Forgent Power Solutions delivered more than a standard earnings beat on Tuesday, as fiscal fourth-quarter bookings soared to $1.503 billion against $461.7 million in revenue, pushing total backlog to $3.0 billion. The impressive 3.3-times book-to-bill ratio fueled a 12.67% rally in FPS shares to $32.27 by 10:20 a.m. Eastern time, though the stock had briefly touched a session high of $33.09 earlier.
The electrical-equipment manufacturer disclosed the results in a Sept. 15 Form 8-K filing. Quarterly revenue surged 94% year over year, adjusted EBITDA jumped 163% to $112.7 million, and the adjusted EBITDA margin widened to 24.4%. All three metrics surpassed the high end of management's May guidance.
Growth Metrics at a Glance
- Q4 revenue: $461.7 million, up 94% from $237.6 million a year ago
- Q4 adjusted EBITDA: $112.7 million, up 163% from $42.8 million
- FY2026 revenue: $1.420 billion, up 89% from $753.2 million in FY2025
- FY2026 adjusted EBITDA: $322.9 million, up 91% from $169.2 million
- FY2027 revenue guide (midpoint): $2.500 billion, up 76% from FY2026
- FY2027 adjusted EBITDA guide (midpoint): $600 million, up 86%
The fiscal 2027 forecast implies a 24.0% adjusted EBITDA margin, just 40 basis points below the record fourth-quarter level. That assumes not only 76% revenue growth but also that new factories can absorb labor and overhead costs efficiently enough to preserve near-record margins.
Backlog coverage stands at 1.2 times the midpoint revenue target, according to TS2's calculation. Management noted that backlog grew 256% year over year and 53% during the quarter. The Powertrain Solutions segment expanded 259% in fiscal 2026 and contributed nearly one-third of fourth-quarter revenue. To support further growth, Forgent is investing an additional $35 million in its Tijuana, Mexico, facility, which is expected to lift total annual revenue capacity by approximately $800 million to $5.8 billion by the fourth quarter of fiscal 2027.
Cash Flow Concerns
However, the cash flow statement reveals a less flattering picture. Forgent generated $109.1 million in operating cash flow during fiscal 2026 but spent $115.9 million on property and equipment, resulting in negative free cash flow of $6.8 million on a simple calculation basis. That contrasts sharply with the $322.9 million in adjusted EBITDA.
There are signs the gap is narrowing. Fourth-quarter operating cash flow reached $74 million while capital spending was $31 million, implying roughly $43 million in quarterly free cash flow. For fiscal 2027, management expects operating cash flow to improve and capital expenditures to decline to about $87 million. The key test will be whether working-capital growth slows as new production facilities ramp up.
The balance sheet adds urgency to that test. As of June 30, Forgent held $97.5 million in cash and carried approximately $582.2 million in total debt, resulting in net debt of roughly $484.7 million. The company also recorded a $338.9 million liability under its tax receivable agreement, according to the fiscal 2026 Form 10-K.
Backlog: Strong Evidence, Not Guaranteed Revenue
Forgent's demand is closely tied to data-center construction. The 10-K reveals that data-center-related products generated about 59% of fiscal 2026 revenue. One customer accounted for 11% of revenue and 15% of accounts receivable, up from no customer above the 10% threshold a year earlier.
The filing also warns that backlog orders can be delayed, reduced, or canceled and may not achieve historical margins. While cancellations have been few and immaterial so far, Forgent acknowledges limited history in measuring backlog realization across the combined business. That is the strongest counterweight to extrapolating the 3.3-times book-to-bill ratio directly into future earnings.
Tuesday's rally should be viewed in price context. FPS fell 9.99% on Monday to $28.64, so the 12.67% rebound to $32.27 left the stock only about 1.4% above Friday's $31.82 close. The report repaired the latest selloff but did not settle whether a $3 billion backlog can convert at a 24% EBITDA margin and eventually reach positive free cash flow. The next evidence will come from consecutive quarters of revenue and adjusted EBITDA growth, which management has explicitly built into its fiscal 2027 outlook.