Powell Industries, Inc.

the Powell Industries first quarter fiscal 2022 results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Ryan Coleman Please go ahead.

Thank you, Operator, and good morning, everyone. Thank you for joining us for Powell Industries' conference call today to review fiscal year 2022 first quarter results. With me on the call are Brett Cope, Powell's Chairman and CEO, and Mike Metcalf, Powell's CFO. There will be a replay of today's call, and it will be available via webcast by going to the company's website, powellind.com, or a telephonic replay will be available until February 16th. The information on how to access the replay was provided in yesterday's earnings release. Please note that information reported on this call speaks only as of today, February 9th, 2022, and therefore you are advised that any time-sensitive information may no longer be accurate at the time of replay listening or transcript reading. This conference call includes certain statements, including statements related to the company's expectations of its future operating results that may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risks and uncertainties and that actual results may differ materially from those expressed in these forward-looking statements. These risks and uncertainties include, but are not limited to, competition and competitive pressures, sensitivity to general economic and industry conditions, international political and economic risks, availability and price of raw materials, and execution of business strategies. For more information, please refer to the company's filings with the Securities and Exchange Commission. With that, I'll now turn the call over to Brett.

Thanks, Ryan, and good morning, everyone. Thank you for joining us today to review Powell's fiscal 2022 first quarter results. I will make a few comments and then turn the call over to Mike for more financial commentary before we take your questions. It has been a short 60 days since we shared our 2021 full-year results. In many respects, not much has changed over the last several weeks. Our first quarter financial performance reflected the usual seasonality and holiday disruption we are accustomed to seeing at the start of our fiscal year. It also reflects the more challenging cost environment that has arisen over the past year as we navigate broad inflationary pressures and supply chain challenges. Nonetheless, we saw further growth in new orders, which marks three consecutive quarters of rising order activity. We continue to experience steady levels of activity within our industrial markets. And while customers as a whole remain tentative and cautious with their capital expenditure plans, we are optimistic that this important market sector to Powell will continue the steady recovery that started midway through last year. New orders placed in the first quarter included $122 million of gross new orders, partially offset by a $14 million scope reduction on a previously booked project. for a total of $108 million of net new orders. The customer requested scope adjustment is for a large industrial project previously booked in fiscal 2021. The $122 million of gross new orders is modestly higher than the prior quarter and is an increase of 34% from the prior year. Meanwhile, the traction and utility markets in which we compete remain active and have been strong offsets to these periods of lower industrial market activity. We expect to continue in fiscal 2022 our strategy of steady, methodic growth in the utility distribution market in all three of our home markets, which include the U.S., Canada, and the United Kingdom. And for the traction market, we will continue to leverage the strength of technical solutions and proven execution capability balanced against prudent commercial risk management in the light and mid-rail projects throughout North America. In the fourth quarter, our total revenue was $107 million, which was unchanged compared to the prior year. Within our industrial markets, revenue from our oil and gas sector increased 7% compared to the prior year, while the petrochemical sector increased by 88%. Taken together, our industrial segment revenue increased by 23% versus the prior year. Revenue from our utility and traction sectors fell by 24% and 15%, respectively, as continued activity was overshadowed by a difficult comparable period in the prior year. Broken down geographically, revenue in the U.S. saw a year-over-year growth of 2%, while revenue in Canada increased 7%. Where we were less than pleased with the quarter's performance was on the gross margin line, which was 12.6% of revenues in the current quarter, which compares to 17.1% that we reported in the same period one year ago. We are beginning to recognize revenue on projects booked in the first half of fiscal 2021 that are presently carrying higher raw material costs, which has created a near-term drag on reported margins. Our gross margin was also impacted by closeouts, which have benefited us in recent quarters, but did not reoccur in the first quarter. Higher costs for raw materials, specifically steel and copper, continue to present challenges, as do higher costs related to supply chain bottlenecks. We remain focused on being engaged with our suppliers and, where possible, passing through inflationary costs. We have and we will continue to remain diligent around our cost structure and protecting our margins to the extent