Conferencia de resultados del Q4 del ejercicio fiscal 2026 de Forgent Power Solutions (FPS): La cartera de pedidos alcanza los 3.000 millones de dólares

Forgent Power Solutions, Inc. (FPS) cerró el ejercicio fiscal 2026 con un récord trimestral en ingresos, EBITDA ajustado y beneficio neto ajustado. La directiva atribuyó los resultados a la demanda de los centros de datos, al aumento de la cuota de mercado, al incremento de las ventas de Powertrain Solutions y al apalancamiento operativo.

Puntos clave

• Los ingresos del cuarto trimestre del ejercicio fiscal 2026 aumentaron un 94% en comparación con el mismo periodo del año anterior y un 22% en comparación con el trimestre anterior, hasta alcanzar los 462 millones de dólares. El EBITDA ajustado se incrementó un 163% hasta los 113 millones de dólares, mientras que el margen EBITDA ajustado se situó en el 24,4%.
• Los ingresos del ejercicio completo aumentaron un 89% hasta los 1.420 millones de dólares. El EBITDA ajustado subió un 91% hasta los 323 millones de dólares, y el beneficio neto ajustado creció un 136% hasta los 208 millones de dólares.
• Las reservas de pedidos del cuarto trimestre alcanzaron los 1.500 millones de dólares, lo que supone un aumento interanual del 375% y una ratio book-to-bill récord de 3,3x. La cartera de pedidos al cierre del ejercicio creció un 256% hasta los 3.000 millones de dólares.
• Los ingresos de Powertrain Solutions crecieron un 187% interanual hasta los 147 millones de dólares en el cuarto trimestre. Este segmento representó aproximadamente el 40% de la cartera de pedidos al cierre del ejercicio.
• La directiva prevé para el ejercicio fiscal 2027 unos ingresos de entre 2.400 millones y 2.600 millones de dólares y un EBITDA ajustado de entre 575 millones y 625 millones de dólares. Más del 90% de la previsión de ingresos está cubierta por la cartera de pedidos.
• Forgent planea construir una planta para Powertrain Solutions de 385.000 pies cuadrados en Tijuana, México, que prevé iniciar sus operaciones en el cuarto trimestre del ejercicio fiscal 2027 y elevar la capacidad total de ingresos a aproximadamente 5.800 millones de dólares.

Datos financieros principales

Todo el crecimiento de los ingresos del cuarto trimestre fue orgánico. Los ingresos de Productos Personalizados aumentaron un 73% hasta los 292 millones de dólares, Powertrain Solutions subió un 187% hasta los 147 millones de dólares, Servicios creció un 69% hasta los 12 millones de dólares y Productos Estándar aumentó un 3% hasta los 11 millones de dólares.

Rendimiento comercial y operativo

Los centros de datos siguieron siendo el mercado final de mayor crecimiento para Forgent. En el ejercicio fiscal 2026, los ingresos procedentes de los centros de datos aumentaron un 161%, impulsados por un incremento del 18% en el número de clientes y una subida del 121% en los ingresos medios por cliente. Los ingresos procedentes de la red eléctrica crecieron un 69%, mientras que los ingresos del segmento Industrial y Otros aumentaron un 11%.

La directiva afirmó que el crecimiento refleja cada vez más una mayor cuota del gasto de los clientes, en lugar de obedecer únicamente a la incorporación de nuevos clientes. Powertrain Solutions pasó de representar el 13% de los ingresos en el ejercicio fiscal 2025 al 25% en el ejercicio fiscal 2026, a medida que los clientes trasladaron más trabajo de construcción de los emplazamientos de proyectos a sistemas modulares fabricados en fábrica.

Forgent recibió su primer pedido directo de un laboratorio de IA de frontera durante el cuarto trimestre y firmó un acuerdo marco de servicios con un hiperescalador. La directiva considera que estos avances constituyen la base para recibir pedidos directos adicionales durante el ejercicio fiscal 2027, al tiempo que subraya que la oportunidad aún se encuentra en una fase inicial.

La empresa tiene previsto construir unas instalaciones exclusivas para Powertrain Solutions de 385.000 pies cuadrados en su campus de Tijuana. Forgent prevé que el proyecto aumente la capacidad de fabricación de Powertrain Solutions en más de un 50%, superando el millón de pies cuadrados. Está previsto que las instalaciones entren en funcionamiento en el cuarto trimestre del ejercicio fiscal 2027.

Forgent también casi duplicó su plantilla de fabricación durante el ejercicio fiscal 2026, cerrando el año con aproximadamente entre 3.500 y 3.600 empleados. La plantilla de ingeniería de aplicaciones aumentó un 54%, mientras que la de ingeniería de procesos, campo y diseño se incrementó un 78%.

Previsiones de la directiva

En el punto medio, las previsiones para el ejercicio fiscal 2027 implican un crecimiento de los ingresos del 76%, un aumento del EBITDA ajustado del 86% y un crecimiento del BPA ajustado de aproximadamente el 95%. La directiva espera que el margen EBITDA ajustado se expanda más de 100 puntos básicos con respecto al ejercicio fiscal 2026, a medida que los mayores volúmenes de producción generen apalancamiento operativo.

