POWELL INDUSTRIES INC 10-K

Item 8. Financial Statements and Supplementary Data Index to Consolidated Financial Statements Page Financial Statements: Report of Independent Registered Public Accounting Firm (PCAOB ID 238 ) 36 Consolidated Balance Sheets as of September 30, 2025 and 2024 39 Consolidated Statements of Operations for the Years Ended September 30, 2025, 2024 and 2023 40 Consolidated Statements of Comprehensive Income for the Years Ended September 30, 2025, 2024 and 2023 41 Consolidated Statements of Stockholders’ Equity for the Years Ended September 30, 2025, 2024 and 2023 42 Consolidated Statements of Cash Flows for the Years Ended September 30, 2025, 2024 and 2023 43 Notes to Consolidated Financial Statements 44 35 Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Powell Industries Inc. Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Powell Industries Inc. and its subsidiaries (the "Company") as of September 30, 2025 and 2024, and the related consolidated statements of operations, of comprehensive income, of shareholders' equity and of cash flows for each of the three years in the period ended September 30, 2025, including the related notes (collectively referred to as the "consolidated financial statements"). We also have audited the Company's internal control over financial reporting as of September 30, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of September 30, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2025 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. Basis for Opinions The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. 36 Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Revenue Recognition - Long-term fixed price contracts As described in Notes B and E to the consolidated financial statements, approximately 96% of the Company’s total revenue of $1,104 million for the year ended September 30, 2025 was generated from the manufacturing of custom-engineered products and systems under long-term fixed-price contracts. Revenue from these contracts is generally recognized over time utilizing the cost-to-cost method to measure the extent of progress toward the completion of the performance obligation and the recognition of revenue over time. Management believes that this method is the most accurate representation of performance, because it directly measures the value of the services transferred to the customer over time as costs are incurred on the contracts. Contract costs include all direct materials, labor, and indirect costs related to contract performance, which may include indirect labor, supplies, tools, repairs and depreciation costs. Under the cost-to-cost method, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. Due to the nature of the 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. Management estimates the amount of variable consideration based on the expected value method, which is the sum of the probability-weighted amount, or the most likely amount method which uses various factors including experience with similar transactions and assessment of anticipated performance. The principal considerations for our determination that performing procedures relating to revenue recognized over time utilizing the cost-to-cost method is a critical audit matter are the significant judgment by management when determining the estimated total cost and revenue, which in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and in evaluating management’s judgment about assumptions related to the estimates of costs to complete and liquidated damages. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the revenue recognition process, including controls over the 37 determination of total estimated costs at completion of the performance obligation and determination of total contract price. These procedures also included, among others, evaluating and testing management’s process for determining the estimated total cost and revenue for a sample of contracts, which included (i) obtaining executed purchase orders and agreements, (ii) evaluating the appropriateness of the method to measure estimated total cost and revenue, (iii) testing the completeness and accuracy of the underlying data used by management, and (iv) evaluating the reasonableness of significant assumptions related to the total estimated costs at completion and liquidated damages used by management and considering the factors that can affect the accuracy of those estimates. Evaluating the reasonableness of significant assumptions related to estimated total cost involved assessing management’s ability to reasonably estimate total costs to complete and liquidated damages by testing management’s process to evaluate the remaining costs related to the performance obligation and evaluating the timely identification of circumstances which may warrant a modification to the total estimated costs or liquidated damages. /s/ PricewaterhouseCoopers LLP Houston, Texas November 19, 2025 We have served as the Company’s auditor since 2004. 38 POWELL INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share data) September 30, 2025 2024 ASSETS Current Assets: Cash and cash equivalents $ 450,739 $ 315,331 Short-term investments 24,788 43,061 Accounts receivable, less allowance for credit losses of $ 368 and $ 414 , respectively 217,065 214,405 Contract assets 136,679 102,827 Inventories 84,719 85,873 Prepaid expenses 10,591 7,487 Other current assets 7,135 7,497 Total Current Assets 931,716 776,481 Property, plant and equipment, net 111,049 103,421 Operating lease assets, net 1,664 1,216 Goodwill 6,125 1,003 Intangible assets, net 6,138 500 Deferred income tax assets 33,440 27,246 Other assets 18,852 18,313 Total Assets $ 1,108,984 $ 928,180 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Accounts payable $ 67,080 $ 73,633 Contract liabilities 297,949 287,763 Accrued compensation and benefits 39,184 33,777 Accrued product warranty 6,356 5,822 Current operating lease liabilities 882 595 Income taxes payable 11,028 8,983 Other current liabilities 23,908 17,442 Total Current Liabilities 446,387 428,015 Deferred compensation (Note J) 13,707 12,027 Long-term operating lease liabilities 782 621 Deferred income tax liabilities 5,297 2,708 Other long-term liabilities 2,041 1,736 Total Liabilities 468,214 445,107 Commitments and Contingencies (Note H) Stockholders’ Equity: Preferred stock, par value $ 0.01 ; 5,000,000 shares authorized; no ne issued — — Common stock, par value $ 0.01 ; 30,000,000 shares authorized; Shares issued: 12,876,196 and 12,795,256 , respectively Shares outstanding: 12,070,178 and 11,989,238 , respectively 129 128 Additional paid-in capital 62,834 70,111 Retained earnings 629,848 462,194 Treasury stock, 806,018 shares at cost ( 24,999 ) ( 24,999 ) Accumulated other comprehensive loss ( 27,042 ) ( 24,361 ) Total Stockholders’ Equity 640,770 483,073 Total Liabilities and Stockholders’ Equity $ 1,108,984 $ 928,180 The accompanying notes are an integral part of these consolidated financial statements. 39 POWELL INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) Year Ended September 30, 2025 2024 2023 Revenues $ 1,104,318 $ 1,012,356 $ 699,308 Cost of goods sold 779,937 739,268 551,755 Gross profit 324,381 273,088 147,553 Selling, general and administrative expenses 95,401 84,888 78,813 Research and development expenses 11,008 9,427 6,220 Amortization of intangible assets 112 — — Operating income 217,860 178,773 62,520 Other expenses (income): Interest income, net ( 15,690 ) ( 17,315 ) ( 6,430 ) Income before income taxes 233,550 196,088 68,950 Income tax provision 52,803 46,240 14,425 Net income $ 180,747 $ 149,848 $ 54,525 Earnings per share: Basic $ 14.98 $ 12.51 $ 4.59 Diluted $ 14.86 $ 12.29 $ 4.50 Weighted average shares: Basic 12,062 11,982 11,879 Diluted 12,167 12,188 12,120 Dividends per share $ 1.0675 $ 1.0575 $ 1.0475 The accompanying notes are an integral part of these consolidated financial statements. 40 POWELL INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands) Year Ended September 30, 2025 2024 2023 Net income $ 180,747 $ 149,848 $ 54,525 Foreign currency translation adjustments ( 2,598 ) 2,561 1,915 Gain on cash flow commodity hedge — — 325 Postretirement benefit adjustment, net of tax ( 83 ) ( 13 ) ( 151 ) Comprehensive income $ 178,066 $ 152,396 $ 56,614 The accompanying notes are an integral part of these consolidated financial statements. 41 POWELL INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (In thousands) Common Stock Additional Paid-in Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive Income/(Loss) Shares Amount Shares Amount Total Balance, September 30, 2022 12,588 $ 126 $ 67,439 $ 283,638 ( 806 ) $ ( 24,999 ) $ ( 28,998 ) $ 297,206 Net income — — — 54,525 — — — 54,525 Foreign currency translation adjustments — — — — — — 1,915 1,915 Stock-based compensation 80 1 4,598 — — — — 4,599 Shares withheld in lieu of employee tax withholding — — ( 652 ) — — — — ( 652 ) Dividends — — 141 ( 12,882 ) — — — ( 12,741 ) Gain on cash flow commodity hedge — — — — — — 325 325 Postretirement benefit adjustment, net of tax of $ 40 — — — — — — ( 151 ) ( 151 ) Balance, September 30, 2023 12,668 $ 127 $ 71,526 $ 325,281 ( 806 ) $ ( 24,999 ) $ ( 26,909 ) $ 345,026 Net income — — — 149,848 — — — 149,848 Foreign currency translation adjustments — — — — — — 2,561 2,561 Stock-based compensation 127 1 4,746 — — — — 4,747 Shares withheld in lieu of employee tax withholding — — ( 6,599 ) — — — — ( 6,599 ) Dividends — — 438 ( 12,935 ) — — — ( 12,497 ) Postretirement benefit adjustment, net of tax of $ 4 — — — — — — ( 13 ) ( 13 ) Balance, September 30, 2024 12,795 $ 128 $ 70,111 $ 462,194 ( 806 ) $ ( 24,999 ) $ ( 24,361 ) $ 483,073 Net income — — — 180,747 — — — 180,747 Foreign currency translation adjustments — — — — — — ( 2,598 ) ( 2,598 ) Stock-based compensation 81 1 4,634 — — — — 4,635 Shares withheld in lieu of employee tax withholding — — ( 12,248 ) — — — — ( 12,248 ) Dividends — — 337 ( 13,093 ) — — — ( 12,756 ) Postretirement benefit adjustment, net of tax of $ 22 — — — — — — ( 83 ) ( 83 ) Balance, September 30, 2025 12,876 $ 129 $ 62,834 $ 629,848 ( 806 ) $ ( 24,999 ) $ ( 27,042 ) $ 640,770 The accompanying notes are an integral part of these consolidated financial statements. 