Forgent Power Solutions, Inc.
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Financial statements
data from SEC XBRL filings. Values are as-reported; restatements supersede originals. Values reported in .
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FORGENT POWER SOLUTIONS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation
This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q (“Quarterly Report”) and our audited consolidated financials statements and the related notes included in our Prospectus dated as of March 26, 2026 and filed with the Securities and Exchange Commission (the “SEC”) on March 30, 2026 relating to our Registration Statement on Form S-1 (File No. 333-294578). In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions about our business and operations. Our actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under the sections of this Quarterly Report captioned “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors.”
This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains the presentation of Adjusted EBITDA, Adjusted Net Income, which are not presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Adjusted EBITDA and Adjusted Net Income are being presented because it provides the Company and readers of this Quarterly Report with additional insight into our operational performance relative to earlier periods and relative to our competitors. We do not intend Adjusted EBITDA and Adjusted Net Income to be substitutes for any GAAP financial information. Readers of this Quarterly Report should use Adjusted EBITDA and Adjusted Net Income only in conjunction with Net Income, the most comparable GAAP financial measure. Reconciliations of Adjusted EBITDA and Adjusted Net Income to Net Income, the most comparable GAAP measure, are provided in “—Non-GAAP Financial Measures.”
Overview
We are a leading designer and manufacturer of electrical distribution equipment used in data centers, the power grid and energy-intensive industrial facilities. Demand for our products is growing rapidly as (i) companies accelerate investment in data centers to meet the computational requirements for cloud computing and artificial intelligence (“AI”), (ii) independent power producers build new generation capacity to satisfy rising electricity demand, (iii) utilities upgrade and expand transmission & distribution (“T&D”) infrastructure to address rapid load growth and (iv) manufacturers reshore their factories to secure their supply chains and mitigate the impact of tariffs.
Electrical distribution equipment is essential for delivering electricity safely and efficiently from power plants to homes, businesses and industrial facilities and between equipment and devices within buildings. Every power plant, utility grid, data center, manufacturing facility and commercial building requires electrical distribution equipment to operate. Because distributing electricity safely and within the parameters required for the application where it is used is fundamental, purchases of electrical distribution equipment for new facilities or to replace equipment that is at the end of its useful life are rarely, if ever, optional. Additionally, because electrical distribution equipment has a high consequence of failure, including lost revenue, equipment damage and even serious injury or death, we believe customers prioritize reliability and safety over price when they select which products to purchase.
Major product categories of electrical distribution equipment that we manufacture and sell include automatic transfer switches (“ATS”), dry type transformers, electrical houses (“eHouse”), generator connection cabinets, liquid filled transformers, panelboards, power distribution units (“PDU”), power skids, remote power panels (“RPP”), switchboards, switchgear and tap boxes.
We sell Custom Products, Powertrain Solutions, and Standard Products. Our Custom Products are designed for a specific project or application, involve significant consultation between our in-house engineering team and the customer and are typically produced in small quantities. Our Powertrain Solutions are combinations of Custom Products that are integrated together, skidded together, or designed to work together as a system. Our Standard Products leverage common designs that are suitable for basic applications and are typically manufactured in large quantities. We also provide on-site commissioning and maintenance services for our products.
26
FORGENT POWER SOLUTIONS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
We specialize in manufacturing Custom Products and Powertrain Solutions that are “engineered-to-order” for technically demanding applications, including data center power distribution, utility substations and energy-intensive manufacturing. Demand for customized electrical distribution equipment is increasing as data centers, independent power producers, utilities and other customers seek to address varying power quality and availability, stringent uptime requirements, challenging form factors and environments, demanding thermal management requirements, integration with other equipment and systems, evolving regulatory requirements and safety considerations and rising construction costs and labor scarcity.
Our customers include technology, power, utility and industrial companies who purchase from us directly; intermediaries such as original equipment manufacturers (“OEMs”) and integrators who incorporate our products into systems that they sell; contractors that build data centers, power plants and T&D infrastructure; and electrical products distributors.
