POWL - Earnings call transcript Q2 2018

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Operator

Greetings and welcome to the Powell Industries Second Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ken Dennard.

Ken Dennard

Thank you and good morning, everyone. We appreciate you joining us for Powell Industries' conference call today to review fiscal year 2018 second quarter results. call Don Brett Madison, the Executive Powell's on and Officer Chief me today Cope, are Chief With Financial Officer.

the details turn the I call management, to Before I usual housekeeping to through. run over have

May not There did going that and will Also, Dennard-Lascar if number distribution yesterday XX. replay powellind.com to note on or and there like e-mail advised release is would press will be features get be for that sensitive you and as information of reading. for today's to replay only XXXX this therefore, will XX, you relay speaks earnings and the receive May the at accurate the If may via you offices us. access are information our And you XXX-XXX-XXXX. listening information of news company's how time of call you’d a one, to will telephonic or call be replay we release. like these will on in call be issued transcript until provided yesterday's Powell, e-mail releases of to time information at at any replay available on Please an please no website it today, reported available webcast the that by one be longer

to political risks cautioned statements. involve to execution company's not As but and competition of are competitive and price Private you limited uncertainties and international those that deemed and know, sensitivity projected statements meaning its actual from include, economic differ and Investors risks, results and in and materials of economic availability forward-looking conditions, business XXXX. that pressures, forward-looking of expectations the operating raw the Litigation of and such industry statements to, strategies. statements forward-looking call general future may that Securities These materially includes to this Act of be be uncertainties, conference within related Reform results may are risks certain the the

more For filings Company's to SEC. refer please information, the with the

the over Brett. turn I’d call to to Brett? Now, like

Brett Cope

everyone. us will for make commentary to quarter joining Thank Ken questions. the comments to more I Don then call results. your and our good morning for XXXX you, over before we review Thank second and I turn will a fiscal you few today take financial

The second quarter The the XXXX to by in new and million million orders quarter project run bookings projects the and pile Also largely compared improvement by highlighted business aftermarket of over was rate of over X fiscal few last increase our significant during growth. our was the power from The generation larger base the from when two increase revenue U.S. included driven over primarily quarters. in experienced strong market. market. bookings quarter, and group one XX domestic order services to the

be our and slight Middle from petrochemical petrochemical the few offshore while geographical a pickup as for variety and also robust. during continue areas, manufacturers a well a inquiry downturn our activity including brownfield quarters return activity Canadian ongoing Over levels. continued to projects utility remains in and begun has infrastructure increased that activity markets demand across oil services, sectors. and active and strength parts yet the plants. including refineries, commercial see ammonia historic levels increased end municipal businesses. the the U.S. gas the and markets, most in smaller Bid to have downstream project support our see upgrade of In fertilizer oil, levels as East to We've core across to gas past largely to and We've distribution, declined show seen

years the to we increased we scope ago. markets not of and scale seen are size, see since several of terms have planning that of projects In now project starting for our decline

are scale projects estimates. several We and with larger cost engineering designs supporting

are be to and our these to year on will meet increased this projects the operations demand, any and the in or U.K. our in calendar while future final our likely workforce to awards customers started by we remain later add have We U.S. tracking into decisions investment stable. XXXX. Operationally, Canada

manufacturing our of a practices are promoting on focus Continuous strong and workplace our have safe several All attention even activity. continue operations the for of partners. learning as customers and and to organization critical providing our employees, started more teams best a supplier increase across

and ensure investments us substations, increase and able we as process We between the engineering advantage utilization process to we have in our unique to to to Utilizing of model systems across lineup this dates. share and set teams a our facilities. production leverage give of capacities. market the benefit have made increased by continue same Powell resources allows to to also we and also to maximize and customer strategic capability capability These continue continue to complex switch tools flexibility tool multiple our from increased are common need to an meet and move North improves. is leverage This capacity a will America in gear

we move of continues scale of our project our in force to cost the business and impending start focus execution labor activity. as into be As the up on control advance incrementally XXXX, second to we half of increase

to research investments efficiency equipment and production continue quality, to commitment enhance strategic in and and our continue coupled add and proactive to product development property, opportunities with advance to value. plant service safety and addition, In we

consolidation quarters of organization the a service market For improved example, announced and advance ago we common leadership team. several activity under of our in

additional to will international time to key our geographic service response begun customer's our teams regions facilities. capabilities determine U.S. provide repairs in in have critical electrical Our to improve existing renew located our how service centers and center

forth have flow. correlate improves. the with as the put efforts new we we the and a challenges center respond and the in market had in opened to will a As us demand to believe to started during increasing U.S. summary, those result, quarter the challenges well selective we position order In past the preemptive faced hiring service second

have our their appreciate the and I'll business. over most be support employees future the in talented for and Don. the Powell’s motivated We that, bad committed to in customers. turn They continue success. good to call With are We times to