42 POWELL INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Year Ended September 30, 2025 2024 2023 Operating Activities: Net income $ 180,747 $ 149,848 $ 54,525 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 7,265 6,871 8,606 Stock-based compensation 4,635 4,747 4,599 Unrealized mark-to-market gain on derivative contracts ( 234 ) ( 326 ) — Bad debt expense (recovery), net ( 3 ) 278 ( 54 ) Deferred income taxes ( 4,868 ) ( 7,474 ) ( 7,847 ) Changes in operating assets and liabilities: Accounts receivable, net ( 2,435 ) ( 7,309 ) ( 99,718 ) Contract assets and liabilities, net ( 23,495 ) ( 34,714 ) 227,598 Inventories 2,976 ( 21,818 ) ( 13,276 ) Income taxes 1,178 2,515 4,812 Prepaid expenses and other current assets ( 1,677 ) ( 3,090 ) ( 3,253 ) Accounts payable ( 7,491 ) 16,346 ( 6,167 ) Accrued liabilities 9,733 5,011 11,729 Other, net 1,606 ( 2,224 ) 999 Net cash provided by operating activities 167,937 108,661 182,553 Investing Activities: Purchases of short-term investments ( 37,262 ) ( 42,855 ) ( 33,515 ) Maturities of short-term investments 53,537 33,107 14,748 Cash paid for business acquisition, net of cash acquired ( 11,488 ) — — Purchases of property, plant and equipment ( 13,149 ) ( 11,983 ) ( 7,819 ) Proceeds from sale of property, plant and equipment 20 107 12 Purchase of intangible assets — ( 250 ) — Net cash used in investing activities ( 8,342 ) ( 21,874 ) ( 26,574 ) Financing Activities: Shares withheld in lieu of employee tax withholding ( 12,248 ) ( 6,599 ) ( 652 ) Dividends paid ( 12,869 ) ( 12,653 ) ( 12,407 ) Net cash used in financing activities ( 25,117 ) ( 19,252 ) ( 13,059 ) Net increase in cash and cash equivalents 134,478 67,535 142,920 Effect of exchange rate changes on cash and cash equivalents 930 1,921 1,001 Cash and cash equivalents at beginning of period 315,331 245,875 101,954 Cash and cash equivalents at end of period $ 450,739 $ 315,331 $ 245,875 The accompanying notes are an integral part of these consolidated financial statements. 43 POWELL INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. Business and Organization Powell Industries, Inc. (we, us, our, Powell or the Company) is a Delaware corporation founded by William E. Powell in 1947. Our major subsidiaries, all of which are wholly owned, include Powell Electrical Systems, Inc.; Powell (UK) Limited; Powell Canada Inc.; and Powell Industries International Limited. 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. Our principal products include integrated power control room substations (PCRs ® ), custom-engineered modules, electrical houses (E-Houses), traditional and arc-resistant distribution switchgear and control gear, medium-voltage circuit breakers, monitoring and control communications systems, motor c ontrol centers, switches and bus duct systems. These products are designed for application voltages ranging from 480 volts to 38,000 volts. Our product scope includes designs tested to meet both United States (U.S.) and international standards, under both the American National Standards Institute (ANSI) and International Electrotechnical Commission (IEC). We also provide spare parts, retrofit and retrofill components for existing systems, and replacement circuit breakers for obsolete switchgear no longer produced by the original manufacturer. Our principal services include field service inspection, installation, commissioning, modification and repair services. We seek to establish long-term relationships with the end users of our systems as well as design and construction engineering firms contracted by those end users. We believe that our culture of safety and focus on customer satisfaction, along with our financial strength, allow us to continue to capitalize on opportunities in the industries we serve. References to Fiscal 2025, Fiscal 2024 and Fiscal 2023 used throughout these Notes to Consolidated Financial Statements relate to our fiscal years ended September 30, 2025, 2024 and 2023, respectively. B. Summary of Significant Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts of Powell and our wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States (U.S. GAAP) requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying footnotes. The most significant estimates used in our consolidated financial statements affect revenue recognition and estimated cost recognition on our customer contracts, allowance for credit losses, provision for excess and obsolete inventory, warranty accruals and income taxes. The amounts recorded for warranties, legal, income taxes, impairment of long-lived assets (when applicable), liquidated damages and other contingent liabilities require judgments regarding the amount of expenses that will ultimately be incurred. We base our estimates on historical experience, forecasts and various other assumptions, as well as the specific circumstances surrounding these contingent liabilities, in evaluating the amount of liability that should be recorded. Additionally, the basis for recognition of deferred tax assets requires estimates related to future income and other assumptions regarding timing and future profitability because the ultimate realization of net deferred tax assets is dependent on the generation of future taxable income during periods in which temporary differences become deductible. Estimates routinely change as new events occur, additional information becomes available or operating environments change. Actual results may differ from our prior estimates. Cash and Investments Cash and cash equivalents – Cash and cash equivalents, primarily funds held in money market savings instruments, are reported at their current carrying value, which approximates fair value due to the short-term nature of these instruments, and are included in cash and cash equivalents in our Consolidated Balance Sheets. Short-term investments – Short-term investments include time deposits with original maturities of three months or more. 44 Supplemental Disclosures of Cash Flow Information (in thousands): Year Ended September 30, 2025 2024 2023 Cash paid (received) during the period for: Interest received, net of interest expense $ ( 14,542 ) $ ( 15,641 ) $ ( 5,465 ) Income taxes paid, net of refunds 56,133 50,919 17,232 Non-cash capital expenditures 186 361 183 Fair Value of Financial Instruments Financial instruments include cash, cash equivalents, short-term investments, receivables, deferred compensation, contingent future payments related to business acquisitions, payables and debt obligations. Except as described below, due to the short-term nature of account receivables and account payables, their book values are representative of their fair values. Accounts Receivable Accounts receivable are stated net of allowances for credit losses. We maintain and continually assess the adequacy of the allowance for credit losses representing our estimate for losses resulting from the inability of our customers to pay amounts due to us. This estimated allowance is based on historical experience of uncollected accounts, the level of past due accounts, the overall level of outstanding accounts receivable, information about specific customers with respect to their inability to make payments and expectations of future conditions that could impact the collectability of accounts receivable. Future changes in our customers’ operating performance and cash flows, or in general economic conditions, could have an impact on their ability to fully pay these amounts, which could have a material impact on our operating results. In most cases, receivables are not collateralized. However, we utilize letters of credit to secure payment on projects when possible. Retention amounts are in accordance with applicable provisions of contracts and become due upon completion of contractual requirements. As of September 30, 2025 and 2024, we had retention amounts of $ 8.1 million and $ 7.1 million, respectively. Of the retained amount at September 30, 2025, $ 8.0 million is expected to be collected in the next twelve months and is recorded in accounts receivable. The remaining $ 0.1 million is recorded in other assets and is expected to be collected beyond September 30, 2026. Contract Balances The timing of revenue recognition, billings and cash collections affects accounts receivable, contract assets and contract liabilities in our Consolidated Balance Sheets. Contract assets are recorded when revenues are recognized in excess of amounts billed for fixed-price contracts as determined by the billing milestone schedule. Contract assets are transferred to accounts receivable when billing milestones have been met, or we have an unconditional right to payment. Contract liabilities typically represent advance payments from contractual billing milestones and billings in excess of revenue recognized. It is unusual to have advanced milestone payments with a term greater than one year, which could represent a financing component on the contract. 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. Inventories Inventories are stated at the lower of cost or net realizable value using weighted-average methods and include the cost of materials, labor and manufacturing overhead. We use estimates in determining the level of reserves required to state inventory at the lower of cost or net realizable value. Our estimates are based on market activity levels, production requirements, the physical condition of products and technological innovation. Changes in any of these factors may result in adjustments to the carrying value of inventory. 