We are a U.S. company. Our principal manufacturing campuses are located in Minnesota, Texas, Maryland, California and Mexico.
Recent Developments
On February 6, 2026, Forgent Power Solutions, Inc. (the “Company”) and parent entities of the Company (the “Selling Stockholders”) sold 19,074,391 and 45,325,609 shares of Class A common stock of the Company, respectively, at an IPO price of $27.00 per share (the “IPO”). From the IPO, the Company received $491.8 million in proceeds, net of underwriting discounts and commissions, which was used to indirectly purchase 19,074,391 Opco LLC Interests from Opco and, and Forgent Power Solutions LLC (“Opco”) utilized the net proceeds it received from the sale of Opco LLC Interests to us to redeem Opco LLC Interests from Forgent Parent II LP and Forgent Parent III LP (the “Existing Opco LLC Owners”). The Company did not receive any of the proceeds from the sale of Class A common stock by the Selling Stockholders.
On March 30, 2026, the Company completed a follow-on offering (the “Follow-On Offering”) consisting of 10,783,205 shares of Class A common stock offered by the Company and 23,716,795 shares of Class A common stock offered by the Selling Stockholders, including the exercise in full of the underwriters' option to purchase additional shares, at a public offering price of $29.50 per share.
From the Follow-On Offering, the Company received $308.6 million in proceeds, net of underwriting discounts and commissions, which was used to indirectly purchase 10,783,205 Opco LLC Interests, and Opco utilized the net proceeds it received from the sale of Opco LLC Interests to the Company to redeem Opco LLC Interests from the Existing Opco LLC Owners. The Company did not receive any of the proceeds from the sale of Class A common stock by the Selling Stockholders.
Performance Measures
In managing our business and assessing financial performance, we supplement the information provided by the consolidated financial statements with other operating metrics. These operating metrics are utilized by our management to evaluate our business, measure our performance, identify trends affecting our business and formulate projections.
We present non-GAAP performance measures as we believe it is appropriate for investors to consider adjusted financial measures in addition to results in accordance with GAAP.
These non-GAAP financial measures provide supplemental information and should not be considered replacements for results in accordance with GAAP. Management uses non-GAAP financial measures internally for planning and forecasting purposes and in its decision-making processes related to the operations of our company. We believe these measures provide meaningful information to us and investors because they enhance the understanding of our operating performance, ability to generate cash, and the trends of our business. Additionally, we believe investors benefit from having access to the same financial measures that management uses in evaluating our operations.
27
FORGENT POWER SOLUTIONS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The primary financial metrics we use to evaluate our overall performance and to track the business results from year to year are Revenues, Net Income, Adjusted EBITDA, and Adjusted Net Income.
The following table sets forth a summary of our financial highlights for the periods indicated (in thousands):
| Three Months Ended March 31, | Nine Months Ended March 31, | |||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Revenues | $ | 378,709 | $ | 186,224 | $ | 958,387 | $ | 515,575 | ||||||||||||||
| Net Income | $ | 24,475 | $ | 8,439 | $ | 39,940 | $ | 22,207 | ||||||||||||||
Adjusted EBITDA(1) | $ | 84,682 | $ | 43,254 | $ | 210,165 | $ | 126,348 | ||||||||||||||
Adjusted Net Income(1) | $ | 55,272 | $ | 23,797 | $ | 130,359 | $ | 68,586 | ||||||||||||||
(1)Adjusted EBITDA and Adjusted Net Income are non-GAAP financial measures. See “—Non-GAAP Financial Measures” below for additional information about Adjusted EBITDA and Adjusted Net Income and for reconciliations to net income, the most directly comparable GAAP financial measures.
Key Factors Affecting Our Performance
We believe our financial performance, results of operations and future success depend on a number of factors that present significant opportunities for us, but also pose risks and challenges, including those described below and in the Company’s final prospectus dated March 26, 2026, and filed with the SEC on March 30, 2026 (the “Follow-On Prospectus”).