Don Madison

Thank second you, to million fiscal or compared by Brett. of of over $XXX of fiscal XXXX $XX quarter quarter the the $X million fiscal we’re to XX% XXXX the in X% million first Revenues decreased quarter or second XXXX. but up

X% decreased International million Here's Domestic year increased to million. some by quarter. $XX $X comparisons million. to to $X million second X% last revenues or by $XX revenues or

of fiscal the quarter export as international $XX domestic million as projects. revenues include to unchanged fiscal international quarter. from from generated increase as in in XX% Our revenues second well operations. in of resulted revenues $X million. export XXXX. profit our from percentage our of an international increase operations, second compared in Gross a Gross from both about revenues to the decreased profit revenues year's Selling, decreased general expenses $XX second last to quarter million XX% and were XXXX administrative The

from of or XXXX. of However the share recorded income $X.XX percentage compared to a second XXXX, per quarter revenues We lower fiscal increased In $X.X revenues. net to $XXX,XXX a in due $X.X the second slightly SG&A a XX% quarter. XX% $X.XX or second as the loss million of loss per to a quarter for share in we taxes million of fiscal recorded at benefit

ago. $XXX first year of placed quarter quarter million in the million $XXX $XXX $XXX the resulting fiscal million $XXX in to million of million a in and were orders quarter a a compared of backlog compared XXXX at first the New to end of second backlog the

a and XX% to and months the decreased lower the as year. at the volume change For XXXX We our ago for tax decreased the first of six million of from revenues. a six ended primarily $XX the continue negatively period first expenses revenues million million gas by same Gross million price by year $X.X current a as general XX% $XX fiscal cost competitive profit have six cost months XX% were revenues margins which percentage revenues beginning and of of resulting oil the for a unchanged were of from due project in project also to be months $XXX income March benefit or effect profit absorption finalized. compared XX% negatively orders of Selling, been and manufacturing expenses pressures. to compared year reduced to XX, continued incurred impacted XX% to administrative to Gross under not facility increased in impacted fiscal a due percentage on reduced to an Gross fiscal XXXX. margins XXXX. recorded to of SG&A backlog profit ago. of and the

or we the six reported a loss months per XX, March of $X.XX XXXX share. ended $X million For

plant activities million XX, September XXXX. had totaled and short-term $XX including maturities cash XXXX At XX, March million. was investments million. ended months million. six compared Investments and at property, used was debt XXXX operating $XX the $XX to current Long-term in $X.X $X.X million March for cash we of XX, For equipment

Looking loss net expect forward, a we in XXXX. fiscal to continue

half However, point, answer we orders has to this the we’ll new half to first anticipated. improvement happy as anticipate show as over second At customer our your strengthened results be questions.

Operator

from Our Securities. your the Please question of Instructions] Jon with Tanwanteng proceed first question. line CJS comes [Operator from

Pete Lucas

It’s Pete for Jon. Lucas

looks any I what still or you’re offshore weakness after build ready to like, majors offshore. think the seeing in might the sense Any that getting be when mentioned future? you your new looking of prepared comments in it rigs sense

Brett Cope

recently, can’t article all Houston is Offshore in your Chronicle shale the of offshore I don’t was before, know Technology the the The I remember shows Houston theme ready gas Conference sorry, was the big an up. the answer it that here thought one weekend if But in OTC had I The falters. question. I'm of author. just we while. a article, lowest and So it summed when attended ran

with are certainly doing. the what watching We’re engaged kind they of majors

of of back top investments piece. at tie you gone are these versus side looking look couple sort some at the If Gulf, have folks big the

weakness say, near least in of lack just to hard continue near midterm. at to term answer I a the XX I see it’s for better and don’t the to months think in So

Pete Lucas

competitive looking a all done, cutting on incremental underutilization that the bit mentioned margins you’ve dollar margins, you revenue at cost under But think And given we pressure about little how should from when of and forward? going we pricing. a

Don Madison

our will some last quarters current on the If gross or at it’s to our look margins outlook. improve in over shown growth two It we’ve you based been slow. continue three

