Powell Industries at Midwest Ideas Conference: Strategic Growth and Market Positioning

On Tuesday, 26 August 2025, Powell Industries (NASDAQ:POWL) presented at the 16th Annual Midwest Ideas Conference, highlighting its robust financial performance and strategic initiatives. The company, a leader in electrical distribution, reported record revenues and emphasized its strong market position. While the company faces challenges such as inflationary pressures, it continues to focus on growth through acquisitions and innovation.

Key Takeaways

• Powell Industries achieved record revenues exceeding $1 billion, with a very liquid balance sheet.
• The company focuses on engineered-to-order solutions, primarily in the 0-38 kV range, and has a strong presence in the ANSI standard.
• Recent acquisition of REM Stack aims to enhance control and monitoring solutions, supporting growth in automation and services.
• Powell’s backlog surpassed $1 billion in 2023, with a strong demand from sectors like oil and gas, utilities, and data centers.
• The company is prioritizing investments in working capital, R&D, and strategic acquisitions.

Financial Results

• Powell Industries reported a backlog increase of approximately $100 million in the latest quarter.
• Orders booked in the first nine months of 2025 totaled $880 million, compared to $1.056 billion for all of 2024.
• The company maintains a strong cash position of $433 million, with half deployed in working capital.
• Capital expenditures included $6 million for property and $12 million for land stabilization in 2024.
• Powell announced its 48th consecutive dividend, reflecting consistent shareholder returns.

Operational Updates

• The acquisition of REM Stack enhances Powell’s automation business by integrating advanced control and monitoring solutions.
• A new VP of Service has been appointed to expand the company’s services franchise.
• Powell introduced three new products targeting utilities, oil and gas, and broader industrial markets.
• The company has effectively managed tariff concerns, leveraging USMCA agreements to avoid tariffs with Canada and Mexico.

Future Outlook

• Powell is focused on organic and inorganic growth, particularly in automation and services.
• The company plans continued investment in R&D to commercialize new products.
• Capital allocation priorities include working capital, R&D, and strategic acquisitions, with potential evaluations of buybacks and dividends each quarter.
• REM Stack’s acquisition is expected to open new market opportunities beyond the UK utility sector.

Q&A Highlights

• Powell’s exposure to LNG accounts for 10-15% of its oil and gas segment.
• The company typically collaborates with EPCs and directly engages with end customers for specific projects.
• There is no indication of double ordering in Powell’s backlog, which is defined by firm contractual commitments.

Powell Industries continues to demonstrate strong market positioning and strategic growth initiatives. For a detailed understanding, readers are encouraged to refer to the full conference call transcript.

Full transcript - 16th Annual Midwest Ideas Conference:

Harold, Host: Alright. Good afternoon everybody and thank you for coming. Up next we have Powell Industries trading on NASDAQ under symbol POWL. On behalf of the company we have Michael Metcalf, EVP and CFO.

Michael Metcalf, EVP and CFO, Powell Industries: Thanks, Harold. Good afternoon and thanks for your your time today. It’s good to be back. This is my I was telling Harold this is my third third annual time here. It gets better every time.

So it’s it doesn’t disappoint. Good good attendance. So I’m from Powell. I’m the CFO, and I’ve been with the company for about seven years. Unfortunately, our CEO was unable to make it.

So I’m carrying the banner today. Little bit about who Powell is. We are an electrical distribution company. So we make electrical, industrial electrical components in predominantly in in the Gulf Coast and in Houston. We were founded in Houston.

We we had our 70 birthday here this last year, so we’ve been around a while. We do have a global footprint. We have we have facilities our largest facilities are in the manufacturing facilities in The US, three of which are in in in the Houston area, one here in Chicago and Northlake and one in Ohio. We have a large facility in Western Alberta and Canada and we have a facility in The UK as well. Last year, we hit, our high watermark of of revenues of just over a billion dollars, and, we we like to we like to clamor our our, you know, brag about our balance sheet, which is very very very liquid and remains that way today.

So these are the products that that Powell builds. On the left hand left hand side is this is the IP of the business. This is a circuit breaker. This is no different than if you were to go into your place of residence and open that gray box with all those circuits. This is the same thing but a 500 pound version.

