Hội nghị công bố kết quả kinh doanh quý 3/2026 của PSIX: Biên lợi nhuận cải thiện, nâng triển vọng nửa cuối năm

Điểm nhấn chính

• Doanh thu thuần quý 3 năm 2026 đạt 202,1 triệu USD, giảm 1% so với cùng kỳ năm trước nhưng tăng 32,5% so với quý trước, nhờ doanh số các sản phẩm liên quan đến trung tâm dữ liệu tăng cao đã bù đắp một phần cho sự suy yếu tiếp diễn của mảng dầu khí.
• Biên lợi nhuận gộp tăng lên 29,7% từ mức 23,9% cùng kỳ năm trước và 27,1% trong quý 2. Khoản hoàn thuế quan 3,8 triệu USD đóng góp khoảng 188 điểm cơ bản và dự kiến sẽ không lặp lại.
• Lợi nhuận ròng tăng lên 29,9 triệu USD, tương đương khoảng 1,30 USD trên mỗi cổ phiếu pha loãng, so với mức 27,6 triệu USD, hay 1,20 USD trên mỗi cổ phiếu pha loãng trong quý 3 năm 2025.
• Dòng tiền từ hoạt động kinh doanh đạt 40,9 triệu USD trong quý. PSI kết thúc tháng 9 với 72 triệu USD tiền mặt, 37,7 triệu USD tổng nợ và khoảng 34 triệu USD tiền mặt ròng.
• Ban lãnh đạo đã nâng triển vọng kinh doanh và hiện dự kiến doanh thu thuần nửa cuối năm 2026 sẽ vượt mức nửa cuối năm 2025, nhờ các đơn hàng hệ thống điện quy mô lớn hơn bắt đầu bước vào giai đoạn sản xuất.
• PSI đang phân bổ thêm nguồn lực kỹ thuật cho động cơ khí tự nhiên và tổ máy phát điện, khi ban lãnh đạo nhận thấy nhu cầu từ trung tâm dữ liệu đang dần dịch chuyển từ nguồn điện dự phòng diesel sang nguồn điện chính và nguồn điện chuyển tiếp chạy bằng khí tự nhiên.

Dữ liệu tài chính quan trọng

Kết quả kinh doanh và hoạt động

Doanh số mảng hệ thống điện giảm 6,2 triệu USD so với cùng kỳ năm trước, một sự cải thiện đáng kể so với mức giảm 34,6 triệu USD ghi nhận trong quý 2. Sự suy yếu tiếp diễn của mảng dầu khí được bù đắp một phần nhờ doanh số các sản phẩm liên quan đến trung tâm dữ liệu tăng cao.

Doanh số mảng vận tải giảm 1,1 triệu USD. Doanh số mảng công nghiệp tăng 5,6 triệu USD, chủ yếu do thời điểm giao các lô hàng sản phẩm truyền thống. Ban lãnh đạo không kỳ vọng mức doanh số công nghiệp này sẽ tiếp tục duy trì.

Những cải tiến vận hành tại các cơ sở ở Wisconsin của PSI đã giúp cắt giảm chi phí sản xuất tăng cao liên quan đến quá trình nâng công suất phục vụ trung tâm dữ liệu. Công ty đang tập trung vào hiệu quả sản xuất, năng suất lao động, cải tiến quy trình và kiểm soát chi phí. Các chi phí mở rộng công suất dự kiến vẫn sẽ tiếp tục phát sinh.

Ban lãnh đạo cho biết diện tích mặt bằng tại Wisconsin của PSI đã mở rộng từ khoảng 150.000 foot vuông lên khoảng 800.000 foot vuông. Công ty hiện không có kế hoạch thuê thêm cơ sở và đang ưu tiên năng suất cũng như hiệu suất thiết bị tổng thể trong khuôn viên hiện có.

Theo chiến lược PowerBoost 2030, PSI có kế hoạch duy trì nền tảng trong mảng công nghiệp và dầu khí, đồng thời mở rộng hiện diện tại thị trường cung cấp điện cho trung tâm dữ liệu AI. Công ty cũng đang đẩy mạnh phát triển động cơ và máy phát điện chạy bằng khí tự nhiên cho các ứng dụng tiềm năng về nguồn điện chính và nguồn điện chuyển tiếp.

