What changed in this filing

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Item 1. Financial Statements

2025-02-07 compared with 2024-07-31 · 106 added, 159 removed, 459 unchanged (37% of the section changed)

4 unchanged sentences

(In thousands, except share and per share data)

June 30, 2024 September 30, 2023

December 31, 2024 September 30, 2024

Current Assets:

12 unchanged sentences

Goodwill and intangible assets, net 1,503 1,503

Deferred income taxes 17,212 17,064

Deferred income tax assets 28,275 27,246

Other assets 17,639 18,313

12 unchanged sentences

Long-term operating lease liabilities 735 621

Deferred income tax liabilities 3,750 2,708

Other long-term liabilities 2,190 1,736

22 unchanged sentences

(In thousands, except per share data)

Three months ended June 30, Nine months ended June 30,

2024 2023 2024 2023

Three months ended December 31,

Revenues $ 241,431 $ 194,017

4 unchanged sentences

Operating income 35,572 25,880

Other expenses (income):

Interest income, net ( 3,865 ) ( 3,998 )

14 unchanged sentences

(In thousands)

Three months ended June 30, Nine months ended June 30,

2024 2023 2024 2023

Three months ended December 31,

Net income $ 34,763 $ 24,085

Foreign currency translation adjustments ( 8,069 ) 3,085

Gain (loss) on cash flow commodity hedge — ( 35 ) — 293

Comprehensive income $ 26,694 $ 27,170

14 unchanged sentences

Balance, December 31, 2024 12,871 $ 129 $ 59,959 $ 493,673 ( 806 ) $ ( 24,999 ) $ ( 32,430 ) $ 496,332

Net income — — — 33,488 — — — 33,488

Foreign currency translation adjustments — — — — — — ( 2,269 ) ( 2,269 )

Stock-based compensation 28 1 1,205 — — — — 1,206

Shares withheld in lieu of employee tax withholding — — ( 1,724 ) — — — — ( 1,724 )

Dividends — — 13 ( 3,249 ) — — — ( 3,236 )

Balance, March 31, 2024 12,794 $ 128 $ 68,348 $ 376,401 ( 806 ) $ ( 24,999 ) $ ( 26,093 ) $ 393,785

Net income — — — 46,223 — — — 46,223

Foreign currency translation adjustments — — — — — — ( 986 ) ( 986 )

Stock-based compensation — — 957 — — — — 957

Shares withheld in lieu of employee tax withholding — — — — — — — —

Issuance of restricted stock — — — — — — — —

Dividends — — — ( 3,240 ) — — — ( 3,240 )

Balance, June 30, 2024 12,794 $ 128 $ 69,305 $ 419,384 ( 806 ) $ ( 24,999 ) $ ( 27,079 ) $ 436,739

The accompanying notes are an integral part of these condensed consolidated financial statements.

POWELL INDUSTRIES, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

(In thousands)

Additional Other

7 unchanged sentences

Dividends — — 423 ( 3,204 ) — — — ( 2,781 )

Gain on cash flow commodity hedge — — — — — — 218 218

Balance, December 31, 2023 12,766 $ 127 $ 68,854 $ 346,162 ( 806 ) $ ( 24,999 ) $ ( 23,824 ) $ 366,320

Net income — — — 8,473 — — — 8,473

Foreign currency translation adjustments — — — — — — 427 427

Stock-based compensation 26 — 1,650 — — — — 1,650

Shares withheld in lieu of employee tax withholding — — ( 159 ) — — — — ( 159 )

Dividends — — 10 ( 3,189 ) — — — ( 3,179 )

Gain on cash flow commodity hedge — — — — — — 111 111

Balance, March 31, 2023 12,667 $ 126 $ 69,955 $ 286,777 ( 806 ) $ ( 24,999 ) $ ( 26,064 ) $ 305,795

Net income — — — 18,454 — — — 18,454

Foreign currency translation adjustments — — — — — — 2,089 2,089

Stock-based compensation — — 958 — — — — 958

Shares withheld in lieu of employee tax withholding — — — — — — — —

Issuance of restricted stock — — — — — — — —

Dividends — — — ( 3,191 ) — — — ( 3,191 )

Loss on cash flow commodity hedge — — — — — — ( 35 ) ( 35 )

Balance, June 30, 2023 12,667 $ 126 $ 70,913 $ 302,040 ( 806 ) $ ( 24,999 ) $ ( 24,010 ) $ 324,070

The accompanying notes are an integral part of these condensed consolidated financial statements.

