POWL 10-K & 10-Q changes, risk factors and insider trading

The end markets that we serve have historically been cyclical and will continue to be vulnerable to general downturns, which in turn could materially and adversely affect the demand for our products and services. Cyclicality is predominately driven by customer demand, global economic and geopolitical conditions and anticipated environmental, safety or regulatory changes that affect the manner in which our customers proceed with capital investments. Our customer projects, budgets for capital expenditures and the need for our services have in the past, and may in the future, be adversely affected by, among other things, the price of oildemand and gas,price poorfor oil, gas and electrical energy, the overall economic conditions,and financial environment, governmental budgets, commodity prices, political uncertainties, cost of capital, currency fluctuations, regulatory actions and currencyenvironmental fluctuations.concerns. These variables may impact the number or the amount of new awards, delays in the timing of awards or potential cancellation of projects. Changes in product mix or services can have a significant impact on our gross margins on a quarterly and annual basis. The uncertainty of our contract award timing is outside of our control and can also present difficulties in matching workforce size with contract requirements. In some cases, we bear and maintain the cost of a ready workforce that may be larger than necessary in anticipation of future workforce needs. If an expected contract is delayed or not received, we may incur additional costs in staff or facility redundancy that could have an adverse impact on our business, financial condition and results of operations.

Failure to place competitive bids and adequately project future costs may result in losses on our fixed-price contracts with customers.

Our products and services are typically awarded in competitive bid situations. When placing bids, we may fail to adequately project costs for our customers’ projects, which may lead to us winning a bid that does not adequately compensate us for our costs. Such failure could adversely impact our results of operations. Factors that could impact our ability to adequately project costs for our bids include, but are not limited to: the impacts of inflation; labor shortage; the cost of raw materials; increases caused by tariffs; delays incurred by the failure of third-party suppliers to deliver in the quality or quantity required; unanticipated technical problems, including design or engineering issues. Additionally, we bear the risk of cost overruns and delays in most of our contracts and, as a result, if we fail to adequately manage such cost overruns or delays, our results of operations and our business may be adversely impacted.

All of the products that we manufacture and sell depend upon optimizing available technology for success in the marketplace. The industries in which we operate are characterized by intense competition and are highly sensitive to technological innovation and customer requirements. Our competitors may develop products or production methods that are superior in price or quality, or incorporate artificial intelligence (AI) into their products that will make current products or services offered by us obsolete. Our future success will depend, in part, on our ability to anticipate and offer products that meet changing industry and customer specifications, including by funding our research and development costs. For example, consumer demand for further automation is changing the markets in which we operate. Failure to successfully develop new products, or to enhance existing products, could result in the loss of existing customers to competitors, the inability to attract new business or an overall reduction of our competitive position, any of which could adversely affect our business and results of operations. Our competitors or other third parties may incorporate AI, including machine learning, data science and similar technologies, into their product development, product enhancement or product offerings more quickly or more successfully than us, which could impair our ability to compete effectively and adversely affect our business, financial condition and results of operations.

The algorithms and models utilized in generative AI systems may have limitations, including biases, errors, or inability to handle certain data types or scenarios. Furthermore, there is a risk of system failures, disruptions, or vulnerabilities that could compromise the integrity, security, or privacy of the generated content. These limitations or failures could result in reputational damage, legal liabilities, or loss of customer/user confidence. Cybersecurity threats and the techniques used in cyberattacks change, develop and evolve rapidly, including from emerging technologies, such as advanced forms of AI and quantum computing. Because AI technology is highly complex and rapidly developing, it is not possible to predict all of the legal, operational or technological risks that may arise relating to our use of AI. The complex and rapidly evolving landscape around AI could expose us to claims, inquiries and proceedings by third parties and global regulatory authorities and subject us to legal liability as well as reputational harm.

The success of our business depends upon the quality of our products and our relationships with customers. In the event that one of our products failsfail to meet our customers'customers’ standards or safety requirements or failsfail to operate effectively, our reputation could be harmed, which would adversely affect our marketing and sales efforts. We provide warranties to our customers for our products and services, and the cost to satisfy customer warranty claims, which may include, among other things, costs for the repair or replacement of products could adversely impact our business and results of operations.

Many of our customer contracts have schedule and performance obligation clauses that, if we fail to meet, could subject us to penalty provisions, liquidated damages or claims against us, or our outstanding letters of credit or performance bonds. In addition, some customer contracts stipulate protection against our gross negligence or willful misconduct. Each individual contract seeks to define the conditions under which the customer may make a claim against us. Due to the growth in our backlog, our manufacturing and fabrication capacity as well as our ability to recruit and retain qualified labor is challenged resulting in an increased risk of meeting delivery dates and other contract performance obligations. It is possible that adjustments arising from such claims, or our failure to manage our contract risk, may not be covered by insurance and could have an adverse impact on our results of operations.

Our strategy includes the pursuit of growth and product diversification through the acquisition of companies or assets and entering into joint ventures that could enable us to expand our geographic coverage and product and service offerings. We periodically review potential acquisitions; however, we may be unable to successfully implement this strategy. Acquisitions involve certain risks, including distraction of management, possible disruption to ongoing business, difficulties in the integration of operations and systems;systems, failure to realize cost savings; and achieve anticipated synergies, complications arising from merging differing cultures, systems, or technologies, the termination of relationships by key personnel and customers of the acquired company and a failure to retain or add additional employees to handle the increased volume of business. Additionally, financial and accounting challenges and complexities in areas such as valuation, tax planning, treasury management, systems integration and financial reporting from our acquisitions may impact our operating results. Due diligence may not be adequate or reveal all risks and challenges associated with our acquisitions. Companies that we acquire may not achieve revenues, profitability or cash flows that we expect, or that ultimately justify the investment. It is possible that impairment charges resulting from the overpayment for an acquisition may negatively impact our results of operations. Financing for acquisitions may require us to obtain additional equity or debt financing, which may not be available on attractive terms, if at all, or which may be restricted under the terms of our credit facility or other financing arrangements. Any failure to successfully complete or successfully integrate acquisitions could have a material adverse effect on our business and results of operations.