So wide at projects the when a of we’re that mix variety in backlog, there levels our of you're price looking seeing. is

to bumpy some There anyone stuff. we actually progress as forward. and Powell could some we bit following that’s a then show going be continue back be it’s little as call will is to that going So be that we quarters

side on really is as now. right it’s side it it’s cost much So the the - price on

Pete Lucas

X over from few in said saw the million. over you one what million last QX, brownfield size over you were me, XX went one two sense average projects. orders all maintenance a overall And was believe or I Any and the they of type you

Brett Cope

greenfield the peak into the in - a orders always what X brownfield say a I came call was that fiscal couple of of it stronger sometimes mix start call quarter. The Xs also or but I'll sort quarter we the second expect - majority and up business base in the X notionally would call of see of something new last first the more second maybe kind didn’t what the few to downturn I our last of Xs, healthy started the fall you but business coming years during on that it in expansions of the

of portion good a that increase. up make did it So

Operator

line the Sidoti Our Company. with John proceed next Please from comes question. Franzreb question of your & from

John Franzreb

with little to a last into first is number. little or all this cycle, order You half XXXX? talk shorter in bit delivered talk are they quarter spilling are you fiscal talk more the about deliveries, scheduled? Could bit - you of a going was that timing to of be everything Just XXXX

Brett Cope

There of spilling XXXX. quarters don’t pursuing. have it lot orders, the cycle short about be of are we're the they talking couple smaller and percentage nature. are last overall job exact I but been over size of We've function into

lot it, have you is project epitome an of you sort creates the small quarter a did A second project. leverage teams of don’t work, operation of because very when challenge The that. a have the for you also same happy of get lot larger as

teams, the some for helps do into see but next fill definitely year. and to we the QX booking year, as gaps in QX QX to work of amount deliveries for lot next fair a over of So

John Franzreb

you or the the there given delivery Then adequately concern costs of times, longer those is jobs? any longer delivery commodity contracts in protected about on

Brett Cope

into we are Well buy. a understand can the chain active to on sort we’ve in been sure the what contract about when happening and and causes to do talking going we cost what’s to comes of inflationary we protect lot contracts actually and it conservation doing watching that and supply our when making more materials

So actively as spending at team looking more that. a time

John Franzreb

you the just just any talked properly in the I scaling service a any actually about Brett just And sure specific that prepared - in you make I up talk so, about to remarks, also? your centers And bit on labor is you want service understand lines. force. that little could and personnel side if or

Brett Cope

second the more really in manufacturing service John to So quarter comments were center new. I The my the is side. mentioned tailored

We’re preparing the kind ads the second of really the to manufacturing we but quarter of hire worked strategy as in facilities. more that

side the well folks some some a additional contract cost fixed as our the factories. time increase assembly handle on factory, of So it's the to folks mix in work within as full short-term

John Franzreb

product line? Any particular

Brett Cope

No.

Don Madison

in product focused here and were John Houston media ads the lines. our of voltage on Most

John Franzreb

thank Don. voltage, okay guys. you, Media Thank you,

Operator

from [Operator PRSPCTV Please Lawrence your of Capital. question from Creatura line proceed Instructions] question. Our comes with the next

Lawrence Creatura

Quick you orders XXXX. looking rollouts how beginning this large have prepared projects your backlogs you some you. you And if question your Thank forward? you product bit talk XXXX and be to to little historically. Could comment, cycle different expected in regarding regarding a affected awards any said large your in or later on and about it possible were have visibility

Brett Cope

very impact them we closely delivery have can So, an whole on watch the of they because course cycle.

and big fortunate seems the at to they’ll projects there's projects come comes roll and committed to lot all what we’ve a delivery look though deliveries then of schedule. and on on you in we're it win, along along big quarter, the If happen of is we smaller a consolidation taken if and is second always projects a phase

engineering they the budgetary last funnel standpoint owner the of it scheduling of estimates as going it’s own our of firms, over quarters in as the couple keep - a but None starts impact the companies well the the on the do be the and and radar the them their returns with refinements, from to we company critical refinements So on can dramatically terms in meetings. really doing that project.

got more None know of work you So are getting it’s how next now -- cognizant we're six this the to be more look picking it's plan to our be last and the that on. might production that okay but wanted and of year looking when from like amount the them it's and out sometimes these balance of funded late we you months real success year chances officially kind of and really the capacities. we've to to and of do award and our in funded estimates leads