45 Property, Plant and Equipment Property, plant and equipment are stated at cost and are depreciated using the straight-line method over the estimated useful lives of the assets. Expenditures for repairs and maintenance are charged to expense when incurred. Expenditures for major renewals and improvements, which extend the useful lives of existing equipment, are capitalized and depreciated. Upon retirement or disposition of property, plant and equipment, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is recognized in the Consolidated Statements of Operations. We review property, plant and equipment for impairment whenever events or changes in circumstances indicate that the carrying value may not be realizable. If an evaluation is required, the estimated future undiscounted cash flows associated with the asset are compared to the asset’s carrying amount to determine if recording an impairment of such asset is necessary. If an impairment is indicated, we record an impairment loss equal to the difference between the carrying value and the fair value of the long-lived asset. This requires us to make long-term forecasts of the future revenues and the costs related to the assets subject to review. Forecasts require assumptions about demand for our products and future market conditions. Estimating future cash flows requires significant judgment, and our projections may vary from cash flows eventually realized. Future events and unanticipated changes to assumptions could require a provision for impairment in a future period. The effect of any impairment would be reflected in operating income in the Consolidated Statements of Operations. In addition, we estimate the useful lives of our property, plant and equipment and periodically review these estimates to determine whether these lives are appropriate. Goodwill and Other Intangible Assets Goodwill and other intangible assets generally result from acquired businesses. We account for business acquisitions by allocating the purchase price to tangible and intangible assets acquired and liabilities assumed at their fair values at the acquisition date; the excess of the purchase price over the allocated amount is recorded as goodwill. Goodwill is not amortized, but is evaluated for impairment at least annually. An impairment exists when the carrying amount of goodwill exceeds its implied fair value. Additional impairment assessments may be performed on an interim basis if we encounter events or changes in circumstances that would indicate, more likely than not, the carrying value of goodwill has been impaired. In the evaluation of goodwill for impairment, we have the option to first perform a qualitative assessment to determine whether it is more likely than not that the fair value is less than its carrying value. If, after completing such assessment, we determine it is more likely than not that the fair value is greater than its carrying value, no further testing is required. If we conclude otherwise, or if we elect to perform a quantitative assessment, we then calculate the fair value and compare to the carrying value. In performing the fair value assessment, management makes various judgments, estimates and assumptions, the most significant of which include the estimated future cash flows and discount rates. If the carrying value exceeds the fair value, an impairment loss, not to exceed the carrying amount of goodwill, is recorded in the Consolidated Statements of Operations. Other intangible assets include customer relationships, trademarks, purchased technology and order backlog, all of which are subject to amortization over their estimated remaining useful lives. We evaluate other intangible assets for impairment when impairment indicators are present. If the carrying value exceeds the fair value, an impairment loss is recorded in the Consolidated Statements of Operations. In Fiscal 2025, we added $ 5.1 million of goodwill and $ 5.8 million of other finite-life intangible assets through the acquisition of Remsdaq Ltd. (Remsdaq). See Note P. Business Acquisition for additional information. Income Taxes We account for income taxes under the asset and liability method, based on the income tax laws and rates in the countries in which operations are conducted, and income is earned. This approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities. Developing our provision for income taxes requires significant judgment and expertise in federal, international and state income tax laws, regulations and strategies, including the determination of deferred tax assets and liabilities and, if necessary, any valuation allowances that may be required for deferred tax assets. In assessing the extent to which net deferred tax assets may be realized, we consider whether it is more likely than not that some portion or all of the net deferred tax assets may not be realized. The ultimate realization of net deferred tax assets is dependent on the generation of future taxable income during the periods in which those temporary differences become deductible. Estimates may change as new events occur, estimates of future taxable income during the carryforward period are reduced or increased, additional information becomes available or operating environments change, which may result in a full or partial reversal of the valuation allowance. We will continue to assess the adequacy of the valuation allowance on a quarterly basis. Our judgments and tax strategies are subject to audit by various taxing authorities. 46 The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in an entity’s financial statements or tax returns. We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Accounting literature also provides guidance on derecognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, and income tax disclosures. Judgment is required in assessing the future tax consequences of events that have been recognized in our financial statements or tax returns. Variations in the actual outcome of these future tax consequences could materially impact our financial statements. Revenue Recognition Our revenues are primarily generated from the manufacturing of custom-engineered products and systems under long-term, fixed-price contracts that may last from one month to several years, depending on the contract. Revenue from these contracts is generally recognized over time utilizing the cost-to-cost method. Under the cost-to-cost method, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. We believe that this method is the most accurate representation of our performance because it directly measures the value of the services transferred to the customer over time as we incur costs on our contracts. Contract costs include all direct materials, labor and indirect costs related to contract performance, which may include indirect labor, supplies, tools, repairs and depreciation costs. We also have contracts to provide field service inspection, installation, commissioning, modification, and repair services, as well as retrofit and retrofill components for existing systems. If the service contract terms give us the right to invoice the customer for an amount that corresponds directly with the value of our performance completed to date (i.e., a service contract in which we bill a fixed amount for each hour of service provided), then we recognize revenue over time in each reporting period corresponding to the amount that we have the right to invoice. Our performance obligations are satisfied as the work progresses. 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. Additionally, some contracts may contain a cancellation clause that could limit the amount of revenue we are able to recognize over time. In these instances, revenue and costs associated with these contracts are deferred and recognized at a point in time when the performance obligation is fulfilled. Selling and administrative costs incurred in relation to obtaining a contract are typically expensed as incurred. We periodically utilize a third-party sales agent to obtain a contract and will pay a commission to that agent. We record the full commission liability to the third-party sales agents at the order date, with a corresponding deferred asset. 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 liability is reduced. Warranty Costs Estimated costs of warranties are accrued based on historical warranty claim costs in relation to current revenues. In addition, specific provisions are made when product failures are projected outside historical experience. Our standard terms and conditions of sale include a warranty for parts and service for one year. Occasionally, we provide service-type warranties that will extend the warranty period. Actual results could differ from our estimate. Projects may require, on occasion, warranty terms that are longer than our standard terms due to the nature of the project. Extended warranty terms may be negotiated and included in our contracts. The allocated revenue associated with the extended warranty is deferred and recorded as a contract liability and recognized as revenue over the extended warranty period. Research and Development Expense Research and development activities are directed toward the development of new products and processes as well as improvements in existing products and processes. These costs, which primarily include salaries, contract services and supplies, are expensed as incurred. Such amounts were $ 11.0 million, $ 9.4 million and $ 6.2 million in Fiscal 2025, 2024 and 2023, respectively. 47 Foreign Currency Translation The functional currency for our foreign subsidiaries is the local currency in which the entity is located. The financial statements of all subsidiaries with a functional currency other than the U.S. Dollar have been translated into U.S. Dollars. All assets and liabilities of foreign operations are translated into U.S. Dollars using period-end exchange rates, and all revenues and expenses are translated at average rates during the respective period. The U.S. Dollar results that arise from such translation, as well as exchange gains and losses on intercompany balances of a long-term investment nature, are included in the cumulative currency translation adjustments in accumulated other comprehensive loss in stockholders’ equity. Stock-Based Compensation We measure stock-based compensation cost at the grant date based on the fair value of the award. Compensation expense is recognized over the period during which the recipient is required to provide service in exchange for the awards, typically the vesting period. Excess income tax benefits related to stock-based compensation expense are recognized as income tax expense or benefit in the Consolidated Statements of Operations. Cash paid when directly withholding shares on an employee’s behalf for tax withholding purposes is classified as a financing activity. We account for forfeitures as they occur, rather than estimate expected forfeitures. Recently Adopted Accounting Standards Update In November 2023, the Financial Accounting Standard Board (FASB) issued Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures , which requires that public entities disclose significant segment expenses that are regularly provided to the chief operating decision maker (CODM) on an annual and interim basis. It also requires that public entities disclose the title and position of the CODM and an explanation of how the CODM uses the reported measures in assessing segment performance and resource allocation. 