FPS Earnings Call

OperatorGreetings and welcome to the Forgent Power Solutions Third Quarter 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press *0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Kate Africk, Head of Investor Relations.

Kate AfrickThank you.

OperatorYou may begin.

Kate AfrickThank you, operator, and thank you everyone for joining us today for Forgent Power Solutions' Third Fiscal Quarter 2026 Earnings Call. With me today are Gary Niederpruem, our Chief Executive Officer, and Ryan Fiedler, our Chief Financial Officer. On this call, management will be making forward-looking statements based on current expectations and assumptions, which are subject to risks and uncertainties. Actual results could differ materially from our forward-looking statements if any of our key assumptions are incorrect because of various factors, including those discussed in today's earnings release and during this conference call and in our latest filings with the Securities and Exchange Commission, each of which can be found on our website. Today's presentation also includes references to non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDA margin, and adjusted net income.

Kate AfrickYou should refer to the information contained in the company's earnings release and presentation for definitional information and reconciliations of historical non-GAAP measures to the comparable GAAP financial measures. With that, let me turn the call over to Gary.

Gary NiederpruemThank you, Kate, and good morning, everyone. We appreciate the continued interest and engagement from our shareholders and the broader investment community. I'm excited to share more about what differentiates Forgent and how we are creating value both for our customers and our shareholders. As is our practice, I'll begin with a summary of our fiscal third quarter results and provide an update on the business. I'll then turn the call over to Ryan, who will review our fiscal third quarter financial results and updated fiscal 2026 guidance. Turning to slide 5. We continued to deliver strong commercial and financial performance in Q3, with revenue growth accelerating both year-over-year and sequentially, even as we grew from a larger base. Revenue increased 103% to a record $379 million, Adjusted EBITDA rose 96% to a record $85 million, and adjusted net income grew 132% to a record $55 million. Importantly, adjusted EBITDA margin expanded 200 basis points sequentially to 22.4% in the quarter, driven primarily by increased leverage on SG&A along with improved labor and overhead absorption.

Gary NiederpruemOur financial performance reflects our focus on the high-growth end markets as well as our exceptional product breadth, manufacturing depth, and customization capabilities, which together we believe enable us to grow faster than the overall market, gain share, and generate attractive margins.

Gary NiederpruemTurning to Slide 6. There are 5 key takeaways we have for shareholders and investors coming out of Q3. First, demand for our products continues to exceed our expectations, and we are raising our fiscal 2026 guidance to reflect the strength of that demand. Second, the fundamentals across our core data center and grid markets remain exceptionally strong, and we see sustained strong market growth. The feedback we are getting from customers is consistent. Investment budgets are expanding. Project pipelines are growing and the need for customization, speed, and scaled manufacturing is only becoming more important. Third, we are taking share across our three primary end markets: data center, grid, and energy-intensive industrials. We estimate aggregate market growth of approximately 20% annually. We have been growing at 3 to 5 times that rate which speaks to the strength of our execution and the relevance of our value proposition.

Gary NiederpruemCustomers are increasingly choosing Forgent because we can deliver highly customized solutions at scale with some of the shortest lead times in the industry. We believe that combination is highly differentiated, and we expect it to continue to drive share gains over time. Fourth, we believe we are still in the early stages of our margin expansion opportunity. In the third quarter, we delivered 200 basis points of sequential adjusted EBITDA margin improvement, and we expect to build on that progress with further sequential margin expansion in the fourth quarter. And lastly, we are beginning to transition from cash consumption towards cash generation. Operating cash flow improved meaningfully in the quarter, and as our current capacity expansion program nears completion,— and capital intensity begins to step down, we expect cash flow dynamics to continue improving with increasing cash generation potential as we move into fiscal 2027.