Data Center Construction Activity
We derive a significant portion of our revenues from products used in data centers, and demand for our products depends, in part, on continued investment in digital infrastructure generally and data centers specifically. Investment in data centers is subject to a number of factors, including the frequency and nature of innovations, whether or not developing or implementing those innovations requires new physical infrastructure and the availability of capital to fund investments in that infrastructure.
Infrastructure Investment
Demand for our products depends in part on the level of investment in new data centers, manufacturing facilities, power plants and T&D infrastructure, which is subject to business and economic cycles. We typically see greater demand for our products when the economy is growing, interest rates are stable or falling and government policy stimulates domestic investment because these conditions encourage businesses to invest in their facilities. We typically see less demand for our products when the economy is contracting and interest rates are rising.
Offering Mix
The profit margins we earn can vary significantly based on the type of product we sell, the level of customization, the size of the order and other factors. We typically earn higher profit margins on engineered to order Custom Products and Powertrain Solutions than on Standard Products. Our overall profit margins can vary between quarters based on offering mix in the period. Our profit margins can also vary based on the amount of revenue from services that we generate as a percentage of our total revenues in the period.
28
FORGENT POWER SOLUTIONS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Capacity Utilization
Our industry is currently capacity constrained in many product categories. Higher capacity utilization gives us and our competitors greater pricing power as well as additional leverage on our fixed costs. We believe we are more vertically integrated than many of our competitors so we typically benefit when products or components that we make in-house, but that many of our competitors must purchase, such as medium voltage switchgear and transformers, are in short supply. Changes in the level of capacity utilization in our factories and across our industry can influence the pricing of our products and increase or decrease our profit margins in the period.
Cost of Raw Material and Labor Inputs
Our largest expenses for purchases of key raw materials are electrical steel, carbon steel, copper, aluminum and other key raw materials used to manufacture our products. Steel and copper are subject to significant price volatility. The cost of raw materials that we purchase, as well as the cost of components that we manufacture in Mexico and ship to the United States, can also be impacted directly or indirectly by the imposition of tariffs on foreign imports to the United States or geopolitical events that disrupt our supply chain. Our profit margins are impacted by, among other things, our ability to pass increases in the cost of our raw materials on to our customers, including any tariffs, and to manage the level of raw material inventory that we hold. In addition, the cost of hourly labor to produce our products, the rate that we add new employees, and our total number of employees has impacted, and may in the future impact, our profit margins. The cost of labor is influenced by the availability of labor, prevailing wages in the areas where our plants are located and other factors. While we have not experienced any significant adverse impact on our business from raw material price volatility, tariffs, supply chain disruptions or labor shortages, any of these factors could have a significant adverse impact on our business in the future. In addition, we may need to hire more personnel than we currently anticipate to support our operations and growth initiatives, and any resulting increases in labor costs could adversely affect our margins and operating results.
Key Components of Our Results of Operations
The following discussion describes certain line items in our consolidated statements of operations.
Revenues
We generate revenues primarily from the sale of electrical distribution equipment. Major categories of electrical distribution equipment that we sell include ATSs, dry type transformers, eHouses, generator connection cabinets, liquid filled transformers, panelboards, PDUs, power skids, RPPs, switchboards, switchgear and tap boxes. We typically sell our products pursuant to purchase orders or sales contracts that specify price, design specifications, delivery dates and warranty for the products being purchased, among other things. Purchase orders and sales contracts can range in value from several thousand to millions of dollars.
Our revenue is affected by changes in the volume and price of products purchased by our customers. Volume is driven by the demand for our products while price is determined by product type, design specifications, lead-time, the level of customization, end market, availability of supply and strength of competitors’ product offerings.
Our revenue growth is dependent on: continued growth in the end markets we serve, including the Data Center, Grid and Industrial markets; our ability to expand our manufacturing capacity to meet demand; and our ability to develop and introduce new and innovative products that address the changing technology and performance requirements of our customers.