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 was effective for fiscal years beginning after December 15, 2023 and interim periods within those 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. Early adoption was permitted. We have adopted the new standard with an effective date of October 1, 2024. See Note N. Segment Information for additional information. Accounting Standards Updates and Disclosure Rules Issued but Not Yet Adopted In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures , which enhances the transparency of income tax disclosures. It requires greater disaggregation of information in the tax rate reconciliation and income taxes paid disaggregated by jurisdiction. This ASU is effective for fiscal years beginning after December 15, 2024, and should be applied on a prospective basis. Retrospective application and early adoption are permitted. We are currently evaluating the impacts of the new standard. 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. C. Earnings Per Share We compute basic earnings per share by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per common and potential common share include the weighted average of additional shares associated with the incremental effect of dilutive restricted stock and restricted stock units. 48 The following table reconciles basic and diluted weighted average shares used in the computation of earnings per share (in thousands, except per share data): Year Ended September 30, 2025 2024 2023 Numerator: Net income $ 180,747 $ 149,848 $ 54,525 Denominator: Weighted average basic shares 12,062 11,982 11,879 Dilutive effect of restricted stock and restricted stock units 105 206 241 Weighted average diluted shares 12,167 12,188 12,120 Earnings per share: Basic $ 14.98 $ 12.51 $ 4.59 Diluted $ 14.86 $ 12.29 $ 4.50 D. Detail of Selected Balance Sheet Accounts Inventories The components of inventories are summarized below (in thousands): September 30, 2025 2024 Raw materials, parts and sub-assemblies $ 90,743 $ 92,314 Work-in-progress 2,222 920 Provision for excess and obsolete inventories ( 8,246 ) ( 7,361 ) Total inventories $ 84,719 $ 85,873 Property, Plant and Equipment Property, plant and equipment are summarized below (in thousands): September 30, Range of 2025 2024 Asset Lives Land $ 24,436 $ 24,110 — Buildings and improvements 133,455 127,094 3 – 39 Years Machinery and equipment 99,840 94,889 3 – 15 Years Furniture and fixtures 3,056 2,885 3 – 10 Years Construction in process 2,110 3,317 — $ 262,897 $ 252,295 Less: Accumulated depreciation ( 151,848 ) ( 148,874 ) Total property, plant and equipment, net $ 111,049 $ 103,421 There were no assets under finance lease as of September 30, 2025 or September 30, 2024. Depreciation expense was $ 7.2 million, $ 6.9 million and $ 8.6 million for fiscal years 2025, 2024, and 2023, respectively. 49 In Fiscal 2025, the expansion and improvement project at our electrical products facility in Houston, Texas was completed and the incremental capacity has been placed into service. Additionally, on August 15, 2025, we acquired land and buildings of $ 2.8 million related to the acquisition of Remsdaq. In Fiscal 2024, we acquired land and buildings in Houston for a total cash purchase price of approximately $ 5.6 million to help further facilitate executing the current backlog as well as planning for modest future volume growth. Accrued Product Warranty Activity in our product warranty accrual consisted of the following (in thousands): September 30, 2025 2024 Balance at beginning of period $ 5,822 $ 3,305 Increase to warranty expense 5,714 7,525 Deduction for warranty charges ( 5,169 ) ( 5,039 ) Change due to foreign currency translation ( 11 ) 31 Balance at end of period $ 6,356 $ 5,822 E. Revenue Revenue Recognition Our revenues are primarily generated from the manufacturing of custom-engineered products and systems under long-term fixed-price contracts under which we agree to manufacture various products such as traditional and arc-resistant distribution switchgear and control gear, medium-voltage circuit breakers, monitoring and control communications systems, motor control centers, switches and bus duct systems. These products may be sold separately as an engineered solution but are typically integrated into custom-built enclosures which we also build. These enclosures are referred to as power control room substations (PCRs ® ), custom-engineered modules or electrical houses (E-Houses). Some contracts may also include the installation and the commissioning of these enclosures. Revenue from these contracts is generally recognized over time utilizing the cost-to-cost method. Under the cost-to-cost method, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. We believe that this method is the most accurate representation of our performance because it directly measures the value of the services transferred to the customer over time as we incur costs on our contracts. Contract costs include all direct materials, labor and indirect costs related to contract performance, which may include indirect labor, supplies, tools, repairs and depreciation costs. We also have contracts to provide field service inspection, installation, commissioning, modification, and repair services, as well as retrofit and retrofill components for existing systems. If the service contract terms give us the right to invoice the customer for an amount that corresponds directly with the value of our performance completed to date (i.e., a service contract in which we bill a fixed amount for each hour of service provided), then we recognize revenue over time in each reporting period corresponding to the amount that we have the right to invoice. 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 years ended September 30, 2025 and September 30, 2024, 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 years ended September 30, 2025 and September 30, 2024, respectively. Additionally, some contracts may contain a cancellation clause that could limit the amount of revenue we are able to recognize over time. In these instances, revenue and costs associated with these contracts are deferred and recognized at a point in time when the performance obligation is fulfilled. Selling and administrative costs incurred in relation to obtaining a contract are typically expensed as incurred. We periodically utilize a third-party sales agent to obtain a contract and will pay a commission to that agent. We record the full commission liability to the third-party sales agents at the order date, with a corresponding deferred asset. 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. 50 Performance Obligations A performance obligation is a promise in a contract or with a customer to transfer a distinct good or service. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue as the performance obligations are satisfied. To determine the proper revenue recognition for contracts, we evaluate whether a contract should be accounted for as more than one performance obligation or, less commonly, whether two or more contracts should be combined and accounted for as one performance obligation. This evaluation of performance obligations requires significant judgment. The majority of our contracts have a single performance obligation where multiple engineered products and services are combined into a single custom-engineered solution. Our contracts include a standard one-year assurance warranty. Occasionally, we provide service-type warranties that will extend the warranty period. These extended warranties qualify as a separate performance obligation, and revenue is deferred and recognized over the warranty period. If we determine during the evaluation of the contract that there are multiple performance obligations, we allocate the transaction price to each performance obligation using our best estimate of the standalone selling price of each distinct good or service in the contract. 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 September 30, 2025, we had backlog of $ 1.4 billion, of which approximately $ 823.6 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. Our backlog does not include service and maintenance-type contracts for which we have the right to invoice as services are performed. Contract Estimates 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. For the years ended September 30, 2025 and 2024, our operating results were positively impacted by $ 19.2 million and $ 16.9 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 increased gross profit by $ 4.6 million and $ 2.2 million, respectively, for the years ended September 30, 2025 and 2024. Gross unfavorable changes in contract estimates were immaterial for the years ended September 30, 2025 and 2024. Variable Consideration 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. Contract Modifications Contracts may be modified for changes in contract specifications and requirements. We consider contract modifications to exist when the modification either creates new or changes the enforceable rights and obligations under the contract. Most of our contract modifications are for goods and services that are not distinct from the existing performance obligation. Contract modifications result in a cumulative catch-up adjustment to revenue based on our measure of progress for the performance obligation. 