Various factors drive demand for our products and services, including the price and demand for oiloil, gas and gas,electrical energy, capital expenditures, economic forecasts, global political environments (including war and terrorism), anticipated environmental, safety or regulatory changes and the cost of capital. Unanticipated increases in raw material and component requirements or prices, the imposition of tariffs, and changes in supplier availability or supplier consolidation could increase production costs and adversely affect profitability. Uncertainty regarding these factors could impact our customers and severely impact the demand for projects and orders for our products and services. Additionally, the loss of significant volume from one particular customer at one of our facilities could adversely impact the operating results of that facility. Our ability to maintain or expand our business would be limited in the future if we are unable to maintain or increase our bonding capacity or our bank credit facility on favorable terms or at all. Similarly, disruptions in the capital markets or increased interest rates may also adversely impact our customer'scustomer’s ability to finance projects, which could result in contract cancellations or delays. These disruptions could lead to reduced demand for our products and services and cancellation of existing projects, and could have an adverse impact on our business, financial condition and results of operations.

Our credit agreement contains various financial covenants and restrictions, which includes maintaining a consolidated net leverage ratio of less than 3.0 to 1.0 and a consolidated interest coverage ratio of greater than 3.0 to 1.0. For more information on our credit agreement and the restrictions thereunder, see Note GG. Long-Term Debt of the Notes to Consolidated Financial Statements. Our ability to remain in compliance with such financial covenants and restrictions may be affected by factors beyond our control, including general or industry-specific economic downturns. If we fail to remain in compliance with such covenants and restrictions, absent an amendment or waiver, this could result in an event of default under the credit agreement. Among other things, the occurrence of an event of default could limit our ability to pay dividends, issue letters of credit, or obtain additional financing or result in acceleration of outstanding amounts under the credit agreement or a termination of the agreement, any of which could have an adverse impact on our liquidity, business and results of operations.

Risk Factors Related to our Corporate Structure and our Common Stock

We are subject to income taxes in the United States and numerous foreign jurisdictions. A change in tax laws, deductions or credits, treaties or regulations, or their interpretation, in the countries in which we operate, could result in a higher tax rate on our pre-tax income, which could have a material impact on our net income. For example, several jurisdictions have implemented or are expected to implement in the future, the Organization for Economic Co-operation and Development Pillar 2, which is aimed at preventing base erosion and profit shifting, ensuring income is subject to a minimum level of taxation and preventing treaty misuse. The application of these provisions is not always certain, and jurisdictions are still developing their rules and interpretations with regard to the same. The One Big Beautiful Bill Act (the OBBBA) was recently signed into law and includes a broad range of tax reform provisions affecting businesses. The OBBBA extends and modifies certain key 2017 Tax Cuts & Jobs Act (TCJA) provisions (both domestic and international) and revamps some of the TCJA’s provisions on the taxation of corporations’ foreign income. The OBBBA also expands certain Inflation Reduction Act incentives while accelerating the phase-out of others. We are regularly under audit by tax authorities, and our tax estimates and tax positions could be materially affected by many factors including the final outcome of tax audits and related litigation, the introduction of new tax accounting standards, legislation, regulations and related interpretations, our global mix of earnings, the extent to which deferred tax assets are realized and changes in uncertain tax positions. A significant increase in our statutory tax rates or loss of our ability to claim Research and Development Tax Credits could have a material impact on our net income or loss and cash flow.

Increased global information technology cybersecurity threats and more sophisticated and targeted computer crime pose a risk to the security of our systems and networks, and the confidentiality, availability and integrity of our data and communications. While we attempt to mitigate these risks by employing a number of measures, including employee education, comprehensive monitoring of our networks and systems, and maintenance of backup and protective systems, our systems, networks and products remain potentially vulnerable to advanced persistent threats. Depending on their nature and scope, such threats could potentially lead to the compromise of confidential information and communications, improper use of our systems and networks, manipulation and destruction of data, defective products, production downtimes and operational disruptions, which in turn could adversely affect our reputation, competitiveness and results of operations.

There has been an increased focus on ESG matters byhave been a focus for consumers, investors, as well as by governmental and non-governmental organizations. For example, organizations that provide ESG information to investors have developed ratings processes for evaluating a business entity’s approach to ESG matters. Although currently no universal rating standards exist, certain investors use these scores to benchmark businesses against their peers and, if a business entity is perceived as lagging, these investors may engage with the entity to demand improved ESG disclosure or performance. Consequently, a low sustainability score could result in exclusion of our securities from consideration by certain investment funds, engagement by investors seeking to improve such scores and a negative perception of our operations by certain investors. To the extent that our ESG initiatives are deemed to be insufficient by stakeholders, this could adversely impact our business, results of operations, stock price or competitive position.

Climate change regulations could require us or our customers to incur additional expenditures to either purchase new, or modify existing equipment or processes. These laws and regulations may also increase the cost of raw materials from our suppliers. The potential for future ESG and climate risk reporting requirements may result in additional costs to monitor, track and report sustainability measures. Additionally,For increasedexample, attentionthe State of California has published new rules that would require companies doing business in California to climateprovide change,significantly conservationexpanded measures,climate-related energydisclosures transition,in negativetheir attitudesperiodic towardreporting. oilNew and naturalproposed gasregulatory productionrequirements may require us to incur significant additional costs to monitor and consumer demand for alternatives to hydrocarbons could reduce the demand for oilcomply, and gasmay applications.also This,include inadditional turn,internal couldcontrol adversely impact the demand for the products produced by our customers and, therefore, reduce demand for our products, which could adversely impact our businessprocesses and results of operations.procedures.