29
FORGENT POWER SOLUTIONS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Cost of Revenues and Gross Profit
Cost of revenues consists primarily of product costs and fixed overhead. Product costs include purchased materials and labor as well as costs related to shipping, tariffs, customer support and product warranty. Fixed overhead includes facilities cost and depreciation of testing and manufacturing equipment which are not directly affected by sales volume. Labor costs in our cost of revenues include both direct labor costs as well as costs attributable to any individuals whose activities relate to the transformation of raw materials or components into finished goods and the transportation of finished goods to the customer. Our product costs are affected by: our sales volume; the cost of raw materials, including electrical steel, carbon steel, copper, aluminum, and other key raw materials; the cost of components, including circuit breakers, accessories and gauges; technological innovation; economies of scale; and improvements in production processes and automation. We do not currently hedge against changes in the price of raw materials.
Gross profit may vary from quarter to quarter and is primarily affected by our sales volume, product costs, product mix, customer mix, end market mix, and seasonality. We have increased and expect to continue to increase our manufacturing headcount in connection with the expansion of our business. The rate at which we add new manufacturing employees and the period of time it takes to train them and for them to reach full productivity has and can in the future impact our gross profit.
Operating Expenses
Operating expenses consist of selling, general and administrative expenses, transaction costs and depreciation and amortization. We expect to continue to invest substantial resources to support our growth and anticipate our operating expenses will increase in absolute dollar amounts for the foreseeable future.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist primarily of salaries, share-based compensation, employee benefits and payroll taxes related to our executives, sales, finance and accounting, human resources, IT, engineering and legal organizations, travel expenses, facilities costs, marketing expenses, bad debt expense and fees for professional services. Professional services consist of audit, legal, tax, insurance, IT and other costs. We have increased and expect to continue to increase our sales and marketing personnel in connection with the expansion of our business. We also expect to incur additional expenses related to becoming publicly traded, including additional directors’ and officers’ liability insurance, director fees, additional expenses associated with complying with the reporting requirements of the SEC, transfer agent fees, costs relating to additional accounting, legal and administrative personnel, increased auditing, tax and legal fees, stock exchange listing fees and other public company expenses.
Depreciation
Depreciation in our operating expenses consists of costs associated with property and equipment not used in the manufacturing of our products. We expect that as we continue to grow both our revenue and our general and administrative personnel, we will require additional property and equipment to support this growth resulting in additional depreciation expenses.
Amortization
Amortization of intangibles consists of customer relationships, trade names, backlog, and non-compete agreements over their expected period of use.
Non-Operating Expenses
Interest Expense
Interest expense consists of interest and other charges paid in connection with our long-term debt.
30
FORGENT POWER SOLUTIONS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Interest Income
Interest income consists of income received on our cash and cash equivalents invested in money market accounts or similar short-term investments.
Income Taxes
We are subject to federal, state and local income taxes in the United States and foreign taxes.
Results of Operations
The following tables set forth our consolidated results of operations for the periods presented. This information is derived from our accompanying consolidated financial statements included elsewhere in this Quarterly Report and prepared in accordance with GAAP. The period-to-period comparisons of our historical results are not necessarily indicative of the results that may be expected in the future, including for the reasons described above under “—Key Factors Affecting Our Performance.”