51 Contract Balances The timing of revenue recognition, billings and cash collections affects accounts receivable, contract assets and contract liabilities in our Consolidated Balance Sheets. Contract assets are recorded when revenues are recognized in excess of amounts billed for fixed-price contracts as determined by the billing milestone schedule. Contract assets are transferred to accounts receivable when billing milestones have been met, or we have an unconditional right to payment. Contract liabilities typically represent advance payments from contractual billing milestones and billings in excess of revenue recognized. It is unusual to have advanced milestone payments with a term greater than one year, which could represent a financing component on the contract. 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 September 30, 2025 and September 30, 2024 are summarized below (in thousands): September 30, 2025 2024 Contract assets $ 136,679 $ 102,827 Contract liabilities ( 297,949 ) ( 287,763 ) Net contract liability $ ( 161,270 ) $ ( 184,936 ) Our net contract billing position remained a net liability at both September 30, 2025 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 year ended September 30, 2025, we recognized revenue of $ 261.2 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 is subject to agreement by our customer. Payment is typically expected within 30 days of invoice. Any uncollected invoiced amounts for our performance obligations recognized over time, including contract retentions, are recorded as accounts receivable in the Consolidated Balance Sheets. Certain contracts allow customers to withhold a small percentage of billings pursuant to retainage provisions, and such amounts are generally due upon completion of the contract and acceptance of the project by the customer. Based on our experience in recent years, the majority of these retainage balances are expected to be collected within approximately twelve months. As of September 30, 2025 and September 30, 2024, we had retention amounts of $ 8.1 million and $ 7.1 million, respectively. Of the retained amount at September 30, 2025, $ 8.0 million is expected to be collected in the next twelve months and is recorded in accounts receivable. The remaining $ 0.1 million is recorded in other assets. Disaggregation of Revenue The following tables present our disaggregated revenue by geographic destination and market sector for the years ended September 30, 2025, 2024 and 2023 (in thousands): 2025 2024 2023 United States $ 880,222 $ 846,526 $ 557,934 Canada 157,191 106,521 84,090 Middle East and Africa 27,440 13,440 14,998 Europe 25,072 31,388 26,699 Asia/Pacific 9,283 6,850 6,188 Mexico, Central and South America 5,110 7,631 9,399 Total revenues by geographic destination $ 1,104,318 $ 1,012,356 $ 699,308 52 2025 2024 2023 Oil and gas (excludes petrochemical) $ 406,565 $ 417,170 $ 273,117 Electric utility 278,988 186,547 158,400 Commercial and other industrial 178,222 149,899 103,966 Petrochemical 151,166 185,606 94,188 Light rail traction power 41,264 22,019 28,112 All others 48,113 51,115 41,525 Total revenues by market sector $ 1,104,318 $ 1,012,356 $ 699,308 F. Goodwill and Other Intangible Assets Our intangible assets include goodwill of $ 6.1 million, which is not being amortized, and other intangible assets of $ 6.1 million being amortized over their estimated useful lives. No impairment expense has been recorded for the last three fiscal years. The changes in the carrying amount of goodwill for our single reporting segment are as follows (in thousands): Total Balance at September 30, 2024 and 2023 $ 1,003 Goodwill related to Remsdaq acquisition (1) 5,143 Foreign currency translation adjustment ( 21 ) Balance at September 30, 2025 $ 6,125 (1) See Note P. Business Acquisition for additional information. Intangible asset balances, subject to amortization, at September 30, 2025 and 2024 consisted of the following (in thousands): September 30, 2025 September 30, 2024 Weighted Average Remaining Useful Lives in Years Gross Carrying Value Accumulated Amortization Net Carrying Value Gross Carrying Value Accumulated Amortization Net Carrying Value Customer relationships 12 $ 2,202 $ ( 23 ) $ 2,179 $ — $ — $ — Technologies 5 3,518 ( 76 ) 3,442 500 — 500 Trademarks 10 475 ( 6 ) 469 — — — Order backlog 1 55 ( 7 ) 48 — — — Total intangible assets $ 6,250 $ ( 112 ) $ 6,138 $ 500 $ — $ 500 Net carrying value of intangible assets attributable to the Remsdaq acquisition was $ 5.6 million at September 30, 2025, consisting of customer relationships, technologies, trademarks and order backlog. The amortization expense for all amortized intangible assets was $ 0.1 million in Fiscal 2025. In addition, we had a technology intangible asset of $ 0.5 million associated with an intellectual property acquired in December 2023, which has not yet been subject to amortization. 53 As of September 30, 2025, the estimated future amortization expense of intangible assets is as follows (in thousands): Year Ending September 30: 2026 $ 983 2027 934 2028 934 2029 934 2030 859 Thereafter 1,494 Total $ 6,138 G. Long-Term Debt U.S. Revolver 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) $ 60.0 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 interests of Powell Industries International Limited. As of September 30, 2025, there were no amounts borrowed under the U.S. Revolver, and letters of credit outstanding were $ 77.5 million. There was $ 72.5 million available for the issuance of letters of credit and borrowings under the U.S. Revolver as of September 30, 2025. As of September 30, 2025, we are required to maintain certain financial covenants, the most significant of which are 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. Our most restrictive covenant, the consolidated net leverage ratio, is the ratio of earnings before interest, taxes, depreciation, amortization and stock-based compensation (EBITDAS) to funded indebtedness. An increase in indebtedness, which includes letters of credit, or a decrease in EBITDAS, could restrict our ability to issue letters of credit or borrow under the U.S. Revolver. Additionally, we must maintain a consolidated cash balance of $ 60 million at all times, which can be deducted from the letters of credit outstanding as noted above. The U.S. Revolver also contains a “material adverse effect” clause, which is a material change in our operations, business, properties, liabilities or condition (financial or otherwise) or a material impairment of our ability to perform our obligations under the U.S. Revolver. As of September 30, 2025, we were in compliance with all of the financial covenants of the U.S. Revolver. The U.S. Revolver allows the Company to elect that any borrowing under the facility bears an interest rate based on either the base rate or the eurocurrency rate, in each case, plus the applicable rate. The base rate is generally the highest of (a) the federal 54 funds rate plus 0.50 %, (b) the Bank of America prime rate or (c) the SOFR rate plus 1.00 %. The applicable rate is generally a range from 0 % to 2 % depending on the type of loan and the Company’s consolidated net leverage ratio. The U.S. Revolver is collateralized by a pledge of 100 % of the voting capital stock of each of our domestic subsidiaries and 65 % of the voting capital stock of each non-domestic subsidiary. The U.S. Revolver provides for customary events of default and carries cross-default provisions with other existing debt agreements. If an event of default (as defined in the U.S. Revolver) occurs and is continuing, on the terms and subject to the conditions set forth in the U.S. Revolver, amounts and letters of credit outstanding under the U.S. Revolver may be accelerated and may become immediately due and payable. H. Commitments and Contingencies Letters of Credit, Bank Guarantees and Bonds Certain customers require us to post letters of credit, bank guarantees or surety bonds. These security instruments assure that we will perform under the terms of our contract. In the event of default, the counterparty may demand payment from the bank under a letter of credit or bank guarantee, or performance by the surety under a bond. 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 $ 77.5 million as of September 30, 2025. We also had outstanding surety bonds totaling $ 417.3 million, with additional bonding capacity of $ 782.7 million available, at September 30, 2025. 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 $ 20.2 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 September 30, 2025, we had outstanding guarantees totaling $ 3.9 million, with additional capacity of $ 16.3 million available under this Facility Agreement. The Facility Agreement provides for customary events of default and carries cross-default provisions with the U.S. Revolver. If an event of default (as defined in the Facility Agreement) occurs and is continuing, per the terms and subject to the conditions set forth therein, obligations outstanding under the Facility Agreement may be accelerated and declared immediately due and payable. Additionally, we are required to maintain cash collateral for guarantees greater than two years . As of September 30, 2025, we were in compliance with all of the financial covenants of the Facility Agreement. Litigation 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 in which the outcomes are not predictable. Although we can give no assurances about the resolution of pending claims, litigation or other disputes, and the effect such outcomes may have on us, management believes that any ultimate liability resulting from the outcome of such proceedings, to the extent not otherwise provided or covered by insurance, will not have a material adverse effect on our consolidated financial position, results of operations or liquidity. Liquidated Damages Certain of our customer contracts have schedule and performance obligation clauses that, if we fail to meet them, could require us to pay liquidated damages. Each individual contract defines the conditions under which the customer may make a claim against us. As of September 30, 2025, certain contracts had a probable exposure to liquidated damage claims of $ 3.7 million, which could possibly increase to $ 4.3 million under certain circumstances. Based on our actual or projected failure to meet these various contractual commitments, $ 3.4 million has been recorded as a reduction to revenue. We will attempt to obtain change orders, contract extensions or accelerate project completion, which may resolve the potential for any unrecorded liquidated damage claims. Should we fail to achieve relief on some or all of these contractual obligations, we could be required to pay additional liquidated damages, which could negatively impact our future operating results. 