3 unchanged sentences

(In thousands)

Nine months ended June 30,

Three months ended December 31,

Operating Activities:

3 unchanged sentences

Stock-based compensation 1,513 1,657

Unrealized mark-to-market gain on derivative contracts ( 113 ) —

Bad debt expense, net 294 36

Unrealized mark-to-market loss on derivative contracts 194 41

Bad debt recovery, net ( 90 ) ( 29 )

Deferred income taxes 13 ( 165 )

14 unchanged sentences

Purchase of intangible assets — ( 250 )

Proceeds from sale of property, plant and equipment 26 12

Net cash used in investing activities ( 9,494 ) ( 1,485 )

15 unchanged sentences

Powell in 1947.

We develop, design, manufacture and service custom-engineered equipment and systems that distribute, control and monitor the flow of electrical energy and provide protection to motors, transformers and other electrically powered equipment.

Our major subsidiaries, all of which are wholly owned, include Powell Electrical Systems, Inc.;

Powell (UK) Limited;

Powell Canada Inc.;

Powell (UK) Limited;

and Powell Industries International, B.V.

We are headquartered in Houston, Texas, and serve the oil and gas and petrochemical markets that include onshore and offshore production, hydrogen, carbon capture, liquefied natural gas (LNG) facilities and terminals, pipelines, refineries and petrochemical plants.

Additional markets include electric utility, light rail traction power, and commercial and other industrial markets that include end markets such as data centers, mining and metals, and pulp and paper.

We are headquartered in Houston, Texas and primarily serve the oil and gas and petrochemical markets, the electric utility market, and commercial and other industrial markets.

Beyond these major markets, we also provide products and services to the light rail traction power market and other markets that include universities and government entities.

We are continuously developing new channels to electrical markets through original equipment manufacturers and distribution market channels.

Basis of Presentation

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We believe that these financial statements contain all adjustments necessary so that they are not misleading.

The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto of Powell and its subsidiaries included in Powell’s Annual Report on Form 10-K for the year ended September 30, 2023, which was filed with the Securities and Exchange Commission (SEC) on December 6, 2023.

The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto of Powell and its subsidiaries included in Powell’s Annual Report on Form 10-K for the year ended September 30, 2024, which was filed with the Securities and Exchange Commission (SEC) on November 20, 2024.

References to Fiscal 2025 and Fiscal 2024 used throughout this report shall mean the current fiscal year ending September 30, 2025 and the prior fiscal year ended September 30, 2024, respectively.

14 unchanged sentences

Additionally, it requires that all existing annual disclosures about segment profit or loss and assets must be provided on an interim basis and clarifies that single reportable segment entities are subject to the disclosure requirement under Topic 280 in its entirety.

ASU 2023-07 is effective for fiscal years beginning after December 15, 2023 and interim periods within those fiscal years beginning after December 15, 2024.

ASU 2023-07 is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024.

A public entity should apply ASU 2023-07 retrospectively to all prior periods presented in the financial statements.

11 unchanged sentences

In addition, larger registrants will be required to disclose information about greenhouse gas emissions, which will be subject to a phased-in assurance requirement.

These disclosure requirements will be effective for the Company's fiscal year beginning October 1, 2025.

In April 2024, the SEC voluntarily stayed the final rules as a result of pending legal challenges.

These disclosure requirements were scheduled to be effective for the Company's fiscal year beginning October 1, 2025.

However, in April 2024, the SEC voluntarily stayed the final rules as a result of pending legal challenges.

We are currently evaluating the impacts of the final rules on our consolidated financial statements and related disclosures.

In November 2024, the FASB issued ASU No.

2024-03, Reporting Comprehensive Income – Expense Disaggregation Disclosures , which requires additional qualitative and quantitative information about specific expense categories in the notes to financial statements for both interim and annual reporting periods.

In January 2025, the FASB further clarified the effective date for interim reporting periods.

This ASU is effective for fiscal years beginning after December 15, 2026 and interim periods within those fiscal years beginning after December 15, 2027, with early adoption permitted.

We are currently evaluating the impacts of the new standard.

