POWL - Earnings call transcript Q1 2022

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Operator

Good morning. And welcome to the Powell Industries' First Quarter Fiscal 2022 Results Conference Call. [Operator Instructions] Please note this event is being recorded. I'd now like to turn the conference over to Ryan Coleman. Please go ahead

Ryan Coleman

good and operator you, morning, everyone. Thank for today to you joining first us call conference Industries' Powell review results. for quarter Thank fiscal XXXX year Chairman Metcalf, on CEO; me the are Cope, With call and CFO. Powell's Powell's Mike Brett and There be it be will XX. available to Company's until available and a or going will website, by February be powellind.com, of webcast telephonic call, replay the a today's via replay will replay was The provided yesterday's information access on how earnings the to release. in speaks information the only XXXX, at that Please longer listening information reading. replay February are this call or be of of reported X, as note and advised on today, that may accurate you therefore time transcript any the time-sensitive no future within call considered statements, This includes operating XXXX. meaning to the including that certain the may of the Reform forward-looking Act related Litigation be Private of Securities statements conference statements results of its Company's expectations those that statements. uncertainties may Investors differ involve risks are and from in such statements cautioned actual results forward-looking expressed and these that materially forward-looking These international strategies. risks to industry execution raw business but and and to, limited risks, economic general pressures, not conditions, and materials, are competitive and and competition price sensitivity economic of availability of and political uncertainties include,

With with over For the turn now refer Company's Brett. to Exchange Commission. more information, call the that, to Securities please filings I'll and the

Brett Cope

results respects much the weeks. been shared XXXX days we and over we XXXX before And our the many last a Thanks turn more fiscal I It take not everyone. year quarter first us Mike few short full commentary your then Powell’s XX Thank to good review changed results. comments several morning, make today has financial questions. Ryan. has you for call to one joining since for will over a in

more to order Nonetheless, performance financial challenges. the start inflationary consecutive at the navigate It over cost marks accustomed chain and in our seeing reflected and environment quarter new orders, activity. are growth has also which pressures as first fiscal the reflects supply year. challenging that we disruption of seasonality year the of we holiday saw usual we past three rising broad further arisen quarters Our

steady activity And while a optimistic we last market and their markets. We cautious capital customers that within will levels our plans, expenditure sector with to tentative through remain this continue are started continue that experience Powell whole of midway steady to important year. as recovery industrial

$XXX traction $XXX modestly new in is previously million on a and New gross these compete first by reduction adjustment utility quarter the which of orders. higher the an $XXX new previously scope industrial for new $XX orders a the we included the prior prior and booked customer from year. XXXX. million a gross orders, requested of fiscal for periods in The Meanwhile, increase net booked have in of partially million than markets million quarter, of active remain orders industrial offsets total of scope project and placed XX% a strong project market of offset activity. The large is been is lower

three strategy continue in against petrochemical year, and to Within prior And by In mid Kingdom. revenue the the X% sector our solutions North sector home our compared in which risk million, the the while methodic projects fourth XXXX rail increased strength of increased market We from light proven our our $XXX and America. revenue XX%. the the the market, for fiscal expect total to steady balanced we traction year. utility throughout was and technical to leverage and oil markets, industrial the commercial gas in management unchanged quarter, United compared prior execution of was include continue which distribution all Canada US, in will prudent of the growth the markets our to capability

X% continued Broken industrial we in revenue Taken Canada down reported growth line, period traction year. and that together, increased in overshadowed which sectors in one the the US geographically, while the of on performance the respectively, were of revenue quarter’s increased segment to by ago. comparable with fell utility than prior the we saw the as period a our gross Revenue was current less Where year same XX% quarter, the XX% year-over-year XX% and by revenue year. our in X%. compares margin was activity XX.X% prior which from was by XX.X% in pleased versus difficult revenues

that We raw are near carrying XXXX reported first costs, of drag the beginning to term has half fiscal revenue in which on a higher margins. booked material presently projects are on recognize created

focused benefited Our challenges suppliers as and do with by on through higher have us not recent close to where Higher in in costs impacted raw gross steel costs. continues also materials, the did our but margin and engaged We related specifically present inflationary bottlenecks. remain first which quarters supply for possible being quarter. copper chain outs, passing to reoccur was costs

to are We possible. industries tight have to and the continue situation is that range labor On monitoring our extent a will and the we margins across similar protecting diverse diligent a impacting structure cost around our of the economy. remain note, we