So this is distributing distributing power across utilities, across petrochemical facilities, it could be sitting outside a data center, every every channel that we play in. That product, it goes into what’s called switchgear, this middle picture. It’s essentially the metal cabinet that’s engineered to distribute the power through the switch through the breaker to the sources that, that require it. We make medium voltage switchgear and we also make low voltage switchgear. So from a breaker standpoint, we have two breakers.

We have a Powell breaker, medium voltage breaker that was developed in the eighties. And then in 02/2006, Tom Powell bought GE’s medium voltage breaker. So we have two medium voltage breakers. So suffice it to say, very strong in medium voltage and that goes into our medium voltage switchgear. And our low voltage switchgear, we do not have a low voltage, breaker.

So we’ll buy low voltage breakers from the likes of Eaton, Siemens, Schneider. That equipment, when it when it’s assembled, goes into what’s called a power control room or on the right hand side, this looks to be an offshore module, two story module. All this electrical equipment will be packed into this module, and it will be built on-site, tested, and ultimately shipped to its final destination. As I mentioned, our wheelhouse is in in zero to 38 kV. So, anything up to 38,000 volts, down to a a thousand volts is is where we play and we’re very strong.

We’re an ETO, engineered to order operation. So most of our products, when they leave the facility, are specifically engineered and designed for a specific electrical configuration. And we have very, very sticky customer relationships as well. You know, this is I get asked a lot about the grid and and where do we play in the grid. This is a snapshot of of of the grid.

So it’s important to understand Powell is agnostic to how the power is derived. If the power is derived solar, wind, coal, hydro, really really doesn’t matter. And we’re also agnostic to where that power goes. Power goes there’s probably a medium voltage switchgear in the bottom of this building that’s being stepped down and then powering the lights. Chicago Transit, we’ve got we’ve got gear on on CTA, industrial applications, etcetera.

We really don’t we’re agnostic to where it goes. But in in between those two streams, all the switching that happens in the medium voltage space is where Powell plays and Powell plays very strong. So across the globe today, there are two electrical standards, and this is this is an important facet for investors to understand as as you understand how we grew up, where we grew up, and and and the channels we play in. There’s the ANSI electrical standard, which is common in all of North America, some parts of The Middle East, Saudi, Kuwait, etcetera, big swaths of the Southeast. And then the rest of the world is on what’s called IEC.

So the same reason you take an electrical appliance over to Europe, you can’t plug it in, it’s because you’re on there’s two different electrical standards. Powell is very very strong in the ANSI standard here in North America, and and in some parts of The Middle East. We bought our UK facility to begin to have a presence, not a large presence, but a presence in the IEC space in the industrial in the industrial elements and utility sector within the within The UK. So we do have IEC capabilities, just not nearly to the to the magnitude that we have ANSI capabilities. And that’s very important as I get into the the geographical revenue.

So a typical power control room, I mean it could be a two to 3,000 square foot power control room. It could they they can go up to 10,000 square feet. The picture on the left hand side is it looks like a a two piece, so that seam on the top that’ll split apart and then when it gets to it’ll be built in one piece, they’ll split apart, they’ll ship it, they’ll get it back to to the site, and then they’ll they’ll put it back together. That’s a that’s a power control room. And that had that’s full of Powell gear, switch gear, breakers, etcetera.

And I mentioned the module previously, that’s an offshore module. We do those. We have an offshore yard right on the water that feeds into into Galveston Bay because they’re too large to ship over the over the road. We’ll do this that module is probably 750,000, 800,000 pound tons rather, and, it’ll be put on a barge and shipped to its ultimate destination. So these are all they’re the configuration, the electrical configuration is unique to each one.

There there are multiple subcontractors. We don’t make everything that goes into these PCRs. We have to go we have to buy you can see HVAC units off the side of this building. We have to buy that. There’s battery backup systems inside.

We don’t make those transformers. We don’t make. So what we do is we buy the things we don’t make. We make the things we make. We integrate the overall solution for the customer, put it on its put it put it at its final resting spot here on its pilings, plug it in and it’s distributing power across across the site.