Lawrence Creatura

the what say a structure margin large what now? doing follow-up, size as Just is those you large a the projects project what’s is project, for to you're like when compared work and

Brett Cope

historically million XX I million. So project times, XX you as maybe tell large upwards in peak as of our excess a be XX would to XX million in million high would

wave, the Those more million large in after well years in million largely came all petrochem $XX wave as project call the of large kind to which couple markets of the of XX downturn, are $XX would to disappeared offshore that XX. really market was after as just has shrunk the of level. which last The the our During the core what earlier question. LNG and mega-projects we

we to tend be more engineering the advantage do As better projects far a fit our larger strong margin capability. the with have structure, They our model as because very complex.

design implementation. projects the aid shines the our and of for the project where bit line work do end engineering over Powell the user little and that because of to So have goal final getting ability sometimes these of to and a is house

So they then little they well. be competitive, a a also be more pretty to tend and fits but bit more to complex little that's and tend fine, again

Operator

Leader comes next Our Please Richard question. from Houston question from Capital. of the your proceed First with line

Richard Leader

of have refining industries, some And rules? events Couple there's or at Tesoro. buy year looking either the you to last the consolidation been going having happening with I any is recently effect in picture a EPA or and in markets in on along positive chemical or consolidation most over your changes the of big forward envision EPA wonder have announcements One do if Marathon the been the old so. the end had rules the the that them industries deals

Brett Cope

corporations. familiar if consolidations Yes, their watching both very sort presents and example any the work the we’ve both Powell. and the consolidation know I with know both We’ve cited been their Marathon done of throughout - new opportunity. Tesoro of you don't at

core spades, couple to again back that back Powell infrastructure come its of not of market be or upgrade. Some going for has last was last market at in definitely come we but on for been see that the the That like has quarters we're was refining back we'd to that's quarters. that the really didn't couple of that historically not where peak where work

And so, that produce what affect of distribution some I different interesting strengths it they see happens watch. mean that certain interesting be on be How feedstocks the consolidations will out? how the will pipeline take manage or in and that to markets. would of the they that and will to

that in is growth set of Gulf just of the Shell, aspirations Aramco strategy. new had kind and Coast One one folks these here separation there's of folks, a some with Motiva the that by of another driving

So it effect Those it. and have we - is can very planning. our something do gyrations it's on about watch talk

facility an our there last out in of effect far anytime was and those a quite been comes out, rules, power bit comes have the the the markets. years, couple those desulfurization, the a distribution of that there on EPA upside big requires has side government XX that As as a any time within can the over

Operator

with Please from from comes question. John of Deysher line Our Pinnacle Capital the proceed next your question Management.

John Deysher

equipment and purchase about GE's deal I that May I hearing closes? coming that curious on scheduled anything think after properties - just for in you're of was come if or for possible of up June the this year. has occurred might to ABB that sometime business sale if was actually be might close

Brett Cope

on big but official tracking we're doing both separately. GE So know I competition. today still a supply of and believe entities consolidation the sitting certainly as don't business independent not of word with that It's here and the course. side do our ABB we're I

exciting, of a just progress month the next hear it's think of from history, field. I I so sort the in is I'm I rumor kind and think or is what

of that’s today. sure not as closed pretty the So

Don Madison

to. we're there acquisition that would this opportunity a whenever the the fit watching duplicate have to they is There but something some clearly do strategy control wanting what merger John we're of there maybe this. for asset, we we actually is any of until in and point that word new it assets. the that businesses try stay will maybe not official like where is close not But is something with be to GE time to watching owners we're at as with

John Deysher

as do But closing still as you still - know? in you far they anticipate June

Don Madison

but the is a rumor not we're of a process. That part

I that to changes or not. any don't whether So there's know

Operator

session. our floor would That to question-and-answer like closing I concludes management to remarks. for turn the back

Brett Cope

you, Thank Operator.

presented quarter of second Powell by encouraging increased for bookings. signs some The way

and workforce, an position our everyone Powell forward the speaking the leading coming Thank a emerging for and activity over higher for we Powell financial remains in look continue with level this prepare as As year, from second in your project look into next half the future in period and research to We operational this and to of quarter. strong. quarters. we performance. of Powell’s downturn to we our for we you will forward exciting interest company programs enter into development our uptick the facilities invest

Operator

teleconference. That gentlemen, thank and you for participation. today's your does concludes Ladies

your have day. may lines disconnect wonderful a You and

Powell Industries (POWL) 9 May 182018 Q2 Earnings call transcript