Powell Industries, Inc.

Good morning, and welcome to the Powell Industries Fiscal Fourth Quarter 2022 Results Conference Call. All participants will be in a listen-only mode today. Should you need any assistance during the call, 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 that this event is being recorded. I would now like to turn the conference over to Ryan Coleman, Investor Relations. Please go ahead, sir.

Thank you, and good morning, everyone. Thank you for joining us for Powell Industries' conference call today to review fiscal year 2022 fourth quarter and full year results. With me on the call are Brad Koch, 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 December 13th. 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, December 6th, 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 actual future 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 Brad.

Thank you, Ryan, and good morning, everyone. Thank you for joining us today to review Powell's fiscal 2022 fourth quarter and full year results. We'll make a few comments and then turn the call over to Mike for more financial commentary before we take your questions. Powell delivered a very strong fourth quarter to close out our fiscal year. Our deliberate and strategic efforts are yielding tangible results that are creating a more resilient, diversified, and less cyclical future Powell that will lead to stronger growth across the economic cycle. I am also incredibly proud of how our team has performed since the onset of the pandemic and its adverse effects on our business. After a challenging period of lower industrial activity throughout fiscal 2021 and into early fiscal 2022, we now enter our fiscal 2023 with the highest backlog in Powell's history. And across all of the business, we are on an extremely strong financial footing. While macroeconomic factors such as elevated costs and the global supply chain certainly remain headwinds, we are in a very solid position to continue to execute our strategic initiatives and deliver improved profitability. Total revenue in the fourth quarter was $163 million, which was 26% above the prior year and higher by 20% sequentially. By market sector, revenue from our oil and gas markets totaled $60 million and grew 24% compared to the prior year, while our utility revenue grew 42% to over $40 million. Traction saw a modest decline of $3 million to just under $14 million, and petrochemical revenue fell 37% to $15 million. Revenue for the full year increased 13% to $533 million, led by 15% growth in oil and gas, 13% growth in petrochemical, 10% in utility, partially offset by a 24% decline in traction revenue for the year. I'd like to take a moment to note that beginning this quarter, we are breaking out a new market sector, which we are calling commercial and other industrial. This sector consists mainly of markets where Powell has not historically had a strong focus. It includes applications for our products in data centers, automation, and cryptocurrency mining, among others. For the full year, our revenue in this market sector more than doubled to over $56 million, which notably was higher than our revenue from our traction market. Order activity in the quarter was strong as we secured $259 million in new bookings. That figure is the highest quarterly total since our second quarter of fiscal 2020 and is the sixth consecutive quarter of rising new gross order activity. Our book-to-bill ratio in the quarter of 1.6 times was equally strong and was the fourth straight quarter with a book-to-bill over one. As we highlighted on prior calls, activity in our coal, oil, and gas markets has lagged the overall recovery of the broader market activity. I am pleased to share that Powell was awarded a large industrial order to support the production of liquefied natural gas, which will be located on the U.S. Gulf Coast. This significant award in our fourth quarter was complemented by continued robust activity of small to mid-sized project orders that spanned across all of our end markets. For the full year, new orders totaled $719 million, an increase of 78% compared to fiscal 2021. Our teams delivered a gross margin in the quarter of 20.6%. This was a sequential improvement of 650 basis points and 320 basis points higher than the prior year. We did benefit from a non-recurring event driven by a positive recovery of project-related costs on a municipal project from a prior year, which contributed 130 basis points to the fiscal fourth quarter. After adjusting for that one-time benefit, strong project execution, favorable services mix, and positive closeouts helped to deliver the underlying margin growth. Mike will explain these effects in greater detail shortly. Moving to the bottom line, we reported net income of $8.7 million in the quarter, or 73 cents per share, compared to $3.3 million, or 28 cents per share, in the prior year. The net income line benefited from the aforementioned cost recovery, which contributed $2 million, or 17 cents per diluted share. The whole year net income was $13.7 million, or $1.15 per diluted share. During fiscal 2022, The company had three non-recurring events that, when combined, contributed 80 cents per diluted share. Lastly, we ended the year with a total backlog of $592 million. This is the highest backlog in Powell's history and represents sequential growth of 18% and is 43% higher than the end of fiscal 2021. Our project backlog is well-balanced across the markets we serve, with the utility and commercial and other industrial sectors comprising a growing share of the backlog. Overall, from