The following discussion and analysis of our financial condition and results of operations for the twelve months ended September 30, 20242025 compared to the twelve months ended September 30, 20232024 should be read in conjunction with the accompanying consolidated financial statements and related notes included in this Annual Report. For discussion and analysis of our financial condition and results of operations for Fiscal Year 20232024 as compared to Fiscal Year 2022,2023, please refer to Part II, Item 7. “Management'sManagement’s Discussion and Analysis of Financial Condition and Results of Operations” in our Form 10-K for the fiscal year ended September 30, 2023,2024, filed with the SEC on DecemberNovember 6,20, 2023.2024. Any forward-looking statements made by or on our behalf are made pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Readers are cautioned that such forward-looking statements involve risks and uncertainties, and the actual results may differ materially from those projected in the forward-looking statements. For a description of the risks and uncertainties, please see “Cautionary Statement Regarding Forward-Looking Statements” and Part I, Item 1A. “Risk Factors” included elsewhere in this Annual Report.

In Fiscal 2024,2025, we reported revenues of $1.0$1.1 billion, net income of $149.8$180.7 million, and generated $108.7$167.9 million in cash from operating activities. As of September 30, 2024,2025, we had total assets of $928.2$1.1 million.billion.

Our backlog wasincreased $1.3to $1.4 billion as of September 30, 2024,2025, of which approximately $849$824 million is expected to be recognized as revenue during our fiscal year ending September 30, 2025.2026. Although current commercial activity remains active in most of the markets that we compete in, we remain attentive to the macro environment and geopolitical events that may have an impact on future market activity.

Oil and gas and petrochemical markets. Our order activity remains strong in these markets. The North American market is responding to increased international demand for liquefied natural gas (LNG) and gas-to-chemical processes utilizing low-cost gas feedstocks. We believe the fundamentals of the U.S. natural gas market, through abundant supply and low cost, willhas continue to supportsupported investments in LNG, related gas processing, and petrochemical processes, and as a result, willhas continue to sustainsustained our order activity associated with such markets.markets, which is evidenced by two large, domestic LNG project awards during the first half of Fiscal 2025. Other oil and gas end markets have remained active as well, and we secured two large, offshore projects in our core oil and gas end markets during the third quarter of Fiscal 2025. In addition to the traditional crude oil refining and other oil and gas downstream processes, we have recently expanded our end markets into hydrogen production, carbon capture as well as alternative fuels, such as biofuels and sustainable aviation fuel, in response to the demand for clean energy.

Electric utility market. Aligned with our strategy of end-market diversification, we seek to continue our focus and growth in electrical distribution substations, while also addressing a resurgence of power generation investment in this market. During the third quarter of Fiscal 2025, we won a project for a new power generation plant, representing the largest electric utility award in the Company’s history.

Revenues increased by 45%,9%, or $313.0$92.0 million, to $1.0$1.1 billion in Fiscal 2024,2025, primarily driven by the increase instrong project backlog resultingat fromthe largeend contracts awarded duringof Fiscal 20232024 and strong bookings that continued throughout Fiscal 2024.2025. Domestic revenues increased by 52%,4%, or $288.6$33.7 million, to $846.5$880.2 million in Fiscal 2024.2025. International revenues increased by 17%,35%, or $24.5$58.3 million, to $165.8$224.1 million in Fiscal 2024.2025, primarily driven by increased project volume from our Canada operations and increased activity in the Middle East and Africa region. Our international revenues include both revenues generated from our international facilities as well as revenues from export projects generated at our domestic facilities.

In Fiscal 2024, revenue from our core oil and gas market (excluding petrochemical) increased by 53%, or $144.1 million, to $417.2 million in Fiscal 2024; petrochemical market revenue increased by 97%, or $91.4 million, to $185.6 million;2025, revenue from our electric utility market increased by 18%,50%, or $28.1$92.4 million, to $186.5$279.0 million; commercial and other industrial market revenue increased by 44%,19%, or $45.9$28.3 million, to $149.9$178.2 million; and revenue from allour otherlight marketsrail combinedtraction power market increased by 23%,87%, or $9.6$19.2 millionmillion, to $51.1$41.3 million. These increases in revenue were primarily driven by improved market conditions in most of our end markets, increased capital spending in our core oil, gas and petrochemical markets, as well as our strategic effort to expand our business into electric utility and commercial and other industrial markets and the improved market conditions in these end markets. Revenue from our light rail traction powerpetrochemical market decreased by 22%,19%, or $6.1$34.4 million, to $22.0$151.2 million with the reduction in backlog and bookings in this market and as the business nears completion of the large petrochemical order secured in Fiscal 2023. Revenue from our oil and gas market (excluding petrochemical) decreased by 3%, or $10.6 million, to $406.6 million and revenue from all other markets combined decreased by 6%, or $3.0 million to $48.1 million in Fiscal 20242025 due to less project volume in this market.volume. For additional information on the markets we serve, see “Markets” in Part I, Item 1 of this Annual Report.

Gross profit increased by 85%,19%, or $125.5$51.3 million, to $273.1$324.4 million in Fiscal 2024.2025. Gross profit as a percentage of revenues increased to 27%29% in Fiscal 20242025 as compared to 21%27% in Fiscal 2023.2024. This increase in gross profit iswas attributableprimarily todriven theby higher volumerevenues levelsand acrossimproved allgross ofprofit Powell'smargin manufacturingdue facilities generatingto favorable volume leverage,leverage and strong project execution,execution andin continuinga effort to improve factory efficiencies while also managing productstable pricing thatenvironment correspondsthroughout toFiscal current cost levels.2025.