Gary NiederpruemMoving to Slide 7, I'll provide more context on the strength of demand we're seeing in the business. In the third quarter, we delivered record bookings of $867 million up 308% year over year and 14% sequentially, building on what was an already record level of bookings in the second quarter. Order growth was led by our data center and grid customers, reflecting continued strength in our core end markets. Importantly, our year over year bookings growth accelerated in the third quarter, even as we grew from a larger base. That underscores both the magnitude and durability of the demand we are seeing. Our book-to-bill ratio was 2.3 times in the quarter despite delivering record revenue. This highlights not only the strength of current demand, but also the increasing visibility we have into future periods.

Gary NiederpruemAs of March 31st, 2026, Backlog was at a record of nearly $2 billion, up 157% year over year and 33% sequentially. This is the highest backlog level in Forgent's history and provides strong visibility into future revenue as customers increasingly move to secure production capacity well into fiscal 2027 and beyond. Turning to Slide 8. Given the strength of the demand environment and our continued execution, we are raising our guidance for fiscal 2026. Importantly, the low end of our updated guidance ranges for revenue and adjusted EBITDA is now above the high end of our prior ranges, which reflects the momentum we are seeing across the business. We now expect 1.35 to $1.39 billion in revenue, $70 million higher than prior guidance; $310 to $320 million of adjusted EBITDA, $10 million higher than prior guidance; and $197 to $207 million of adjusted net income, $7 million higher than prior guidance.

Gary NiederpruemAt the midpoint, our updated guidance implies stronger year-over-year growth across all key metrics, including 82% revenue growth, 86% adjusted EBITDA growth, and 128% adjusted net income growth.

Gary NiederpruemWe are operating in a very strong demand environment, but our objective is to always grow faster than the market by taking share. Slide 9 highlights two of the metrics we use to measure that progress. Starting on the left-hand side of the page, Powertrain solutions are integrated combinations of custom products designed to work together as a system. When we deliver a powertrain solution, we are addressing a broader set of the customer's needs and capturing a larger share of their overall project spend. In the third quarter, powertrain solutions revenue increased 248% year over year to almost $100 million, and more than doubled sequentially. That growth reflects our ability to expand our role with customers by delivering more comprehensive, higher-value solutions across the powertrain.

Gary NiederpruemWhile we are seeing strong growth across our product portfolio, powertrain solutions remains the fastest growing part of the business. It is also contributing to higher average customer spend which increased 109% year over year and 20% sequentially. Average customer spend is an important metric for us for two reasons. First, it tells us we are broadening customer engagement and unlocking the full potential of our product portfolio. Second, it indicates that we are capturing a greater share of project spend, increasing our relevance to customers and expand— expanding our presence across more of the powertrain. The strategy behind these results is very deliberate. We are engaging with customers early in their planning process in leading with our engineering capabilities. When we work hand in hand with customers to design their powertrain, it naturally creates opportunity to deliver multiple product categories and integrated solutions.

Gary NiederpruemWe are also leveraging our strength in medium voltage switchgear and transformers to create pull-through demand across the rest of our portfolio. This remains a significant opportunity for Forgent, and we believe we are still in the early stages of realizing its full potential.

Gary NiederpruemSlide 10 provides an example of how our strategies are translating into customer wins. During the quarter, we secured a greater than $100 million powertrain solution order from a new NeoCloud customer for the first building of what is planned to be a multi-gigawatt-plus data center campus. Our scope includes medium voltage switchgear, medium voltage transformers, low voltage switchboards, and service, representing a fully integrated powertrain solution.

Gary NiederpruemWhat differentiated Forgent to this win? First, we engaged early with our engineering team, which allowed us to solve design challenges upfront and build credibility with the customer. Second, our broad portfolio enabled us to deliver a fully integrated solution rather than a collective of individual products, making it easier and more efficient for the customer to work with us. Third, we tailored our solutions to the customer-specific requirements. And finally, our speed from concept to uptime was best in class, reinforcing the value of our execution model with delivery starting just 6 months after the PO.