Định hướng của ban lãnh đạo

PSI hiện kỳ vọng doanh thu thuần nửa cuối năm 2026 sẽ vượt mức doanh thu thuần nửa cuối năm 2025. Triển vọng trước đó dự báo doanh thu xấp xỉ tương đương so với cùng kỳ năm trước. Dự báo điều chỉnh phản ánh tiến độ sản xuất hiện tại cùng lượng hàng dự kiến bàn giao của các sản phẩm trung tâm dữ liệu.

Ban lãnh đạo dự kiến biên lợi nhuận gộp quý 4 sẽ giảm so với quý 3 do khoản hoàn thuế quan 3,8 triệu USD không còn lặp lại. Công ty cũng dự báo biên lợi nhuận sẽ giảm nhẹ thêm, chủ yếu do cơ cấu sản phẩm kém thuận lợi hơn.

Cho cả năm 2026, ban lãnh đạo kỳ vọng sự suy yếu tiếp diễn của mảng dầu khí sẽ được bù đắp phần lớn bởi doanh số cao hơn từ các sản phẩm trung tâm dữ liệu, tùy thuộc vào tiến độ ký kết hợp đồng với khách hàng và ghi nhận doanh thu vào cuối năm. PSI dự kiến sẽ cung cấp thêm góc nhìn về năm 2027 khi công bố kết quả kinh doanh quý 4.

Rủi ro và các yếu tố cần theo dõi

• Việc chuyển đổi đơn hàng trung tâm dữ liệu vẫn phụ thuộc vào tiến độ của khách hàng, năng lực xử lý sản xuất và tính sẵn sàng của chuỗi cung ứng.
• Tình trạng hạn chế nguyên vật liệu hiện tại có thể ảnh hưởng đến một số đợt giao hàng dự kiến trong quý 4.
• Các sản phẩm trung tâm dữ liệu nhìn chung có biên lợi nhuận gộp thấp hơn so với các sản phẩm dầu khí, tạo áp lực lên cơ cấu sản phẩm khi doanh số mảng trung tâm dữ liệu tăng trưởng.
• Chi phí mở rộng công suất tại Wisconsin dự kiến vẫn sẽ tiếp diễn bất chấp những cải tiến trong vận hành.
• Sản lượng sản xuất, tỷ lệ phế phẩm, các điều chỉnh hàng tồn kho cuối năm và các yếu tố vận hành khác có thể khiến biên lợi nhuận gộp giảm xuống dưới mức kỳ vọng hiện tại của ban lãnh đạo.
• Doanh thu vẫn tập trung vào một số lượng khách hàng hạn chế, bao gồm cả các khách hàng trong thị trường trung tâm dữ liệu.

Điểm nhấn phiên hỏi đáp với chuyên gia phân tích

Về triển vọng nâng cao trong nửa cuối năm, ban lãnh đạo dẫn lý do là lượng bàn giao sản phẩm trung tâm dữ liệu dự kiến tăng cùng những cải tiến vận hành liên tục tại Wisconsin. Ban lãnh đạo từ chối đưa ra con số cụ thể về mức tăng doanh thu dự kiến so với cùng kỳ năm trước.

Khi được hỏi về công suất tại Wisconsin, ban lãnh đạo cho biết quy mô mặt bằng hiện tại đủ để đáp ứng nhu cầu. Các nỗ lực trong ngắn hạn sẽ tập trung vào năng suất, hiệu quả và thực thi vận hành thay vì tiếp tục mở rộng cơ sở vật chất.

Về công nghệ phát điện, CEO Richard Hu cho biết ban lãnh đạo vẫn giữ quan điểm tích cực về nhu cầu trung và dài hạn từ các trung tâm dữ liệu. PSI nhận thấy nhu cầu mới đang dần dịch chuyển từ máy phát điện diesel dự phòng sang nguồn điện chính và nguồn điện chuyển tiếp chạy bằng khí tự nhiên, đồng thời công ty đang phân bổ thêm nguồn lực kỹ thuật cho các tổ máy phát điện chạy bằng khí tự nhiên.