Selling, general and administrative expenses increased by 8%,12%, or $6.1$10.5 million, to $84.9$95.4 million in Fiscal 2024,2025, primarily due to increasedhigher compensation expense and highercosts spendingassociated onwith infrastructurethe improvements.acquisition of Remsdaq. Selling, general and administrative expenses as a percentage of revenues decreasedincreased to 9% in Fiscal 2025, compared to 8% in Fiscal 2024, compared to 11% in Fiscal 2023, resulting from higher revenues on our existing cost structure.2024.

We recorded an income tax provision of $52.8 million in Fiscal 2025, resulting in an effective tax rate of 23%, compared to an income tax provision of $46.2 million in Fiscal 2024, resulting in an effective tax rate of 24%, compared to an income tax provision of $14.4 million in Fiscal 20232024 at an effective tax rate of 21%.24%. InFor both Fiscal 2025 and 2024, the effective tax rate was favorably impacted by the estimated Research and Development (R&D) Tax Credit and tax benefits related to the vesting of restricted stock units.units Theseand itemsthe estimated Research and Development Tax Credit, which were offset by state income tax expense,expense and certain non-deductible items,items. andAdditionally thein taxFiscal impact2024, ofthese benefits were offset by an income inclusion related to U.S. global intangible income.

In Fiscal 2024,2025, we recorded net income of $180.7 million, or $14.86 per diluted share, compared to net income of $149.8 million, or $12.29 per diluted share, compared to net income of $54.5 million, or $4.50 per diluted share in Fiscal 2023.2024. ThisThe increase in net income iswas primarily duedriven toby higher revenuesrevenue coupled withand improved gross profit margins,margin asin wellFiscal as our disciplined cost structure.2025.

The order backlog, which is our remaining unsatisfied performance obligations, represents the estimated transaction price for goods and services for which we have a material right, but work has not been performed. The order backlog at September 30, 20242025 was $1.3$1.4 billion, consistenta with3% increase from our $1.3 billion backlog at September 30, 2023.2024. Bookings,This netincrease ofwas cancellationsmainly driven by electric utility, commercial and scopeother reductions,industrial decreasedand light rail traction power markets, partially offset by 24% in Fiscal 2024 to $1.1 billion, compared to $1.4 billion in Fiscal 2023. Despite strong bookings in Fiscal 2024, thea decrease in bookingsthe waspetrochemical duemarket. to a normalizationAs of theSeptember 30, 2025, electric utility and oil and gas sector(excluding withpetrochemical) fewermarkets largeeach ordersaccounted awardedfor in33% thisof sectorour duringbacklog, Fiscalthe 2024.commercial and other industrial market accounted for 15% and the petrochemical and light rail traction power markets each accounted for 8% of our backlog.

Cash, cash equivalents and short-term investments increased to $475.5 million at September 30, 2025, compared to $358.4 million at September 30, 2024,2024. compared to $279.0 million at September 30, 2023. ThisThe increase in cash, cash equivalents and short-term investments was primarily driven by our improvedstrong earnings due to increased project margins and volumes,earnings, partially offset by working capital allocatedcommitment, tocash projectspaid infor ourthe orderRemsdaq book,acquisition, capital spending, as well as dividend payments.payments, and cash payments related to shares withheld in lieu of employee tax withholding. We invest our cash, cash equivalents and short-term investments in accordance with the Company’s investment policy approved by the Board of Directors. We believe that our cash, cash equivalents and short-term investments, as well as available borrowings under our U.S. credit facility, will be sufficient to support our futureongoing operating activities, workingdividend capital requirements, payment of dividendspayments and capitalfuture spending,organic and inorganic business growth, as well as research and development initiatives for the next twelve months and beyond.

On October 4, 2023, we entered into a third amendment (the Third Amendment) to our credit agreement with Bank of America, N.A. (as amended, the U.S. Revolver). The Third Amendment which added Texas Capital Bank as Syndication Agent and a lender, increased the amount of the revolving line of credit from $125.0 million to $150.0 million, and extended the expiry date to October 4, 2028. The aggregate commitment of $150.0 million consists of $100.0 million committed by Bank of America and $50.0 million committed by Texas Capital Bank. As amended by the Third Amendment, the lesser of (a) $60 million, (b) 60% of available cash, and (c) the aggregate face amount of the issued but undrawn letters of credit that are not cash-secured shall be deducted from consolidated funded indebtedness, when calculating the consolidated net leverage ratio. We have the option to cash collateralize all or a portion of the letters of credit outstanding, which would favorably impact the consolidated funded indebtedness calculation and the consolidated net leverage ratio. On June 26, 2024, in connection with the expected discontinuation of the publication of the Canadian Dollar Offered Rate (CDOR), we further amended the U.S. Revolver by entering into a Canadian benchmark replacement conforming changes amendment with Bank of America, N.A. that added and amended certain terms related to the replacement of the CDOR as a benchmark rate with the forward-looking term rate based on the Canadian Overnight Repo Rate Average. On September 24, 2024, in connection with the expected discontinuation of the publication of the Bloomberg Short-Term Bank Yield Index Rate as administered by the Bloomberg Index Service Limited (BSBY), we further amended the U.S. Revolver by entering into a conforming changes amendment with Bank of America, N.A. that added and amended certain terms related to the replacement of the BSBY as a benchmark rate with the Secured Overnight Financing Rate (SOFR) as administered by the Federal Reserve Bank of New York. On September 30, 2025, we entered into a fourth amendment to the U.S. Revolver associated with a reorganization of holding companies of our foreign subsidiaries, replacing the prior share pledge on 65% of the equity interests of Powell Industries International, B.V., with the share pledge on 65% of the equity interest of Powell Industries International Limited.