a commercial standpoint, the fourth quarter was another step in the right direction and marked the continued return of our key end markets. Turning to our operational performance, we continue working diligently to mitigate the effects of a higher-cost environment. While the prices for key commodities, such as copper and steel, have improved compared to previous levels, the price and availability of key engineered components remain material headwinds. Our teams are working hard to identify and address these price increases early enough to factor them into our bidding process and ensure they do not create significant cost overruns on current and future project activity. We continue to have an extremely strong focus on productivity and strong project closeouts to protect our margins. We are also implementing pricing initiatives to align projects to the current cost environment where and when possible. We continue to closely monitor the cost of labor and our level of staffing across the business as we work to support the growth and timing of execution of our improved backlog. While not a major headwind currently, we certainly appreciate the difficult nature of finding and retaining qualified employees, as well as the rising cost of labor across the economy. Our human resources team has been working extremely hard over the last several quarters. We have an incredibly talented and resourceful group across the company that I am very proud of. Their tenacity, dedication, and creativity have helped Powell effectively navigate the difficult labor environment thus far. I'd like to conclude with a quick recap of our strategic initiatives and where our attention has been focused throughout fiscal 2022. It was on this call one year ago that we formally introduced our three areas of focus for Powell. One year later, I am very pleased with the progress we have made around each of these areas. Powell continues to develop and expand our established and reputable line of electrical automation solutions. This past year, we released several digital products that will help our customers safely and reliably control the operation of the breaker. Additionally, we recently released a new and innovative product to measure and control the operation of switchgear with Powell's first digital current measurement sensor. And we have taken our first steps to offer secure subscription-based service contracts, helping our customers protect monitor and control their high value assets and ensure peak performance. Our global services team is delivering strong results in line with our strategy. I'd like to take a moment to congratulate and thank all of our team and our service business. Their performance in the fourth quarter and for the entire year has been very strong. While there remains more work to be done, we have taken significant steps to expand Powell's value proposition beyond installation and commissioning of our electrical products and solutions. This past year, we have demonstrated our ability to offer increased value to our customers, providing value-add engineering earlier in the project during the development phase of the power network solution. And we have demonstrated our ability to take an expanded scope of site services to help our clients more efficiently and cost-effectively meet their schedule and project requirements around the modification or repair of their electrical distribution systems. I am confident that our service strategy will continue to build on these initial successes and be a true differentiator for Powell and for our customers going forward as we expand our portfolio of value-added services. And finally, in addition to our digital products, our research and development teams have made good progress in our low and medium voltage product offerings. This past year, we have further expanded our low voltage flex gear product with additional low voltage breaker offerings. Powell's FlexGear is the only ANSI offering that provides a common platform allowing our customers to use any commercially available low-voltage air circuit breaker. Also notable this past year, our medium and high-voltage bus team in Chicago led the adoption of our bus solutions to commercial markets. This is one of the contributing factors that led to Powell introducing the new commercial and other industrial sector noted earlier in my comments. And last, we welcome a new Vice President of Research and Development, Marshall Monet Jr. joined Powell this past fall. Marshall brings a proven track record of over 30 years successfully mapping and developing products and solutions that help customers improve their operations. Dennis Donsgaard, who has contributed an impressive 50 years of service with Powell, is transitioning from the R&D leadership role, a position he led for over 12 years, to helping me further develop our organic and inorganic roadmaps in support of our growth strategies. Dennis is an invaluable part of Powell's success. He has held roles in operations and he led the development of what today is Powell's global service organization. Overall, I am very excited about the path we are on and where Powell is positioned within the broader electrical distribution and management ecosystem. Our status as a leader in engineer to order, value added solutions for complex electrical distribution applications is ideally suited for a growing number of electrification requirements across the globe that is driving increased demand for power, often with new applications. With that, I'll turn the call over to Mike to provide more detail around our financial results.