55 I. Income Taxes The components of the income tax provision were as follows (in thousands): Year Ended September 30, 2025 2024 2023 Current: Federal $ 40,543 $ 45,271 $ 18,129 State 9,052 8,101 4,036 Foreign 8,076 342 107 57,671 53,714 22,272 Deferred: Federal ( 5,083 ) ( 11,872 ) ( 7,458 ) State ( 1,144 ) ( 1,620 ) ( 1,499 ) Foreign 1,359 6,018 1,110 ( 4,868 ) ( 7,474 ) ( 7,847 ) Total income tax provision $ 52,803 $ 46,240 $ 14,425 Income before income taxes was as follows (in thousands): Year Ended September 30, 2025 2024 2023 U.S. $ 193,656 $ 167,887 $ 56,923 Foreign 39,894 28,201 12,027 Income before income taxes $ 233,550 $ 196,088 $ 68,950 A reconciliation of the statutory U.S. income tax rate and the effective income tax rate, as computed on earnings before income tax provision (benefit) in each of the three years presented in the Consolidated Statements of Operations, was as follows: Year Ended September 30, 2025 2024 2023 Statutory rate 21 % 21 % 21 % State income taxes, net of federal benefit 3 3 3 Research and development credit ( 1 ) ( 1 ) ( 2 ) Foreign rate differential 1 — — Valuation allowance — — ( 3 ) Non-deductible expenses 2 1 1 Impact of U.S. global intangible taxes and benefits — 1 1 Stock-based compensation ( 3 ) ( 1 ) — Effective rate 23 % 24 % 21 % Our income tax provision reflects an effective tax rate on pre-tax results of 23 % in Fiscal 2025 compared to 24 % and 21 % in Fiscal 2024 and 2023, respectively. The income tax provision for Fiscal 2025 was favorably impacted by benefits related to the vesting of restricted stock units and the current year estimated Research and Development (R&D) Tax Credit. These items were offset by state income tax expense and the tax expense related to certain nondeductible expenses. The income tax provision for Fiscal 2024 was favorably impacted by the estimated R&D Tax Credit and benefits related to the vesting of restricted stock units. These items were offset by state income tax expense, the tax expense related to certain nondeductible expenses and an income inclusion related to U.S. global intangible income. The income tax provision for Fiscal 2023 was favorably impacted by the reversal of a valuation allowance on the United Kingdom (U.K.) deferred tax assets that were previously fully reserved, in addition to the estimated R&D Tax Credit. These items were offset by state tax expense, the tax expense related to certain nondeductible expenses and an income inclusion related to U.S. global intangible income. 56 We record and maintain valuation allowances against the deferred tax assets of various foreign jurisdictions until sufficient evidence is available to demonstrate that it is more likely than not that the net deferred tax assets will be recognized. As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. During Fiscal 2024, management determined that there was sufficient positive evidence to conclude that certain Canadian tax credits in the amount of $ 0.5 million were realizable. The determination was based on the operating results of the past three years and the anticipated future taxable income from our Canadian operations. The release of the valuation allowance resulted in a $ 0.5 million tax benefit and a corresponding increase in the deferred tax assets. We have not recorded deferred income taxes on $ 53.7 million of undistributed earnings of our foreign subsidiaries because of management’s intent to indefinitely reinvest such earnings. Upon distribution of these earnings in the form of dividends or otherwise, we may be subject to U.S. income taxes and foreign withholding taxes. It is not practical, however, to estimate the amount of taxes that may be payable on the eventual remittance of these earnings. We are subject to income tax in the U.S., multiple state jurisdictions and certain international jurisdictions, primarily the U.K. and Canada. The significant jurisdictions that remain open to examination are as follows: Canada 2018 – 2024, U.K. 2024 and U.S. federal and state 2021 – 2024. As of September 30, 2025, we did not have any state audits underway that would have a material impact on our financial position or results of operations. The tax effect of temporary differences between U.S. GAAP accounting and federal income tax accounting, creating deferred income tax assets and liabilities, was as follows (in thousands): September 30, 2025 2024 Deferred Tax Assets: Research and experimental expenditures $ 18,406 $ 12,552 Long-term contracts 6,801 7,480 Deferred compensation 3,306 2,868 Uniform capitalization and inventory 2,016 1,511 Warranty accrual 1,447 1,304 Stock-based compensation 1,367 1,269 Reserve for accrued employee benefits 1,189 1,029 Net operating loss 1,086 1,248 Credit carryforwards 797 1,304 Other 671 655 Deferred tax assets $ 37,086 $ 31,220 Deferred Tax Liabilities: Depreciation and amortization $ ( 5,687 ) $ ( 3,773 ) Retention and other ( 1,597 ) ( 1,310 ) Deferred tax liabilities $ ( 7,284 ) $ ( 5,083 ) Less: valuation allowance ( 1,659 ) ( 1,599 ) Net deferred tax asset $ 28,143 $ 24,538 We have deferred tax assets related to international net operating loss carryforwards of $ 0.2 million that are not reserved with a valuation allowance available to offset future tax liabilities in the respective jurisdictions. The majority of these net operating loss carryforwards are related to our U.K. operations and have an indefinite carryforward period. As of September 30, 2025, the majority of our tax credit carryforwards are fully reserved with a valuation allowance. The net increase in the total valuation allowance during the year was less than $ 0.1 million, which was largely a result of the net operating losses generated in foreign jurisdictions. In assessing the realizability of net deferred tax assets, we consider whether it is more likely than not that some portion or all of the net deferred tax assets may not be realized. The ultimate realization of net deferred tax assets is dependent on the generation of future taxable income during the periods in which those temporary differences become deductible. 57 A reconciliation of the beginning and ending amount of the unrecognized tax benefits follows (in thousands): Year Ended September 30, 2025 2024 2023 Balance at beginning of period $ 1,739 $ 1,889 $ 1,377 Increases related to tax positions taken during the current period 540 460 400 Increases related to tax positions taken during a prior period 185 70 112 Decreases related to expiration of statute of limitations ( 316 ) ( 680 ) — Decreases related to settlement with taxing authorities — — — Balance at end of period $ 2,148 $ 1,739 $ 1,889 Included in the balance of unrecognized tax benefits at the end of Fiscal 2025, 2024, and 2023 are $ 1.9 million, $ 1.5 million, and $ 1.6 million, respectively, of tax benefits that, if recognized, would affect the effective tax rate. Our policy is to recognize interest and penalties related to income tax matters as tax expense. The amount of interest and penalty expense recorded for the year ended September 30, 2025 was not material. Management believes that, within the next twelve months, it is reasonably possible that the unrecognized tax benefits will decrease by approximately $ 0.3 million due to the expiration of certain federal statutes of limitations. We are unable to make reasonably reliable estimates regarding the timing of future cash outflows, if any, associated with the remaining unrecognized tax benefits for the open periods of fiscal years ended September 30, 2022 – 2025. Management believes that an adequate provision has been made for any adjustments that may result from tax examinations. However, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in our tax audits are resolved in a manner not consistent with management’s expectations, we could be required to adjust our provision for income tax in the period such resolution occurs. J. Employee Benefit Plans Retirement Plans We have defined employee contribution plans for substantially all of our U.S. employees (401k plan) and our Canadian employees (Registered Retirement Savings Plan). We recognized expenses under these plans primarily related to matching contributions of $ 5.3 million, $ 4.4 million and $ 3.4 million in Fiscal 2025, 2024 and 2023, respectively. Deferred Compensation We offer a non-qualified deferred compensation plan to a select group of highly compensated individuals (as defined). The plan permits the deferral of up to 50 % of a participant’s base salary and 90 % of a participant’s annual incentive. The deferrals are held in a separate irrevocable rabbi trust (the Rabbi Trust), which has been established to administer the plan. The Rabbi Trust is intended to be used as a source of funds to match respective funding obligations to participants. The assets of the trust are subject to the claims of our creditors in the event that we become insolvent. Consequently, the Rabbi Trust qualifies as a grantor trust for income tax purposes. We make periodic payments into company-owned life insurance policies held in the Rabbi Trust to fund the expected obligations arising under this plan. Changes in the deferred compensation balance are recorded to compensation expense and reflected within the selling, general and administrative expenses line in the Consolidated Statements of Operations. The plan is not qualified under Section 401 of the Internal Revenue Code. We recorded net compensation expense adjustments of $ 0.2 million related to this plan in both Fiscal 2025 and Fiscal 2024. At September 30, 2025, total assets held in the Rabbi Trust were $ 13.9 million and recorded in other assets and the liability was $ 13.7 million and recorded in deferred compensation in our Consolidated Balance Sheets. The $ 13.9 million of assets held in the Rabbi Trust is invested in company-owned life insurance policies. 