Toàn văn biên bản cuộc họp công bố kết quả kinh doanh

Toàn văn cuộc gọi công bố kết quả kinh doanh

Phần trình bày của ban lãnh đạo

Operator

[Operator Instructions]

Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Ken Janke, VP, Corporate Controller for Power Solutions International. Go ahead.

Unknown Speaker

Good afternoon, and welcome to Power Solutions International's Third Quarter 2026 Earnings Conference Call. I'm Ken Janke, Vice President and Corporate Controller. Joining me today are Richard Hu, our Chief Executive Officer, and Ken Lee, our Chief Financial Officer.

Before we begin, I would like to remind everyone that today's prepared remarks and responses to questions will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about our sales and margin outlook, order conversion, capacity ramp-up, operational improvements, new product development, potential investments in manufacturing capabilities, and our PowerBoost 2030 strategy. These statements are based on current expectations and assumptions, speak only as of today, and are subject to risks and uncertainties that could cause actual results to differ materially.

Important factors include the timing and ultimate conversion of power systems orders into revenue, including data center-related orders, quarterly variability in product mix, including the lower gross margins of data center products relative to oil and gas products, customer-specific requirements and changes to custom product orders, the cost, pace, throughput, and operational outcomes of capacity ramp-up activities at our Wisconsin operations, including the duration and magnitude of related production costs, our ability to execute operational improvement initiatives, the level and persistence of customer demand, including demand conditions in the oil and gas end market, the concentration of our sales among a limited number of customers, including in the data center market, existing material availability constraints, and other supply chain factors affecting shipment timing, mix, sales, and gross margin, the non-recurrence of the tariff refund and year-end adjustments, including those arising from inventory counts, the timing, scope, cost, and funding of potential investments in manufacturing capabilities, which will remain under evaluation, integration of recent acquisitions, including MTL manufacturing and equipment, compliance with the covenants under our credit facility, macroeconomic, regulatory, and trade conditions, including U.S. tariffs and trade restrictions, changes in management or other personnel, and the outcome of pending or threatened litigation, including the previously disclosed securities class action and related shareholder derivative actions, and other legal or regulatory matters.

Additional information concerning factors that could cause actual results to differ materially is contained in our earnings release dated November 5, 2026, and under risk factors and the other cautionary disclosures in our annual report on Form 10-K for the year ended December 31, 2025, and subsequent Forms 10-Q and other SEC filings. Those disclosures are incorporated by reference for purposes of today's call and are available in the Investor Relations section of our website at www.psiengines.com. Our SEC filings are also available at sec.gov. We undertake no obligation to update any forward-looking statements except as required by law.

We will also reference EBITDA, EBITDA margin, and net cash or net debt, which are non-GAAP financial measures. The accompanying presentation also includes adjusted EBITDA. EBITDA margin represents EBITDA as a percentage of net sales. Net cash or net debt represents cash and cash equivalents less total debt, including finance lease liabilities. Definitions and reconciliations to the most directly comparable GAAP financial measures appear in today's earnings release and the appendix to the accompanying investor presentation, both available in the Investor Relations section of our website at www.psiengines.com. These measures supplement and do not replace our GAAP results. With that, I will turn the call over to Richard.

Richard Hu

Thank you, Ken, and good afternoon, everybody. Welcome again to joining us here for PSI's earnings call. This is really my very first earnings call as the Chief Executive Officer of PSI. Indeed, today, if I look at the calendar, it marks actually my 80th day at the company. I'm, again, super excited and humbled to be speaking with you during the call. Before we jump into the business, first, I do want to take the chance to thank Ken Lee for taking his leadership, helping the company being an Interim Chief Executive Officer. And also I want to thank Ken for his partnership and also strong cooperation in the transition. Thank you very much, Ken.

Since I joined the company in August, my focus has been learning and evaluating the business as soon as I can, as fast as I can. And I did it actually with my so-called 6P playbook: people, product, process, profit, partners, and sometimes politics. As of today, I have met actually 5 of our key customers across the traditional industrial oil and gas customer segment as well as the data center power customers. I have visited all 5 existing production locations we have today in Illinois and Wisconsin. And also I did already 2 intercontinental travels to meet shareholders as well.