Se espera que los ingresos y el EBITDA ajustado aumenten de forma secuencial durante el ejercicio fiscal 2027. La directiva señaló que las entregas están ponderadas hacia el periodo del segundo al cuarto trimestre, mientras que el flujo de caja operativo debería inclinarse en mayor medida hacia la segunda mitad del año debido a las inversiones en capital de trabajo e instalaciones realizadas en el primer semestre.

La previsión para el primer trimestre incluye aproximadamente 10 millones de dólares en costes extraordinarios vinculados a la contratación acelerada y a la ampliación de capacidad. La directiva prevé que el margen EBITDA ajustado del segundo trimestre mejore un par de cientos de puntos básicos respecto al primer trimestre a medida que se incremente la producción.

Riesgos y puntos a vigilar

• Cumplir con la cartera de pedidos para el ejercicio fiscal 2027 requiere mantener la contratación, la formación y la expansión de la producción. La directiva prevé incorporar a cientos de empleados en cada trimestre.
• La rentabilidad del primer trimestre se verá afectada por unos 10 millones de dólares en costes que no se prevé que se absorban por completo hasta que aumente la producción en trimestres posteriores.
• La gestión de la cadena de suministro sigue siendo un requisito clave de ejecución, aunque la directiva afirmó que no ha detectado restricciones recurrentes en los componentes que impliquen un aumento significativo de los plazos de entrega.
• Powertrain Solutions puede incluir equipos de terceros que presentan márgenes inferiores a los de los componentes fabricados internamente por Forgent.
• Un tamaño medio de pedido más elevado puede generar volatilidad trimestral en las reservas de pedidos publicadas. Forgent dejará de comunicar los pedidos y la cartera de pedidos con carácter trimestral en el ejercicio fiscal 2027 para pasar a presentarlos anualmente.
• Se prevé que la generación de caja se concentre en la segunda mitad del año, reflejando el gasto en capital de trabajo e instalaciones realizado en el primer semestre.

Puntos destacados de la sesión de preguntas y respuestas con analistas

La directiva declaró que la totalidad de la cartera de pedidos de 3.000 millones de dólares está compuesta por órdenes de compra firmes y no por cartas de intención. Los precios se mantuvieron estables en comparación con el trimestre anterior y la empresa no registró aplazamientos significativos de proyectos ni una desaceleración generalizada en la demanda de sus productos.

En cuanto a los márgenes, la directiva prevé un margen EBITDA ajustado en el primer trimestre de aproximadamente el 21%, seguido de una mejora a medida que aumente el volumen. Se espera que el apalancamiento operativo compense de sobra durante el conjunto del año la infraabsorción derivada de las contrataciones iniciales y los costes de puesta en marcha de capacidad.

Forgent está negociando diversos acuerdos con los clientes, que van desde órdenes de compra individuales hasta compromisos de capacidad a más largo plazo. La directiva cree que los costes necesarios para el talento adicional, la gestión de programas y el personal de fábrica están incluidos en el plan para el ejercicio fiscal 2027 según las hipótesis actuales.

La empresa indicó que la expansión de Powertrain Solutions se aceleró porque la demanda de módulos e-House y skids está superando sus previsiones iniciales de capacidad. La directiva pretende mantener los plazos de entrega por debajo de los niveles habituales del mercado a pesar del aumento de la cartera de pedidos.

En relación con la asignación de capital, Forgent identificó las operaciones de M&A como su principal prioridad a medida que aumente el flujo de caja libre. Los posibles objetivos podrían incluir la ampliación de líneas de productos, servicios y expansión geográfica, aunque la directiva aclaró que las adquisiciones deben cumplir criterios tanto estratégicos como financieros.

Transcripción completa de la conferencia de resultados

Transcripción completa de la conferencia de resultados

Comentarios de la dirección

Operator

Greetings, and welcome to the Forgent Power Solutions, Inc. Q4 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. [Operator Instructions]

It's now my pleasure to turn the call over to Kate Africk, Head of Investor Relations. Kate, please go ahead.

Kate Africk

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

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. Fourth quarter revenues increased 94% to a record $462 million. Adjusted EBITDA increased 163% to a record $113 million, and adjusted EBITDA margin expanded 200 basis points sequentially to 24.4%. 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. For the full year, revenues increased 89% to $1.42 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 7 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, all exceeding the high end of our guidance. Guidance that, as a reminder, we raised in just 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. We also booked more than $1.5 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 increasingly approximately 2.5x 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 2 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 strength 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. Today, our backlog stands at $3 billion, more than 3.5x 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. Fourth quarter bookings reached $1.5 billion, a new company record, increasing 375% year-over-year and 73% sequentially. Order strength was broad-based across all 3 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. Our book-to-bill ratio reached a new record of 3.3x 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 7 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 reach 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 co-location providers, national and international colos and Neocloud 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 the 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 up market looks like in practice. This recent win with the 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 build-outs in the U.S. These programs are highly technical, qualification standards are rigorous and proper engagement is paramount. Securing this award reflects the strength of our engineering capabilities, 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 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 working 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 the modular construction can compress portions of the builds scheduled 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 expected 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 3 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 to 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-specific requirements. In other words, we can offer the speed and efficiency of a modular factory build solution without compromising the level of customization our customers need. And third, proximity matters. These are large complex systems and e-House can be approximately 60 feet long and weight as much as 50 tonnes. So having manufacturing capacity close to key customers can make a significant difference in delivering 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 Solutions 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 6 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% and bringing it to over 1 million square feet. It will also increase our total revenue capacity to approximately $5.8 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 7 months later and what that progress means for our shareholders going forward. This page really highlights how far the company has come in just 1 year. Forgent is a bigger, broader and better positioned company today across nearly every dimension than it was in fiscal '25.