| Three Months Ended March 31, | Nine Months Ended March 31, | |||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | Increase / Decrease | % Change | 2026 | 2025 | Increase / Decrease | % Change | |||||||||||||||||||||||||||||||
| (in thousands, except change data) | ||||||||||||||||||||||||||||||||||||||
| Revenues | $ | 378,709 | $ | 186,224 | $ | 192,485 | 103 | % | $ | 958,387 | $ | 515,575 | $ | 442,812 | 86 | % | ||||||||||||||||||||||
| Cost of Revenues | 247,513 | 118,059 | 129,454 | 110 | % | 627,483 | 317,210 | 310,273 | 98 | % | ||||||||||||||||||||||||||||
| Gross Profit | 131,196 | 68,165 | 63,031 | 92 | % | 330,904 | 198,365 | 132,539 | 67 | % | ||||||||||||||||||||||||||||
| Operating Expenses | ||||||||||||||||||||||||||||||||||||||
| Selling, general and administrative expenses | 78,518 | 32,108 | 46,410 | 145 | % | 200,246 | 87,911 | 112,335 | 128 | % | ||||||||||||||||||||||||||||
| Depreciation and amortization | 13,342 | 13,657 | (315) | (2) | % | 40,069 | 46,508 | (6,439) | (14) | % | ||||||||||||||||||||||||||||
| Total Operating Expenses | 91,860 | 45,765 | 46,095 | 101 | % | 240,315 | 134,419 | 105,896 | 79 | % | ||||||||||||||||||||||||||||
| Income from Operations | 39,336 | 22,400 | 16,936 | 76 | % | 90,589 | 63,946 | 26,643 | 42 | % | ||||||||||||||||||||||||||||
| Other Income (Expense) | ||||||||||||||||||||||||||||||||||||||
| Interest expense | (10,839) | (13,219) | 2,380 | (18) | % | (45,704) | (41,833) | (3,871) | 9 | % | ||||||||||||||||||||||||||||
| Interest income | 701 | 1,285 | (584) | (45) | % | 2,088 | 4,509 | (2,421) | (54) | % | ||||||||||||||||||||||||||||
| Other expense | (319) | (131) | (188) | 144 | % | (95) | (462) | 367 | (79) | % | ||||||||||||||||||||||||||||
| Total Other Expense, net | (10,457) | (12,065) | 1,608 | (13) | % | (43,711) | (37,786) | (5,925) | 16 | % | ||||||||||||||||||||||||||||
| Income Before Tax Expense | 28,879 | 10,335 | 18,544 | 179 | % | 46,878 | 26,160 | 20,718 | 79 | % | ||||||||||||||||||||||||||||
| Income Tax Expense | (4,404) | (1,896) | (2,508) | 132 | % | (6,938) | (3,953) | (2,985) | 76 | % | ||||||||||||||||||||||||||||
| Net Income | 24,475 | 8,439 | 16,036 | 190 | % | 39,940 | 22,207 | 17,733 | 80 | % | ||||||||||||||||||||||||||||
| Less: net income attributable to non-controlling interest | 6,188 | 1,557 | 4,631 | 297 | % | 11,394 | 4,451 | 6,943 | 156 | % | ||||||||||||||||||||||||||||
| Net Income Attributable to Forgent Power Solutions, Inc. | $ | 18,287 | $ | 6,882 | $ | 11,405 | 166 | % | $ | 28,546 | $ | 17,756 | $ | 10,790 | 61 | % | ||||||||||||||||||||||
Comparison of Operations for the Three Months Ended March 31, 2026 and 2025
Revenues
Revenues for the three months ended March 31, 2026 were $378.7 million as compared to $186.2 million for the three months ended March 31, 2025. The increase in revenues was driven by increases in sales of Custom Products and Powertrain Solutions, attributable to growing demand for our products across our end markets, particularly with our data center and grid customers, and new campuses commencing production in the current year to meet customer demand.
31
FORGENT POWER SOLUTIONS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Cost of Revenues
Cost of revenues for the three months ended March 31, 2026 were $247.5 million as compared to $118.1 million for the three months ended March 31, 2025. The increase in cost of revenues was primarily driven by an increase in material and labor costs related to higher sales volumes and an increase in fixed overhead costs, including depreciation expense related to the expansion of our manufacturing campuses. Cost of revenues as a percentage of revenues increased primarily as a result of under-absorbed labor costs related to accelerated headcount growth, under-absorbed fixed overhead relating to new campuses ramping toward their target production rates, and one-time startup costs at new campuses.
Operating Expenses:
Selling, General, and Administrative
Selling, general, and administrative expenses for the three months ended March 31, 2026 were $78.5 million as compared to $32.1 million for the three months ended March 31, 2025. The increase in selling, general, and administrative expenses was driven by increases in headcount, sales and marketing costs, professional services, and IT costs to support our growth, as well as IPO-related bonuses.
Depreciation
Depreciation for the three months ended March 31, 2026 was $1.6 million as compared to $0.3 million for the three months ended March 31, 2025. The increase in depreciation was primarily driven by an increase in property and equipment in the current fiscal year.
