Powell Industries, Inc.

Welcome to the PAL Industries Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal conference specialists 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. And 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 Mr. Ryan Coleman of 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 2024 fourth quarter and full year 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 November 27th. 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, November 20, 2024, 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 risk, availability and price of raw materials, and execution of business strategies. For more information, please refer to the company's filings or 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 2024 fourth quarter and full year 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 strong fourth quarter performance that saw revenue grow 32% compared to the prior year, helping the company achieve a total of $1 billion in revenue for the full fiscal year and marking a significant growth milestone and record year for the company. We experienced tremendous growth in each of our key markets throughout fiscal 2024, with our top line growing by 45% compared to fiscal 2023. Our oil and gas and petrochemical sectors grew 53% and 97% respectively, while revenues within the commercial and other industrial and electric utility sectors increased 44% and 18% respectively. We booked $267 million of new orders in the quarter, led by continuing strong activity within our utility sector and a notable booking supporting the capacity expansion of an LNG facility based along the U.S. Gulf Coast. We recorded more than $1 billion in new orders for the second consecutive fiscal year. Our core industrial markets have remained strong while we continue to make substantial progress to diversify and grow in markets such as utilities, data centers, hydrogen, carbon capture, and more. Our project execution remains an area of strength for us, as reflected by our gross margin. Our fourth quarter margin of 29.2% was aided slightly by some one-time items, which Mike will discuss shortly, But the underlying margin performance continues to improve. For the full year, we recorded a gross margin of 27%, which was an improvement of 590 basis points compared to the prior year. We continue to see improvement in the margin profile of sectors outside of our core industrial end markets as we become more efficient in our manufacturing and delivery processes for these projects. On the bottom line, we recorded net income of $46 million in the fourth quarter, or $3.77 per diluted share, which was 74% higher than the prior year. For the full year, net income of $150 million translated to $12.29 per diluted share, which nearly tripled the $4.50 per diluted share we delivered in fiscal 2023. Our backlog continues to hold steady at 1.3 billion. which was unchanged compared to both the prior quarter as well as the prior year. We are pleased with the overall composition of our backlog, as well as the timelines and margin profile of the projects that constitute our order book. Our current project schedule provides good visibility as we have orders in our backlog which we expect to realize revenue into our fiscal 2027. We are making good progress with our capacity initiatives. which are advancing as planned to help facilitate the execution of our current backlog, as well as provide room for modest volume growth going forward. At the start of the fourth quarter, we acquired nine acres of property neighboring our Houston headquarters location. We are already making use of this incremental space, freeing up capacity to drive more throughput at our nearby manufacturing facility, which will contribute incremental revenue in fiscal 2025. The expansion of our electrical products factory in Houston also remains on schedule and is expected to be completed in the middle of fiscal 2025. This effort coincides with our initiative to develop and launch new products in support of our future growth across the customers and markets we serve. On that point, our R&D spend in fiscal 2024 was up 52% as we advanced our innovation initiatives to develop new technologies and broaden our product portfolio. I'm pleased to report a recent win in our product development process as last quarter we launched our new station breaker, which is a medium voltage breaker commonly used in the commercial and utility renewables market sectors. We received our first order for this product in October and we've been very pleased thus far with this reception by our customers. Our labor staffing levels are relatively unchanged and we remain comfortable with our ability to execute on the project schedules within our current backlog. However, as we evaluate the medium and long-term trajectories of our markets and plan for volume growth, identifying and acquiring qualified people throughout the organization remains a top priority. As part of our efforts on this front, we are in the final steps of opening an engineering satellite office. This office is located on the far west side of Houston, allowing us to better engage and hire from a wider population of qualified engineers. This will enable us to continue to attract the talent to fuel each of our three strategic growth initiatives. Looking forward, our expectations for project activity and new orders across our markets remain healthy. The balanced nature of our quoting activity coupled with our recent win rate leaves us optimistic as we head into fiscal 2025. The fundamentals for our oil and gas and petrochemical markets support our expectation for continued strength for these sectors. In addition to the legacy work Powell does in these markets, our oil and gas sector includes energy transition projects, such as biofuels, carbon capture, and hydrogen, areas where Powell has not historically participated, but where we are seeing substantially higher volume of project activity. Specific to the fundamentals of the U.S. natural gas market, price spreads across global markets remain favorable and conducive to U.S. export activity. While recent activity has been more muted as a result of the U.S. Department of Energy policy regarding LNG export permitting, activity around future projects continues to be very strong, and we believe that projects which are currently on hold will come to market at some point, and as such, we have not altered our long-term planning for this market. Activity within our commercial and other industrial market also remains healthy and includes activity within the data center market. We continue to evaluate ways to further penetrate the data center market and expand the total content opportunity with these customers, which requires that we qualify more of our products and services for the future of this important end market. Lastly, the outlook for our utility market remains very strong. Activity levels in this sector have clearly accelerated in recent quarters, and our fourth quarter was the second consecutive quarter where new order totals were led by the utility sector. it is becoming increasingly clear that the reliable supply of electrical energy must grow significantly over the next several years to meet rising demand. Powell has the right industry breadth, technical knowledge, talent, and strategy to leverage our more than 75 years of expertise in these markets to deliver for all of our stakeholders. With that, I'd like to turn the call over to Mike to walk us through our financial results in more detail.