As of September 30, 2024,2025, there were no amounts borrowed under the U.S. Revolver, and letters of credit outstanding were $63.8$77.5 million. There was $86.2$72.5 million available for the issuance of letters of credit and borrowings under the U.S. Revolver as of September 30, 2024.2025. For further information regarding our debt, see Notes GG. Long-Term Debt and HH. Commitments and Contingencies of Notes to Consolidated Financial Statements.

Operating activities provided net cash of $167.9 million during Fiscal 2025 and provided net cash of $108.7 million during Fiscal 2024 and provided net cash of $182.6 million during Fiscal 2023.2024. Cash flow from operations is primarily influenced by project volume and margins, as well as working capital requirements, the timing of milestone payments from our customers, and payment terms with our suppliers. The decreaseincrease in operating cash flow was primarily duedriven toby improved earnings and a steady allocation of working capital impact as we allocate capital to the projects in the order book, partially offset by higher net income resulting from increased project volume and improved project margins.book.

Actual revenues and project costs may vary from previous estimates due to changes in a variety of factors. The cost estimation process is based on the professional knowledge and experience of our engineers, project managers and financial professionals. Factors that are considered in estimating the work to be completed and ultimate contract recovery include the availability and productivity of labor, the nature and complexity of the work to be performed, the availability of materials, and the effect of any delays on our project performance. We periodically review our job performance, job conditions, estimated profitability and final contract settlements, including our estimate of total costs and make revisions to costs and income in the period in which the revisions are probable and reasonably estimable. We bear the risk of cost overruns in most of our contracts, which may result in reduced profits. Whenever revisions of estimated contract costs and contract values indicate that the contract costs will exceed estimated revenues, thus creating a loss, a provision for the total estimated loss is recorded in that period. See Note EE. Revenue of the Notes to Consolidated Financial Statements for disclosures related to changes in contract estimates.

It is common for our long-term contracts to contain variable consideration that can either increase or decrease the transaction price. Due to the nature of our contracts, estimating total cost and revenue can be complex and subject to variability due to change orders, back charges, spare parts, early completion bonuses, customer allowances and liquidated damages. We estimate the amount of variable consideration based on the expected value method, which is the sum of the probability-weighted amounts, or the most likely amount method, which uses various factors including experience with similar transactions and assessment of our anticipated performance. Variable consideration is included in the transaction price if legally enforceable and to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur once the uncertainty associated with the variable consideration is resolved.

See Note II. Income Taxes of the Notes to Consolidated Financial Statements for disclosures related to the valuation allowance recorded in relation to deferred taxes.

In the secondthird quarter of Fiscal 2026, we reported revenue of $296.6$311.7 million, net income of $45.9$52.2 million, and generated $51.2$100.2 million in cash from operating activities. As of MarchJune 31,30, 2026, we had total assets of $1.2$1.4 billion.

Our backlog increased to $1.8$2.4 billion as of MarchJune 31,30, 2026, with approximately $1.1$1.3 billion expected to be recognized as revenue within the next twelve months. During the first halfnine months of Fiscal 2026, commercial activity remained favorable across most of our end markets, with particularly strong demand in the commercial and other industrial, electric utility, and oil and gas (excluding petrochemical), and electric utility markets.

During the firstthird halffiscal quarter, we achieved total bookings of Fiscal$934 2026,million, weincluding secured fourthree mega orders, including twoa data center projects,project onevalued at over $400 million, which was disclosed as a subsequent event in the second fiscal quarter, a Liquefied Natural Gas (LNG) project,project valued at approximately $60 million, and onea petrochemical project invalued at approximately $75 million. For the electricfirst utilitynine market,months reflectingof Fiscal 2026, bookings totaled $1.9 billion, including seven mega orders across diverse end markets, demonstrating continued customer investment and strong activity across these end markets. Subsequent to the second fiscal quarter, we secured an additional mega order in the data center market with a value in excess of $400 million.activity. We remain encouraged by the outlook for both the data center and electric utility end markets and the durability of the current investment cycles. Notwithstanding this momentum, we continue to monitor macroeconomic conditions and geopolitical developments that could affect customer spending behavior or the timing of project awards. While current demand indicators remain positive, these external factors could influence future levels of market activity.

Oil and gas and petrochemical markets. The North American oil and gas end markets continue to exhibit strong commercial activity levels in response to rising global demand for LNG and gas-to‑chemical processes that leverage low‑cost natural gas feedstocks. We believe the fundamentals of the U.S. natural gas market, through abundant supply and competitive cost, continue to support investments in LNG facilities and related gas processing infrastructure. These dynamics contributed to sustained order activity, including a mega LNG project award of approximately $60 million during the firstthird fiscal quarter. Commercial activity in the petrochemical market has remained subdued over the past several quarters. However, we are cautiously optimistic that the petrochemical market may be entering the early stages of a cyclical inflectionrecovery following an extended period of reduced investment activity. Reflecting this potential improvement, we secured a mega petrochemical order during the third fiscal quarter with a contract value of approximately $75 million. Beyond traditional crude oil refining and other oil and gas downstream operations, we have broadened our end markets into hydrogen production, carbon capture as well as alternative fuels, such as biofuels and sustainable aviation fuel, aligned with growing demand for cleaner energy solutions.

Electric utility market. Aligned with our strategy of end-market diversification, we continue to focus on growth in electrical distribution substations while also addressing a resurgence of power generation investment in this market. During the secondfirst quarternine months of Fiscal 2026, we secured atotal mega orderbookings of approximately $75$313 million, reflecting continued customer investment in grid modernizationmodernization, transmission and distribution infrastructure, and generation capacity.capacity expansion.