have for continue cost operations. working wage all in of order added But closely While activity. to this as looking costs successful an these watching upward remains future potential across plan been project through we we manage and forward the largely expected pressure challenges margins manufacturing our on headwind,

prior $XXX,XXX $XXX lower reported bottom line, in ended and a in term short of We cash a million led $X.X of our profit Moving million the to in the the quarter loss investments to to debt. loss quarter with compared year. net gross no the net of

we continuing some and incredibly which put cash lower Mike the quarter will balance capital work have position than to an details. position is give net prior as sheet Our maintain while strong liquidity additional our to to

to the period That backlog year. $XXX the results $XXX remain Overall, the of financial quarter. slightly ended lower than million, our million we backlog of million while compares Lastly, a with $XXX last the pre-pandemic levels. comparable at than last quarter totaling higher end

growing been trends believe however, We our cycle long have a on are encouraged customers can momentum month the markets comfortable we we in spending, across by business we basis. are what deploying are believe month serve. sometimes are incrementally encouraging capital We around which by more their the mask seeing a we

driven We our continue and to and measured end in our outstanding see core a continues our utility recovery markets and was commitment to Powell’s the to reputation remain steady service traction and active. built while be innovation. by excellence markets

transitions to be to committed an problems. world the organically. in solutions electrical leverage solutions will these know Powell to that for to new innovative remain the R&D able As spending equipment the assets future, electrified to We markets and develop I develop new

broaden order outline areas in end the have We also future optionality strategies strength our deploy diversify our for Powell. of Powell’s formally our and balance mix. portfolio product the focus market three Last that quarter, to sheet to introduced we

Our and the platform. larger our extending investments, electrical preventative achieve through future in first our of priority electrical will distribution, equipment, is higher the of capital of We growing to all digital maintenance. play helping that believe from a analytics, performance automation life ours technologies predictive their their role continue like operating customers

carbon achieve While reduction also to help this technology goals. leveraging

area achieved will of their We but and history continue our protection see asset management customers of XXXX, integral business. important of success. to and our as capital have electrical successes of sensors, reputable products strategically upon build and out the small suite digital solutions, develop automation to as fiscal throughout longevity Building our the assets, increasingly this we their our ultimately,

and approach. existing plan installed expertise. like expanding priorities our more Powell a de-risk or existing seeks product both scope business there product our of of has finally, market the applications strategic our where seek our customer our our through around market counter as things around existing of we opportunities, our the the by opportunities can select complement historically than on stickier opportunity, diversification that we where to have Rather a optic new second are to or new is business Ultimately, models, financial Inorganic that services We of here, a move high out focus provide our we to focused role priority electrical into portfolio, strategic tangential cycles penetrating leading into our offerings base, of feel end all compelling de-risking sector the efforts bolster our but subscription density our as carry play to targeting focus where profile, aim position, either well return global markets. third efforts traditional that geographies, side differentiated spend a underserved. the help through to our an And take offerings, and our where relationships. be will a creating expanding services to operate people. may customer building is all on catalog The currently technologies. These markets we also to product is as digital that we market plan franchise, with to services selective

to in to would identifying that be will accretive through opportunities We inorganic grow as well area both this seek organically R&D, as Powell.

are fiscal we enter As priorities XXXX, unchanged. our

is execution in outs to of our project foremost, we health customers and margins environment. performance, employees, inflationary remain the First and strong look our and safety protect and maintaining we efficiencies close as solid factory on cost focused an suppliers? Second, our

detail committed we as the planning provide progress the to and more across evaluation markets that, we thoughtfully are executing continuous of investors and operations to resource structure, And Mike I'll on updating our to lastly, a appropriately. our that call strategic financial over our geographies With three we horizon, look priorities, over longer-term chain cost results. as serve. turn to our and around current Next supply the optimize on

Mike Metcalf

in million. roughly of good bookings versus period for Brett prior for first quarter million. a fiscal higher net fiscal first year. same first new current a new $XXX million orders booked In net year, reflected of the XXXX prior which was you, reported revenue million reduction of quarter flat of versus we due to quarter Gross $XXX fiscal $XX and $XXX Net the Thank the the project quarter the morning, $XX in XXXX, the million, everyone. re-scoping bookings was

million, result, by were were sector $XX compared XX% project by revenues In million Pacific. our reported market period, versus and to X% was in year, to revenues As fiscal by at lower book-to-bill perspective, same million across fiscal backlog to million of while the based revenues were $XX the revenues international first the the versus and to lower orders prior Asia which compared domestic petrochemical sectors year of upon $XXX net international total, ago, gas year. in quarter. X% higher prior lower first oil driven a prior our $XX From the volume year the a the quarter, one as higher X.X Compared were a was with ago. period in the year ratio end

and fiscal ago. utility sectors the quarter first same decreased While XX% fiscal million versus one period to $XX year versus the XX%, quarter by of lower respectively, the traction $X Gross were million XXXX. profit and by first in