We ended fiscal '26 with approximately $3 billion of backlog, more than 3.5x the $850 million we had at the end of fiscal '25. Just as importantly, our backlog now represents more than 2x our fiscal '26 revenue compared with roughly 1x 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. We also nearly doubled the size of the company in 12 months, with revenue increasing 89% to $1.4 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 continue to expand our service businesses by attaching start-up and commissioning work to a meaningful portion of the equipment orders in our backlog. At year-end, our service backlog was approximately 3x our FY '26 service revenue, underscoring the significant growth opportunity ahead for this business. Together, these shifts expand our addressable market, deepen our customer relationship and position Forgent to capture more value across the life cycle of the infrastructure we provide. So the takeaway from this side is pretty slight forward, 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 4 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.

Starting with financial performance. As is customary, we shared a fiscal '26 forecast with research analysts in conjunction with our IPO process in December '25. Those forecast figures are shown in the gray area on this slide and our actual results are shown in blue. We meaningfully exceeded that forecast on both revenue and adjusted EBITDA, and we did so while scaling the business at an unprecedented pace, expanding our manufacturing footprint adding head count and building the SG&A infrastructure required to operate as a public company.

For fiscal '26, revenue was $150 million or 12% above that forecast. Adjusted EBITDA was $18 million or 6% above that forecast. And excluding start-up costs and the under-absorbed labor and overhead associated with bringing new capacity online, adjusted EBITDA was $34 million or 11% above that forecast. These results also exceeded the high end of the guidance we initiated in March and raised in May. So from a financial standpoint, the scorecard is clear. We exceeded our commitments.

Turning to Slide 14. During the IPO process, we outlined a very deliberate commercial strategy designed to deliver growth in excess of our underlying markets. The strategy was straightforward: focus on attractive end markets supported by long-term mega trends; expand the customer wallet available to us; win a larger share of that wallet; and take share from competitors by delivering shorter lead times and greater engineering value. In fiscal '26, we executed that strategy exceptionally well.

The chart on the right breaks down our growth by end market, showing the contribution from both customer count and average revenue per customer and then compares our revenue growth to the estimated growth rate of the underlying market.

Starting with data centers. Revenue grew 161% year-over-year. That growth was driven by an increase of 18% in customer count and 121% increase in average revenue per customer. Said differently, we added customers, but more importantly, we significantly expanded the scope of what we are delivering to those customers. That resulted in growth that was roughly 4x the market, which we estimate grew approximately 37%. In grid, revenue grew 69%, driven by a 7% increase in the customer count and a 58% increase in average revenue per customer. That represents approximately 7x the market growth rate based on our estimate that the grid market grew about 10%. And in industrial and other revenue grew 11%, approximately 300 basis points faster than the market growth rate. Our customer count declined as we high graded our mix of customers but average revenue per customer increased 28%, demonstrating our ability to deepen relationships with our largest industrial customers.

The pattern across all 3 end markets is consistent, we are not simply benefiting from market growth. We are adding customers, expanding our share of wallet with existing customers and increasingly selling more complex, higher-value solutions. That includes more prefabricated and integrated offerings and engineering offerings across the full powertrain rather than delivering individual point products. This is exactly what we said we would do. We positioned Forgent end markets with powerful secular tailwinds and then we executed commercially to grow well in Texas of those markets. So from a commercial standpoint, the scorecard is very clear. We delivered on the strategy we laid out to investors and we are meaningfully outperforming the market.

Next on to Slide 15. Let's turn to operations and assess what we delivered against the commitments we made during the IPO process. We said we would invest in capacity to capture demand, offer some of the shortest lead times in the industry and deliver customization at scale through vertically integrated flexible manufacturing, and that is exactly what we did. Across fiscal '25 and '26, we invested approximately $190 million to bring more than 1.8 million square feet of new manufacturing capacity online across multiple campuses. In total, we expanded our footprint from roughly 480,000 square feet to 2.3 million square feet, roughly equating to a fivefold increase in manufacturing capacity.

Just as importantly, this was not capacity added in just 1 location or for just 1 product line. We expanded in each of our 5 campuses, giving us a broader, more flexible and more geographically advantaged manufacturing network. That matters because proximity to customers, particularly in large-scale modular solutions can have a meaningful impact on lead times, logistics costs and execution certainty.