Earnings Per Share

2 unchanged sentences

The following table reconciles basic and diluted weighted average shares used in the computation of earnings per share (in thousands, except per share data):

Three months ended June 30, Nine months ended June 30,

2024 2023 2024 2023

Three months ended December 31,

Net income $ 34,763 $ 24,085

7 unchanged sentences

The components of inventories are summarized below (in thousands):

June 30, 2024 September 30, 2023

December 31, 2024 September 30, 2024

Raw materials, parts and sub-assemblies $ 94,785 $ 92,314

4 unchanged sentences

Property, plant and equipment are summarized below (in thousands):

June 30, 2024 September 30, 2023

December 31, 2024 September 30, 2024

Land $ 23,684 $ 24,110

6 unchanged sentences

Total property, plant and equipment, net $ 101,957 $ 103,421

There were no assets under finance lease as of June 30, 2024 or September 30, 2023.

Intangible Asset

In December 2023, we acquired intellectual property for a total consideration of $ 0.5 million, of which $ 250 thousand was paid in cash at the acquisition date.

There were no assets under finance lease as of December 31, 2024 or September 30, 2024.

Accrued Product Warranty

Activity in our product warranty accrual consisted of the following (in thousands):

Three months ended June 30, Nine months ended June 30,

2024 2023 2024 2023

Three months ended December 31,

Balance at beginning of period $ 5,822 $ 3,305

15 unchanged sentences

Our performance obligations are satisfied as the work progresses.

Revenues from our custom-engineered products and value-added services transferred to customers over time accounted for approximately 96 % and 95 % of revenues for the three and nine months ended June 30, 2024, respectively, and approximately 94 % and 93 % of revenues for the three and nine months ended June 30, 2023, respectively.

Revenues from our custom-engineered products and value-added services transferred to customers over time accounted for approximately 97 % and 94 % of revenues for the three months ended December 31, 2024 and December 31, 2023, respectively.

We also have sales orders for spare parts and replacement circuit breakers for switchgear that are obsolete or that are no longer produced by the original manufacturer.

Revenues from these sales orders are recognized at the time we fulfill our performance obligation to the customer, which is typically upon shipment and represented approximately 4 % and 5 % of revenues for the three and nine months ended June 30, 2024, respectively, and approximately 6 % and 7 % of revenues for the three and nine months ended June 30, 2023, respectively.

Revenues from these sales orders are recognized at the time we fulfill our performance obligation to the customer, which is typically upon shipment and represented approximately 3 % and 6 % of revenues for the three months ended December 31, 2024 and December 31, 2023, respectively.

Additionally, some contracts may contain a cancellation clause that could limit the amount of revenue we are able to recognize over time.

4 unchanged sentences

As the project progresses, we record commission expense based on percentage of completion rates that correlate to the project and reduce the deferred asset.

Once we have been paid by the customer, we pay the commission and the deferred liability is reduced .

Once we have been paid by the customer, we pay the commission and the liability is reduced .

Performance Obligations

9 unchanged sentences

Remaining unsatisfied performance obligations, which we refer to as backlog, represent the estimated transaction price for goods and services for which we have a material right, but work has not been performed.

As of June 30, 2024, we had backlog of $ 1.3 billion, of which approximately $ 841 million is expected to be recognized as revenue within the next twelve months .

As of December 31, 2024, we had backlog of $ 1.3 billion, of which approximately $ 893 million is expected to be recognized as revenue within the next twelve months .

Backlog may not be indicative of future operating results as orders may be cancelled or modified by our customers.

7 unchanged sentences

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.

For the nine months ended June 30, 2024 and 2023, our operating results were positively impacted by $ 14.2 million and $ 13.2 million, respectively, as a result of net changes in contract estimates related to projects in progress at the beginning of the respective period.

For the three months ended December 31, 2024 and 2023, our operating results were positively impacted by $ 2.4 million and $ 5.4 million, respectively, as a result of net changes in contract estimates related to projects in progress at the beginning of the respective period.

These changes in estimates resulted primarily from favorable project execution, reduced cost estimates and negotiations of variable consideration, discussed below, as well as revenue recognized from project cancellations and other changes in facts and circumstances during these periods.

Project cancellations on two projects increased gross profit for the nine months ended June 30, 2023 by $ 3.4 million.

Gross unfavorable changes in contract estimates were immaterial for both the nine months ended June 30, 2024 and 2023.

Gross unfavorable changes in contract estimates were immaterial for both the three months ended December 31, 2024 and 2023.

Variable Consideration

15 unchanged sentences

Our contract assets and liabilities are reported in a net position on a contract-by-contract basis at the end of each reporting period and are generally classified as current.