As net which raw material million the net of additional of percentage in versus were quarter current roughly $X.X $XX a gross fiscal million the percentage lower ago, XXX loss to to XX% decreased the backlogs. of a $X.XX close substantially to addition same as $X from by to $X.XX fiscal loss of loss driven quarter, points part in higher a of XXXX. revenue, we of or and by of SG&A versus ago. in a loss of to share, large cost year period Selling, of first or reported in a million, a a per XX.X% volume profit share year the basis a a $XXX,XXX, lower project expenses in on decrease revenue outs the the by general quarter quarter quarter $X.X XXXX, base. million compared costs, same cost lower diluted the In per diluted current added administrative a period first of

in Effective working production. equipment XX, the as million, million, quarter XXXX. At had as was the During we long-term new XXXX, debt. the cash first ongoing in December the no capital of quarter stages as in of property, short in driven company $XXX,XXX. XXXX, projects, compensation, fiscal of as Investments annual activities net investments manufacturing first of build-up to XX, operating in projects fiscal plant the the million incentive compared $XXX held well term for well by at cash totaled of $XXX used XXXX, currently $XX variable and September

of markets. remainder the the maintain As we we continued to forward cautious look of our to relative fiscal recovery core our industrial XXXX, optimism end

impacts in the efforts, as cost Additionally, cost the do order to we year Through remainder anticipate of to management any the respect on environment, continual we to and a the backlog. side we internal help remain negate recovery these the acutely throughout as pricing. supply ancillary macro as with commercial focused execute well our landscape

through orders compared balance Our strength we to to to improve our cadence laid very year. will backlog financial addition positioned remains back remainder in strategic of I say prior out. also XXXX, on improve while to continues this the has sheet, our we the words. progress strong to to focus of Considering it while are longer-term few Brett pass a the imperatives, the to our as that performance continuing as Brett With well fiscal

Brett Cope

of his happiness will of I happy the Directors, first, Tom, employees, respect throughout and this only legacy and team for out of on the legacy And to we have thank continuous comments, we our health values to first globally, February Powell, wish from our my all achieve in I XXXX you across with can’t upcoming and close Tom and continue company Customers questions. began retirement much the behalf X,XXX recognizing guide your into the future. success. not Board in in Directors answer at Tom Mike. Board employees Powell. will would firmly with point the support industry. commitment senior leaves and board tenure of be the which career like is effective prepared Thanks attitude, improvement our to contributions At but towards Powell’s Tom quarter the rooted and we'll do the the you retirement. your be core retiring Tom’s from XX. will by company and your our for leadership our that Powell

Operator

comes Jon today Kansas [Operator Instructions] City question Capital. with first from Braatz Our

Jon Braatz

Mike. morning, Good

for the you with be faced Turning, first the anticipating margins, given the quarter it anybody And really spectacular think XXXX, quarter going about back margins But to the caused environment. detail rising here to like you million It go the from obviously, that or look in cost like like the fourth you it bit either it in quarter drop you gross other cost. were there mentioned additional in little the Could that is, is greater. pressure the occurred a even to I put I from on first -- rising year? seems costs. in something Mike, don't was in into the quarter year it. seemed added have something And at margins the it in just full there think, want that might was some you happened pressure margin question were last $X.X more seems

look As million you in those forward, you of the see $X.X cost? how recovery do

Mike Metcalf

Sure, primary in the the variables. current Jon, margin so on gross question two the first your of degradation quarter, really taking