Commercial and other industrial markets. AsWe acontinue resultto of a mix of factors, we are experiencingexperience strong growth inacross commercial facilitiesand thatindustrial provideend-markets, forprimarily driven by the production of various consumer goods and therapid expansion of data centers thatto supportmeet increasing demand for cloud computing and increasingartificial investmentsintelligence applications. During the first nine months of Fiscal 2026, we were awarded approximately $800 million in artificialdata intelligence.center Duringinfrastructure projects, including a mega order valued at over $400 million secured during the third fiscal quarter and two additional mega orders secured in the first half of Fiscal 2026, we were awarded projects related to data center infrastructure with a combined valueeach exceeding $300 million, including two mega projects, each with an order value greater than $75 million. Subsequent to the second fiscal quarter, we secured an additional mega ordermillion in thecontract data center market with a value in excess of $400 million.value. Commercial activity in this market sector reflects the continued investment in data center infrastructure, and we are also observing increased activity across other industrial end markets.

The markets in which we participate are capital-intensive and cyclical in nature. Cyclicality is predominantly driven by customer demand, global economic and geopolitical conditions and anticipated environmental, safety or regulatory changes that affect the manner in which our customers proceed with capital investments. Our customers analyze various factors, including the demand and price for oil, gas and electrical energy, the overall economic and financial environment, governmental budgets, regulatory actions and environmental concerns. These factors influence the release of new capital projects by our customers, which are traditionally awarded in competitive bid situations. Scheduling of projects is matched to customer requirements, and projects typically take a number of months to produce. Schedules may change during the course of any particular project, and our operating results can, therefore, be impacted by factors outside of our control. As data center projects become a larger component of our backlog and revenues: (i) our product mix may shift, as such projects will likely require less custom engineered-to-order equipment and systems than other end markets; (ii) we have, and will, become subject to additional risks related to that end market, including fluctuations in demand for data centers and developments in legislative or regulatory initiatives with respect thereto; and (iii) our operating results may be impacted by the aforementioned factors and risks, among others related to the data center end market.

Our operating results are impacted by several factors such as the timing of new order awards, project backlog, changes in project cost estimates, customer approval of final engineering specifications and delays in customer construction schedules, all of which contribute to short-term earnings variability and the timing of project execution. Our operating results also have been, and may continue to be, impacted by the timing and resolution of change orders and the resolution of potential contract claims and liquidated damages, all of which could improve or deteriorate gross margins during the period in which these items are resolved with our customers. Disruptions in the global supply chain have negatively impacted and may continue to negatively impact our business and operating results due to the limited supply of, delays for and uncertainty in the timing of the receipt of key component parts and commodities. We continue to remain focused on the variables that impact our markets as well as cost management, labor availability and supply chain challenges.

During the first halfnine months of Fiscal 2026, we continued experiencing high volatility in commodity prices, and ongoing supply chain delays for specific engineered components remained a persistent challenge for us. Moreover, ongoing and recently proposed changes to U.S. global trade policy (including legal changeschallenges thereto), along with potential international retaliatory measures, and concerns over inflation, recession and slowing growth have continued to cause high volatility in global markets and uncertainty around short- and long-term economic impacts in the United States and other markets we serve. We continue to evaluate and monitor the potential impacts of these changes and measures, including the imposition of tariffs, on our business and operations. We could potentially face the challenge of increased costs of raw materials and engineered components as well as negative impacts on our margins; however, it is not possible to predict the impact, if any, of any changes or proposed changes to the U.S. global trade policy, or any international retaliatory measures, on our business and operations. In response to the rising cost environment and persistent supply chain challenges, we are taking strategic measures to effectively manage our product pricing, refine delivery schedules, and manage bid validity dates with our customers. Our supplier engagement includes improving forecasting and negotiating favorable terms that allow us to meet or exceed customer timelines. Additionally, we remain focused on enhancing factory efficiencies and improving project execution to mitigate risks and maintain customer satisfaction.

Quarter Ended MarchJune 31,30, 2026 Compared to the Quarter Ended MarchJune 31,30, 2025 (Unaudited)

Revenue increased by 6%,9%, or $18.0$25.5 million, to $296.6$311.7 million in the secondthird quarter of Fiscal 2026. Domestic revenue increased by 2%,12%, or $4.4$26.1 million, to $232.3$250.6 million in the secondthird quarter of Fiscal 2026. International revenue increaseddecreased slightly by 27%,1%, or $13.5$0.6 million, to $64.3$61.1 million in the secondthird quarter of Fiscal 2026, primarily driven by increased activities in the Middle East and Africa, Europe, as well as the Asia/Pacific regions.2026. International revenue includes both revenue generated at our international facilities and export project revenue produced at our domestic facilities.

In the secondthird quarter of Fiscal 2026, revenue growth was led by strength in our commercial and other industrial, electric utility, and oil and gas (excluding petrochemical) markets. Revenue from the commercial and other industrial market increased 35%,54%, or $14.1$26.8 million, to $54.4$76.3 million; while revenue from the electric utility market grew by 14%,18%, or $10.1$13.7 million, to $80.5$88.6 million. Revenue from the oil and gas market (excluding petrochemical) increased 11%,1%, or $11.6$0.8 million, to $112.7$106.3 million. These increases were primarily driven by our strategic initiative to expand into higher-growth electric utility and commercial and other industrial markets, supported by strong backlog and robust booking activity in these end markets. Partially offsetting these increases, revenue from the petrochemical market declined by 37%,49%, or $16.2$17.9 million, to $27.6$18.5 million, and revenue from the light rail traction power market decreased 10%,7%, or $1.0$0.6 million, to $9.0$8.0 million. These declines were primarily attributabledriven toby lower bookingbacklog activity,across these end markets, particularly within the petrochemical market. Revenue from all other markets combined decreasedincreased 5%,23%, or $0.7$2.6 million, to $12.3$14.1 million in the secondthird quarter of Fiscal 2026.

