Power Solutions International Reports Q2 2026 Sales of $152.5 Million

Power Solutions Intl (NASDAQ: PSIX ) released second-quarter financial results and hosted an earnings call on Thursday. Read the complete transcript below. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

6%, but a year-over-year decrease of 21% primarily due to lower sales in power systems and industrial end markets. 9% in the previous quarter, reflecting operational improvements at Wisconsin operations despite an unfavorable product mix. 8 million, strengthening the company's financial position. Demand for data center power solutions remains strong, with expectations for second half 2026 sales to exceed first half, though shipment timing may vary.

The company is not providing formal full-year guidance for 2026 or 2027 but remains focused on margin improvement and operational execution, particularly in Wisconsin. Full Transcript OPERATOR Good afternoon, and welcome to Power Solutions Intl second quarter 2026 earnings conference call. Currently, all participants are in a listen-only mode. The question-and-answer session will follow the formal presentation.

As a reminder, this conference is being recorded. I would now like to hand the conference over to Ken Jenke, Vice President and Corporate Controller. Sir, please go ahead. Ken Jenke, Vice President and Corporate Controller Good afternoon, and welcome to Power Solutions Intl's second quarter 2026 earnings conference call.

I'm Ken Jenke, Vice President and Corporate Controller, and joining me today is Ken Lee, our Interim Chief Executive Officer and Chief Financial Officer. Before we begin, I would like to remind everyone that today's prepared remarks and responses to questions may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations and assumptions, speak only as of today, and are subject to risks and uncertainties that could cause actual results to differ materially. S.

tariffs and trade restrictions; changes in management or other personnel; and the outcome of pending or threatened litigation and other legal or regulatory matters. Additional information concerning factors that could cause actual results to differ materially is contained in the cautionary language in today's earnings release and in the factors and other cautionary disclosures in our most recent Form 10-K, subsequent 10-Qs, and other SEC filings. gov. We undertake no obligation to update any forward-looking statements, except as required by law.

We will also reference certain non-GAAP financial measures. Today's call EBITDA margin represents EBITDA as a percentage of net sales. A definition of EBITDA and a reconciliation to net income appear in today's earnings release, which is available in the Investor Relations section of our website. With that, I will turn the call over to Ken.

Ken Lee, Interim CEO and CFO Thank you, Ken, and good afternoon, everyone. Thank you for joining us. Before we review the second quarter results, I would like to briefly address the leadership transition we announced on July 27. Richard Hu will become PSI's Chief Executive Officer on August 17.

Richard brings more than 25 years of global industrial leadership experience, including six years at BorgWarner, most recently as Vice President and the General Manager of the Americas Region for its Turbo and Thermal Technology business units, where he led a multi-billion-dollar operation and a global team of approximately 33,900 employees across the United States, Mexico, and Brazil. We look forward to welcoming him and working with him as PSI continues to execute its strategy. I will continue to serve as Interim Chief Executive Officer until Richard begins and will continue as Chief Financial Officer following the transition.

Now let me turn to our second quarter results. Before I walk through the detailed financials, I want to briefly rank the quarter on a sequential basis. The second quarter showed meaningful improvements in several key metrics. 9%.

The gross margin improvements reflect, in part, the early benefits of ongoing operational improvement efforts in Wisconsin and were partially offset by unfavorable product mix. 8 million during the quarter. Compared to the second quarter of 2025, net sales reflect the timing of certain power systems shipments and softened demand in our oil and gas business. Gross margin reflects a low mix of oil and gas products together with elevated production costs associated with capacity ramp-up activities at our Wisconsin operations.

27 per diluted share, tax benefit in the prior-year period related to the release of a valuation allowance. Demand for our data center power solutions remains strong. Based on our current production schedule, we expect the second half 2026 sales to exceed the first half 2026 sales as larger power systems orders move into production, although shipment timing and quarterly results may vary. The remainder of our remarks will cover results by end market, gross margin drivers, operating expense, cash flow and balances, and updates on MTL and our outlook.

4 million, or 21%, compared to the second quarter of 2025. 6% from the first quarter of 2026, exceeding our prior expectation that the second quarter revenue would be generally consistent with the first quarter. 7 million in the transportation end market. Within our power systems end markets, the year-over-year decline primarily reflects uneven order patterns and the shipment timing for data center-related products together with continued softness in our oil and gas business.

We continue to see strong demand for our data center power solutions, and based on our current production schedule, we expect the second half 2026 sales to exceed the first half 2026 sales as larger power systems orders move into production and are recognized as revenue. At the same time, the timing and ultimate volume of revenue recognized from that demand remains subject to customer scheduling, manufacturing slowdowns, supply chain factors, and other variables, and we are not predicting any specific level of data center revenue in any future period. 1 million in the second quarter of 2025. 2% in the prior-year period.

1% in the second quarter. The improvements reflect, in part, the early benefits of our ongoing operational improvement efforts in Wisconsin and were partially offset by unfavorable product mix in the quarter. We're encouraged by our progress. 2%.

I want to be judged about the outlook on gross margin. Our capacity ramp-up activities in Wisconsin are continuing, and we expect related elevated production costs to persist. The trajectory of any future sequential improvements will depend on product mix, slowdowns, and other operational factors. We are not providing a specific gross margin outlook for 2026 at this time.