Contract assets and liabilities as of June 30, 2024 and September 30, 2023 are summarized below (in thousands):

June 30, 2024 September 30, 2023

Contract assets and liabilities as of December 31, 2024 and September 30, 2024 are summarized below (in thousands):

December 31, 2024 September 30, 2024

Contract assets $ 92,349 $ 102,827

1 unchanged sentence

Net contract liability $ ( 190,246 ) $ ( 184,936 )

Our net contract billing position remained a net liability at both June 30, 2024 and September 30, 2023, primarily due to favorable contract billing milestones.

Our net contract billing position remained a net liability at both December 31, 2024 and September 30, 2024, primarily due to favorable contract billing milestones.

We typically allocate a significant percentage of the progress billing to the early stages of the contract.

To determine the amount of revenue recognized during the period from contract liabilities, we first allocate revenue to the individual contract liability balance outstanding at the beginning of the period until the revenue exceeds that balance.

During the nine months ended June 30, 2024, we recognized revenue of $ 228.9 million that was related to contract liabilities outstanding at September 30, 2023.

During the three months ended December 31, 2024, we recognized revenue of $ 116.9 million that was related to contract liabilities outstanding at September 30, 2024.

The timing of our invoice process is typically dependent on the completion of certain milestones and contract terms and subject to agreement by our customer.

3 unchanged sentences

Based on our experience in recent years, the majority of these retainage balances are expected to be collected within approximately twelve months.

As of June 30, 2024 and September 30, 2023, we had retention amounts of $ 6.6 million and $ 7.4 million, respectively.

Of the retained amount at June 30, 2024, $ 5.9 million is expected to be collected in the next twelve months and is recorded in accounts receivable.

As of December 31, 2024 and September 30, 2024, we had retention amounts of $ 7.5 million and $ 7.1 million, respectively.

Of the retained amount at December 31, 2024, $ 6.7 million is expected to be collected in the next twelve months and is recorded in accounts receivable.

The remaining $ 0.8 million is recorded in other assets.

Disaggregation of Revenue

The following tables present our disaggregated revenue by geographic destination and market sector for the three and nine months ended June 30, 2024 and 2023 (in thousands):

Three months ended June 30, Nine months ended June 30,

2024 2023 2024 2023

The following tables present our disaggregated revenue by geographic destination and market sector for the three months ended December 31, 2024 and 2023 (in thousands):

Three months ended December 31,

United States $ 197,772 $ 159,860

5 unchanged sentences

Total revenues by geographic destination $ 241,431 $ 194,017

Three months ended June 30, Nine months ended June 30,

2024 2023 2024 2023

Three months ended December 31,

Oil and gas (excludes petrochemical) $ 95,679 $ 83,636

6 unchanged sentences

Long-Term Debt

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.

The Third Amendment 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.

As of June 30, 2024, there were no amounts borrowed under the U.S.

We have a credit agreement with Bank of America, N.A.

and Texas Capital Bank with an aggregate commitment of $ 150.0 million, consisting of $ 100.0 million committed by Bank of America and $ 50.0 million committed by Texas Capital Bank (the U.S.

Revolver has an expiration date of October 4, 2028.

As of December 31, 2024, there were no amounts borrowed under the U.S.

Revolver, and letters of credit outstanding were $ 56.1 million.

There was $ 93.9 million available for the issuance of letters of credit and borrowings under the U.S.

Revolver as of June 30, 2024.

As of June 30, 2024, we were in compliance with all of the financial covenants of the U.S.

Revolver as of December 31, 2024.

As of December 31, 2024, we were in compliance with all of the financial covenants of the U.S.

Commitments and Contingencies

4 unchanged sentences

To date, there have been no significant draws or claims related to security instruments for the periods reported.

We were contingently liable for letters of credit of $ 68.4 million as of June 30, 2024.

We also had surety bonds totaling $ 422.1 million that were outstanding, with additional bonding capacity of $ 777.9 million available, at June 30, 2024.

We were contingently liable for letters of credit of $ 56.1 million as of December 31, 2024.

We also had surety bonds totaling $ 432.1 million that were outstanding, with additional bonding capacity of $ 767.9 million available, at December 31, 2024.

We have strong surety relationships;

however, a change in market conditions or the sureties' assessment of our financial position could cause the sureties to require cash collateralization for undischarged liabilities under the bonds.

We have a $ 19.0 million facility agreement (Facility Agreement) between Powell (UK) Limited and a large international bank that provides Powell (UK) Limited the ability to enter into bank guarantees as well as forward exchange contracts and currency options.