The execution required to do this was significant. We were building facilities, hiring and training employees, ramping production and adding new operational infrastructure, all while delivering for our customers in a period of exceptional demand growth, and we did all that while limiting the impact on margins as we scale. Today, construction is complete or nearing completion across the major expansion of the projects, and we are progressing toward our target production rates at each campus. As those facilities continue to ramp, they provide the capacity, flexibility and speed we need to support the demand we are seeing as well as give us opportunities to increase our margins through economies of scale.

So from an operational standpoint, the scorecard is also clear. We delivered on what we said we would do. We added the capacity, we scaled the organization. We protected customers' executions and materially strengthened the manufacturing platform that will support Forgent's next phase of growth.

Slide 16 covers our people. And in many ways, this may be the most important page in the deck. Scaling the business at this pace requires more than physical manufacturing capacity. It requires the ability to recruit, train, develop and retain the talent needed execute. During the IPO process, we committed to recruiting and retaining the direct labor required to match our expanded manufacturing capacity. Growing the engineering resources needed to deliver customization at scale, maintaining a flat accountable organization built for speed and operating leverage and attracting A+ leadership talent to help take Forgent through its next phase of growth.

In fiscal '26, we delivered against each one of those commitments. We nearly doubled our manufacturing head count. We made significant investments in engineering talent, application engineering head count grew 54% and process field and design engineering head count increased 78%. Those hires really matter because our ability to deliver custom engineered, integrated solutions at scale is one of the core differentiators of our business.

We also strengthened our leadership team with exceptional industry talent. We recently welcomed Juan Macias as President of Solutions and Services; Dan Eslinger, as Executive Vice President of Engineering; and Joe Reele as Senior Vice President of Technical Business Development. Each brings decades of relevant experience and a strong track record from leading companies in our industry. Their expertise will help us continue executing at a high level for customers as we look to double our business again.

Talent is a known constraint across our industry, particularly in manufacturing and engineering. Our focus on making Forgent an employer of choice has allowed us to scale rapidly without workforce constraints limiting our growth. That is a real competitive advantage, and it reflects the strength of our culture, the opportunity we offer people and the commitment of our teams across the company.

So from a people perspective, the scorecard is clear. We invested ahead of the opportunity, expanded the talent base required to support our growth, added critical leadership capabilities and strengthened the organization for the next stage of Forgent's evolution.

This is our scorecard for fiscal '26, commitments made and commitments met or exceeded, that matters to us, and we know it matters to our shareholders. It also raises the bar. The year ahead is more ambitious than the one we just completed, and we are starting from a base that is nearly twice as large. But we enter fiscal '27 better positioned, better resourced and more confident in our ability to execute than at any point in our history.

With that, I'll turn it over to Ryan to walk through our fourth quarter and full year financials in more detail. Then I'll come back and cover our priorities and outlook for fiscal '27.

Ryan Fiedler

Thanks, Gary, and good morning, everyone. Turning to Slide 18. Fourth quarter revenues were $462 million, up 94% year-over-year and 22% sequentially. All of that growth was organic. Revenue growth in the quarter was led by Custom Products and Powertrain Solutions for data center customers. Powertrain Solutions revenues increased 187% to $147 million, custom Products revenues increased 73% to $292 million. Services revenue grew 69% to $12 million and Standard Products revenues grew 3% to $11 million.

Moving on to adjusted EBITDA on Slide 19. Adjusted EBITDA in the fourth quarter was $113 million, more than double the prior year on higher revenues and margin expansion. In total, adjusted EBITDA grew 163%. Breaking that down, gross profit increased 109% on volume growth and favorable product mix. SG&A increased in absolute dollars, reflecting continued investment across sales, operations and engineering to support growth but declined as a percentage of sales as revenue growth outpaced operated cost growth. The result was adjusted EBITDA margin of 24.4%, up 200 basis points sequentially and 640 basis points year-over-year. That represents our second consecutive quarter of 200 basis points of sequential margin expansion.

On to Slide 20 for a summary of the full year, we set records across every key metric in fiscal 2026. Revenues increased $667 million or 89% to $1.42 billion. Adjusted EBITDA increased $154 million or 91% to $323 million. And adjusted net income increased $120 million or 136% to $208 million. Each of those finished above the high end of the guidance we provided in May, well above the guidance we initiated in March.

With that, I'll turn it back to Gary to discuss our key priorities and outlook for fiscal 2027.

Gary Niederpruem

Thanks, Ryan. Turning to Slide 22. Let me frame how we are thinking about the year ahead. We see 4 major themes shaping our markets in fiscal '27 and each one ties directly to a strategic priority for Forgent. First, robust demand continues for our products and solutions. Our conversations with customers indicate that capital spending plans are being revised upward from where they were even just 6 months ago, and our backlog is clear evidence of that momentum. Our first priority is to make sure we have a team and leadership capacity to capture the opportunity in front of us. That means hiring ahead of the demand and continuing to add the talent and infrastructure required to support growth, just as we did successfully this past year.

Second, we continue to see opportunities to take share. In this market, customers need partners with the engineering depth to solve complex problems in the available manufacturing capacity to deliver with speed and certainty. Companies that can do both have a real opportunity to displace incumbents. That is exactly what Forgent was built to do, and we will continue to use that formula to compound market growth with share gains.