Amortization
Amortization of intangibles for the three months ended March 31, 2026 was $11.7 million as compared to $13.4 million for the three months ended March 31, 2025. The decrease in amortization was driven by backlog from certain acquisitions being fully amortized in the current fiscal year.
Interest Expense
Interest expense for the three months ended March 31, 2026 was $10.8 million as compared to $13.2 million for the three months ended March 31, 2025. The decrease in interest expense was primarily driven by lower interest rates in the current year.
Interest Income
Interest income for the three months ended March 31, 2026 was $0.7 million as compared to $1.3 million for the three months ended March 31, 2025. The decrease in interest income resulted from (i) lower average cash and cash equivalents balances and (ii) lower interest rates in the current year as compared to the prior year.
Income Tax Expense
Income tax expense was $4.4 million and $1.9 million for the three months ended March 31, 2026 and 2025, respectively. Our effective income tax rate for the three months ended March 31, 2026 and 2025 was 15.2% and 18.3%, respectively. For the three months ended March 31, 2026, our effective income tax rate differed from the federal statutory rate of 21% primarily due to our non-controlling interest not being subject to income taxes, favorable discrete adjustments related to the filing of our 2024 federal return, and the use of R&D credits.
Net Income
As a result of the factors discussed above, net income for the three months ended March 31, 2026 was $24.5 million compared to $8.4 million for the three months ended March 31, 2025.
32
FORGENT POWER SOLUTIONS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Comparison of Operations for the Nine Months Ended March 31, 2026 and 2025
Revenues
Revenues for the nine months ended March 31, 2026 were $958.4 million as compared to $515.6 million for the nine months ended March 31, 2025. The increase in revenues was driven by increases in sales of Custom Products and Powertrain Solutions, attributable to growing demand for our products across our end markets, particularly with our data center and grid customers, and new campuses coming online in the current fiscal year to meet customer demand.
Cost of Revenues
Cost of revenues for the nine months ended March 31, 2026 were $627.5 million as compared to $317.2 million for the nine months ended March 31, 2025. The increase in cost of revenues was primarily driven by an increase in material and labor costs related to higher sales volumes and an increase in fixed overhead costs, including depreciation expense related to the expansion of our manufacturing campuses. Cost of revenues as a percentage of revenues increased primarily as a result of under-absorbed labor costs related to accelerated headcount growth, under-absorbed fixed overhead relating to new campuses ramping toward their target production rates, and one-time startup costs at new campuses.
Operating Expenses:
Selling, General, and Administrative
Selling, general, and administrative expenses for the nine months ended March 31, 2026 were $200.2 million as compared to $87.9 million for the nine months ended March 31, 2025. The increase in selling, general, and administrative expenses was driven by increases in headcount, sales and marketing costs, professional services, and IT costs to support our growth, along with IPO-related bonuses.
Depreciation
Depreciation for the nine months ended March 31, 2026 was $3.0 million as compared to $0.8 million for the nine months ended March 31, 2025. The increase in depreciation was primarily driven by an increase in property and equipment in the current fiscal year.
Amortization
Amortization of intangibles for the nine months ended March 31, 2026 was $37.0 million as compared to $45.8 million for the nine months ended March 31, 2025. The decrease in amortization was driven by backlog from certain acquisitions being fully amortized in the current fiscal year.
Interest Expense
Interest expense for the nine months ended March 31, 2026 was $45.7 million as compared to $41.8 million for the nine months ended March 31, 2025. The increase in interest expense was driven by the write-off of approximately $10 million of deferred financing costs related to refinancing our 2023 Credit Agreement.
Interest Income
Interest income for the nine months ended March 31, 2026 was $2.1 million as compared to $4.5 million for the nine months ended March 31, 2025. The decrease in interest income resulted from (i) lower average cash and cash equivalents balances and (ii) lower interest rates in the current year as compared to the prior year.