possible. On a similar note, we are monitoring the tight labor situation that is impacting a diverse range of industries across the economy. While the expected upward pressure on wage costs remains an added potential headwind, We have largely been successful working through these challenges across all of our manufacturing operations, but continue watching this closely in order to manage costs and margins looking forward as we plan for future project activity. Moving to the bottom line, our lower gross profit led to a reported net loss of $2.8 million in the quarter, compared to a net loss of $364,000 in the prior year. We ended the quarter with $102 million of cash in short-term investments and no debt. Our net cash position is lower than the prior quarter as we have put our capital to work while continuing to maintain an incredibly strong liquidity position and balance sheet, to which Mike will give some additional details. Lastly, we ended the quarter with backlog totaling $416 million, slightly higher than the $415 million last quarter, and compares to a backlog of $465 million at the end of the comparable period last year. Overall, while our financial results remain lower than pre-pandemic levels, we have been encouraged by the momentum we are seeing on a month-by-month basis. We believe our customers are growing incrementally more comfortable around deploying their capital spending. However, we are a long-cycle business, which can sometimes mask what we believe are encouraging trends across the markets we serve. We continue to see the steady and measured recovery in our core end markets while our traction and utility markets remain active. Powell's reputation was built, and our excellence continues to be driven by outstanding service and a commitment to innovation. As the world transitions to an electrified future, I know that Powell will be able to leverage these assets in the new markets and to develop innovative electrical equipment solutions for new problems. We remain committed to our R&D spending to develop these solutions organically, and we also have optionality to deploy the strength of our balance sheet in order to broaden Powell's product portfolio and diversify our end market mix. Last quarter, we formally introduced three strategies that outline our focus areas for the future of Powell. Our first priority is growing our electrical automation platform. We believe that digital technologies like ours will continue to play a larger role in the future of electrical distribution, helping all of our customers achieve higher operating performance from their capital investments, extending the life of their equipment through predictive analytics and preventative maintenance, while also leveraging this technology to help achieve carbon reduction goals. We continue to build out our suite of digital asset management sensors and have achieved small but strategically important successes throughout fiscal 2021 as we develop this area of the business. Building upon our reputable history of electrical automation solutions, our customers will increasingly see our products as integral to the protection and longevity of their capital assets and ultimately their success. The second of our strategic priorities is our focus on expanding our existing services franchise. We plan to take a more selective and high-return approach. Rather than building out a global services business that seeks to be all things to all people, we plan to focus our efforts around geographies where PAL has either an existing installed base with a leading market position or around select market sector opportunities where our services can provide differentiated expertise. Ultimately, we aim to move into the OPEX side of our customer spend through digital offerings that carry subscription-like models, de-risking our financial profile, and creating stickier customer relationships. Inorganic opportunities may also play a role here as we seek to bolster our market density where we feel there is a compelling opportunity or where we currently operate but have historically underserved. And finally, our third strategic priority, is focused on the diversification of our product portfolio through both targeting tangential applications that complement our existing product offerings, as well as expanding the scope of our product catalog into new electrical technologies. These efforts will help to de-risk the business by penetrating new markets that are counter to the cycles of our traditional end markets. We will seek to grow in this area both organically through R&D, as well as identifying inorganic opportunities that would be accretive to power. As we enter fiscal 2022, our priorities are unchanged. First and foremost is the health and safety of our employees, customers, and suppliers. Second, we remain focused on maintaining our solid execution performance, strong project closeouts, and factory efficiencies as we look to protect our margins in an inflationary cost environment. Next is the continuous evaluation of our current cost structure, supply chain, and resource planning to optimize operations across the geographies and markets that we serve. And lastly, as we look over a longer-term horizon, we are committed to thoughtfully executing on our three strategic priorities and updating investors on our progress appropriately. With that, I'll turn the call over to Mike to provide more detail around our financial results.