Third, the shift toward modular solution continues to gain momentum. We are one of a few companies capable of delivering customized modular solutions at scale and with the planned expansion of our Powertrain Solutions capacity, we will have even greater ability to support that demand.

Fourth, we expect M&A-driven consolidation across our industry to continue. Over the next several years, we believe there will be fewer, larger and more capable players serving these markets, and we certainly intend for Forgent to be one of them. Historically, our growth has been entirely organic, driven by investments in capacity and commercial execution. In fiscal '27, we are also beginning to look outward at acquisition opportunities that could further accelerate our growth broaden our capabilities and strengthen our market position.

Taken together, those 4 priorities, talent, share gains, capacity and acquisitions form the foundation of our fiscal '27 plan.

Turning to Slide 23. I'll walk through our fiscal 2017 guidance. We expect revenue of $2.4 billion to $2.6 billion, representing 76% growth at the midpoint. We expect adjusted EBITDA of $575 million to $625 million, representing 86% growth at the midpoint and implying an adjusted EBITDA margin of approximately 24%, up from 22.7% in fiscal '26. We also expect adjusted EPS of $1.26 to $1.40, representing approximately 95% growth at the midpoint.

There are a few key points I'd highlight in terms of how to think about this outlook. First, with production slots allocated across fiscal '27, our backlog covers more than 90% of our revenue guidance with the remainder of our backlog scheduled to deliver in fiscal '28. We also continued to reserve a modest amount of capacity for strategic book-and-ship orders, which enables us to maintain short lead times support priority customers and capture incremental demand as it emerges.

Second, we expect adjusted EBITDA margins to expand by more than 100 basis points year-over-year. The primary driver is operating leverage as higher volumes move through the capacity we already have put in place. We expect that operating leverage to more than offset any of the under-absorption associated with accelerated hiring and the start-up costs for the next phase of capacity expansion that we will experience early in the year. As production ramps through the year, we expect both revenue and adjusted EBITDA to increase sequentially.

Finally, we expect adjusted EPS to grow faster than adjusted EBITDA as interest expense becomes a smaller percentage of our pretax income. Taken together, fiscal '27 is expected to be another year of compounding growth for Forgent, continued market growth and share gains driving the top line with operating leverage supporting margin expansion and even stronger earnings growth.

Flipping to Slide 24. Given the pace of evolution in our business, we continue to assess how best to align our disclosure and guidance practices with the information investors need to understand the company's underlying trajectory. As a result, beginning in fiscal '27, we are making two changes to our reporting and guidance cadence. First, as we've discussed earlier, our average order size has continued to increase. As a result, quarterly orders are becoming less representative of our underlying run rate than they have been historically because a single order can have a significant impact. In some orders -- in some quarters, order activity may suggest growth that is above full year trend, while in others, it may understate the momentum we are seeing in the business. With that in mind, we will no longer report orders and backlog on a quarterly basis. We will continue to provide orders and backlog annually as part of our year-end disclosures.

Second, in place of quarterly orders and backlog, we will begin providing quarterly revenue and adjusted EBITDA guidance for the next fiscal quarter on a rolling basis. Consistent with that change, today, we are providing guidance for the first quarter of fiscal '27 in addition to the full year guidance I just discussed. I would also note that this approach is consistent with the disclosure practices of many of our peers.

Before walking through the specific Q1 guidance ranges, I want to highlight 2 key factors that shaped our outlook for the quarter. First, as I mentioned on the prior slide, nearly all of our full year revenue guidance is already covered in backlog. Delivering against that backlog while also positioning Forgent for continued growth requires us to make investments early in the year. In Q1, that will translate to approximately $10 million of one-time costs that we do not expect to fully absorb until production ramps in subsequent quarters. In many ways, this is similar to what we experienced in the second quarter of fiscal '26. Demand for our products and solutions is growing faster than originally planned, and we are investing in people and capacity to capture that incremental opportunity.

Second, a significant portion of our backlog is scheduled for delivery in Q2, Q3 and Q4, as a result, revenue is expected to be more heavily weighted towards those quarters than Q1. Together, those factors translate guidance for Q1 revenues of $445 million to $465 million and adjusted EBITDA of $90 million to $100 million. At the midpoint, that is 61% revenue growth and 46% adjusted EBITDA growth year-over-year.

Turning to Slide 25. We are transitioning to significant cash generation. Operating cash flow increased approximately 2.5x in fiscal '26 to $109 million from $45 million in fiscal '25. We expect another substantial step-up in fiscal '27 with operating cash flow of more than $300 million. Cash flow will be weighted more heavily towards the second half of the year, reflecting first half investments in working capital and facilities required to support the production ramp. At the same time, capital intensity is declining meaningfully as the major capacity investments we made over the last 2 years begin to scale. Capital expenditures were 11% of sales in fiscal '25, declined to 8% in fiscal '26 and are expected to step down to roughly 3% of sales in fiscal '27 inclusive of the incremental Powertrain Solutions investment we announced this morning. As free cash flow builds, our first priority for capital allocation will be M&A opportunities that complement our product portfolio, expand our capabilities and accelerate our long-term growth.