33
FORGENT POWER SOLUTIONS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Income Tax Expense
Income tax expense was $6.9 million and $4.0 million for the nine months ended March 31, 2026 and nine months ended March 31, 2025, respectively. Our effective income tax rate for the nine months ended March 31, 2026 and 2025 was 14.8% and 15.1%, respectively. For the nine months ended March 31, 2026, our effective income tax rate differed from the federal statutory rate of 21% primarily due to our non-controlling interest not being subject to income taxes, favorable discrete adjustments related to the filing of our 2024 federal return, and the use of R&D credits.
Net Income
As a result of the factors discussed above, net income was $39.9 million and $22.2 million for the nine months ended March 31, 2026 and 2025, respectively.
Non-GAAP Financial Measures
We present non-GAAP performance measures as we believe it is appropriate for investors to consider adjusted financial measures in addition to results in accordance with GAAP.
These non-GAAP financial measures provide supplemental information and should not be considered replacements for results in accordance with GAAP. Management uses non-GAAP financial measures internally for planning and forecasting purposes and in its decision-making processes related to the operations of our Company. We believe these measures provide meaningful information to us and investors because they enhance the understanding of our operating performance, ability to generate cash, and the trends of our business. Additionally, we believe investors benefit from having access to the same financial measures that management uses in evaluating our operations.
The primary limitation of these measures is they exclude the financial impact of items that would otherwise either increase or decrease our reported results. This limitation is best addressed by using these non-GAAP financial measures in combination with the most directly comparable GAAP financial measures in order to better understand the amounts, character, and impact of any increase or decrease in reported amounts. These non-GAAP financial measures may not be comparable to similarly titled measures reported by other companies, which limits their usefulness as a comparative measure.
Among other limitations, Adjusted EBITDA and Adjusted Net Income do not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments and do not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations. Adjusted EBITDA and Adjusted Net Income also do not reflect income tax expense or benefit.
Because of these limitations, Adjusted EBITDA and Adjusted Net Income should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA and Adjusted Net Income on a supplemental basis. You should review the reconciliations of net income (loss) to Adjusted EBITDA and Adjusted Net Income respectively below and not rely on any single financial measure to evaluate our business.
Our non-GAAP financial measures include:
•Adjusted EBITDA – We define Adjusted EBITDA as net income (loss) plus or minus (i) interest expense, (ii) interest income, (iii) income tax benefit (expense), (iv) depreciation expense, (v) amortization of intangibles, (vi) equity-based compensation, (vii) sponsor fees and expenses, (viii) public company readiness costs, (ix) earnout expenses, (x) non-recurring integration and consulting fees, and (xi) investment banking fees and expenses.
•Adjusted Net Income – We define Adjusted Net Income as net income (loss) plus or minus (i) amortization of intangibles, (ii) amortization of deferred financing costs, (iii) equity-based compensation, (iv) sponsor fees and expenses, (v) public company readiness costs, (vi) earnout expenses, (vii) non-recurring integration and consulting fees, (viii) investment banking fees and expenses, and (ix) tax impact of adjustments.
34
FORGENT POWER SOLUTIONS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Adjusted EBITDA
Adjusted EBITDA is intended as a supplemental measure of performance that is neither required by, nor presented in accordance with, GAAP. We present Adjusted EBITDA because we believe it assists investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance.
In addition, we use Adjusted EBITDA (i) in evaluating management’s performance when determining incentive compensation, (ii) to evaluate the effectiveness of our business strategies and (iii) because our debt agreements use a similar metric to measure our compliance with certain covenants.