At June 30, 2024, we had outstanding guarantees totaling $ 6.4 million, with an additional capacity of $ 12.6 million available under this Facility Agreement.

We have an $ 18.8 million facility agreement (Facility Agreement) between Powell (UK) Limited and a large international bank that provides Powell (UK) Limited the ability to enter into bank guarantees as well as forward exchange contracts and currency options.

At December 31, 2024, we had outstanding guarantees totaling $ 7.7 million, with an additional capacity of $ 11.1 million available under this Facility Agreement.

The Facility Agreement provides for customary events of default and carries cross-default provisions with the U.S.

1 unchanged sentence

Additionally, we are required to maintain cash collateral for guarantees greater than two years .

As of June 30, 2024, we were in compliance with all of the financial covenants of the Facility Agreement.

As of December 31, 2024, we were in compliance with all of the financial covenants of the Facility Agreement.

We are involved in various legal proceedings, claims and other disputes arising from our commercial operations, projects, employees and other matters which, in general, are subject to uncertainties and for which the outcomes are not predictable.

3 unchanged sentences

Each individual contract defines the conditions under which the customer may make a claim against us.

As of June 30, 2024, certain contracts had a probable exposure to liquidated damages claims of $ 2.5 million, which

could possibly increase to $ 2.8 million under certain circumstances.

As of December 31, 2024, certain contracts had a probable exposure to liquidated damages claims of $ 2.4 million, which could possibly increase to $ 3.1 million under certain circumstances.

Based on our actual or projected failure to meet these various contractual commitments, $ 2.0 million has been recorded as a reduction to revenue.

5 unchanged sentences

We issue restricted stock units (RSUs) to certain officers and key employees of the Company.

The fair value of the RSUs is based on the price of our common stock as reported on the NASDAQ Global Market on the grant dates.

The fair value of the RSUs is based on the price of our common stock as reported on the NASDAQ Global Market during a specified period prior to the grant dates.

Typically, these grants vest over a three-year period from the date of issuance and are a blend of time-based and performance-based shares.

1 unchanged sentence

The performance-based shares vest based on the three-year earnings and safety performance of the Company following the grant date.

At June 30, 2024, there were 194,981 RSUs outstanding.

At December 31, 2024, there were 119,216 RSUs outstanding.

The RSUs do not have voting rights but do receive dividend equivalents upon vesting, which are accrued quarterly.

Additionally, the shares of common stock underlying the RSUs are not considered issued and outstanding until vested and common stock is issued.

Total RSU activity (number of shares) for the nine months ended June 30, 2024 is summarized below:

Total RSU activity (number of shares) for the three months ended December 31, 2024 is summarized below:

Units Weighted

3 unchanged sentences

Forfeited/canceled ( 1,063 ) 45.09

Outstanding at June 30, 2024 194,981 $ 35.38

During both the nine months ended June 30, 2024 and 2023, we recorded compensation expense of $ 3.4 million related to the RSUs.

Outstanding at December 31, 2024 119,216 $ 63.72

During the three months ended December 31, 2024 and 2023, we recorded compensation expense of $ 1.3 million and $ 1.6 million, respectively, related to the RSUs.

Restricted Stock

In December 2023, the Company's Compensation and Human Capital Committee revised the non-employee directors' annual restricted stock compensation from a fixed-shares arrangement to a fixed-value arrangement, retrospectively effective on October 1, 2023.

Prior to October 1, 2023, each non-employee director received 2,400 restricted shares of the Company’s common stock annually.

Fifty percent of the restricted stock granted to each of our non-employee directors vested immediately, while the remaining fifty percent vested on the anniversary of the grant date.

Compensation expense was recognized immediately for the first fifty percent of the restricted stock granted, while compensation expense for the remaining fifty percent was recognized over the remaining vesting period.

Subsequent to October 1, 2023, each non-employee director shall receive restricted shares of the Company's common stock valued at $ 0.1 million annually.

Each non-employee director receives restricted shares of the Company's common stock valued at $ 0.1 million annually.

The number of granted shares is calculated by dividing the $ 0.1 million by the average of high and low prices of our common stock on the grant date.

The shares shall vest on the earlier of the grant anniversary date or the date of the next annual meeting of stockholders, whichever occurs first.

In February 2024, 4,620 shares of restricted stock were issued to our non-employee directors at a price of $ 153.81 per share.

During the nine months ended June 30, 2024 and 2023, we recorded compensation expense of $ 0.4 million and $ 0.5 million, respectively, related to restricted stock.