Gary NiederpruemSlide 11 highlights a different large and strategic order, this time from a repeat customer where we are providing over $100 million of low voltage equipment across multiple data center campuses throughout the United States. While this order does not meet our definition of a powertrain solution order, given it involves just a single product category, the strategic importance of the win is just as compelling. To provide some context, Forgent had previously supplied medium voltage transformers to the customer, establishing a strong track record of understanding their unique technical requirements and delivering to specifications and timeline. That performance laid the groundwork for a broader opportunity as the customer rapidly scaled development across multiple sites with timeline certainty as a top priority.

Gary NiederpruemOur ability to offer dedicated capacity and start deliveries within just 5 months of PO with minimal execution risk enabled by our vertically integrated manufacturing model and supply chain control gave us a clear advantage. The relationship expanded from an initial transformer order to low voltage gear as well, with additional opportunities in the pipeline, illustrating how strong execution can drive increased scope, increased wallet share, and longer-term enterprise-level relationships.

Gary NiederpruemTaken together, these orders reinforce that our strategy is working across both new and existing customers and across different product mixes. We are increasing our relevance with customers, capturing more of their spend, and positioning Forgent for continued growth as we scale.

Gary NiederpruemMoving to Slide 12. Earlier I mentioned that we believe we are still in the early innings of our margin expansion opportunity. This page helps explain why. From the second quarter to the third quarter, gross margin increased 30 basis points. That improvement was driven by operating leverage on higher revenue despite the impact of growth-related costs, including underabsorbed fixed costs and one-time startup costs at our new facilities, as well as underabsorbed labor costs associated with accelerated hiring. To put that in context, absent those growth-related costs, gross margins would have been approximately 180 basis points higher. The key takeaway is, while gross margin improved in the quarter, we believe there is still meaningful opportunity ahead. As these growth-related costs moderate and as new capacity becomes more fully utilized, we expect gross margins to continue improving in the years ahead.

Gary NiederpruemWhere we did see the full benefit of operating leverage was in SG&A. SG&A as a percentage of sales declined 230 basis points quarter over quarter, reflecting revenue growth outpacing operating cost growth. We expect that dynamic to continue, which should contribute to further margin expansion in future periods. The key takeaway is that we expect to deliver further sequential margin expansion in the fourth quarter, and we believe there is meaningful opportunity to continue expanding margins over time. We are already seeing that leverage materialize in SG&A, and we expect to see it increasingly in gross margins as our new facilities continue to ramp and move toward full production rates. Turning to Slide 13. Increasing operating leverage is also beginning to translate into improved cash flow. While we expect to continue making meaningful working capital investments to support our revenue growth, We are now reaching a scale where the business is starting to generate significant operating cash flow.

Gary NiederpruemIn the third quarter, operating cash flow improved by $37 million year-over-year to $29 million, and we are expecting operating cash flow to continue to grow over time. Importantly, we also expect free cash flow to inflect as we complete our current capacity expansion plan toward the end of this year and capital intensity begins to step down. As free cash flow increases, it will provide us with greater flexibility to pursue strategic M&A opportunities to complement our product portfolio and augment our growth.

Gary NiederpruemThe transition towards cash generation represents an important milestone for Forgent and a direct outcome of the strategy we have been executing. With that context on the trajectory of margins and cash flow, I'll now turn it over to Ryan to walk through our financial results in more detail.

Ryan FiedlerThanks, Gary. I'll walk through our third quarter financial results and then discuss our updated outlook. As Gary mentioned, the quarter reflects strong execution against accelerating demand with revenue growth, margin expansion, and improving cash flow all progressing at or better than expectations. As we continue to ramp our production volumes. Turning to Slide 15. Revenues in the quarter were $379 million, an increase of 103% versus last year, all organic. Growth continued to accelerate both year over year and sequentially, even as we scaled off a substantially larger base. This performance reflects a combination of strong end market demand— and continued share gains, supported by progress on our production ramp. Similar to last quarter, growth was led by our data center and grid end markets, both of which more than doubled year over year. We also saw broad-based strength across the portfolio. Revenues for all of our offerings increased year over year, led by continued strong growth in custom products and powertrain solutions.