58 Retiree Medical Plan We have an unfunded plan that extends health benefits to retirees that are also available to active employees under our existing health plans. The current plan provides coverage for employees with at least 10 years of service who are age 55 or older but less than 65 . Effective January 1, 2023, eligibility for postretirement medical benefits changed to age 60 with 10 years of continuous service. Employees who are under age 50 as of January 1, 2023 or who are hired after January 1, 2023 are no longer eligible for postretirement medical benefits. The retiree is required to pay the COBRA rate, less a subsidy provided by us based on years of service at the time of retirement. The unfunded liability is recorded in other long-term liabilities and was $ 0.2 million as of September 30, 2025 and $ 0.3 million as of September 30, 2024. Our net periodic postretirement costs were immaterial for all periods presented in the Consolidated Statements of Operations. Due to the immateriality of the costs and liabilities of this plan, no further disclosure is being presented. K. Stock-Based Compensation We have the following stock-based compensation plans: Restricted Stock Units In February 2014, our stockholders approved and adopted at the Annual Meeting of Stockholders the 2014 Equity Incentive Plan (the 2014 Plan), which replaced our 2006 Equity Compensation Plan (2006 Plan). Persons eligible to receive awards under the 2014 Plan include our officers and employees. The 2014 Plan authorizes stock options, stock appreciation rights, restricted stock, restricted stock units (RSUs) and performance-based awards, as well as certain other awards. In February 2023, our stockholders approved an amendment to the 2014 Plan that extended the term of the 2014 Plan by five years and increased the number of shares of common stock that may be issued under the plan by 600,000 shares for a total of 1,350,000 shares. In accordance with the 2014 Plan, the Compensation and Human Capital Committee has authorized grants of 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 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. Fifty percent of the grant is time-based and typically vests over a three-year period on each anniversary of the grant date, based on continued employment. The remaining fifty percent of the grant is earned based on the three-year earnings and safety performance of the Company following the grant date. At September 30, 2025, there were 116,886 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 past fiscal year is summarized below: Number of Restricted Stock Units Weighted Average Grant Value Per Share Outstanding at September 30, 2024 192,011 $ 35.38 Granted 20,380 184.01 Vested ( 94,002 ) 30.64 Forfeited/canceled ( 1,503 ) 85.21 Outstanding at September 30, 2025 116,886 $ 64.79 Restricted Stock In February 2022, our stockholders approved an amendment to the 2014 Non-Employee Director Equity Incentive Plan (the 2014 Director Plan) that extended the term of the 2014 Director Plan by ten years and increased the number of shares of common stock that may be issued under the 2014 Director Plan by 200,000 shares for a total of 350,000 shares. The plan is administered by the Compensation and Human Capital Committee. Eligibility to participate in the plan is limited to those individuals who are members of the Board of Directors of the Company and who are not employees of the Company or any affiliate of the Company. Under the terms of the 2014 Director Plan, the maximum number of shares that may be granted during any calendar year to any individual is 12,000 shares. The total number of shares that may be issued for awards to any single participant during a calendar year for other stock-based awards (excluding stock options and stock appreciation rights) is 4,000 shares. 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 59 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 was 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. 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. Under this 2014 Director Plan, in February 2025, 3,500 shares of restricted stock were issued to our non-employee directors at a price of $ 200.02 per share. In August 2025, an additional 230 shares of restricted stock were issued to one of our non-employee directors at a price of $ 222.25 per share. In February 2024, we issued 4,620 shares of restricted stock to our non-employee directors at a price of $ 153.81 per share. The total number of shares of common stock available for future awards under the 2014 Director plan was 182,250 shares as of September 30, 2025. At September 30, 2025 and 2024, there were 3,730 shares and 4,620 shares, respectively, of unvested restricted stock outstanding. Compensation Expense Total compensation expense related to restricted stock grants under all plans was $ 0.7 million, $ 0.6 million and $ 0.6 million for the years ended September 30, 2025, 2024 and 2023, respectively. Total compensation expense related to RSUs under all plans was $ 3.9 million, $ 4.2 million and $ 4.0 million for the years ended September 30, 2025, 2024 and 2023, respectively. We record the amortization of non-vested restricted stock and restricted stock units as an increase to additional paid-in capital. As of September 30, 2025 and 2024, amounts of deferred compensation expense not yet recognized related to non-vested stock and RSUs totaled $ 2.4 million and $ 2.1 million, respectively. As of September 30, 2025, the total weighted average remaining contractual life of our non-vested restricted stock and RSUs is approximately five months and 1.35 years, respectively. L. Fair Value Measurements We measure certain financial assets and liabilities at fair value. Fair value is defined as an “exit price,” which represents the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in valuing an asset or liability. The accounting guidance requires the use of valuation techniques to measure fair value that maximize the use of observable inputs and minimize the use of unobservable inputs. As a basis for considering such assumptions and inputs, a fair value hierarchy has been established that identifies and prioritizes three levels of inputs to be used in measuring fair value. The three levels of the fair value hierarchy are as follows: Level 1 — Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 — Inputs other than the quoted prices in active markets that are observable either directly or indirectly, including quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active or other inputs that are observable or can be corroborated by observable market data. Level 3 — Unobservable inputs that are supported by little or no market data and require the reporting entity to develop its own assumptions. 60 Recurring Fair Value Measurements 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 September 30, 2025 (in thousands): Fair Value Measurements at September 30, 2025 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Fair Value at September 30, 2025 Assets: Cash and cash equivalents $ 450,739 $ — $ — $ 450,739 Short-term investments 24,788 — — 24,788 Rabbi trust assets — 13,931 — 13,931 Liabilities: Deferred compensation — 13,707 — 13,707 Contingent future payments related to the acquisition of Remsdaq — — 2,344 2,344 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 September 30, 2024 (in thousands): Fair Value Measurements at September 30, 2024 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Fair Value at September 30, 2024 Assets: Cash and cash equivalents $ 315,331 $ — $ — $ 315,331 Short-term investments 43,061 — — 43,061 Rabbi trust assets — 12,324 — 12,324 Liabilities: Deferred compensation — 12,027 — 12,027 Fair value guidance requires certain fair value disclosures to be presented in both interim and annual reports. The estimated fair value amounts of financial instruments have been determined using available market information and valuation methodologies described below. Cash and cash equivalents – Cash and cash equivalents, primarily funds held in money market savings instruments, are reported at their current carrying value, which approximates fair value due to the short-term nature of these instruments and are included in cash and cash equivalents in our Consolidated Balance Sheets. Short-term investments – Short-term investments include time deposits with original maturities of three months or more. Rabbi trust assets and deferred compensation – We hold investments in an irrevocable rabbi trust for our deferred compensation plan. The assets are primarily related to company-owned life insurance policies and are included in other assets in the accompanying Consolidated Balance Sheets. Because the mutual funds and company-owned life insurance policies are combined in the plan, they are categorized as Level 2 in the fair value measurement hierarchy. The deferred compensation liability represents the investment options that the plan participants have designated to serve as the basis for measurement of the notional value of their accounts. 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. Contingent future payments related to the acquisition of Remsdaq – The contingent future payments were calculated using a probability outcome model based on internally developed assumptions; accordingly, they are categorized as Level 3 in the fair value measurement hierarchy. There were no transfers between levels within the fair value measurement hierarchy during the year ended September 30, 2025. 