During the three months ended December 31, 2024 and 2023, we recorded compensation expense of $ 0.2 million and less than $ 0.1 million, respectively, related to restricted stock.

Fair Value Measurements

9 unchanged sentences

Level 3 — Unobservable inputs that are supported by little or no market data and require the reporting entity to develop its own assumptions.

The following table summarizes the fair value of our assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2024 (in thousands):

Fair Value Measurements at June 30, 2024

The following table summarizes the fair value of our assets and liabilities that were accounted for at fair value on a recurring basis as of December 31, 2024 (in thousands):

Fair Value Measurements at December 31, 2024

Quoted Prices in

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Because the deferred compensation liability is intended to offset the plan assets, it is also categorized as Level 2 in the fair value measurement hierarchy.

There were no transfers between levels within the fair value measurement hierarchy during the quarter ended June 30, 2024.

There were no transfers between levels within the fair value measurement hierarchy during the quarter ended December 31, 2024.

Our leases consist primarily of office and construction equipment.

All of our future lease obligations are related to non-cancelable operating leases.

The following table provides a summary of lease cost components for the three and nine months ended June 30, 2024 and 2023, respectively (in thousands):

Three months ended June 30, Nine months ended June 30,

The following table provides a summary of lease cost components for the three months ended December 31, 2024 and 2023, respectively (in thousands):

Three months ended December 31,

Lease Cost 2024 2023

3 unchanged sentences

Short-term lease cost (2)

754 669 1,798 1,486

Total lease cost $ 871 $ 686

3 unchanged sentences

Leases with initial terms of twelve months or less are not recorded in our Condensed Consolidated Balance Sheets.

The following table provides a summary of the operating lease assets and operating lease liabilities included in our Condensed Consolidated Balance Sheets as of June 30, 2024 and September 30, 2023, respectively (in thousands):

Operating Leases June 30, 2024 September 30, 2023

The following table provides a summary of the operating lease assets and operating lease liabilities included in our Condensed Consolidated Balance Sheets as of December 31, 2024 and September 30, 2024, respectively (in thousands):

Operating Leases December 31, 2024 September 30, 2024

Operating lease assets, net $ 1,365 $ 1,216

2 unchanged sentences

Total lease liabilities $ 1,365 $ 1,216

The following table provides the maturities of our operating lease liabilities as of June 30, 2024 (in thousands):

The following table provides the maturities of our operating lease liabilities as of December 31, 2024 (in thousands):

Operating Leases

3 unchanged sentences

Present value of lease liabilities $ 1,365

The weighted average discount rate as of June 30, 2024 was 3.82 %.

The weighted average remaining lease term was 2.42 years at June 30, 2024.

The weighted average discount rate as of December 31, 2024 was 6.13 %.

The weighted average remaining lease term was 2.46 years at December 31, 2024.

The calculation of the effective tax rate is as follows (in thousands):

Three months ended June 30, Nine months ended June 30,

2024 2023 2024 2023

Three months ended December 31,

Income before income taxes $ 39,437 $ 29,878

2 unchanged sentences

Effective tax rate 12 % 19 %

Our income tax provision reflects an effective tax rate on pre-tax income of 25 % and 23 % for the three and nine months ended June 30, 2024, respectively, compared to 22 % for both the three and nine months ended June 30, 2023.

The effective tax rate for the three and nine months ended June 30, 2024 was favorably impacted by the estimated Research and Development Tax Credit (R&D Tax Credit).

The effective tax rate for the nine months ended June 30, 2024 was also favorably impacted by discrete items primarily related to the vesting of RSUs.

These items were offset by an income inclusion related to U.S.

global intangible income and the tax expense related to certain nondeductible expenses.

The effective tax rate for the three and nine months ended June 30, 2023 approximated the U.S.

federal statutory rate and was favorably impacted by the estimated R&D Tax Credit and the projected utilization of net operating loss carryforwards in the U.K.

that had been fully reserved with a valuation allowance.

The favorable impacts were offset by state income tax expense, certain nondeductible expenses and an income inclusion related to U.S.

Our income tax provision reflects an effective tax rate on pre-tax income of 12 % for the three months ended December 31, 2024 compared to 19 % for the three months ended December 31, 2023.

The effective tax rates for the first quarter of Fiscal 2025 and Fiscal 2024 were favorably impacted by discrete items related to the vesting of RSUs and the estimated Research and Development (R&D) Tax Credit, which were partially offset by the tax expense related to certain nondeductible items.