Ryan FiedlerCustom products revenues increased 82% year over year to $259 million, representing 68% of total revenues. Powertrain solutions revenues grew 248% year over year to $99 million, representing 26% of total revenues, up from 16% of our mix last quarter. Standard Products revenues increased 53% year over year, and Services revenues grew 4% year over year, representing 3% and 2% of total revenues respectively. Services remain a strategic priority for us, and we are actively pursuing greater monetization of commissioning and related services as we deliver higher volumes of new equipment. Although Services is still at an early stage, we see attractive long-term potential as we continue to invest in the offering and as our installed base expands. Overall, third quarter revenues exceeded our expectations, reflecting accelerated growth driven by market demand and share gains as we execute our production ramp.

Ryan FiedlerTurning to Slide 16, I'll walk through adjusted EBITDA— and margin performance for the third quarter. Adjusted EBITDA was $85 million, up 96% year over year, driven primarily by strong revenue growth. Gross profit increased 92% year over year, while SG&A increased 145%, reflecting investments in sales, operations, and engineering to support our rapid growth, as well as incremental costs associated with being a public company. Adjusted EBITDA margin was 22.4% for the quarter. On a sequential basis, adjusted EBITDA margins expanded 200 basis points. Adjusted EBITDA margins benefited from 30 basis points of sequential gross margin expansion driven by higher production volumes as growth-related costs at our newer facilities declined as a percentage of sales. The larger contributor to the sequential margin expansion, as we expected, was greater leverage on SG&A expenses. While SG&A grew nominally, it declined by 230 basis points as a percentage of sales.

Ryan FiedlerIn summary, adjusted EBITDA margins expanded sequentially in the third quarter, consistent with our expectations, and we expect sequential expansion again in the fourth quarter as higher production volumes drive further absorption and SG&A leverage. With that context on Q3 profitability, let's turn to our updated outlook. On slide 18, I'll start with our outlook for the fourth quarter. After a strong execution in the third quarter, our expectations are now higher for the fourth quarter. For the fourth quarter of fiscal 2026, we expect revenues of $392 to $432 million, representing a 73% growth year over year at midpoint, as well as continued strong sequential growth as production volumes increase further. We expect adjusted EBITDA of $100 to $110 million, representing a 145% year over year increase at midpoint, and margins expanding to around 25% with incremental operating leverage as our production ramp continues.

Ryan FiedlerLastly, we expect adjusted net income of $67 to $77 million, more than tripling year over year. Overall, the fourth quarter outlook reflects continued strong demand, increasing scale, and the operating leverage that is beginning to emerge as we move through the second half of the year. Next, I'll discuss our full fiscal year 2026 guidance on slide 19. We expect revenues in the range of $1.35 to $1.39 billion, representing 82% year-over-year growth at the midpoint. We expect adjusted EBITDA of $310 to $320 million, representing an 86% year-over-year growth at midpoint, and adjusted net income of $197 to $207 million, reflecting 128% growth at the midpoint. This implies an adjusted EBITDA margin of approximately 23% for the full year, modestly higher year over year. As discussed, March performance reflects strong volume growth in the early stages of operating leverage as we scale. In addition to price, we expect continued leverage across SG&A and improved absorption of labor and overhead to more than offset tariff impacts.

Ryan FiedlerOverall, our full-year outlook reflects a combination of accelerating demand, increasing scale, and improved profitability, and positions the business well as we move into fiscal 2027 with greater capacity, visibility, and earnings power. With that, I'll turn it back to Gary for closing remarks.