We also have a growing, arm of our business, control and monitoring solutions. This is an automation arm whereby, we have the hardware, probes, if you will, that are embedded within this equipment. And these they’re they’re potassium tipped probes, and they can detect anomalies, electrical anomalies, heat anomalies, dust, grease, etcetera, and they send a they they communicate with that yellow box. And today, that yellow box will sit on the face of on the outside of a of switchgear. That’s where it stops.

We announced, about three weeks ago an acquisition, UK operation called REM Stack that’s a controller that will interface, they’ll take SCADA from this from this the hardware that we have today and ultimately read it and send it to an operator’s device whether it’s an iPad, an iPhone, a desktop, whatever the case may be, to give predictive analytics and preventative maintenance data to an operator say, hey, across your two dozen power control rooms on your site, Building Number 10 has a problem in switchgear lineup, you know, Number 72. Go look at it. Much more efficient than manually checking each each each lineup as they do in in in a lot of cases today. Where we play today strongly is about 50 to 60% depending on the time. Today, it’s a little over 50 is what I would call core industrial markets.

So it’s LNG, it’s carbon capture, it’s hydrogen, it’s your legacy refineries, pipelines, green diesel, sustainable airline fuels. Wherever you have a a high hydrocarbon that’s being moved in large quantities needs a lot of power to move it, that’s gonna fall under our oil and gas umbrella. We also segment out our utility sector. So any generation and distribution, we don’t do any transmission today, but predominantly generation and distribution application for utility is separated out in our our q’s and our k’s. We also are heavy, not heavy, but we’re we’re present a lot less so today than we were probably five years ago in the light rail traction sector.

As I mentioned earlier, if you were to go on CTA, you pass substations. In a lot of cases, those substations could be Powell substations that are powering the tracks. So we do that all over all over the country, in Canada as well. Metals and mining, this is not frequent, but we did just book a large, mining project, potash mine in Canada here about six months ago. So again, wherever you need large amounts of of power to move material, Powell is going to be relevant.

And then ultimately data centers. Data centers have been a new, add to the portfolio over the last two or three years. Today, we we’ve broken that out into a separate sector because it did it was being captured in an all other bucket that exceeded the 10%. So we broke that out into a commercial and other industrial sector here probably two, three years ago. And that sector today altogether is 15%, about half of that is attributable to data centers.

Powell’s Powell’s business model is is unique. You know, I I I often get people are sometimes surprised that we go toe to toe with the guys on the left hand side, the the multinationals. They build the same products we build. They have a lot of smart engineering folks, but when they go to market, they don’t have the building kit, the the wrapper, the building capabilities, and the integrating on one site capabilities. So when Powell goes into a campaign, our value prop is number one, we will engineer this thing any way you want it.

If we’re in the middle of a project and you have a change, great, that’s fine. We’ll we’ll work with the customer to accommodate that change. They’re gonna pay for it, but we’re happy to do it. And it’s done all in one site under under one roof. So we build raw raw steel copper comes in the back door.

It gets cut, bent, welded, painted, assembled into switch gear, breakers, and then ultimately the power control room, it gets assembled in the front of the shop. The customer comes in, they test it, they don’t like something, we use the we we use our labor on-site to fix it. The next morning they come in, everything’s fine, we put it on a truck and and off it goes to the to the to the facility. On the other hand, the folks on the left hand side because they don’t have that building capability and they’re a little bit less nimble from a ETO standpoint and flexibility standpoint, they have to go hire one of the building manufacturers, three of which are listed on the on the right hand side, but there are there are many. And they have to ship their gear from all points across the globe to this facility and get it integrated, and then go through the same process that that I just explained.

And it’s a lot more it’s it’s much clunkier if there’s issues, there’s not on-site engineers to help them. So we we found that this is a this is highly valued across whether it’s our core industrial customers, utility customers, and and now we’re we’re finding data center customers value that as well. So our CEO Brett Cope’s been in that seat for roughly a dozen years. And about five years ago, four five years ago, we got to the point where his vision was ready to be it was ready to be assimilated with the investment community. And we put this this slide together and this is where both from an organic standpoint and an inorganic standpoint, These are the areas where Brett is really focused on adding to the portfolio, adding growth to the portfolio.