Gross profit increased 5%,8%, or $4.5$7.4 million, to $87.9$95.3 million for the secondthird quarter of Fiscal 2026. Gross profit as a percentage of revenue remained flat at 30%31% compared to the secondthird quarter of Fiscal 2025. The increase in gross profit was primarily attributable to higher revenue.

Selling, general and administrative expenses increased 19%,6%, or $4.1$1.6 million, to $25.8$26.7 million in the secondthird quarter of Fiscal 2026, primarily due to higher compensation expenses.expenses, including the impact of the Remsdaq Limited acquisition completed in August 2025. As a percentage of revenue, selling, general and administrative expenses increasedremained toflat at 9% during the secondthird quarter of Fiscal 2026,2026 compared to 8% in the secondthird quarter of Fiscal 2025.

We recorded an income tax provision of $15.9$17.0 million in the secondthird quarter of Fiscal 2026, compared to an income tax provision of $16.1$15.9 million in the secondthird quarter of Fiscal 20252025. resulting in anThe effective tax rate ofwas 26%25% forin theboth second quarters of Fiscal 2026 and Fiscal 2025.periods. For each of the three months ended MarchJune 31,30, 2026 and 2025, the effective tax rates were favorably impacted by the estimated Research and Development (R&D) Tax Credit, which was offset by the tax expense related to certain nondeductible items. For additional information regarding our income taxes, see Note L. Income Taxes of Notes to Condensed Consolidated Financial Statements.

In the secondthird quarter of Fiscal 2026, we recorded net income of $45.9$52.2 million, or $1.25$1.42 per diluted share, compared to net income of $46.3$48.2 million, or $1.27$1.32 per diluted share (as adjusted for the Stock Split),share, in the secondthird quarter of Fiscal 2025. The decreaseincrease in net income was primarily driven by higher gross profit, partially offset by higher selling, general and administrative expenses and increased research and development expenses, partiallyincluding offsetthe byimpact higherof grossthe profitRemsdaq Limited acquisition completed in theAugust second quarter of Fiscal 2026.2025.

The order backlog, which represents our remaining unsatisfied performance obligations, reflects the estimated transaction price for goods and services for which we have a material right but for which work has not yet been performed. Order backlog at MarchJune 31,30, 2026 totaled $1.8$2.4 billion, representing a 12%35% increase from $1.6$1.8 billion at DecemberMarch 31, 2025.2026. This increase was mainlyprimarily driven by growth in the commercial and other industrial and electric utility markets.market. As of MarchJune 31,30, 2026, the electriccommercial utilityand other industrial market represented 30%40% of total backlog, while the oil and gas market (excluding petrochemical) and the commercialelectric and other industrialutility market each accounted for 29%.24%.

Bookings, net of cancellations and scope reductions, increased 97%158% in the secondthird quarter of Fiscal 2026 to $489.7$934.2 million, compared to $249.0$362.1 million in the secondthird quarter of Fiscal 2025. This increase was primarily driven by stronger booking activity across most of our end markets, particularly within the commercial and other industrial and electric utility markets.market.

SixNine Months Ended MarchJune 31,30, 2026 Compared to the SixNine Months Ended MarchJune 31,30, 2025 (Unaudited)

Revenue increased 5%,7%, or $27.7$53.2 million, to $547.8$859.5 million in the sixnine months ended MarchJune 31,30, 2026. Domestic revenue increased modestly by 0.4%,4%, or $1.5$27.6 million, to $427.2$677.8 million, while international revenue increased 27.7%,16%, or $26.2$25.6 million, to $120.6$181.8 million. The increase in international revenue was primarily driven by increased activity in the Middle East and AfricaAsia/Pacific region, as well as the Asia/PacificMiddle East and Africa and Europe regions.regions, partially offset by decreased activity in Canada. International revenue includes both revenue generated at our international facilities and export project revenue produced at our domestic facilities.

Revenue growth during the sixnine months ended MarchJune 31,30, 2026 was led by strength in the electric utility, commercial and other industrial, electric utility and oil and gas (excluding petrochemical) markets. Revenue from the electric utility market increased 23%, or $28.2 million, to $149.8 million, while revenue from the commercial and other industrial market increased 12%,28%, or $10.4$37.2 million, to $95.1$171.4 million, while revenue from the electric utility market increased 21%, or $41.9 million, to $238.4 million. Revenue from the oil and gas market (excluding petrochemical) increased 7%,5%, or $13.8$14.6 million, to $210.6$316.9 million. These increases were primarily driven by our strategic initiative to expand our business into the electric utility and commercial and other industrial and electric utility markets, as well as improvedstrong market activities in these end markets. Partially offsetting these increases, revenue from the petrochemical market decreased 35%,39%, or $26.6$44.4 million, to $50.3$68.8 million, and revenue from the light rail traction power market decreased 3%,4%, or $0.6$1.2 million, to $17.7$25.6 million in the first halfnine months of Fiscal 2026. These declines were primarily attributable to a reduction in backlog within the petrochemical market following the completion of a large petrochemical order secured in Fiscal 2023, as well as lower bookingbacklog activitylevels in these markets. Revenue from all other markets combined increased 11%,15%, or $2.5$5.1 million, to $24.4$38.5 million in the sixnine months ended MarchJune 31,30, 2026.

Gross profit increased 11%,10%, or $16.4$23.8 million, to $159.4$254.7 million for the sixnine months ended MarchJune 31,30, 2026. Gross profit as a percentage of revenue increased to 29%30% in the first halfnine months of Fiscal 2026, as compared to 27%29% in the sixnine months ended MarchJune 31,30, 2025. The increase in gross profit was primarily driven by higher revenues, as well as improved gross profit margin resulting from favorable volume leverage and strong project execution in a stable pricing environment.