Gary NiederpruemBefore we open it up for questions, let me close with a few brief thoughts. First, let me say thank you to all of our employees, customers, and investors. All three constituents have trusted Forgent in different ways, and we don't take any of that lightly. Second, this was another strong quarter for Forgent as we continue to establish our track record in the public markets and position Forgent as a trusted partner delivering customization at scale with speed. The quarter reflected accelerating demand, expanding customer relationships, and continued strong execution as we scale the business. Third, the progress we outlined today across orders and backlog, revenue growth, margin expansion, and the transition towards cash generation reinforces our confidence in the trajectory of the business. We look forward to our fiscal fourth quarter call when we will provide our outlook for fiscal 2027.

Gary NiederpruemWith that, we're happy to take your questions. Operator?

OperatorThank you. And at this time, we will conduct our question and answer session. To get through as many questions as we can in the time remaining, all questioners should limit themselves to one question. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions.

OperatorAnd your first question comes from Julian Mitchell with Barclays. Please state your question.

Julian MitchellThanks very much. Good morning. Maybe my question really is about the revenue outlook for kind of the next 12 months and really to understand, you know, when we look at the recent backlog and orders trends, they suggest very significant revenue growth in the year ahead. Is there anything you'd highlight to us on sort of lead times extending or anything like that, that may put a low ceiling on the ability of revenue to catch up to kind of quarterly orders? I think orders have been running at 2 to 1 versus revenue the last 3 quarters. Anything you could flesh out there maybe help us understand how much of that March backlog should ship in the next 12 months?

Gary NiederpruemYeah, good morning, Julian. It's Gary. Couple dimensions to that answer here. So one is, I mean, let's start with that order-to-revenue number of 2:1. That is really quite remarkable. And you're right, it's the second quarter in a row we've achieved that on a trailing 3 quarters. It is above that number. So Couldn't be happier with the way both sides of that equation on the order and the revenue side is shaping up for us. So that's number 1. Number 2 is if you look at the profile and the shaping of that backlog, we are certainly starting to see orders drop in that are, you know, it used to be 9 to 12 months. Now it's probably 12 to 15-ish months on average. That really is not as much a function of our lead time as much as it is us engaging with our customers early and then locking in capacity. So most of the shipment profile is, it's a little bit to do with our lead time, but it's more around to do the customer's project and when they want that product.

Gary NiederpruemSo that's sort of dimension 2. The third one, just to quantify that a little bit, you know, obviously what was in backlog at the end of March also had our fourth fiscal quarter in there. So there's a big chunk of that and you, we can back into the math based on the guide. But, you know, I would say, you know, 55 to 60% of what is in backlog right now is scheduled to ship in '27. You know, the other chunk of that is going to be in fiscal Q4. The other chunk of that is going to be out in '28. So, you know, we still have book and bill business to capture in '27, but that was all part of the pipeline and part of the roadmap. But I think those are the 3 best dimensions I can give you to answer that question.

Julian MitchellGreat.

OperatorThank you.

Gary NiederpruemYou're welcome.

OperatorYour next question comes from Joseph Ritchie with Goldman Sachs. Please state your question.

Joseph RitchieHey guys, good morning.

Gary NiederpruemGood morning, Joseph.

Joseph RitchieRyan, you gave some of the headwinds associated with margins this quarter. It looks like you guys are expecting margins to ramp about 300 basis points sequentially, pretty good incrementals on that, I think around 60%. I guess, I guess two-part question. What gives you the confidence that some of the headwinds that you saw this quarter dissipate in your fiscal fourth quarter? And then also, how do you think about the trajectory for 2027? Thanks.

Ryan FiedlerYes. So just maybe a couple of points here, Joseph. Yeah, we did have a little bit of the headwinds that we kind of talked about or that you mentioned here for Q3. But overall, the sequential margin improvement of 200 basis points, we felt very good about. You know, we continue to see good operating leverage as our top line continued to grow. And as we think about, you know, Q4, you know, we continue to see strong top line growth. That operating leverage certainly is a benefit. That we expect to see come through the business. And, and you can see the, the improvement in the EBITDA margins for Q3 to Q4, where we, we expect another few hundred basis points of improvement. You know, I think we feel very good about our ability to achieve that. And if you think about Q4, we do have some benefit to certain mix dynamics that will drive some of the incremental margins that we have in the, in the fourth quarter.

Ryan FiedlerAnd we think that that's, you know, probably slightly above what we would view as kind of a normalized run rate as we go into next year. As you think about 2027, we'll be providing more detail on what that looks like in our next earnings call. And we will be able to share some additional detail at that point, Joseph.

Joseph RitchieGreat, thank you.

OperatorThe next question comes from Julian Dumoulin-Smith with Jefferies. Please state your question.

Tanner JamesGood afternoon. This is Tanner James on for Julian. Could you discuss trends you're seeing specifically in order activity for grid-related equipment? Like, what's the mix you're seeing for generation-adjacent equipment orders versus that of traditional T&D? And then perhaps on the generation side, has there been any impact from evolving customer sentiment toward or away from development of certain types of generation resource? Thanks.

Gary NiederpruemYeah, hey Tanner James, um, couple pieces there. So one is, uh, for the most part we are relatively agnostic to the generation type, um, so whether that is coal or gas or nuclear or alternative energy, you know, we are relatively agnostic. The one dimension that increments us up though is in that alternative energy space because there are more not only changes, but there's, there's step function changes in voltage that needs to take place when you have alternative energy. So that is a net good guy for us. So when you take a look at our overall grid business, um, we definitely are seeing growth in that sector, not only in the revenue, but backlog and the order rate. Uh, and then secondly, you know, if you double-clicked on that a little bit, there is still a, a heavy amount of not only grid reinvestment going on, but also parts of that renewable supply chain that are a tailwind for us that we are capturing as well.

Gary NiederpruemSo those are the couple of things I'd say on that one.

Tanner JamesGreat. Thanks.

OperatorThank you. And your next question comes from Nigel Coe with Wolfe Research. Please state your question.

Nigel CoeGreat. Thanks a lot. Good morning and thanks for the question. Obviously, a lot of inflation out there. I'm just wondering how price-cost is tracking. And then perhaps talk about tariffs and, you know, how the change in the tariff regime has been impacting you guys. And I'm actually curious how— maybe just remind us what kind of backlog protection you have against rising inflation and tariffs. Thanks.

Gary NiederpruemYeah, sure, Nigel. So let's split that in two there for a second. So on the tariff piece, the changes that kicked in 45 days ago or so, were generally neutral-ish for us. Couple products got a little bit worse, couple products got a little bit better. On average, it was sort of a neutral exchange for us at this point in time. That's number one. Number two, price-cost, it is always hard to really pinpoint price-cost because of the custom nature of our product set. But to the best of our ability, we think we are, again, neutral to probably slightly positive We have pretty good visibility on both of those, but this is where vertical integration really helps because that flat bill of material and flat supply chain, we have really pretty good visibility as to what's going on and there's not a latent impact to indoor supply chain. So that's a, a secondary benefit of being vertically integrated. And then on the last piece, the backlog protection, you know, we, we handle this in, in a couple of different ways.

Gary NiederpruemOne is when we get an order from our customer, we do a pretty good job of turning around and securing that supply in our supply chain very quickly. So that's, that's mode number 1. And then mode number 2 is, in the majority of contracts we've signed over the last 9 to 12 months, most of those have some form of tariff and inflation protection clause in there. So then at that point, it becomes a commercial decision whether we want to actually do that or not. Sometimes we do, sometimes we don't. But the summation of all of that is price-cost generally neutral. The latest tariff, you know, as of 45 days ago or so, generally neutral-ish. So, you know, that hasn't really impacted the P&L at this point either in a good or a bad way. It's just been just that, just neutral.

Nigel CoeGreat. Thanks, Gary.

Gary NiederpruemThanks, Nigel.

OperatorThank you. And your next question comes from Jeff Hammond with KeyBanc Capital Markets. Please state your question.

Jeff HammondHey, good morning, everyone.

Gary NiederpruemGood morning, Jeff.

Jeff HammondIt's good to see that the cash flow flipped positive. Just how should we be thinking about free cash flow conversion as we move into fiscal '27? Just how you're thinking about working capital needs within that. And then I think you put and you've stated kind of we're going to step down to 1%. What would it take to really start to contemplate any kind of incremental, you know, capacity adds given how strong things are? Thanks.

Gary NiederpruemYeah, sure, Jeff. A couple pieces there again. So one is, I would say from a macro standpoint, we're really pretty happy with how that current capital expansion plan has come along. If you just think about what we said we were going to do in terms of the spend and what that is providing us in the factory, We are, we are right on track to the point where we should be meaningfully complete with that $205 million expansion by the end of this fiscal year. There'll be a little bit that bleeds over into the first half of next fiscal year, but we will be meaningfully complete. That's number one. Number two is, you know, we are in the middle of assessing our '27 plans right now to determine what capital really looks like for FY '27. I think that 1, 1.5% number is probably a pretty good number based on everything we see. You know, the thing that would increment it up is purely just the demand profile and the mix of that demand profile.

Gary NiederpruemBut everything we see right now, I think, you know, the guide rails that we've given in the past is pretty much still the right guide rails at this point in time.

Ryan FiedlerAnd Jeff, maybe just to answer on top of that on the working capital side, you know, we can, you know, continue to see ourselves in that 10 to 15% range. You know, we were kind of in the midpoint of that this quarter. If you look at the detail behind that, We still have opportunity for us to continue to improve on that side, and we're actively working it. So that will also continue to be something as an opportunity for free cash flow generation as time goes on.

Jeff HammondGreat. Thanks.

OperatorYour next question comes from Andrew Obin with Bank of America. Please state your question.

David Ridley-LaneThis is David Ridley-Lane on for Andrew. Look, I'm not going to ask you if you can continue this, you know, 2+ times book-to-bill, but I just want to confirm that you would expect to be adding to backlog in the fourth quarter and that within that growth that you're seeing, now that that backlog is now covering over a year, you know, to me building on the last question, would you consider increasing your down payment requirements for orders maybe to, to help with some of that working capital dynamic? Thank you.

Gary NiederpruemYeah, David, that, that was a beautifully crafted way of not asking the question and asking the question at the same time. So, you know, kudos to you there. So let's, on the orders and backlog, you know, I don't think we're going to guide on a quarterly basis here to what that orders and backlog number would be. But I think clearly from the sentiment we had in the prepared remarks and just the overall demand environment, look, the pipeline is pretty robust at this point in time. So I would leave it at that. And the reason I would leave it at that is it is still really hard to predict when an order is going to actually come in from our customer on a month-to-month or quarter-to-quarter basis. So I don't want to set any false expectations and have something slip out a day or two. And likewise, if something gets pulled in, we're not going to celebrate it. Too much. So I would just say demand environment is pretty robust and we feel good about the pipeline at this, as it sits at this point in time.

Gary NiederpruemAnd then on your, your second question, you know, what, you know, what we are seeing in FY27 is a continuation of all the things that we're seeing in FY26. That pipeline or that backlog is getting extended a little bit. Again, not because of our lead times, but more because of the project lead times from the customer base. But you look at over the next 15 months, we have decent visibility into everything that we think we need to execute on.

OperatorThank you. And your next question comes from Chigusa Katoku with JPMorgan Chase. Please state your question.

Chigusa KatokuHi, thanks for taking my question. I'm just going to take a stab at this, but in terms of your orders, I think you highlighted two $100 million wins this quarter. So would you— do you see that as lumpiness? And is this quarter like a high watermark for orders? Or if you have any color here and, you know, order backlog trends from here, that would be great. Thanks.

Gary NiederpruemYeah, Chigusa, I would double down on the comments that we made to David's question just a second ago in terms of not— won't guide to any order number, but would certainly suggest that demand, the market demand, and more importantly, our ability to take share in that market demand continues to be really, you know, pretty good for the foreseeable future. Not sure how that portends to an exact order number in any given quarter, but the macro backdrop is certainly, you know, positive. And then in terms of the $200 million order numbers you referenced there, I don't think that's as much lumpiness as it is, you know, these projects are just getting larger and larger, not only are the projects getting larger, but we are fulfilling more of our product set within those projects. So I think in general, you will see our order sizes continue to gravitate up because of the project size growing and our ability to sell across the portfolio growing.

Gary NiederpruemBoth of those dynamics will lead to, you know, a larger order number as we continue to go forward.

Chigusa KatokuGreat, thank you.

OperatorThank you, and your next question comes from Chris Snyder with Morgan Stanley. Please go ahead.

Chris SnyderThank you. I appreciate some of the prior commentary that on the project business, customers are ordering a bit further out than maybe they were 6 or 12 months ago. But I would imagine that, you know, there's some level of book-and-ship and quick turnaround business for you guys as well, whether it's same quarter or kind of next quarter delivery. So I guess my question is, does the company still have incremental capacity to serve that demand? And I guess I'm really trying to kind of get at, like, if some of that quick ship demand comes through in Q4, is there upside to the revenue forecast guide, or are you guys starting to maybe run up against some of your own capacity? Thank you.

Gary NiederpruemYeah, sure, Chris. So on the book and bill piece of it, there is a little bit of flow business. And when I say flow, that is sort of intra-quarter orders that we would book and then that we would ship and be able to transact within the quarter. It is a smaller, a relatively small number in the grand scheme of things though. And it typically comes in either in a few low voltage products or in some of our dry-type transformer business. But again, it's a pretty small number in the grand scheme of things. So that's number 1. Number 2 is, you know, I think the guide that we gave in terms of the bracketed ranges is what we feel comfortable with. One, knowing the visibility we have at this point in the quarter. And 2, you know, I don't think we're hitting any ceiling on our ability to ship. But, you know, typically what it is, is the customers either don't need those products. If somebody dropped in a huge order, they don't need it in 3 or 4 weeks.

Gary NiederpruemSo for the most part, I think our supply and demand balance is just that. It's pretty balanced for where we sit at the moment.

Chris SnyderMakes sense. Thank you, Gary. Appreciate that.

Gary NiederpruemThanks, Chris.

OperatorYour next question comes from Noah Kaye with Oppenheimer. Please state your question.

Noah KayeGood morning, Gary, Ryan, Kate. Thank you all for taking the questions. So, you know, there are growing power bottlenecks on the grid, and we've seen this rise in behind-the-meter power configurations, you know, for the data centers. I think it's as much as a third of the gigawatts in the planning queue right now. And you frame this as really a content growth opportunity for the company. Can you talk a little bit about where your pipeline sits now in terms of targeting behind the meter and how you think of your wallet share opportunity there?

Noah KayeYeah.

Gary NiederpruemGood morning, Noah. Yes. Anecdotally, here's what I would say. Any behind the meter opportunity is a net good guy for us. You know, at some point the grid will come back and interconnect it, but that's going to be, you know, 5 to 7 years from now. And in that period of time, the more behind-the-meter opportunities there are, regardless of what the power source is, whether it's solar, whether it's natural— again, turbines, you know, that is a good thing for us because it's another spot where electricity needs to be either stepped up or stepped down and distributed. So at this point in time, we do see opportunities growing in the behind-the-meter realm. In both for natural gas turbines as well as in alternative energy ways. So generally that is a good, a good trend for us.

Noah KayeAll right. Thanks, guys.

Gary NiederpruemThanks, Noah.

OperatorThank you. And ladies and gentlemen, there are no further questions at this time. So with that, we will now conclude today's Forgent Power Solutions Fiscal Third Quarter 2026 Earnings Conference Call. You may disconnect your lines at this time. Thank you all for your participation.