or there's time elements that we can provide that's unique to our model, for instance, using our offshore facility for a large single piece that will help reduce cost at site, you know, we just ask for a fair value in return for that for the site, but not to be silly about it.

Yep, yep.

Our next question comes from John Franzreb from Sidoti & Company. Please go ahead.

Hi, guys, and thanks for taking the follow-up. Brett, I'm just curious about the opportunity pipeline. It seems phenomenal. I wonder if you kind of look at it and say, listen, we're going to have an exit book-to-bill ratio of above 1.0 for the next coming two years. Is that something reasonable to expect?

I think it's reasonable, John. I mean, there's no guarantee of future results. You know the phrase. The amount of conversations we're having across all three verticals, I think it's a reasonable expectation, which is why we had chats with the board and we had the change in some of the metrics that we're driving to the company for. And so the buying potential is definitely there. And as a team, we've got to solve that. And I feel good that we've got the right team and the right environment to make that happen for all the stakeholders.

Got it. And I was wondering, has the board considered a stock split at this level? I mean, compared to historic levels, it's fairly impressive.

Yeah, we have. You know, some of the color on that really is more if you think about our team and the growth of the employees as, you know, just critical to the success of all the stakeholders' interests. Using equity within our structure has become very much more the forefront discussion with the board and Mike and I and our CHRO. And so, yes, the stock split from a math standpoint about making sure it's a tool that we use for our team to support their engagement in the process here is definitely very active.

Got it. And I guess kind of just one last question. How should we think about the cash on the balance sheet at over $500 million? When does that number start to get drawn down a little bit as you use more and work in capital as these larger projects come on board?

A couple of comments there. I'll let Mike jump in. You know, as I noted already this morning, I definitely think we're thinking about allocating some of that to some new facilities. Can't really pin down the timing yet. We've got a board here in a few weeks. It'll be in the discussion. And then, you know, we're not slowing down on the M&A side. Even though we, you know, we did the one with REMSDAQ last summer, there are still some ideas out there that, you know, When we can get out into the market and do the strategic work, there's still some really nice potential out there. So there's that. And then I think the capital needs might be capital.

Yeah, and as a follow-up on that, John, you know, from a working capital perspective, you know, roughly 40% to 50% of that balance will be deployed at some point in the future to that $1.6 billion backlog number. But that said, you know, when you look at what's the free cash available for capital deployment in some way, shape, or form, you know, it's probably $200 million to $225 million. Brett mentioned that we're thinking about capacity requirements across the business, so I'm sure some of it will get deployed.

Great. Thanks a lot, Mike. I appreciate the call.

Our next question comes from Chip Moore with Ross MKM. Please go ahead.

Hey, thanks for the follow-up. Just one more from me on REMSDAQ. I think you called out getting some traction here in the U.S. So just an update there now that you've had them for not too long, but a little longer. And then service, more opportunity, I guess more specifically around data center in particular. Just talk to that.

Well, thank you for the question. Yeah, REMSDAQ, great strategic ad, great set of folks in the UK. We, you know, when you have these dynamic times in the market, Chip, you, you know, every market has an approved approach, a way they bring in technology. You know, REMSDAQ was so experienced in their market in the utility space, that was one of the things that attracted us to them initially, plus their technology roadmap. The data center market, the commercial and other industrial, has definitely opened the door to allow us to get that technology in quicker than we anticipated into the U.S. market. So we've had some technical meetings with some of the customers that have come to us on applying this technology to the powertrain that feeds in the data center for some protective and control logic, and it's opened the door. And it's created new opportunities for us, even on the high-voltage side. We just took our first order for a high-voltage control and protection substation, the utility connect, if you will, the high-voltage into the medium voltage, which would be a new space for Powell. And, again, that was underscored by our ability with having REMSDAQ and their technology as an enabler. So super exciting time. I have a high expectation for the growth of this business. It is accreted to margin significantly. And Paul has a long history of success here. Mike, on the service piece, yeah, there is clearly opportunity on the data center front, the commercial and industrial. We haven't taken anything significant yet, but over the last quarter or two, well, I've been involved myself with some of the discussions where we do see an opportunity for service to come in on the build side, quite frankly, initially. We've not entered on the OPEX side after. I think that will come. It's still a new market for us, and as these assets get installed, I think we'll see some insulation and long-term support work. But we right now are developing some ideas with clients on how our team can help the constructability, the timing, given our know-how on the skid and the integration of the mechanical side of these solutions with how they're trying to speed up the timeline. And so our service team is engaged, and we're actually out providing some quotes for what we think we can do. We haven't closed anything yet, but it would be – we do see it as a big opportunity as we go forward.

Appreciate it. Thanks very much.

Thanks, Jeff.

Our next question comes from Manish Simaya with Cantor. Please go ahead.

Thank you so much for the follow-up. Mike, I'm not sure if you mentioned the next 12 months backlog. Would you mind giving that to us?

Yeah. And then I – Yep. Manish, you'll see that in the queue. that we submit later today. Of the $1.6 billion backlog, roughly 60% of that is convertible over the next 12 months. I think in the queue you'll see $933 million. And on top of that, we refresh what the book and bill rate's been on average over the last 12 months, and that's running $65 to $70 million cadence every quarter. So, yeah, those are two of the key metrics as

you look forward. Okay, wonderful. And then, you know, Brett, you talked about strong demand across the board, strong activity, strong backlog. You know, my big question is the shortage of skilled labor in this country, and, you know, is that going to be a constraint as far as your

growth ambitions are concerned? It's a concern, Manish. It has been, you know, the entire 15 years I've been at Powell through any cycle. Is it a concern today? Absolutely. The management team discusses it routinely. You know, on the variable side, you know, there's always a time where there's a skill set within the company that has a need. On the variable side, we're doing fairly well. In fact, I'd say in the last couple of quarters, we've solved some problems. As I sit here today, on the fixed side, we do have some needs that are challenging us with this step change, especially on the commercial side, this growth and this growth needs today on engineering. So that's a problem that we're out working, and I feel confident in the next 90 days or so, we'll figure out how to solve that one. But it's not unique or new to us. Because we are a long-cycle project company by historical sense, we've been here before, and I'm confident the team will find a way to solve the need. But given the growth of the backlog, yeah, we've got some needs right now, and we're going to go out and solve them.

Well, thank you again, and congrats on the quarter.

This concludes our question and answer session. I would like to turn the call back over to Brett Cope, CEO, for any closing remarks.

Thank you, Bailey. our first quarter delivered solid performance with improvements in our top and bottom line. Powell's employees consistently embraced the challenge. While keeping our core focus on executing the most complex of industrial electrical distribution projects, our team is responding to meet new and growing market opportunities, which underscore our ability to secure future business and drive new strategies to improve productivity and profitability. I would like to thank our valued customers and our supplier partners for their continued trust and support of Powell. We're very pleased with our first quarter and we expect another strong year for Powell. Mike and I look forward to updating you all next quarter. The conference is now

concluded. Thank you for attending today's presentation. You may now disconnect.