John Braatz

John Braatz from Kansas City Capital followed up for a specific figure regarding the incentive compensation catch-up in the fourth quarter.

Answer

Mike Metcalf, Powell's CFO, confirmed that the fourth quarter included a catch-up in variable compensation due to strong results, specifying that approximately $3 million of the $5 million year-over-year increase in Q4 SG&A was attributable to variable compensation and headcount additions.

John Braatz asked if management was surprised by the delays in LNG projects reaching Final Investment Decision (FID) since the pauses ended. He also sought insights into active areas within the C&I segment beyond data centers and the drivers behind the significant increase in traction market orders. Furthermore, he questioned whether Powell could leverage SG&A costs going forward, given the robust revenue line, and inquired about the specific amount of the incentive compensation catch-up in the fourth quarter.

Answer

Chairman and CEO Brett Cope acknowledged the delays in LNG projects but expressed continued confidence in the sector's strong activity and the timing of their JacintoPort investment. He identified mining and occasional pulp and paper cycles as other active C&I areas, in addition to data centers. Cope attributed the traction market's growth to a broader set of projects reaching market simultaneously across various regions. CFO Mike Metcalf anticipated SG&A leverage going forward, noting that the fiscal 2025 year-to-date SG&A as a percentage of revenue was only 20 basis points higher than 2024. Metcalf confirmed the incentive compensation was a Q4 catch-up due to strong results, with variable compensation contributing approximately $3 million to the $5 million year-over-year SG&A increase.