So the takeaway here is what I have found. PSI is a company with really deep engineering expertise, strong long-standing relationships with our customers, and also, more importantly, a wide range of a balanced product portfolio, which I think well positions us ready to pivot to embracing the new growth opportunities from either the traditional industrial oil and gas as well as capturing the new incremental growth from the data center power market.

During the past 80 days, I have worked intensively and closely with our leadership team in the company. So we did have several rounds of strategic sessions, workshops together. Collectively, the team at PSI has developed so-called PowerBoost 2030. This strategy and roadmap will guide the company to continue to pivot to the next chapter of the company's history, we call it PSI 2.0. PSI 2.0 marks, in my opinion, a new era, a new journey for the company and for the organization.

Essentially, what PSI 2.0 or PowerBoost 2030 will do for us is to transition the company from a pure player in the industrial oil and gas market into a wider range of portfolio covering both our traditional market as well as capturing a new incremental data center power growth market. So the key words here I would emphasize are we are going to build a more balanced and resilient portfolio in which we can grow both from our heritage market as well as capture the new incremental data center power market.

With that being said, a minor example, 1 step forward for the company, was like last month we launched our new refreshed corporate logo identity, which does reflect, in my opinion, the new evolution to moving forward to a more modern, more technology-oriented company as PSI. Today, our priorities under PowerBoost 2030 are clear: deliver customer commitments, expanding our presence into the new rapid-growth AI data center market, and also fast forward with our key initiatives. For example, we do want to reinforce our manufacturing in the U.S. That's 1 of the key initiatives we are promoting. We do want to continue deepening our commitment and investment in North America to support our customers more sustainably and with profitable growth. Last but not least, let me talk about VIA.

So vision into action—me, myself, being a big fan of VIA, which is all about execution. Currently, our team is working intensively to put the strategy into actions. Internally, as of today, we are focusing on shifting and optimizing our operational model, organizational structure, processes in promoting greater speed and agility. And also we are reprogramming the culture DNA of the company. All of us, we are pivoting to a more agile focus on execution deliverables.

So now let's turn to Q3. Big picture overall, I believe our Q3 results do reflect strong operational performance. Net sales of $202 million increased 32.5% sequentially versus Q2, and also it's well in line year-over-year with the same quarter last year. If you look at net income, net income was growing about 8% to $29.9 million, or if you look at it from a diluted earnings per share, it's reaching about $1.30 per diluted share. We also generated a very strong cash flow in Q3, so we are at around $34 million net cash, very strong performance. With that being said, Ken, the CFO, will walk you through some of the details of the quarter when it comes to cash flow, because there are some 1-time factors which we do not expect to recur.

Talk about the market and operations. I would say, again, in power systems, we see demand from data center-related products remaining strong, and that's really partially offsetting the continued softness of oil and gas revenue. And the volume for the revenue from that demand remains subject to customer scheduling, manufacturing throughput, and also supply chain material availability and some challenges from the supplier base as well. So at this moment, we're not predicting a specific level of data center revenue in the near future.

With that being said, we are indeed, again, working very intensively with our customers, focusing on the 2027 order intake. When we talk about Wisconsin operations, I think the message here is that our operations are continuously improving, climbing on the performance lifting pattern. We see performance keep moving up, reducing significantly the elevated production costs. Also, the capacity ramping up is on track, on plan, and continuing. And also we expect today the related production costs to persist. We remain focused on on-time delivery for the customer, which is the #1 priority for Wisconsin operations.

Again, if we talk about the AI data center power industry, I think the business continues to expand rapidly in demand, and also they are asking for more reliable, scalable, and efficient power solutions. We see the situation continues to accelerate, at least in the medium to longer term. In response, PSI, what we are doing today from a product perspective, we are advancing the development activities in terms of natural gas engines and generators, because this is potentially a new mainstream of demand from the industry.

