HAMMOND POWER SOLUTIONS INC (TSX:HPS) reported first-quarter financial results on Wednesday. The transcript from the company’s first-quarter earnings call has been provided below.
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Summary
HAMMOND POWER SOLUTIONS INC reported record sales of $264.8 million in Q1 2026, a 31.5% increase from the previous year, driven by strong performance in the US and Mexico.
The company announced a strategic acquisition of AEG Power Solutions to expand its technology portfolio and geographic reach, with expectations to close the deal in Q2 2026.
Gross margins improved sequentially to 30.1%, though they were slightly down year-over-year due to tariff impacts; the company remains focused on managing cost pressures and improving factory overhead absorption.
Order backlog increased, providing good visibility and supporting capacity ramp, particularly in Mexico, while continuing to focus on backlog conversion efficiency.
Management remains confident in the business fundamentals and long-term demand drivers, with ongoing strategic investments in capacity expansion and operational improvements.
Full Transcript
OPERATOR
Good morning ladies and gentlemen. Welcome to HAMMOND POWER SOLUTIONS INC First Quarter 2026 Financial Results Conference Call. Certain statements that will be discussed in this conference call will constitute forward looking statements. The forward looking information and statements included in this discussion are not guarantees of future performance and should not be unduly relied upon. Forward looking statements will be based on current expectations, estimates and projections that involve a number of risks and uncertainties which could cause actual results to differ materially from those anticipated and described in the forward looking statements. Such information and statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward looking information and statements. These factors include, but are not limited to such things as the impact of general industry conditions, fluctuations of commodity prices, industry competition, availability of qualified personnel and management, stock market volatility, and timely and cost effective access to sufficient capital from internal and external sources. The risks just outlined should not be construed as exhaustive. Although management of the Company believes that the expectations reflected in such forward looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Accordingly, listeners should not place any undue reliance upon the forward looking information discussed in this call. I’d like to hand the call over to Mr. Adrian Thomas, Chief Executive Officer of HAMMOND POWER SOLUTIONS INC.
Adrian Thomas (Chief Executive Officer)
Mr. Thomas, good morning everyone and thank you for joining us today. I’m pleased to share HAMMOND POWER SOLUTIONS INC first quarter 2026 financial results. Joining me is our CFO Richard Vollering who will walk through the financial results in more detail following my remarks. After that, we’ll open the call up for questions. We started 2026 with strong momentum reflecting healthy demand across our end markets, continued progress in our manufacturing footprint and disciplined execution across our organization. Q1 was a record quarter for us with sales of 264.8 million driven primarily by strength in the US and continued momentum in custom products, particularly for data center applications. Gross margins improved sequentially from fourth quarter reflecting pricing actions, favorable mix and better factory overhead absorptions as volumes increased. Demand across our core end markets remained healthy during the first quarter, supported by long term trends in electrification, power reliability and energy efficiency. Data center activity continues to be a meaningful contributor driving both volume and higher custom product mix. Order Activity during the quarter was strong and our backlog increased sequentially and significantly year over year, giving us good visibility into the remainder of 2026 and supporting our continued capacity ramp, particularly in Mexico. As volumes scale, our focus remains on efficient backlog conversion while managing cost pressures, tariff related input costs remain a headwind compared to last year, but we are actively addressing this through pricing discipline, mix management and continued improvement in factory absorption. The sequential margin improvement we delivered in the quarter reflects progress in these areas, while margin recovery requires ongoing execution. We believe that we have the right operational levers in place as the year progresses and Richard will provide more insights later in the call. During the quarter, we also announced our agreement to acquire AEG Power Solutions, subject to regulatory approvals and customary closing conditions. This acquisition expands our technology portfolio, broadens our geographic footprint and adds meaningful aftermarket and services capabilities. We see this as a strong strategic fit as our customers power needs continue to grow in complexity and scale. We expect this acquisition to close in the second quarter of 2026. Looking ahead, we remain confident in the fundamentals of our business. Our strong backlog provides good visibility and the demand drivers supporting our markets remain intact. While we continue to monitor variability in input costs and project timing, we believe HAMMOND POWER SOLUTIONS INC is well positioned to execute through the remainder of the year. With that, I’ll turn the call over to Richard to review the financial results.
Richard Vollering (Chief Financial Officer)
Thank you Adrian and good morning everyone. I’ll walk through our first quarter financial performance and provide some additional context on margins and our statement of financial position. Sales were 264.8 million in the first quarter, up 31.5% compared to the 201.4 million in the first quarter of 2025. Growth was driven primarily by US and Mexico where sales increased 41.8% year over year. Canada was up 3.2% and India increased 33.5% largely due to the timing of project shipments that shifted from the fourth quarter of 2025. Gross margin was 30.1% compared to 31.5% a year ago, reflecting the impact of tariffs, both direct and indirect on input costs along with ongoing variability in commodities and project timing. Importantly, gross margin improved sequentially from 29.2% in Q4 2025 as pricing actions flowed through, product mix improved and factory overhead absorption benefited from higher volumes. General and Administrative expenses were higher year over year, driven primarily by share-based compensation. In Q1 2026, share-based compensation expense was $5.8 million compared to a recovery of in the prior period, reflecting the impact of a higher share price. Excluding share-based compensation. General and Administrative expenses increased in line with sales volumes and due to strategic investments in people and technology. Net earnings were $19.6 million compared to $26.2 million in the prior year. Basic earnings per share were $1.64 adjusted earnings per share adjusted for foreign exchange and share-based compensation or $2.08 compared to $1.60 in the first quarter of 2025. Adjusted EBITDA was $41 million in the first quarter as compared to 30.9 million in the first quarter of 2025. …
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