Over the longer term, our goal is to focus on business opportunities that can support gross margin at or around the 25% level. 6 million in the prior-year period. The increase was primarily driven by higher R&D program expenditures to support new programs in 2026 and the recovery of R&D costs from certain customers in 2025. 6 million, or 27%, compared to the second quarter of 2025.

The decrease was primarily attributable to lower compensation expense related to the revaluation of previously awarded stock appreciation rights, as well as lower costs associated with employee incentive programs, partially offset by incremental selling and administrative expense associated with MTL Manufacturing and Equipment. 4 million in the quarter. 5 million in the second quarter of 2025. 7 million in the prior-year period, reflecting lower overall effective interest rates.

1 million in the prior-year period. 27 per diluted share, non-recurring tax benefit related to the release of a valuation allowance on deferred tax assets. That one-time benefit is the primary driver of the significant year-over-year difference in net income, and investors should keep that context in mind when reading the year-over-year comparison. 22 per diluted share, in the second quarter of 2025.

6 million, and diluted earnings per share more than doubled from the first quarter. 1 million in the prior-year period. 8% in the prior-year period. 9%.

The sequential increase reflects the higher sales and gross profit in the second quarter together with lower operating expense. 2 million in the prior-year period. 5 million in the first half of 2025, with favorable working capital movements and operational improvements contributing to the year-over-year increase. 7 million for the first half of the year.

8 million during the quarter. 6 million, including a $65 million draw on our revolving credit facility. 4 million as of March 31, 2026. 6 million.

Our balance sheet is solid, and we believe our current liquidity position is sufficient to meet our anticipated cash needs. On January 9, 2026, we acquired MTL Manufacturing and Equipment Inc. MTL's operations contributed positively to our consolidated net income in the second quarter. The acquisition expands PSI's vertical integration by adding in-house manufacturing capabilities for components used in power generation products, including fuel tanks and enclosure assemblies.

We believe these capabilities will enhance supply chain control and manufacturing flexibility and support future goals. 2026 outlook: Given ongoing variability in order timing and market conditions, we are not providing formal full-year guidance at this time. Based on our current production schedule and information available as of today, we expect the second half 2026 sales to exceed the first half 2026 sales and to be approximately in line with sales in the second half of 2025, as larger power systems orders move into production and are recognized as revenue.

The timing and ultimate volume of these shipments remain subject to customer scheduling, manufacturing slowdowns, supply chain factors, and other variables, and there can be no assurance that those orders will translate to a uniformly strong second half. Continued softness in oil and gas end markets is expected to weigh on quarterly revenue trends. Capacity ramp-up activities at our Wisconsin operations and their raised cost effects on gross margin are expected to continue. 6% from the first quarter and gross margin improved approximately 420 basis points.

The gross margin improvements reflect, in part, the early benefits of ongoing operational improvement efforts in Wisconsin. Also, capacity ramp-up activities and related costs continue. Second, our financial position is stronger. 8 million.

We ended the quarter with roughly balanced cash and debt and increased the financial flexibility to support our goals. Third, demand for our data center power solutions remains strong. Based on our current production schedule, we expect the second half 2026 sales to exceed the first half 2026 sales as larger power system orders move into production. Although shipment timing and quarterly results may vary, we remain focused on operational execution and converting that demand into revenue.

Operator, we are ready to open the line for questions. OPERATOR Thank you. As a reminder, to ask a question, please press star-1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star-1-1 again.

We ask that you please limit yourself to one question and one follow-up. One moment while we compile our Q&A roster. Our first question comes from the line of Eric Stein with Craig-Hallum Capital Group. Your line is open.

Please go ahead. Eric Stein, Analyst at Craig-Hallum Capital Group Hi Ken, hi Alex, how are you? Ken Lee, Interim CEO and CFO Hey, doing well, thanks. Eric Stein, Analyst at Craig-Hallum Capital Group So maybe we could just talk a little bit more in depth about Q2.

I mean, clearly it came in ahead of your internal projections, you know, so maybe some clarity, because you've still got softness in oil and gas, how far you are through the ramp in the enclosure business. And I would guess that goes hand in hand with the gross margin improvement, which this is a level that we haven't seen in several quarters and is a level that you achieved back when oil and gas was strong and it's your highest margin business. I'm just trying to get my arms around how that improvement came about in Q2, both revenues and margins. Ken Lee, Interim CEO and CFO Yeah, Alex, thanks for the question.

So if you compare the Q2 sales by $152 million versus Q1, $128 million, the total increase about $24 million. And I would say most of the increase is from the power systems, and definitely the Wisconsin operation increased the production and the sales. 9%. Since then we implemented various operation improvement initiatives in Wisconsin, and we see improvements in productivity, efficiency, slowdowns, and also material availability, which enabled us to increase the production and also sales for enclosure.

And also when we produce more, it has positive impacts on the fixed cost absorption. So definitely it comes in, gross margin also improving. So all of these together help us to deliver quite improvements in the second quarter. But going forward we continue to see, I would say, softness in the oil and gas.

We're not seeing any sign for significant improvements, but we do have some larger custom orders for the AI data center products, and the team is working on transforming the order into production and sales. So we expect the second half sales will exceed the first half, and our internal expectation is the second half will be consistent with the second half last year.