Over the past year or so, we have established regular quarterly earnings calls. We refreshed also our investor website to improve communications with our external investors. I think this pattern we are going to continue and continuously improve. Our goal is to really reinforce communication with our investors. And also, in parallel, we continue to strengthen our balance sheet position for the future to support growth. While we roll out PowerBoost 2030 in 2027, we do expect we should be able to be in a better position to provide additional perspective on our strategy and roadmap during our Q4 earnings call onwards. With that, let me turn the call to Ken Lee, our CFO, to review in more detail about financial results in the quarter.

Unknown Speaker

Thank you, Richard, and good afternoon, everyone. Net sales for the third quarter of 2026 were $202.1 million, a decrease of $1.8 million, or 1%, compared with the third quarter of 2025. Sequentially, net sales increased 32.5%, or $52.5 million, from the second quarter. By end market, power systems sales decreased $6.2 million year-over-year, a significant narrowing from the $34.6 million year-over-year decline in the second quarter. The decrease primarily reflects continued softness in oil and gas, partially offset by higher sales of data center-related products. Transportation sales decreased $1.1 million. Industrial sales increased $5.6 million, primarily reflecting the timing of shipment of certain legacy products, and we do not expect this level of industrial sales to continue.

Gross profit was $59.9 million, an increase of $11.2 million, or 23%, compared with the third quarter of 2025. Gross margin was 29.7% compared with 23.9% in the prior year period. Sequentially, gross profit increased 45%, and gross margin expanded 260 basis points from 27.1% in the second quarter. The increase in gross margin compared with the third quarter of 2025 primarily reflects the benefits of company operational improvement initiatives at its Wisconsin operations, which have reduced the elevated production costs associated with capacity ramp-up activities supporting data center-related applications, as well as a $3.8 million tariff refund recognized as a reduction in cost of sales in the third quarter of 2026, which contributed approximately 188 basis points to gross margin, partially offset by an unfavorable year-over-year product mix resulting from lower oil and gas sales.

These initiatives focus on enhancing manufacturing efficiency, streamlining production processes, improving labor productivity, and strengthening cost controls, resulting in lower manufacturing costs and improved gross margins. Capacity ramp-up activities at the Wisconsin operations are continuing, and the company expects the raised production costs to persist. Gross margin remains subject to product mix, production volume, scrap parts, and other operational factors. We do not expect the third quarter gross margin level, which included a tariff refund, to be sustained in the fourth quarter.

Research and development expense was $5.1 million in the third quarter, compared with $4.8 million in the prior year period. The increase was primarily driven by higher program expenditures to support new programs in 2026. Selling, general, and administrative expense was $13.7 million, a decrease of $1.6 million, or 10%, compared with the third quarter of 2025. The decrease reflected certain prior expenses tied to customer relationship improvement initiatives, offset by higher costs supporting our data center goals. As a percentage of sales, SG&A was 6.8% compared with 7.5% in the prior year period. On that basis, net income as a percentage of net sales was 14.8%, compared with 13.5% in the prior year period and 11.1% in the second quarter.

EBITDA, a non-GAAP measure, was $42.7 million compared with $29.8 million in the prior year period. EBITDA margin was 21.1%, compared with 14.6%. On a sequential basis, EBITDA increased 66% from $25.7 million in the second quarter, and EBITDA margin expanded 420 basis points from 16.9%. EBITDA includes the $3.8 million tariff refund discussed earlier. Operating income was a record $48.9 million, including the $3.8 million tariff refund, an increase of $12.5 million, or 44%, compared with the third quarter of 2025. Operating margin expanded to 20.2% from 13.9%.

Interest expense was $1.0 million, compared with $1.6 million in the prior year period, primarily due to lower average debt balances. Income before income taxes increased 50% to $48.1 million. Income tax expense was $10.2 million compared with an income tax benefit of $0.9 million in the third quarter of 2025. The prior year period included $7 million, or $0.30 per diluted share, tax benefit from the release of a valuation allowance on deferred tax assets. Our effective tax rate was approximately 25.3% in the third quarter. Net income for the third quarter was $29.9 million, or about $1.30 per diluted share, compared with $27.6 million, or $1.20 per diluted share, in the third quarter of 2025, which included the $0.30 per diluted share of valuation allowance release I just mentioned.

