Power Solutions International — Second Quarter 2026 Earnings Summary

Financial Performance

• Net sales for the quarter ended June 30, 2026, were $152.5 million, a 21% decrease from $191.9 million in the same period of 2025.
• Net income was $16.9 million, a 67% decrease from $51.2 million in the prior year period.
• Diluted earnings per share (EPS) were $0.73, compared to $2.22 in the prior year.
• Gross profit was $41.4 million, down 24% from $54.1 million in the prior year.
• Gross margin was 27.1%, a 1.1 percentage point decrease from 28.2% in the prior year; gross margin improved approximately 420 basis points sequentially from the first quarter of 2026.
• Research and development expenses were $5.1 million, an increase from $4.6 million in the prior year.
• Selling, general and administrative (SG&A) expenses were $12.1 million, a 27% decrease from $16.7 million in the prior year.
• Interest expense was $1.6 million, down from $1.7 million in the prior year.
• Income tax expense was $5.6 million, compared to an income tax benefit of $20.1 million in the prior year, which included a $29.2 million benefit from the release of a valuation allowance.
• Cash and cash equivalents were approximately $70.1 million as of June 30, 2026, up from $41.3 million as of December 31, 2025.
• Total debt was approximately $72.6 million as of June 30, 2026, a reduction of $30.8 million from $103.4 million as of March 31, 2026.
• Net cash provided by operating activities for the six months ended June 30, 2026, was $75.7 million, compared to $25.5 million in the prior year period.

Guidance and Future Outlook

• The Company is not providing formal full-year guidance.
• Based on current production schedules, the Company expects second-half 2026 sales to exceed first-half 2026 sales and to be approximately in line with sales in the second half of 2025.
• The Company expects continued softness in the oil and gas end market to weigh on quarterly revenue trends.
• Capacity ramp-up activities at the Wisconsin operations and their related cost effects on gross margin are expected to persist.
• Revenue recognition from data center-related orders remains subject to customer scheduling, manufacturing throughput, supply chain factors, and other variables; the Company is not predicting specific revenue levels for any future period.

Business Segments and Product Lines

• Sales in the power systems end market declined $34.6 million, driven by uneven order patterns and shipment timing for data center-related products and softness in oil and gas markets.
• Sales in the industrial end market declined $3.0 million.
• Sales in the transportation end market declined $1.7 million.
• The Company continues to see strong demand for data center power solutions.
• The acquisition of MTL Manufacturing & Equipment, Inc. on January 9, 2026, expanded vertical integration by adding in-house manufacturing capabilities for fuel tanks and electrical enclosure panels.
• MTL's operations contributed positively to consolidated net income in the second quarter.

Market and Competitive Landscape

• The Company operates in the power systems, industrial, and transportation end markets.
• The Company designs, engineers, and manufactures emission-certified engines and power systems using a fuel-agnostic strategy.
• Demand for data center power solutions remains strong, though shipment timing and volume vary.

Risks and Challenges

• Variability in order timing and market conditions affects revenue recognition.
• Quarterly variability in product mix impacts gross profit and gross margin.
• Costs, pace, throughput, and operational outcomes of capacity ramp-up activities at Wisconsin operations may persist.
• Continued softness in the oil and gas end market is a risk to revenue trends.
• Supply-chain disruptions, component availability, and supplier performance pose risks.
• Macroeconomic, regulatory, and trade conditions, including U.S. tariffs and trade restrictions, may impact the business.
• Integration of recent and future acquisitions, including MTL, carries execution risks.
• Pending or threatened litigation, including a previously disclosed putative federal securities class action, presents uncertainty.

Management Commentary and Tone

• Kenneth Li, Interim Chief Executive Officer and Chief Financial Officer, stated that second-quarter results reflect continued progress in executing strategy and investing in long-term growth.
• Management noted that second-quarter sales increased 18.6% from the first quarter.
• Management highlighted that strong operating cash flow enabled the reduction of total debt, strengthening the balance sheet and financial flexibility.
• Management acknowledged that gross margin improvement was partially offset by unfavorable product mix.

Other Key Points

• The Company acquired MTL Manufacturing & Equipment, Inc. on January 9, 2026, for approximately $11.9 million in cash (based on investing activities).
• Total debt as of June 30, 2026, included $65.0 million in borrowings under the Revolving Credit Agreement.
• The prior-year period included a significant tax benefit of $29.2 million ($1.27 per diluted share) from the release of a valuation allowance on deferred tax assets.
• SG&A expense decreases were driven by lower compensation expense related to the revaluation of previously awarded stock appreciation rights (SARs) and lower employee incentive program costs, partially offset by incremental expenses associated with MTL.
• Adjusted net income for the quarter was $17.971 million, and adjusted diluted EPS was $0.78.
• Adjusted EBITDA for the quarter was $26.833 million.