The table below reconciles Net Income (the most directly comparable GAAP measure) to Adjusted EBITDA (a non-GAAP measure) for the periods presented (in thousands):
| Three Months Ended March 31, | Nine Months Ended March 31, | |||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Net Income | $ | 24,475 | $ | 8,439 | $ | 39,940 | $ | 22,207 | ||||||||||||||
| Interest expense | 10,839 | 13,219 | 45,704 | 41,833 | ||||||||||||||||||
| Interest income | (701) | (1,285) | (2,088) | (4,509) | ||||||||||||||||||
| Income tax expense | 4,404 | 1,896 | 6,938 | 3,953 | ||||||||||||||||||
| Depreciation expense | 6,423 | 1,444 | 13,400 | 3,976 | ||||||||||||||||||
| Amortization of intangibles | 11,732 | 13,432 | 37,006 | 45,799 | ||||||||||||||||||
| Equity-based compensation | 3,357 | 367 | 5,544 | 1,272 | ||||||||||||||||||
Sponsor fees and expenses(1) | 1,680 | 2,885 | 18,818 | 7,310 | ||||||||||||||||||
Public company readiness costs(2) | 16,884 | 1,648 | 20,965 | 2,095 | ||||||||||||||||||
Earnout expenses(3) | — | — | 5,400 | — | ||||||||||||||||||
Non-recurring integration and consulting fees(4) | 5,589 | 1,209 | 18,538 | 2,412 | ||||||||||||||||||
| Adjusted EBITDA | $ | 84,682 | $ | 43,254 | $ | 210,165 | $ | 126,348 | ||||||||||||||
_____________
(1)Represents fees and expense reimbursements paid to our Sponsor.
(2)Represents non-recurring professional services fees we incurred in connection with readying the Company for our initial public offering and statutory SEC reporting, as well as IPO-related bonuses and certain non-recurring recruiting costs.
(3)Represents non-recurring earnout amounts accrued to certain sellers in connection with business acquisitions.
(4)Represents non-recurring professional services fees we incurred in connection with certain post-acquisition activities, including valuation, technical accounting and integration consulting services.
35
FORGENT POWER SOLUTIONS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Adjusted Net Income
Adjusted Net Income is intended as a supplemental measure of performance that is neither required by, nor presented in accordance with, GAAP. We present Adjusted Net Income because we believe it assists investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. In addition, we use Adjusted Net Income to evaluate the effectiveness of our business strategies.
The table below reconciles Net Income (the most directly comparable GAAP measure) to Adjusted Net Income (a non-GAAP measure) for the periods presented (in thousands):
| Three Months Ended March 31, | Nine Months Ended March 31, | |||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Net Income | $ | 24,475 | $ | 8,439 | $ | 39,940 | $ | 22,207 | ||||||||||||||
| Amortization of intangibles | 11,732 | 13,432 | 37,006 | 45,799 | ||||||||||||||||||
| Amortization / write off of discounts and deferred financing costs | 672 | 624 | 11,682 | 1,955 | ||||||||||||||||||
| Equity-based compensation | 3,357 | 367 | 5,544 | 1,272 | ||||||||||||||||||
Sponsor fees and expenses(1) | 1,680 | 2,885 | 18,818 | 7,310 | ||||||||||||||||||
Public company readiness costs(2) | 16,884 | 1,648 | 20,965 | 2,095 | ||||||||||||||||||
Earnout expenses(3) | — | — | 5,400 | — | ||||||||||||||||||
Non-recurring integration and consulting fees(4) | 5,589 | 1,209 | 18,538 | 2,412 | ||||||||||||||||||
Recent insider activity
| Date | Insider | Role | Action | Shares | Price | Value |
|---|---|---|---|---|---|---|
| 2026-06-01 | Neos Partners, LP indirect | Director | Sell | -145,866,000 ×3 | ||
| 2026-03-30 | Neos Partners, LP indirect | Director | Sell | -103,500,000 ×3 |
Source: SEC Form 4 filings.
Recent SEC filings
- 2026-05-28 S-1MEF S-1MEF
- 2026-05-26 S-1 Registration Statement
- 2026-05-14 10-Q Quarterly Report
- 2026-05-14 8-K Earnings Release; Financial Statements and Exhibits
- 2026-03-24 S-1 Registration Statement
- 2026-03-16 10-Q Quarterly Report
- 2026-03-16 8-K Earnings Release; Financial Statements and Exhibits
- 2026-02-10 8-K Material Agreement Entered; Unregistered Equity Sale; Material Modification to Rights; Officer/Director Change; Bylaws/Articles Amended; Other Events; Financial Statements and Exhibits
- 2026-01-26 S-1/A Registration Statement (Amended)
- 2026-01-16 S-1/A Registration Statement (Amended)
- 2026-01-09 S-1 Registration Statement