Turning to cash flow, we generated $40.9 million of operating cash flow in the third quarter, compared with $3.3 million in the prior year period. For the first 9 months of 2026, operating cash flow was $116.6 million compared with $28.7 million in the first 9 months of 2025. Capital expenditures were $2.6 million in the third quarter. Strong cash flow enabled us to reduce total debt by approximately $34.9 million during the quarter, from $72.6 million at June 30 to $37.7 million at September 30, which includes $35 million of borrowings under our new revolving credit facility. With $72 million of cash and cash equivalents, we ended the quarter with net cash of approximately $34 million, compared with net debt of approximately $55 million at the end of 2025.

In October 2026, the company made a payment totaling $20 million under its revolving credit agreement, and as of today, the outstanding balance under the revolving credit agreement is $15 million. In September, we closed a new 3-year, $220 million committed revolving credit facility. It increased our committed borrowing capacity from $135 million and matures in September 2029. Borrowings bear interest at SOFR plus 180 basis points compared with SOFR plus 260 basis points under our prior facility, which was paid in full and terminated at closing. This is an 80-basis-point reduction in our borrowing spread. We appreciate the support of our banking partners and their confidence in PSI. Our balance sheet is solid, and we believe our liquidity position is sufficient to fund the working capital and capital investments required as larger power systems orders move through production.

Turning to our outlook, based on our current production schedule and the information available today, we are raising our outlook. We now expect second-half 2026 net sales to exceed second-half 2025 net sales as larger power systems orders move into production and are recognized as revenue. That compares with our prior expectation for second-half sales to be approximately in line with the second half of 2025. The timing, volume, and mix of shipments, including customer orders, remain subject to customer scheduling, manufacturing throughput, supply chain factors, and other variables, including current material availability constraints affecting certain planned fourth quarter deliveries. There can be no assurance that orders will convert to revenue in any particular quarter.

Looking ahead to the fourth quarter, gross margin is expected to decline from the third quarter because the $3.8 million tariff refund, which contributed approximately 188 basis points to third quarter gross margin, is not expected to recur. In addition to that effect, we expect a modest further reduction in gross margin, primarily reflecting a less favorable product mix. Softness in demand within the oil and gas market is set to continue, so we expect it to be approximately offset for full year 2026 by higher sales of data center products, subject to customer contracting and recognition of the associated revenue by year end.

Data center products generally carry lower gross margins than oil and gas products. We anticipate continued benefits from our operational improvement initiatives, particularly at our Wisconsin facilities. However, continuing ramp-up costs, material availability constraints, production volume, and year-end adjustments, including those arising from inventory counts, may adversely affect gross margin and result in margins below our current expectations. Finally, we expect to provide additional perspectives on 2027 with our fourth quarter results. With that, I will turn the call back to Richard.

Richard Hu

Thank you, Ken. So finally, in closing today, I do have 3 takeaways here from my side. Firstly, I would say the operational improvements we are delivering. If you look at our Wisconsin operational team, I would say the team is keeping up with their strong momentum and good work to continue improving our operational performance and also ramp up capacity on plan. We are on track with that improvement plan. Secondly, I would say, as Ken mentioned before, we do have strong financial firepower prepared to invest in our growth in the future. Today the growth, strong cash flow generation, and also newly settled credit facility give us a solid financial foundation and the flexibility to deliver to our customers and to invest in the growth initiatives that will define PSI 2.0.

Thirdly, I also see, again, we are very well prepared with our balanced and resilient product portfolio and customer mix. Here, please, again, the key words from my side are balanced and resilient when it comes to our product portfolio and customer mix. We do believe when we are continuously maintaining our traditional foundation of the business in industrial oil and gas, in the meantime we also try to work very hard to capture the new incremental data center power growth market as well. Overall, PSI, again, is at a pivotal point today. We are going to evolve from a pure player in traditional industrial oil and gas into becoming a balanced and resilient, wider-range power solution provider. And we are going to walk on our journey with 2 legs: with our traditional industrial oil and gas, but also the new incremental data center power market in North America. The new PowerBoost 2030 will pave the road for the company and will empower our journey ahead. Thank you, and with that, operator, I think we are ready to open the line for Q&A.

Operator

[Operator Instructions]

Our first question comes from the line of Eric Stine of Craig-Hallum Capital Group.