Finally, on Slide 26, I wanted to frame our fiscal '27 guidance against the same December forecast we talked about earlier that we had provided to research analysts for our IPO. At the midpoint, our fiscal '27 guidance is around 30% above that forecast with revenues of $2.5 billion versus $1.8 billion and adjusted EBITDA of $600 million versus $469 million. Our outperformance is not only continuing in fiscal '27, it is widening. And more importantly, the midpoint of our fiscal '27 revenue guidance corresponds to our forecast for fiscal '28 from our IPO model, a little more than 7 months post-IPO and Forgent is a full year ahead of the plan.

Let me close with a few thoughts before we open it up for questions. We entered fiscal '26 with clear commitments to our customers and to our shareholders can be delivered on both. And for this, I want to thank all of the Forgent team members around the company. Our customers needed a partner with the engineering depth, execution certainty and available capacity to support build-outs of unprecedented size and speed. We proved we could meet that standard, and that is what's driving our share gains and unlocking opportunities with the largest, highest growth and most technically demanding players in the market. We enter fiscal '27 in a fundamentally stronger position than we entered fiscal '26 with a record backlog, deeper in direct customer relationships, more capacity coming online and the team to execute against all of it and we are just getting started.

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

Operator

[Operator Instructions] Our first question today is coming from Andrew Obin from Bank of America.

Preguntas y respuestas

Andrew Obin

Thank you for the good quarter. So maybe a question just about backlog quality and how it's changing as you are adding new customer types. And what I'm trying to get to, what's happening with pricing, terms and conditions. And also, how is the time line to conversion evolving given the evolution of your end markets? So that's my first question.

Gary Niederpruem

Yes, for sure. So let me back that in a couple of different ways, Andrew. So first is backlog quality is unbelievably high, which it has been the entire duration of Forgent. So anything in our backlog is a firm purchase order. So there's no LOIs. There's no handler to use. We don't book that type of stuff when it enters into backlog. So backlog is 100% firm commitments and purchase orders from our customers. That's number one. Number two is, pricing remains very consent. There isn't any great swings up or down from what we saw over the prior quarter. So that's the pricing piece. And then number three, in terms of, is anything in the market around slowdown, push outs, we have not heard of that for our products. Yes, in any given month or any quarter, is there -- a train didn't show up at sites if something gets delayed by a couple of weeks or something gets pulled in by a few weeks. That is the natural ebb and flow of the business is always that. But in terms of meaningful pushouts, we are not seeing that for our product set.

And most importantly, we are not hearing anything about any massive projects being delayed or the market slowing by any means. So all of that portends to us that it's a healthy market, and we continue to participate in a really very, very meaningful way in that market.

Operator

Next question is coming from Julien Dumoulin-Smith from Jefferies.

Julien Dumoulin-Smith

Nicely done. Again, I got to reiterate that nice forceful statement here. Maybe just to follow up on that. Can you talk about the ramp through the course of '27 in terms of your margins, right? Obviously, starting out first quarter here, a little bit below. How do you think about ending the year? And then more importantly, how does that portend if you can give us a glimpse on how you think into longer-term EBITDA margin trajectory?

Ryan Fiedler

Yes, Julien, really appreciate your question. So overall, we do expect our margins to improve as the year progresses. The first quarter were coming in at about 21% is what we're guiding to for EBITDA margins. And that obviously does include the higher investments that Gary talked about on the call. and that's really going to help us achieve that significant step-up that we expect in Q2 and beyond. As we move through the year, we do expect that strong volume and top line growth as the year progresses. And with that, we do expect some strong operating leverage and improving margins. With a couple of hundred basis points of margin expansion in Q2 from Q1 and then as mentioned, 24% for the full year. So as you can imagine, that's going to continue to expand this year goes on.

I think it's also important to note that if you think about 2026 from Q2 to Q4, we had a significant ramp during that time period as well. And we increased our adjusted EBITDA basis by about 400 basis points over those 2 quarters with that volume expansion.

Operator

Next question is coming from Michael Elias from TD Cowen.

Michael Elias

Great. I'll also say congratulations, and I'll raise one, congratulations on adding Joe Reele to the team, excellent addition. From my perspective, a quick question for you is when I have conversations with, let's say, hyperscalers and large data center operators, One thing that comes up is Forgent's lead time being faster than peers, which makes me think that there's probably some kind of potential for you to do a capacity agreement, a longer-term capacity agreement where there's a progression of orders over time that rolls throughout the function of the agreement. How do you think, or how should we think about the potential for a capacity agreement and as part of that, how should we think about the cost to Forgent of setting that up?

Gary Niederpruem

Michael, and thank you for the shout-out to Joe. We're really pleased that Dan and Joe and Juan, all joined us. One of the things we've talked about for a while continuing to add management talent and technical and engineering talent to the team and all 3 of those have hit the ground running, just thrilled with how they've evolved just in the 6 weeks they've been in the business. So thank you for that, number one.