I just mentioned the automation business that we bought here mid August. Automation is a passion of his. He grew up in ABB, twenty plus years in ABB with controls and and and automation hardware. He knows it very well. This an area that I think as you as you learn Powell and you you follow Powell, this is an area that you’ll you’ll see continued focus on.

Our services franchise, you know, when we bought the General Electric Breaker in 02/2006, we also bought an installed base of these breakers. I mean, how many GE refrigerators are there across The US? Equal number of these GE breakers in Middle East and wherever the ANSI, ANSI standard is prevalent, GE power vac medium voltage breakers you can you can pretty much guarantee they’re there. And this is an area where we’re we’ve brought on a new vice president of service. He’s building a team.

They have a lot of great ideas. This is an area where we we wanna we wanna deliver value added services to our customer base, new and existing customer base. Then ultimately building out the the the product portfolio. As I mentioned earlier, we are if you think about the utility space, there’s generation, there’s distribution, there’s transmission. We are heavy in the distribution and generation piece.

We’re we’re very very relevant there. We don’t have anything in transmission. Is there are there some opportunities that could be nice tuck ins in that area amongst a plethora of other portfolio ads. But the these are the areas as we think forward, you know, five, ten, fifteen years, what does this business wanna look like in in a decade, these are the areas where where we’re really focused. So from a capital allocation perspective, I mentioned we’re very liquid.

You know, we closed last fiscal quarter with over over 400,000,000 of cash, zero debt. Of that of that cash and I’ll get into it in a minute, I think on the next slide, a lot of that cash will be deployed to working capital. These projects that we have in our backlog, they span one to three years. So when we take the order, we take cash, we take down payment, milestones, and then we’ll spend that we’ll start spending that money six, nine, twelve, eighteen months later. So working we need to focus on the working capital making sure that we’ve got adequate capital there.

The organic and inorganic growth, I just I just talked about that. We were spending a lot in r and d. Recently, announced three new products within, within our commercial portfolio that exited the r and d pipeline. One for utilities, one for the oil and gas sector, and and really spanning across all of our all of our our end markets. So we aren’t overly weighted in in one or the other.

We’ve got a very robust r and d pipeline and hopefully we continue to see see products get commercialized out of that over the next several years frankly. And then we talk about whether it’s buybacks, dividends, every every quarter with the board. We did just have our forty eighth consecutive, dividend, announcement this last quarter. So when you think about the capital, as I said, 433,000,000 as we exited the, last quarter. Roughly half of that is is, is deployed to working capital.

And then between r and d and capex and the dividend, you know, it’s roughly 45,000,000. We just announced this acquisition, which was roughly 16,000,000. Leaves us roughly a 150,000,000 plus, free cash for deploying to to other initiatives. And you can see what we’ve done. We you can see how we’ve increased it as the level of business has gone gone up over the last few years.

We have we have deployed more capital across the business in those those different areas. CapEx, we’ve made some very thoughtful CapEx ads, haven’t gone crazy. We’ve we’ve bought, we bought a piece of property in 2024 for about $6,000,000, that gives us about nine, ten acres. If we need additional, area to lay down buildings. It’s close to our facility.

And we just announced last week, a deployment of about 12 and a little better than $12,000,000 to to stabilize the remaining portion of a 20 acre plot of land on on on the fabrication yard on the on the on the water that I mentioned earlier where we do the very very large buildings. So financially speaking, a five year snapshot, you’re going from really, you know, tough times to the market’s really good and you can see how the how the margins have reflected, the market activity. 2020 actually wasn’t that bad of a a year because in February 2020, we booked the largest, and it still is the largest order. It was at over $200,000,000, LNG order that we booked, in February 2020, and then March, March, the pandemic hit. So that fed us through through the, pandemic.