In addition, the favorable tax impact in the first quarter of Fiscal 2024 was partially offset by an income inclusion related to U.S.

global intangible income.

Subsequent Events

Cash Acquisition of Property, Plant and Equipment

On July 1, 2024, we acquired land and buildings in Houston, Texas, for a total cash purchase price of approximately $ 5.5 million to help further facilitate executing the current backlog as well as planning for modest future volume growth.

Hurricane Beryl

During the second week of July 2024, operations across our three facilities located in Houston, Texas, experienced a temporary power outage and subsequent shutdown of our operations resulting from Hurricane Beryl.

These facilities resumed limited operations within the same week.

We are evaluating the potential financial impact, if any, associated with this event.

Quarterly Dividend Declared

On July 30, 2024, our Board of Directors declared a quarterly cash dividend on our common stock in the amount of $ 0.2650 per share.

The dividend is payable on September 18, 2024 to stockholders of record at the close of business on August 14, 2024.

On February 4, 2025, our Board of Directors approved an increase to the quarterly cash dividend on our common stock to $ 0.2675 per share, equating to an annualized dividend of $ 1.07 per share from the current amount of $ 1.06 per share.

The dividend is payable on March 19, 2025 to shareholders of record at the close of business on February 19, 2025.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Unless otherwise indicated, all references to “we,” “us,” “our,” “Powell” or “the Company” include Powell Industries, Inc.

and its consolidated subsidiaries.

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act).

All statements, other than statements of historical fact, included in this report are forward-looking statements.

Such forward-looking statements include, but are not limited to, projections and estimates concerning the timing and success of specific projects, our future backlog, revenues, income, acquisitions, liquidity, capital spending, results of operations and financial condition, as well as other statements that are not historical facts contained in or incorporated by reference into this report.

Such forward-looking statements include, but are not limited to, projections and estimates of the timing and success of specific projects and our future backlog, revenues, income, acquisitions, liquidity and capital expenditures, as well as other statements that are not historical facts contained in or incorporated by reference into this report.

Statements that contain words such as “believes,” “expects,” “anticipates,” “intends,” “estimates,” “continue,” “should,” “could,” “may,” “plan,” “project,” “predict,” “potential,” “possible,” “would,” “outlook,” “will” or similar expressions are forward-looking statements.

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We disclaim any obligation to update or revise these statements unless required by applicable law, whether as a result of new information, future events or otherwise.

and we caution you not to unduly rely on them.

We caution you not to unduly rely on them.

We have based these forward-looking statements on expectations and assumptions of management at the time the statements were made.

While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties that could cause actual results to differ materially from those included in this report, most of which are difficult to predict and many of which are beyond our control.

These risks, contingencies and uncertainties relate to, but are not limited to, the factors detailed below, elsewhere herein and in our other SEC filings.

These risks, contingencies and uncertainties include, but are not limited to, the potential failure to adequately predict costs (including in connection with our fixed-price contracts) and prevent cost overruns, including the impacts of inflation, potentially disruptive or unanticipated changes in suppliers, the availability of cash on hand and other sources of liquidity to fund our operating expenses and capital expenditures, the impacts of future legislative and regulatory initiatives, electronic, cyber or physical security breaches, and other factors detailed herein and in our other SEC filings.

Additional important risks, uncertainties and other factors are detailed below.

Risk Factors Related to our Business and Industry

• Our business is subject to the cyclical nature of the end markets that we serve.

This has had, and may continue to have, an adverse effect on our future operating results.

This cyclicality has had, and may continue to have, an adverse effect on our operating results.

• Our industry is highly competitive.

• Our backlog is subject to unexpected adjustments, cancellations and scope reductions and, therefore, may not be a reliable indicator of our future earnings.

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

• Supplier concentration and limited supplier capacity may adversely impact our business and results of operations.

• Our business requires skilled and unskilled labor, and we may be unable to attract and retain qualified employees.

• Revenues recognized over time from our fixed-price contracts could result in volatility in our results of operations.

• We are exposed to risks relating to the use of subcontractors.

• Technological innovations may make existing products and production methods obsolete.

• We may not be successful in our artificial intelligence (AI) initiatives, which could adversely affect our business, reputation, and results of operations.

• Unforeseen difficulties with expansions, relocations, or consolidations of existing facilities could adversely affect our operations.

• Quality problems with our products could harm our reputation and erode our competitive position.