Yes, let's go back just a little bit. So if you go back just 18 months ago or so, we had really 2 primary routes to market which were the OEMs and then the EPCs. As you think about where we have evolved the business in the last 18 months and where we will over the course of the next quarter or 2, we will have all 6 to 7 major routes to market in cohorts covered. As part of that, certainly, depending on the maturation of where we are in the sales cycle with that customer, there's a spectrum of opportunities with all of those. It could be anything from selling point products, all the way up to integrated solutions. And some customers will want us to go right from a standstill all the way to a run. Some are going to be more in that crawl-walk-run mentality. But based on everything we see today, there is dialogue, meaningfully dialogue going on with all types of those cohorts around anything from individual POs all the way to making longer-term commitments. So we're in the throes of that conversation with several of those customers.

And then from a cost standpoint, we think from what we see today for the year, we have covered that incremental cost that we may need to have in terms of adding more talent, adding more program management, certainly the people in the factory. We think we have that covered in the plan that we've laid out today. So if something drastically changes, then we'll revisit. But for right now, we feel really pretty comfortable around the cost that we have in the plan that we presented to be able to do business with all those cohorts.

Operator

Next question is coming from Luke Junk from Baird.

Luke Junk

Gary, hoping you could just double-click on recent order trends underpinning Powertrain solutions now being 40% of the backlog and maybe broadening out a little bit, just what it says about repeat engagement with customers and building a more durable industry position overall? Maybe said differently, just how you think about the potential to more permanently displace in the comments out there.

Gary Niederpruem

Yes. Luke. Yes, look, we have grown the business here based on two things. One is adding additional customers to the fleet, but almost even more than that, the outsized growth has come from increasing the affluent revenue per customer. So historically, if we would have sold just a point product to a customer, we are now selling those customers either multiple product lines or selling them integrated solutions. So the fact that those customers that we did business with 1 year or 2 ago, our spending anywhere from 30% to 100% more with us, I think it's a true testament to us being able to not only expand the portfolio with them, but getting in a deeper engagement way by selling more and more of those integrated solutions. So really, really happy with how we've continued to progress and evolve existing customers by selling more of the share of that wallet.

Operator

Next question is come from Joe Ritchie from Goldman Sachs.

Joseph Ritchie

Kudos on the great end to the year. I wanted to ask about the PTS Capacity Expansion. So from what I remember from the IPO, you had at least like 4 locations where you had modular solutions. I guess clearly had capacity for up to $5 billion of revenue. I guess, why the decision to expand capacity now and then also specifically in Tijuana?

Gary Niederpruem

Yes, Joe, you're 100% right on how we position it what you remembered in terms of what we added historically. We've been very open to say, while that $5 billion number, the incremental 1.8 million square feet, which took us to a total of 2.3 million square feet should take us a couple of years to fill up. But we also said that if there is 1 product line or 2 that's running hotter than we even anticipated, we would not be afraid to come back and add some additional growth capital to expand that footprint again, and that's exactly what we saw here from what we have seen historically, what is in the backlog and when we look at the pipeline out over the course of the next couple of years, Powertrain Solutions, whether that is in e-House, whether that's a modular skid really seems to be the dominant deployment mechanism for a lot of our customers.

So at that point, we sort of said, why wait? We see it, we feel it, we hear it, we're in the conversations with those customers. And it's just it's the right thing to do now to stay ahead of the curve so we can keep those lead times inside of the market expected lead times and the rest of the competition. So that's -- those are the things that really brought us the greatest visibility as to why we'd want to do it out.

Operator

Our next question is coming from Chigusa Katoku from JPMorgan.

Chigusa Katoku

Congrats on a great quarter. So I wanted to ask on mix. As Powertrain Solutions grow as a percentage of your portfolio, how should we think about the impact to your margins? Are there increasing complexities and inefficiency, supply chain challenges that you have to deal with? Any color here would be great.

Gary Niederpruem

Yes. Chigusa, thank you. So yes, look, no doubt Powertrain Solutions is a little bit more of a complex base than someone a point low voltage transformer or selling a point low voltage switch gear, no doubt about that. But the margin profile at this point from a product standpoint as well as from an end customer standpoint, is all sort of still within a standard deviation. We haven't seen too much change there, either by product or by customer segment.

The one thing that we continue to educate people on is and a solutions-oriented portal there is sometimes the need to buy third-party gear -- sorry, your question got me chocked up clearly. Clearly, need to buy third-party gear, and sometimes that third part of the year, you can't mark up as much as you with your own organic content. So from time to time, we will take solutions business that has third-party year in it that just want to afford us the margin of an organic margin. But by and large, if you strip that phenomenon out when it is our content in any house or on a skid relative to some of the other point products that we have, the margin rates are really all within the standard deviation of each other.

Operator

Next question is coming from Noah Kaye from Oppenheimer.

Noah Kaye

There's such an [ invertibly ] dynamic aspect to how power architectures are shipping in this industry and specifically data center. And so as you start to generate meaningful cash flow, you focus on M&A as your strategic capital allocation priority, can you give us some parameters around how you're thinking about your technology-related portfolio needs. And can you give us any parameters around the financial criteria that you would target for potential acquisitions?