And remember the lead time for our products is when we book them, when we book these products, it’s gonna take us twelve, eighteen, maybe longer months longer to to execute them. So the projects that we booked in 2020, 2021 kind of exited the backlog in 2223. These are projects that had leaner margins. They’re firm fixed price contracts. So at the end of COVID, ’22 when the inflationary pressures hit, we we got kinda we got caught flat footed, hit the reset button, made a ton of changes commercially, operationally, and that culminated with the, you know, the data center resurgence, whether there’s a second derivative and how that’s impacting the utility demand.

It’s it’s really helped us from an operating leverage perspective as well as, you know, just the the natural pricing dynamics in the market. And you can see the operating cash flow very very strong across last three years. We generate a lot of cash. I won’t belabor this page other than to say if you look at that lower left hand corner chart, you can see in 2023, the fourth quarter twenty two through the third quarter twenty three, we booked an order that was we call them mega orders. If it’s greater than $50,000,000, we call them out in in our to our investors.

And from 04/2022 to 03/2023, there was a minimum of one mega and they were all well over 50 that we booked. And that you can see in the upper left hand quadrant, that resulted in the backlog surpassing a billion dollars in in 2023. 2024, we didn’t book any large mega orders, nothing over $50,000,000, but the activity across all of our end markets, data centers, utilities, just the regular oil and traditional oil and gas refining pipeline, petrochem, just very steady state plus some and we were able to maintain a one one point one book to bill through 2024, didn’t erode the margin at all. And this latest quarter and on the heels of last couple quarters, we’ve started to see some of these larger 50 plus million dollars jobs, come come back. So the last quarter, that we just announced 03/2025, we, we’re up about a $100,000,000 in our backlog and we’ve booked $880,000,000 of orders through the first nine months of the year and that compares to about a billion 56 all all of 2024.

So we’re we’re very pleased with our orders cadence and our backlog and our throughput in the business as as we sit here today. We added this slide this quarter because we get a lot of questions on our backlog especially given what utilities done. And you can clearly see it was in the high high teens in 2020 that as of the last quarter, it’s almost a third of our backlog. So the, you know, 17% of a total backlog of 477,000,000 in 2020 is now 32% of a total backlog of 1,400,000,000.0. And we also segmented out the commercial and other industrial sector, you know, that in 2020 that was 2%.

It had zero zero data data center volume. And we started to see through COVID, specifically ’22 plug, ’22 and on, started to see that data center work which is captured in this sector begin to begin to build up in in backlog in ’22. Now I mentioned the difference between ANSI and IEC, and this is this is kinda where you see it. We are over 80% of our revenues are in The United States. And in that international revenue, you’ve got Canada, which Canada is the predominant piece of that nine other 19%, but we do we do include it in in in international.

So that international revenue is is UK based revenue, as well as, as well as Canada. But it’s it’s really driven that US revenue is driven by the ANSI standard where we grew up. We’re very strong in the ANSI world. So anything in blue, the blue color is 100% ANSI. The yellowish color, they have a mix of ANSI and IEC.

So we can compete there if it’s an ANSI application. We can compete less competitively if it’s an IEC application. The the gray is all ICE IEC and, we we pick our battles we pick our battles well there. Now over 806,000,000 through the first nine nine months, 50 plus percent is I I call it core industrial. So oil and gas, you can see everything we we put in oil and gas there and then petrochemical.

So petrochemical is plastics, fertilizers, ammonia, gas to chemicals if you will. The the, utility space, if this chart were to go, you know, out to twenty twenty, twenty twenty one, as I as I alluded to on the backlog chart, we have held 20 to 25% top line segmentation to electrical utilities for at least the last three years. And you can see the the pie in the the bright blue, the commercial and other industrial. That was in 2221 that was high single digits and now it’s grown into the 15 to 17 type of type type of number and that’s really driven by data centers. Probably half of that is is data center data center data center attributable.

So, you know, that’s that’s really all I have today for for Powell. I’ll leave a few minutes to to take questions. But, suffice it to to to say to wrap up, really, all of our end markets are are very active, whether it’s in the oil and gas segment in oil in in LNG, utilities, whether it’s attributable to the demand for data centers, to the demand of the infrastructure, build out. And then we’re starting to see some of these ancillary markets, whether it’s mining, getting a mining job here, a light rail traction job there. Jobs jobs coming in are are larger in scale, more power is demanded.