Phần hỏi đáp

Eric Stine

Maybe just touching on your '26 outlook to start. And I know that it's quite high level and you have increased it, but could you talk a little bit about just the moving pieces there? You've got oil and gas still depressed. The enclosure business, you've still made a lot of progress, but still in ramp-up mode. I'm just trying to get a little context as to what the potential magnitude or the puts and takes could be dictating how much improvement you could see over the second half of '25.

Unknown Speaker

So Eric, as we mentioned, we raised our outlook for the second half, right? And previously, we said it's flat versus last year. Now we say the second half will be higher than last year. And just for Q3, it's about a 32.5% sales increase versus Q2. So for oil and gas, I always say it's stabilizing. But definitely we see, we expect to see higher sales for data center products. And this reflects our current production schedule and also the higher expected shipments of data center products in the second half. And on the enclosure side of the business in Wisconsin, we are making improvements in operations, productivity, and efficiency. Definitely, we see growth for the enclosure side of the business plus the genset business to support data centers. And I will not give you a quantitative number on what the percentage increase is versus last year, but definitely we expect it will exceed the second half of last year.

Eric Stine

Okay. Well, maybe sticking with the Wisconsin operations, now that it's basically been a year or a little under a year since you undertook that, you've been making progress and it's been ramping. As you look at that and as you look at where demand is trending and obviously continues to grow, is there a current view on whether you need more capacity in Wisconsin or, given the efficiency improvements that you've made in that current footprint, that's more than sufficient, at least for the time being?

Unknown Speaker

So for Wisconsin, as you know, we increased our footprint pretty significantly. We used to have like 150,000 square feet. Now it's about 800,000 square feet. And some of the facilities are used for warehouse. And we see strong demand for our products, and definitely we think at the current time, we don't think we need to lease more facilities to support the demand, and we are more focused on operational excellence improvements to increase our capability to support the high demand for the enclosure business.

Richard Hu

Yes, just building on—this is Richard speaking, Eric—just building on what Ken mentioned, again with my 80 days at the company, I would agree with what Ken mentioned. I think today the opportunity from Wisconsin in enclosures is rather an internal concept of continuously lifting improvement on operational performance, improvement on OEE, productivity, rather than any additional expansion whatsoever. I think the current team, we are working closely with our enclosure team, monitoring week-by-week how they are doing. Are they on track for productivity improvement? That's exactly where the laser focus is, Eric.

Eric Stine

Okay. Maybe last one for me. Just you mentioned looking at the power gen side, and I know to this point it's predominantly been diesel. So what do you kind of think of how that market's developing, what the overall opportunity might be?

Richard Hu

Yes, I mean, if I may answer the question, I feel overall we are seeing—firstly, the data center power market remains strong, right? We see over the past maybe 24, 48 hours there have been some bumpy dynamics because of the midterm election, whatsoever. But nevertheless, we remain bullish with the medium to long term, this mega wave of data center compute demand, right? That's our foundational perspective. With that being said, we do see I think a new trend from the industry will be like a kind of shifting. The major demand or incremental demand will be a major shift from, let me say, standby diesel, gradually more and more incremental demand will be shifted to natural gas prime power or bridge power. That's what we hear from our customers, and we see that overall as a kind of trend today, Eric.

Eric Stine

Okay, thank you.

Richard Hu

And by the way, before I forget, that's exactly, if you look at our engineering organization focus, that's exactly where we are allocating tremendously incremental resources developing and engineering the natural gas gensets prepared for this upcoming incremental growth.

Operator

[Operator Instructions]

I am seeing no further questions at this time, so I would now like to turn the conference call back over to Richard Hu, the CEO, for the closing remarks for this conference today.

Richard Hu

All right. Thanks, Grace. And again, from my side and the whole PSI leadership team, I want to thank everybody interested in participating in the Q3 earnings call today. As we just mentioned, I think we are excited. We are in the beginning of a new journey, a new era. And please stay tuned. There is more to come. Thank you. Thanks, everybody.

Operator

Thank you for your participation in today's conference. This does conclude the program, and you may now disconnect.

This live transcript is auto-generated without human intervention or review.