Gary Niederpruem

Yes. No. Look, I think you're right. As we continue to transition to a business that generates not only cash but a meaningful amount of cash, we are simultaneously ramping up our inorganic activities. There's a number of different things we were looking at. We've been pretty consistent in saying that there are some things in our portfolio. We think we can round out with product line extensions. Certainly, service is very clearly at the top of their list. And they're also -- I wouldn't rule out some geographic expansion at some point as well. So I think those are going to continue to be the 3 themes that you see from us.

And for us, yes, there needs to be a financial profile in metrics that are met. But most importantly, it has to be the right strategic fit. And so we're not going to do anything just for financial engineering and we're also not going to buy a business that is losing money just because it's strategic. So for us, it has to be both a strategic fit and past the financial parameters that we have outlined.

Operator

Our next question is coming from Jeffrey Hammond from KeyBanc Capital Markets.

David Tarantino

This is David Tarantino on for Jeff. Maybe just following up on the sales cadence for the year. It sounds like you have really strong visibility from the backlog. But can you frame for us how much does it depend on your ability to continue to ramp supply chain and labor and how you level set this within the guide?

Gary Niederpruem

Yes. Sure, David. So I would say '27 is going to be a year much like '26. In terms of every quarter, we're going to have to continue to add hundreds of employees. If you take a look at the employee base, at the end of '25, it was probably roughly 18-ish hundred, 1,800 people. We finished '26 right around 3,500 and 3,600. So we've demonstrated. We almost effectively doubled the workforce over that 12-month period of time. I don't know if we will double it again by the end of '27. But the point is we have demonstrated that we can hire onboard, attract, retrain, train, retain, hundreds and hundreds and hundreds of people of every quarter. And I think that's the exact same playbook that we will execute at '27. So we've demonstrated we can do it. And I think it's going to be a continued rich to repeat every week, every month, every quarter. And we found that we've gotten that muscle pretty taught at this point in time. So I feel very good about all the work that we were doing there.

And I think that will be the single biggest thing. Supply chain, like anything, there's always a few bumps in the road, but there isn't anything habitual that says this part went from 50 weeks out to 100 weeks, there's nothing like that. It's just more you've got to manage it, you got to stay on top of it. So it's hard, but I think we've demonstrated that we can do it, and we fight every day to make sure we continue to do it even better than we did the day before.

Operator

Next question is coming from Nigel Coe from Wolfe Research.

Nigel Coe

So Gary, I want to come back to the topic of lead times. I think the perception out there is that your lead times have been a big advantage versus competitors, and that's certainly what we hear as well. Just curious how lead times are tracking and your lead times in terms of your commitments to customers, how that's been tracking over the last 6 to 12 months? And how you think that compares to your competitors across your major product categories. And I'm actually wondering if you could just maybe double click into that. Are there any constraints in terms of labor or other constraints that limited your ability or lengthening those lead times as we go over the next 6 to 12 months?

Gary Niederpruem

Yes. Very good, Nigel. Thank you. Good to hear your voice. So I would say a few things. One is on the labor constraints, we have a number of different positions, obviously, [ hire ] for both at the SG&A line as well as in the plants of the direct and indirect level. We are continually at the plant level, we have a massive training program in massive training dojos in every one of our facilities. So we don't really hire in people that have the skill sets that we need, we're typically hiring good people, and then we train them to do what we need to do. And depending on which department they're going to go in, that training could last anywhere from weeks to months to quarters depending on what we need to do there. So that's sort of the [ DL ] and [indiscernible] side.

From an SG&A side, we worked hard in we had a stat in the slides that, we've hired a tremendous amount of application engineering solutions architects process engineered field engineers, design engineers, we put a huge emphasis on continuing to grow the engineering and technical rates of the company. we're working really hard at that. I think you'll continue to see us pore gas on that fire as we get to '27. And then your first part about lead times, we still do believe that we are inside the expected lead times for every product line that we have in the industry. So even though the backlog number is much higher today than what it was, that's why we've doubled the workforce. That's why we've added the next to 800 -- or 350,000 square feet down in T.J. So our goal is to continue to always keep those lead times inside market expected lead times. And across the entire product category, we still are there today just like we would have been 9 months ago or 12 months ago.

Operator

We've reached the end of our question-and-answer session. I'd like to turn the floor back over to Gary for any further closing comments.

Gary Niederpruem

Yes. Thank you, operator. Thank you, everybody, for joining the call today. It was a little bit more of a lengthy prepared remarks, but we think it was important to -- there was a lot of goodness, a lot of richness in those slides, not only in terms of what Q4 ended up, how the year ended up and what that portends to what we believe is shaping up to be a great '27. Demand and commercial momentum continues at a very accelerated rate. We delivered the margin expansion that we wanted to, we continue to invest in the business not only for today and tomorrow that you can see that in the people that we've hired and the amount of clinical talent that we've hired. I would be remiss if I didn't thank the entire Forgent family for everything that you have done for us and will continue to do. And with that, I hope everybody has a great day and look forward to talking to you all over the course of the next couple of days and weeks. Thank you, folks.

Operator

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.