61 Non-recurring Fair Value Measurements We had non-recurring fair value measurements associated with our acquisition of Remsdaq, see Note P. Business Acquisition, for additional information on non-recurring fair value measurements. M. Leases Our leases consist primarily of office space 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 years ended September 30, 2025, 2024 and 2023 respectively (in thousands): Lease Cost 2025 2024 2023 Operating lease cost $ 932 $ 920 $ 1,457 Less: sublease income — — ( 515 ) Variable lease cost (1) 188 108 369 Short-term lease cost (2) 2,422 2,476 1,864 Total lease cost $ 3,542 $ 3,504 $ 3,175 (1) Variable lease cost represents common area maintenance charges related to our Canadian office space lease. (2) Short-term lease cost includes leases and rentals with initial terms of one year or less. We recognize operating lease assets and operating lease liabilities representing the present value of the remaining lease payments for leases with initial terms greater than twelve months. Leases with initial terms of twelve months or less are not recorded in our Consolidated Balance Sheets. The following table provides a summary of the operating lease assets and operating lease liabilities included in our Consolidated Balance Sheets as of September 30, 2025 and 2024, respectively (in thousands): September 30, Operating Leases 2025 2024 Assets: Operating lease assets, net $ 1,664 $ 1,216 Liabilities: Current operating lease liabilities 882 595 Long-term operating lease liabilities 782 621 Total lease liabilities $ 1,664 $ 1,216 62 The following table provides the maturities of our operating lease liabilities as of September 30, 2025 (in thousands): Operating Leases 2026 $ 964 2027 590 2028 204 2029 29 2030 — Thereafter — Total future minimum lease payments $ 1,787 Less: present value discount (imputed interest) ( 123 ) Present value of lease liabilities $ 1,664 The weighted average discount rates as of September 30, 2025 and 2024 were 7.13 % and 5.44 %, respectively. The weighted average remaining lease term was 2.06 years and 2.47 years, respectively, at September 30, 2025 and 2024. N. Segment Information We manage our business as one reportable, operating segment and our revenues are primarily generated from the development, design, manufacturing and servicing of custom-engineered equipment and systems for the distribution, control and monitoring of electrical energy. Our chief operating decision maker (“CODM”) is our chief executive officer. The CODM manages and allocates resources on a total consolidated basis by assessing performance of revenues and earnings before interest and taxes (“EBIT”) using actual-to-actual, actual-to-plan and actual-to-forecast variance analysis. The measure of segment profit and loss regularly provided to the CODM that is most consistent with GAAP is consolidated net income, as presented in our Consolidated Statements of Operations. The CODM does not manage cost components by product, customer type or service type, nor does the CODM regularly receive disaggregated information at this level. For the years ended September 30, 2025, 2024 and 2023, the summary of segment net income, including segment expenses, for our single reportable segment were as follows (in thousands): Year Ended September 30, 2025 2024 2023 Revenues $ 1,104,318 $ 1,012,356 $ 699,308 Segment operating expenses: Cost of goods sold 779,937 739,268 551,755 General and administrative expenses 65,569 57,037 52,819 Sales and marketing expenses 29,551 27,063 25,642 Research and development expenses 11,008 9,427 6,220 Other expense (1) 393 788 352 Total segment operating expenses 886,458 833,583 636,788 Operating income / EBIT 217,860 178,773 62,520 Interest income, net ( 15,690 ) ( 17,315 ) ( 6,430 ) Income tax provision 52,803 46,240 14,425 Segment net income $ 180,747 $ 149,848 $ 54,525 Gross profit 324,381 273,088 147,553 (1) Other expense includes realized currency loss of $ 0.3 million, $ 0.8 million, and $ 0.4 million, respectively. 63 Revenues by country represent sales to unaffiliated customers as determined by the ultimate destination of our products and services, summarized for the last three fiscal years by region in the table below (in thousands): Year Ended September 30, 2025 2024 2023 United States $ 880,222 $ 846,526 $ 557,934 Canada 157,191 106,521 84,090 Middle East and Africa 27,440 13,440 14,998 Europe 25,072 31,388 26,699 Asia/Pacific 9,283 6,850 6,188 Mexico, Central and South America 5,110 7,631 9,399 Total revenues $ 1,104,318 $ 1,012,356 $ 699,308 Long-lived assets by country consist of property, plant and equipment, net of accumulated depreciation and are determined based on the location of the tangible assets, summarized for the last two fiscal years in the table below (in thousands): September 30, 2025 2024 Long-lived assets: United States $ 70,699 $ 64,560 Canada 32,744 34,456 United Kingdom 7,606 4,405 Total $ 111,049 $ 103,421 64 O. Quarterly Information The table below sets forth the unaudited consolidated operating results by fiscal quarter for the years ended September 30, 2025 and 2024 (in thousands, except per share data): 2025 Quarters First (1) Second (2) Third (3) Fourth (4) 2025 Revenues $ 241,431 $ 278,631 $ 286,273 $ 297,983 $ 1,104,318 Gross profit 59,524 83,432 87,899 93,526 324,381 Net income 34,763 46,330 48,234 51,420 180,747 Earnings per share: Basic $ 2.89 $ 3.84 $ 4.00 $ 4.26 $ 14.98 Diluted $ 2.86 $ 3.81 $ 3.96 $ 4.22 $ 14.86 (1) The results for the first quarter of Fiscal 2025 demonstrated normal seasonality and were negatively impacted by holidays and work schedules compared to other quarterly periods. (2) The results for the second quarter of Fiscal 2025 were positively impacted by project cancellations of $ 1.8 million. (3) The results for the third quarter of Fiscal 2025 were positively impacted by project cancellations of $ 2.3 million. (4) The results for the fourth quarter of Fiscal 2025 were positively impacted by project cancellations of $ 0.5 million. 2024 Quarters First (1) Second Third Fourth (2) 2024 Revenues $ 194,017 $ 255,108 $ 288,168 $ 275,063 $ 1,012,356 Gross profit 48,194 62,720 81,740 80,434 273,088 Net income 24,085 33,488 46,223 46,052 149,848 Earnings per share: Basic $ 2.02 $ 2.79 $ 3.85 $ 3.84 $ 12.51 Diluted $ 1.98 $ 2.75 $ 3.79 $ 3.77 $ 12.29 (1) The results for the first quarter of Fiscal 2024 demonstrated normal seasonality and were negatively impacted by holidays and work schedules compared to other quarterly periods. (2) The results for the fourth quarter of Fiscal 2024 were positively impacted by project cancellations of $ 2.2 million. The sum of the individual earnings per share amounts may not agree with year-to-date earnings per share as each period’s computation is based on the weighted-average number of shares outstanding during the period. 65 P. Business Acquisition On August 15, 2025, Powell UK Limited, a fully owned subsidiary of Powell Industries, Inc. completed the previously announced business acquisition of all outstanding equity interests in Remsdaq, a U.K.-based manufacturer of SCADA RTUs for electrical substation control and automation in generation, transmission and distribution, for a total consideration of $ 18.4 million including cash acquired of $ 4.6 million. Cash payment of $ 15.2 million, including cash acquired of $ 4.6 million, was made on the acquisition date and deferred payments of $ 3.2 million are contingent upon Remsdaq meeting certain technical and financial milestones. We recorded assets acquired and liabilities assumed in connection with this acquisition based on their estimated fair values as of the acquisition date of August 15, 2025. In September 2025, Remsdaq achieved its financial milestone and accordingly, we made cash payments of $ 0.9 million and reduced the fair value of the deferred payments to $ 2.3 million. We incurred total acquisition-related costs of approximately $ 1.4 million, including legal, accounting, valuation, and other professional fees. These costs were expensed as incurred and included within Selling, General and Administrative Expenses in the Consolidated Statements of Operations. The aggregate purchase price allocation at the acquisition date was as follows (in thousands): Purchase Price Allocation Fair value of assets acquired Cash and cash equivalents $ 4,565 Receivables 1,095 Inventory 2,176 Intangible assets 5,773 Goodwill 5,143 All other assets 3,644 Total assets recognized 22,396 Fair value of liabilities assumed Liabilities assumed ( 2,542 ) Deferred tax liabilities associated with intangible assets recognized related to acquisition ( 1,443 ) Fair value of net assets $ 18,411 Purchase Consideration Cash consideration $ 15,175 Fair value of contingent consideration 3,236 Total purchase consideration $ 18,411 The fair value of the assets acquired and liabilities assumed are preliminary and subject to change until we finalize the valuation of net assets acquired. Goodwill is non-deductible for income tax purposes and calculated as the excess of the consideration transferred over the net assets recognized and represents the anticipated synergies of acquiring Remsdaq. Other intangible assets of approximately $ 5.8 million include customer relationships, technology, trademarks and order backlog, as follows (in thousands) at the acquisition date: Intangible Assets Identified Fair Value Useful Life Customer relationships $ 2,211 12 Technology 3,030 5 Trademarks 477 10 Order backlog 55 1 Total $ 5,773 66 We engaged an independent third-party valuation specialist to assist with the fair value measurement of the intangible assets assumed through the acquisition of Remsdaq, and the calculation of goodwill. The intangible assets were valued using the income approach, specifically the multi-period excess earnings method and the relief from royalty method. The inputs include forecasted future revenues, future margins, and revenues attributable to existing customers, obsolescence factor, royalty rate, customer attrition rate, contributory asset charges and discount rates, which are unobservable inputs that are based on our own and Remsdaq’s assumptions. Accordingly, the fair values of goodwill and other intangible assets are considered level 3 measurements under the U.S. GAAP fair value hierarchy. The purchase price includes up to $ 3.2 million in contingent consideration, of which approximately $ 0.9 million has been earned and paid in September 2025 after Remsdaq achieved its financial target. The remaining contingent consideration was calculated based on a probability outcome model to measure the fair value of the contingent consideration, which is considered a Level 3 measurement under the U.S. GAAP fair value measurement hierarchy. As of September 30, 2025, we determined the fair value of the contingent consideration was $ 2.3 million. Q. Subsequent Event Quarterly Dividend Declared On November 4, 2025, our Board of Directors declared a quarterly cash dividend on our common stock in the amount of $ 0.2675 per share. The dividend is payable on December 17, 2025 to shareholders of record at the close of business on November 19, 2025. 67 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.