Selling, general and administrative expenses increased 18%,14%, or $7.8$9.3 million, to $51.0$77.7 million in the sixnine months ended MarchJune 31,30, 2026, primarily due to higher compensation expensesexpenses, including the impact of the Remsdaq Limited acquisition completed in August 2025, and increased infrastructurespending expenses.on infrastructure. As a percentage of revenue, selling, general and administrative expenses increased to 9% during the first halfnine months of Fiscal 2026, compared to 8% during the first halfnine months of Fiscal 2025.

We recorded an income tax provision of $21.5$38.5 million in the sixnine months ended MarchJune 31,30, 2026, compared to an income tax provision of $20.8$36.7 million in the sixnine months ended MarchJune 31,30, 20252025. resulting in anThe effective tax rate ofwas 20%22% forin theboth first half of Fiscal 2026 and Fiscal 2025.periods. For each of the sixnine months ended MarchJune 31,30, 2026 and 2025, the effective tax rates were favorably impacted by discrete items related to the vesting of RSUs and the estimated R&D Tax Credit.Credit, Thewhich lowerwas effectiveoffset by the tax ratesexpense relativerelated to statutorycertain ratesnondeductible were primarily driven by higher stock prices associated with the vested RSUs.items. For additional information regarding our income taxes, see Note L. Income Taxes of Notes to Condensed Consolidated Financial Statements.

In the sixnine months ended MarchJune 31,30, 2026, we recorded net income of $87.3$139.4 million, or $2.39$3.81 per diluted share, compared to net income of $81.1$129.3 million, or $2.22$3.54 per diluted share (as adjusted for the Stock Split),share, in the sixnine months ended MarchJune 31,30, 2025. The increase in net income was primarily driven by higher gross profitprofit, duringpartially offset by higher selling, general and administrative expenses and research and development expenses, including the first halfimpact of Fiscalthe 2026.Remsdaq Limited acquisition completed in August 2025.

Order backlog, which represents our remaining unsatisfied performance obligations, reflects the estimated transaction price for goods and services for which we have a material right but for which work has not yet been performed. Order backlog at MarchJune 31,30, 2026 totaled $1.8$2.4 billion, representing a 28%73% increase from $1.4 billion at September 30, 2025. This increase was mainly driven by growth in the commercial and other industrial, electric utility and oil and gas (excluding petrochemical) markets. As of MarchJune 31,30, 2026, the electriccommercial utilityand other industrial market represented 30%40% of total backlog, while the oil and gas market (excluding petrochemical) and the commercialelectric and other industrialutility market each accounted for 29%.24%.

Bookings, net of cancellations and scope reductions, increased 79%112% to $928.5$1.9 billion during the nine months ended June 30, 2026, compared to $879.7 million during the sixnine months ended MarchJune 31, 2026, compared to $517.6 million during the six months ended March 31,30, 2025. This increase was primarily driven by stronger booking activity in the commercial and other industrial market, a recovery of the petrochemical market, and electric utility markets as well as continued growth in the oil and gas market (excluding petrochemical). and electric utility markets.

As of MarchJune 31,30, 2026, current assets exceeded current liabilities by 2.32.0 times.

Cash, cash equivalents and short-term investments increased to $544.9$633.6 million at MarchJune 31,30, 2026, compared to $475.5 million at September 30, 2025. The increase was primarily driven by our strong earnings performance, partially offset by cash payments related to shares withheld in lieu of employee tax withholdingwithholding, capital expenditures and dividend payments. We invest our cash, cash equivalents and short-term investments in accordance with the Company’s investment policy approved by the Board of Directors. We believe that our cash, cash equivalents and short-term investments, together with available borrowings under our U.S. credit facility, will be sufficient to support our ongoing operating activities, dividend payments and future organic and inorganic business growth, as well as research and development initiatives for the next twelve months and beyond.

Approximately $124.1$125.8 million of our cash, cash equivalents and short-term investments at MarchJune 31,30, 2026 was held outside of the U.S. to support our international operations. We intend to indefinitely reinvest all current and future foreign earnings internationally to ensure adequate liquidity and working capital for our international business. In the event that we elect to repatriate some or all of the foreign earnings that were previously deemed to be indefinitely reinvested outside the U.S., we may incur additional tax expense upon such repatriation under current tax laws.

As of MarchJune 31,30, 2026, there were no amounts borrowed under the U.S. Revolver, and letters of credit outstanding were $78.7$103.9 million. There was $71.3$46.1 million available for the issuance of letters of credit and borrowings under the U.S. Revolver as of MarchJune 31,30, 2026. For further information regarding our debt, see Notes F. Long-Term Debt and G. Commitments and Contingencies of Notes to Condensed Consolidated Financial Statements.

Operating activities provided net cash of $94.8$195.0 million during the sixnine months ended MarchJune 31,30, 2026 and provided net cash of $59.5$106.9 million during the same period in Fiscal 2025. Cash flow from operations is primarily influenced by project volume and margins, working capital requirements, the timing of milestone payments from customers, and payment terms with suppliers. The increase in operating cash flow was primarily driven by improved earnings and higher milestone payments associated with strong booking activity.

Investing activities provided $14.0$14.5 million of cash during the sixnine months ended MarchJune 31,30, 2026 and providedused $4.6$4.2 million of cash during the same period in Fiscal 2025. Cash provided by investing activities in the first sixnine months of Fiscal 2026 was primarily due to maturities of short-term investments, partially offset by capital spending. We continue to progress the expansion of our Jacintoport fabrication yard in Houston, which is planned to be completed by the end of Fiscal 2026.

Net cash used in financing activities was $21.0$24.5 million during the sixnine months ended MarchJune 31,30, 2026 compared to $18.4$21.7 million used during the same period in Fiscal 2025. The increase in cash used in financing activities was primarily due to cash payments related to shares withheld in lieu of employee tax withholding, largely driven by the increase of our share price in the first halfnine months of Fiscal 2026 compared to the same period of Fiscal 2025.