So that’s that’s where that’s where power plays very very well. So with that, take any questions. We’ve about five minutes left. Of the oil and gas segment, how much is it on LNG? We don’t specifically break that out but I would say, you know, it’s probably roughly 10 to 15% roughly.

And is your customer typically the EPC or is it the It’s typically the EPC. We do have both worlds. I mean, we will, in LNG specifically, we will work with the end customer very closely even if it’s with an EPC. We when the EPC leaves, we want them to know how else they’re going to. They they know who to call for for that that application as well as their next application.

And we do see instances where they will reach out if they’ve got, say, a brownfield expansion and they don’t want to engage in EDC, they might come direct to us. But for the large greenfield projects, big new configuration complex, they will typically select a large EPC and then the EPC will put the spec out for bid on the on the street. For utilities, that’s that’s typically that’s direct. They’ll come direct. Sure.

Two questions, tariffs. And the second question, you mentioned control and monitoring. What percent So on on tariffs, fortunately, we were a little worried with the Canada back and forth because we build all of our breakers that go into this equipment in Houston, and then we ship them to The UK and Canada. Fortunately, our breakers are covered under USMCA, so we don’t have we don’t have any exposure there. That was a concern at one point.

And then we put we build all of our wiring harnesses on the shoulders of the auto industry right across the border with the Makiodoras. They do all these very fine wiring and they label the wires and then they ship the wire harnesses up to our production facilities and we plug it into the switch gear. That was a concern early on, but that too is covered under u m USMCA. My most recent concern was this copper thing when copper spiked up to $5.50 a pound. Fortunately, we’re hedged, but hedges run out, and I was wondering what we’re gonna do if it maintains at $5.50.

Fortunately, administration, they clarified a specific type of source of copper that is, exempted and that was that that fell under, what we what we buy. So copper went away. My most recently my most recent concern is India with India’s, exposure to tariffs due to the the Russian con Russia UK or Ukraine conflict, we buy batteries and transformers out of out of India. So, you know, if if that continues, we would we are in the process of pivoting suppliers, but that doesn’t help us in the short term. Unfortunately, it’s immaterial, it’s rather immaterial.

But we’re watching it closely. If it’s a tariff that we are not going to be able to mitigate, we’re going roll it into a pricing model and pass it on. Now your recurring revenue question on this business that we bought in The UK, today it’s a product model. They sell a controller, there’s no, you know, software as a service, recurring, recurring updates, things of that nature. Can we get there someday?

Potentially. But REMstack’s been part of the family for two weeks, and, I think the biggest opportunity that we see is today, they are laser focused on The UK utility side. That’s it. And this product is agnostic to either electrical standard, irrespective of the geography, irrespective of the channel, whether it’s an oil and gas customer, whether it’s a utility customer, whether it’s a traction power customer. This product can be deployed anywhere in our gear and they weren’t able to penetrate other markets because you need to embellish in the switchgear, which they don’t build.

They just build the product. They have to go to a switchgear manufacturer. We’ve got switchgear all over the place. We’ve switchgear in The UK. We’ve got it in Canada.

We’ve got it here. So that that’s the that’s the value prop that that Brett and the team identified as we and this one was in work works for a long time, and, fortunately, they didn’t sell to PE. They didn’t like PE. They didn’t like some of the local UK folks that they were talking to. They liked Powell, they liked the culture.

It’s a it’s a I think it’ll be a good add to the portfolio. Somebody else have a question? Yeah. Can I just ask one, how is backlog defined? What needs to happen for something Yeah.

Is a firm contractual commitment with a termination clause. K. Nothing in backlog. We have zero letters of intent backlog, zero MO MOUs, memorandums of understanding in backlog. It is a signed contract to deliver, and if the customer deems that they want to terminate, there’s a cost to do so.

Has there ever been an instance, just given some of the things going on with dentists and others, has there ever been any indication or inclination at all of any type of double ordering? Double order? Yeah. Any anyone else? Okay.

Thank

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