Powell Industries, Inc.

Welcome to the Powell Industries Earnings Conference Call. At this time, all participants are in a listen-only mode. If 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 your question, please press star then two. Please also note, this event is being recorded. I'd like to turn the conference over to Ryan Coleman, Investor Relations. Thank you. You may begin, sir.

Thank you, Operator, and good morning, everyone. Thank you for joining us for Powell Industries' conference call today to review fiscal year 2023 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 8th. The information on how to access the replay was provided in yesterday's earnings release. Please note that the information reported on this call speaks only as of today, February 1st, 2023, 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 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.

Thanks, Ryan, and good morning, everyone. Thank you for joining us today to review Powell's fiscal 2023 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. Powell delivered a great start to the fiscal year, as the momentum we experienced in the second half of last year from our core oil and gas and petrochemical markets carried into the start of 2023 and was further complemented by solid growth within the quarter in our utility and commercial and other industrial markets. These strong results remain the function of the team's commitment to our customers as well as our broader deliberate focus on our strategic initiatives to create a more resilient and diversified Powell that will lead to stronger growth across the economic cycle. Macroeconomic factors such as elevated costs and the global supply chain certainly remain headwinds, but we are very pleased with our execution and the momentum built within the business over the past few quarters. Powell is well positioned to deliver improved revenue growth and profitability in fiscal 2023. Total revenue in the first quarter was $127 million, which was 19% higher than the prior year. By market, revenues in our petrochemical sector were higher by 31% while the oil and gas sector was roughly flat on a year-over-year basis. Our utility sector saw revenue jump 32% compared to the prior year, while the newly broken out commercial and other industrial sector saw revenue triple. This was partially offset by the traction sector, which declined by 38%, mainly the function of wrapping up a large municipal project in Canada. Order activity in the quarter was very strong, as we secured $212 million in new bookings. This is the best first fiscal quarter of bookings Paul has had since Q1 of fiscal 2013. Our book-to-bill ratio in the quarter of 1.7 times was equally strong and was the fifth straight quarter with a book-to-bill over one. I'm also pleased to report that for a second consecutive quarter, we were fortunate to book another significant industrial order to support the production of liquefied natural gas as we continue to see favorable opportunities within LNG, gas pipeline, and gas to chemical sectors. Overall activity in our oil, gas, and petrochemical markets continues to improve, as bookings in these markets nearly tripled compared to the prior year. Meanwhile, project activity and associated work on new bids across our utility, traction, and commercial and other industrial sectors remain favorable. Each of these sectors experienced a year-over-year growth in bookings and are largely supported by a steady volume of small to mid-sized project activity. Our teams delivered a gross margin in the quarter of 15.3%, which increased 270 basis points compared to the same period in the prior year. Strong project execution, favorable services mix, and positive closeouts helped to deliver the underlying margin growth. Moving to the bottom line, we reported net income of $1.2 million in the quarter, or 10 cents per diluted share, compared to a net loss of $2.8 million, or a loss of 24% for diluted share in the prior year. Lastly, we ended the quarter with a total backlog of $680 million. This is the second consecutive quarter that we have recorded the highest backlog in Powell's history and represents sequential growth of 15%. and is 63% higher than the end of Q1 last year. A significant increase in our backlog volume provides an extended runway for Powell to sustain improved revenue growth for the next few years as we are beginning to book projects into fiscal 2025. Importantly, our project backlog remains well-balanced across our seven manufacturing facilities and across the markets that we serve. Overall, from a commercial standpoint, the quarter was another step in the right direction and marked the continued return of our key end markets. We are encouraged by the current demand environment and are comfortable with our capacity to execute on our order book efficiently and on time. It is also worth noting that these solid financial results came in what is typically a softer quarter due to seasonality effects and is our best first fiscal quarter of financial performance in recent years. Turning to our operational performance, we continue working diligently to mitigate the effects of the higher-cost environment. The price and availability of key engineered components remain material headwinds, and we are closely watching the price action for key commodities such as steel and copper. 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 activities. We also maintain and emphasize an extremely strong focus on productivity and strong project closeouts to protect our margins. Further, we continue to implement pricing initiatives to align projects to the current cost environment where and when possible. Labor also remains a challenging area to navigate. We 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. Similar to past quarters, Labor issues have not yet presented material headwinds, but we remain attentive to our current capacity levels as our backlog grows to record levels. Our human resources team has been working extremely hard over the last several quarters and have facilitated our ability to effectively navigate the difficult labor environment thus far. I also wanted to take a moment to call out that yesterday afternoon we announced that the Board has approved a 1% increase to our common stock dividend. This is an important step for Powell and underscores our growing confidence, our long-term strategic direction, as well as our commitment to delivering value for our shareholders. The fundamentals and outlook for our business are improving, and our strong balance sheet leaves us in a very solid financial position. We remain acutely focused on executing against each of our strategic initiatives in fiscal 2023, which include 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 and the new electrical technologies. We are already seeing the impact of these initiatives in our financial results and will continue to share examples of our progress as appropriate. Overall, we are confident that the positive transformational steps being taken internally at the company, supported by improving conditions across our core end markets, will drive another strong year for Powell. With that, I'll turn the call over to Mike to provide more detail around our financial results.