• Many of our contracts contain performance obligations that may subject us to penalties or additional liabilities.

• Growth and product diversification through strategic acquisitions involve a number of risks.

• We are exposed to risks relating to the use of subcontractors.

• Misconduct by our employees or subcontractors, or a failure to comply with laws or regulations, could harm our reputation, damage our relationships with customers and subject us to criminal and civil enforcement actions.

• Misconduct by our employees or subcontractors, or a failure to comply with applicable laws or regulations, could harm our reputation, damage our relationships with customers and subject us to criminal and civil enforcement actions.

• Unsatisfactory safety performance may subject us to penalties, negatively impact customer relationships, result in higher operating costs, and negatively impact employee morale and turnover.

• Catastrophic events, including natural disasters, health epidemics, acts of war and terrorism, among others, could disrupt our business.

Risk Factors Related to our Financial Condition and Markets

• Global economic uncertainty and financial market conditions may impact our customer base, suppliers and backlog.

• Our backlog is subject to unexpected adjustments, cancellations and scope reductions and, therefore, may not be a reliable indicator of our future earnings.

• Revenues recognized over time from our fixed-price contracts could result in volatility in our results of operations.

• Many of our contracts contain performance obligations that may subject us to penalties or additional liabilities.

• Fluctuations in the price and supply of materials used to manufacture our products may reduce our profits and could adversely impact our ability to meet commitments to our customers.

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• We extend credit to customers in conjunction with our performance under fixed-price contracts which subjects us to potential credit risks.

• A significant portion of our revenues may be concentrated among a small number of customers.

• We carry insurance against many potential liabilities, but our management of risk may leave us exposed to unidentified or unanticipated risks.

• A significant portion of our revenues may be concentrated among a small number of customers and may be subject to the risks of particular industries.

• Our international operations expose us to risks that are different from, or possibly greater than, the risks we are exposed to domestically and may adversely affect our operations.

• Failures or weaknesses in our internal controls over financial reporting could adversely affect our ability to report on our financial condition and results of operations accurately and/or on a timely basis.

Risk Factors Related to our Common Stock

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• There can be no assurance that we will declare or pay future dividends on our common stock.

• We may issue preferred stock on terms that could adversely affect the voting power or value of our common stock.

Risk Factors Related to Legal and Regulatory Matters

• Our operations could be adversely impacted by the effects of government regulations.

• Provisions of our charter documents or Delaware law could delay or prevent an acquisition of our company, even if the acquisition would be beneficial to our stockholders, and could make it more difficult to change management.

• Actual and potential claims, lawsuits and proceedings could ultimately reduce our profitability and liquidity and weaken our financial condition.

• Changes in tax laws and regulations may change our effective tax rate and could have a material effect on our financial results.

• Failure to develop, obtain, enforce, and protect intellectual property rights or third-party claims that we are infringing on their intellectual property could harm our business.

• Provisions of our charter documents or Delaware law could delay or prevent a change in control of our company, even if that change would be beneficial to our shareholders.

• Significant developments arising from tariffs and other economic proposals could adversely impact our business.

General Risk Factors

• We carry insurance against many potential liabilities, but our management of risk may leave us exposed to unidentified or unanticipated risks.

• Catastrophic events, including natural disasters, health epidemics, acts of war or terrorism, climate change, among others, could disrupt our business.

• A failure in our business systems or cybersecurity attacks on any of our facilities, or those of third parties, could adversely affect our business, results of operations and reputation.

• Changes in and compliance with ESG initiatives could adversely impact our business.

• Actual and potential claims, lawsuits and proceedings could ultimately reduce our profitability and liquidity and weaken our financial condition.

• Changes in tax laws and regulations may change our effective tax rate and could have a material effect on our financial results.

• Data privacy, data protection, and information security may require significant resources and present certain risks.

• Changes in and compliance with Environmental, Social, and Governance (ESG) initiatives could adversely impact our business.

• The departure of key personnel could disrupt our business.

Refer to “Risk Factors” in Item 1A of Part I of our Annual Report on Form 10-K for the year ended September 30, 2023, which was filed with the SEC on December 6, 2023.

Refer to “Risk Factors” in Part I.

Item 1A of our Annual Report on Form 10-K for the year ended September 30, 2024, which was filed with the SEC on November 20, 2024.

We can provide no assurance that the forward-looking statements contained in this report will occur as expected, and actual results may differ materially from those included in this report.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements