Forgent Power Solutions Q4 2026 Earnings Call Transcript

Forgent Power Solutions (NYSE: FPS ) reported fourth-quarter financial results on Tuesday. The transcript from the company's fourth-quarter earnings call has been provided below. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

View the webcast at Summary Forgent Power Solutions Inc. 42 billion. The company's strategic initiatives focused on expanding Powertrain Solutions capacity, with plans for a new facility in Tijuana to meet growing demand for modular solutions. Forgent provided fiscal 2027 guidance with expected revenue growth of 76% and adjusted EBITDA growth of 86%, highlighting strong backlog coverage and continued market share gains.

Operational achievements included a fivefold expansion in manufacturing capacity and significant hiring to support growth, doubling the workforce within a year. Management emphasized robust demand, strategic capacity expansions, and potential M&A opportunities as key priorities for fiscal 2027. Full Transcript OPERATOR Greetings and welcome to the Forgent Power Solutions Inc. Q4 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. You may be placed into the question queue at any time by pressing star 1 on your telephone keypad, and we ask you please ask one question, then return to the queue. As a reminder, this conference is being recorded.

If anyone should require operator assistance, please press 0 on your telephone keypad. It's now my pleasure to turn the call over to Kate Efric, Head of Investor Relations. Kate, please go ahead. Kate Efric, Head of Investor Relations Thank you, Operator, and thank you everyone for joining us today for Forgent Power Solutions' fiscal fourth quarter and full year 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, adjusted net income and adjusted earnings per share. You 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 Niederpruem, Chief Executive Officer Thank you, Kate, and good morning everyone.

As is our practice, I'll begin with our fourth quarter financial highlights and a business update. Then, since this is our year-end call, I'll spend a few minutes reviewing our full year results against the commitments and priorities we outlined during our IPO process earlier this year. After that, I'll turn it over to Ryan to walk through our fourth quarter and full year financial results in more detail. Then I'll conclude with a discussion of our strategic priorities for the coming year and provide our fiscal '27 guidance.

Turning to Slide 5, we closed fiscal 2026 with the strongest quarter in Forgent's history, delivering record quarterly revenues, adjusted EBITDA and adjusted net income. 4%. Importantly, Q4 represented the second consecutive quarter of significant margin expansion, which aligns with the expectations we set throughout the year. Adjusted net income increased 275% to $77 million.

42 billion, adjusted EBITDA increased 91% to $323 million, and adjusted net income increased 136% to $208 million. These results reflect the strength of our value proposition and our team's unwavering commitment to delivering for our customers and our shareholders. Taking a company public, expanding manufacturing capacity fivefold, and doubling revenue all in the same year while continuing to meet our customer commitments is an extraordinary achievement. I'm incredibly proud of and grateful to our employees for their exceptional skill and dedication.

Thank you, Forgent family. Turning to Slide 6, I'll frame our business update for the quarter around seven takeaways. First, we continue to see strong demand for our products and solutions and we are managing that demand effectively. That is reflected in our performance relative to guidance, with each of our KPIs exceeding the high end of our guidance—guidance that, as a reminder, we raised in May.

Second, our commercial strategy continues to drive growth well above the market, a clear indication that we are gaining share and our rate of growth is still increasing despite our significantly larger scale. To put that in perspective, fourth quarter revenue growth exceeded our full year growth rate by approximately 500 basis points. 5 billion of orders in the quarter alone. That's more than our total revenue for all of fiscal '26.

Third, we are delivering on the margin expansion we committed to. Adjusted EBITDA margin increased 200 basis points sequentially for the second consecutive quarter, primarily due to operating leverage as volumes grew. Fourth, our scale is beginning to drive significant cash generation, resulting in our operating cash flow increasing approximately two and a half times in fiscal '26 versus fiscal '25. Fifth, demand for modular solutions is growing rapidly.

Customers increasingly want to shift work from the field to the factory in order to reduce reliance on field labor and accelerate speed to power. This trend benefits Forgent in two important ways. It expands our addressable wallet by allowing us to capture value that historically would have been performed by contractors on site, and it plays directly to our strengths as one of the few companies with the capability to deliver these types of integrated solutions at scale. Our momentum in this area is evident in our fourth quarter Powertrain Solutions booking and in our backlog, which is now approximately 40% Powertrain Solutions.

Sixth, we already have sufficient demand visibility to justify adding manufacturing capacity beyond the expansion we recently completed. We plan to make an incremental investment at our Tijuana campus to increase Powertrain Solutions capacity, and we are again accelerating hiring in the first quarter to prepare for a significant production ramp in the quarters ahead. Finally, the quality and depth of our demand visibility are the strongest in our company's history at this point. Last year we entered fiscal 2026 with $850 million of backlog.

5 times higher, placing us in a fundamentally stronger position as we enter fiscal '27 and providing substantially greater confidence in our outlook for the year ahead. Moving to Slide 7, let me put some numbers around the demand environment. 5 billion, a new company record, increasing 375% year over year and 73% sequentially. Order strength was broad-based across all three of our end markets, led by data centers and extended across both custom products and Powertrain Solutions.

Year-over-year bookings growth was higher in the fourth quarter than the third quarter, despite comping to a much higher prior year result. 3 times, also on a much larger revenue base. Backlog increased to $3 billion at year end, an all-time high, up 256% year over year and 53% sequentially. The fact that Forgent set new records for bookings and backlog for seven consecutive quarters underscores the durability of the demand we are seeing, our continued share gains and the strength of our visibility on future revenue growth.

Turning to Slide 8, when I joined Forgent in 2025, our data center business was largely focused on selling point products—individual pieces of equipment—and we primarily reached the market through EPCs, engineering firms and OEMs that acted as intermediaries. Since then, we have made deliberate investments in our sales and engineering capabilities to engage end customers directly and support a broader, more integrated set of solutions across the powertrain. You can see that progression on the slide. We started with EPCs, engineering firms and OEMs, then expanded into regional colocation providers, national and international colos and neo-cloud customers.

Each step moved us closer to the end user and increased the portion of customer spend available to us. Our next major step is to enter the frontier AI labs and hyperscalers shown on the right side of this slide. We received our first direct order from a frontier AI lab in the fourth quarter and we have also signed an MSA with a hyperscaler. We view these milestones as proof points and, more than that, as the foundation for meaningful direct orders from both of these customer types as fiscal '27 progresses.

The key takeaway is that we are still in the early innings of expanding our direct customer base in the data center market. We have already demonstrated the ability to move upmarket from intermediated point product sales to direct engagement with some of the most technically demanding data center customer types in the world. But we believe the hyperscaler and frontier AI lab opportunity remains largely untapped for Forgent and represents a significant organic growth opportunity for us over the next 24 months. Building on that progression, Slide 9 gives you a concrete example of what this move upmarket looks like in practice.

This recent win with a frontier AI lab demonstrates that Forgent now has a seat at the table with the largest electrical equipment providers in the industry. This customer is pursuing one of the largest AI infrastructure buildouts in the US. These programs are highly technical, qualification standards are rigorous, and proper engagement is paramount. Securing this award reflects the strength of our engineering capabilities and the quality of our solutions and our growing credibility with the most demanding data center customers.

Importantly, this is only the initial award. The customer's first campus alone is expected to exceed 1 gigawatt and the broader opportunity for additional orders is measured in multiple gigawatts. So while this win is meaningful on its own, we view it as an even more important proof point of our ability to penetrate frontier AI customers directly and build a foundation for significantly larger opportunities ahead. Turning to Slide 10, let me zoom out to a shift that is reshaping how our customers build—the move towards more modular solutions.

As a reminder, a modular solution is a prefabricated, factory-built system such as power, cooling or compute modules that can be deployed on site much faster than traditional field-built infrastructure. It shifts work from the construction site to a controlled manufacturing environment, reducing reliance on field labor, improving quality and scalability and accelerating speed to power. Our data center customers tell us that modular construction can compress portions of the build schedule by roughly 30% to 50% versus traditional field-built construction. The chart on the left highlights the shift that has already occurred and what is expected through 2030.

In the cloud era, modular and prefabricated construction accounted for only 10% to 20% of data center construction. Today it is approximately 40% and third-party research expects it to grow to 60% by the end of the decade. That continued shift is a significant positive for Forgent. It expands our addressable wallet by allowing us to capture value that historically would have been performed by contractors on site, and it plays directly to our strengths as one of the few companies capable of delivering these types of integrated solutions at scale.

We are winning in modular solutions for three reasons that are difficult for competitors to replicate. First, we are vertically integrated all the way back to sheet metal fabrication. That gives us a meaningful advantage on cost, lead times and customization compared with competitors that rely more heavily on third-party suppliers. Second, we have deep in-house engineering capabilities which allow us to deliver highly customized solutions tailored to each customer's specific requirements.

In other words, we can offer the speed and efficiency of a modular factory-built solution without compromising the level of customization our customers need. And third, proximity matters. These are large, complex systems. An E-house can be approximately 60 feet long and weigh as much as 50 tons, so having manufacturing capacity close to key customers can make a significant difference in delivery time, logistics complexity and shipping costs.

With facilities located near every major data center hub in the country, we believe we are uniquely positioned to serve customers quickly, efficiently and at scale. The strength of those capabilities, aligned with clear market demand, is reflected in the Powertrain Solution results shown in the middle of this page. Powertrain Solutions revenue grew 187% year over year and 48% sequentially to $147 million in the fourth quarter. Put simply, we nearly tripled the size of that business in just six months.

That growth is well ahead of the demand assumptions that supported our original capacity expansion plans. In response to that momentum, today we announced an incremental investment to build a dedicated 385,000 square foot Powertrain Solutions facility in our Tijuana, Mexico campus. To put that size in perspective, it will be roughly 80% the size of our largest plant today, so it's a very meaningful expansion. Once complete, the new facility will increase our Powertrain Solutions manufacturing capacity by more than 50%, bringing it to over 1 million square feet.

8 billion, an increase of about $800 million. We expect the new facility to come online in the fourth quarter of fiscal '27. Moving to Slide 12, as I mentioned at the outset of the call, I want to spend a few minutes reflecting on where we were when we began our journey as a public company, where we stand today a little over seven months later, and what that progress means for our shareholders going forward. This page really highlights how far the company has come in just one year.

Forgent is a bigger, broader and better positioned company today across nearly every dimension than it was in fiscal '25. 5 times the $850 million we had at the end of fiscal '25. Just as importantly, our backlog now represents more than 2 times our fiscal '26 revenue, compared with roughly 1 times revenue at the end of fiscal '25. That gives us a fundamentally stronger starting point and significantly greater visibility as we enter the new fiscal year.

4 billion and adjusted EBITDA increasing 91% to $323 million. Importantly, we delivered that growth while also expanding margins, demonstrating the operating leverage in our model as we scale—even while absorbing the additional costs that naturally come with rapid growth. Our fastest growth came in data centers where demand remains exceptionally strong, but we also continued to deliver growth across each of our end markets: data center, grid and industrial. This is an important point because it reinforces one of the key messages from our IPO—Forgent has multiple ways to win; we are not dependent on a single end market, customer or growth factor.

Finally, we meaningfully expanded the breadth of our offering. Powertrain Solutions increased from 13% of revenue in fiscal '25 to 25% in fiscal '26, reflecting strong customer demand for more integrated modular solutions. We also continued to expand our service businesses by attaching startup and commissioning work to a meaningful portion of the equipment orders in our backlog. At year end, our service backlog was approximately three times our FY26 service revenue, underscoring the significant growth opportunity ahead for this business.

Together, these shifts expand our addressable market, deepen our customer relationships and position Forgent to capture more value across the lifecycle of the infrastructure we provide. So the takeaway from this slide is pretty straightforward. Compared with where we stood a year ago, Forgent is bigger, more profitable, more visible, and better positioned for sustained growth. Turning to Slide 13, internally, we place a lot of emphasis on doing what we say we're going to do.

We hold ourselves accountable to the commitments we make to one another, and we believe shareholders should hold us to the same standards on the commitments we make externally. Over the next four slides, we will walk through the commitments we made during the IPO process and what we have delivered since then—financially, commercially, operationally and with our people.