Powell Industries, Inc.

Good morning, and welcome to the Powell Industries Earnings Conference Call. At this time, all participants are in a 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 telephone keypad. To withdraw a question, please press star, then two. Please note, this event is being recorded. I would like to turn the conference over to Ryan Coleman, Investor Relations. Thank you. You may begin.

Thank you, and good morning, everyone. Thank you for joining us for Powell Industries' conference call today to review fiscal year 2022 second 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 May 11th. Information on how to access the replay is provided in yesterday's earnings release. Please note that the information reported on this call speaks only as of today, May 4th, 2022, and therefore, your advice 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 expectation 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 projected 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.

Thank you, Ryan, and good morning, everyone. Thank you for joining us today to review Powell's fiscal 2022 second 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. Our results in the second quarter saw a strong sequential uptick in new order activity, as well as year-over-year revenue growth of 8% as our customers and end markets continue to recover from the pandemic-induced downturn. The $151 million of new orders for the second quarter marks four consecutive quarters of rising new order activity and is the highest quarter of new order intake activity since our second quarter of fiscal 2020. Our bookings performance led to a book-to-bill ratio of 1.2 times in the quarter and is the second consecutive quarter with a book-to-bill ratio of up one. Our revenue of $128 million compares to $107 million in the prior quarter and is 8% higher than last year. Then our industrial markets revenue from our oil and gas sector increased year over year by 7% for the second straight quarter, while the petrochemical sector increased by 85% after growing by 88% versus the prior year in the first quarter of fiscal 2022. Year to date, revenue from our industrial markets is 21% higher than the comparable period in fiscal 2021. Revenue from our utility sector grew by 7% compared to the prior year, while traction fell by 34% due largely to timing and our continuing efforts to exercise discipline and risk management within this market segment. We remain pleased with the focus and level of execution throughout all of our operations as we saw our gross margins improve sequentially by 230 basis points to 14.9% in the second quarter. We continue working to find ways to mitigate the effects of the higher cost environment. As we stated last quarter, we are beginning to recognize revenue on projects booked in the first half of fiscal 2021 that carry higher raw material and component costs, continuing to create a near-term headwind. However, we are cautiously optimistic that we have begun to see the stabilization in the prices of key commodities, such as copper and steel. Left engineering components continue to present a challenge both through supply availability and pricing. We are actively engaged with our suppliers and, where possible, passing through inflationary costs. We also continue to monitor and navigate the tight labor situation. While the expected upward pressure on wage costs remain an added potential headwind, we have largely been successful working through these challenges across all of our manufacturing operations. As you may recall, While we did execute a modest restructuring at the outset of the global pandemic in 2020, we deliberately retained the majority of our workforce during fiscal 2021, despite lower revenue levels. We knew it was critically important to retain the technological and commercial know-how and skilled labor for the eventual return of our order and project activity. That decision is presently benefiting us as we start to pivot and plan for the growth of our backlog. Nonetheless, we will continue to prudently manage our fixed costs as we plan for future project activity. Moving to the bottom line, we reported a net loss of $1.2 million in the quarter compared to a net loss of $225,000 in the prior year. The net loss was mainly driven by a second fiscal quarter tax provision, as Mike will explain shortly in more detail. We ended the quarter with $114 million of cash and short-term investments and no debt. Our net cash position is $12 million higher than the prior quarter, despite building working capital in the face of rising order activity to support the steady improvement of our end markets. Lastly, we ended the quarter with backlog totaling $440 million, which marks sequential growth of 6% from $416 million at the end of the first quarter and is $3 million higher than one year ago. While we see our second quarter results as another step in a positive direction, Perhaps most noteworthy is the fact that we continue to see an encouraging and broad recovery in overall order activity, despite the slower recovery dynamics of our industrial end markets. These are legacy markets for Powell that have historically constituted the majority of our order book and revenues. While we have been experiencing a steady increase in cost estimating activities across an increasing funnel for our industrial end markets, including our core oil, gas, and petrochemical customers, capital spending still remains modestly below pre-pandemic levels. Offsetting the pace of the industrial recovery during the second quarter, the business recognized a greater proportion of utility and light industrial orders, while also continuing from the first quarter of fiscal 2022, our global services team has delivered strong performance in line with our strategic objectives. These results clearly demonstrate that the commercial strategies and deliberate strategic efforts to diversify our business Enhancing the share of growth opportunities in new markets and applications for Powell's technologies is beginning to deliver for all of our stakeholders. These positive changes will aid in de-risking our business and lead to less reliance on the heavy cyclical nature of our core markets. There are also significant steps towards our stated strategy of expanding into new markets that are demanding innovative solutions and products where Powell can leverage its leading R&D capabilities and operational excellence. Overall, our view of a steady recovery and positive momentum across our markets on a month-to-month basis remains intact and unchanged. Customer attitudes around deploying capital are becoming gradually more positive. We expect the industrial markets to continue their pace of gradual but steady improvement and thoughtful capital investment for the remainder of fiscal 2022. Customer activity across projects related to LNG, gas pipeline, and gas to chemicals continues to remain attractive, and opportunities within the more nascent light commercial and renewable sector remains active, providing opportunities for us to leverage Powell's strengths and capabilities. Additionally, we expect to continue our strategy of steady, methodic growth across the utility distribution market throughout North America and the U.K., and for the traction sector, we will continue to leverage the strength of technical solutions and proven execution capability balanced against prudent commercial risk management for light and mid-rail projects. Reflecting on our second quarter results and measuring progress against the strategic priorities that we've set forth and the associated alignment of the business against these initiatives, we are pleased with the progress to date. As a reminder, we have focused on broadening the following attributes, growing our electrical automation platform, expanding our existing services franchise, and diversifying 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. We are beginning to see the benefits materialize as a result of these efforts and look forward to sharing additional examples of our successes within each initiative. Lastly, our priorities for the year 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. 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 as appropriate. With that, I'll turn the call over to Mike to provide more detail around our financial results.