Steel it's commodities we little about commodities, first about over took up the copper little gone cost But our at The months of it's the higher nature last of that. you our the ongoing materials, the increase estimating is core if you back tools, there or are a just our of for XX%. those has inflationary increasing, us, our input up further, go pricing XX lead price steel, a a the about and are think but and copper more, if last impact even look over increase than is XX% you lag. concurrently a as projects, long those raising year,

booked the we of in what ‘XX, incremental is have half backlog So from that are late fiscal commodity. benefit our first the which exiting price that of really today projects from ‘XX add didn't we fiscal

of price prior projects to probably as quarter, any to into this quarter, elevations in at over little due seeing we're as the bit well bleed a what commodity. our next So

that for quarter. headwind gross facing the first gross scenario profit the margin really was that So

if Secondly, late booked ‘XX, backlog But is the lower that close the quarters to exiting early the in you over back the strengthen. than now. today. late much had, to about cadence was it due it much number lower cadence order project again, what ‘XX, And in we that's think last been of that it continues volume anyway, ‘XX, we orders of just outs, orders early three has than the ‘XX, the

higher of don't in projects, where where So had we're valley have a same prior we volume. we existing quarters, now kind a backlog levels that of

that So this the margin two that really impacted things -- quarter. and gross were impacted that's really percentages those gross margin

control On price costs overhead the and We and prices, plant. we can't prices. have costs, place $X.X really copper our million, the we in in mechanisms mitigate they're clearly help levers steel can't are, control do manage those an to but

what the focused we can, best that's focused managing we're on. So that on and can the we can. we items We're things that to control

Jon Braatz

still copper potential the new little seeing at the projects a given the inflationary you to and to And at are costs coming business sort secondly, steel, now bit then against currently new the able look those orders, as board, into of you you protect into look you surcharge costs? on add the environment As increase? better inflationary are orders you

Mike Metcalf

first the mid has probably of has use into gone as the lot you we steel, £XXX it's imagine. off softened six And stabilized really question a bit. over Yes, pound; little high. steel past months can the leveled copper a it It's quite

There models. and those extent again, would From our trader, transitioning can't we estimating of incorporated commodities is due pricing products. a saw a So to to a I'm lead increases the increases that lag -- not the into don't, are I we've the I standpoint, to yes, models. imagine taken our previously. But in costs estimating commodities the steel extent we time just but our go

Operator

Company. John come Franzreb Sidoti & with Our next question will from

John Franzreb

morning, my Good questions. for taking Mike, and thanks Brett

XX-XX over the with First, always Tom past to retirement, whatever on to congratulations his I'd was is it work years. fun say he

I to up follow want to margin I question, the parts guess back on. gross Going two

is those price the put Maybe everybody job to a Is competitive doing? a far it increases customers more prices? the easier little little say they're becoming talk price becoming as landscape, to is bit the relative raising ago? as on bidding activity the Firstly, about six increases the months taking through palined what

Brett Cope

Brett, take a little first I'll John, one, that bit. maybe it's

and about fair were opportunity people the shortages, levels see last think competition. that the I think on I a on I last the indicated started price there still side. we we sort are cost is And last a of slow side, opportunity half that where where methodic is asked are control recoveries price. year, calendar can't year products for I'm is say still. second kind our increasing logistic not, There rash quarter, quarters, seeing we relented But we to two their is there we the we industrial Powell. of of because But has competition of a of amount also which price of under manufacture. things that in the impact

those medium where things side, the upside we price we better we're a On having our especially are have and to in pretty competent still in supply there. on voltage command able the market some control, anti on American substations, our in North the are opportunity little chain we abilities

John Franzreb

Have buying as far steel as earlier, locking soon so as get exposed? they're as pricing in you the patterns not changed your buying job, you as

John Franzreb

as lean ancillary and these we shortages, don't that steel, are make we, secure. shortages, disruption. where to a have chain but will the fact supply forward see and are little cache of sure we forward our a in inventory, copper our bit of John, only do parts manufacturing we and Not in we usage some Yes, see lean you we the critical products,

John Franzreb

Okay. gross with margin? costs is Less the impacted that labor easy work increases, how's to

Brett Cope

to will we have that do margins closely, a the we a impact had haven't it environment that labor, given really variable present, be watching we on are anticipate to At manage. respect with material macro

Mike Metcalf

watch, working comments is we prepared way location. something and are do as we in through it We our availability, Yes, can different the it. to location noted, see it I as noted it is we

but to watching is So haven't become able it's factor something we're it not without we closely. yet to challenge or but has been program overcome it a

John Franzreb

Okay.

the we kind margin fair this the running point of still it to in profile jobs that margin unawares is should gross you're below of So gross one, be the this caught the have ones the is that through assume since one? another do or low may, are

Mike Metcalf

the we incorporated we don't, as that in Ross's bleed I mid get. start at last improve our we in year I should to to system and look, And as comment, through copper said this mean, financial buy should question, our forward alluded The anticipate. pricing I the John that's so mid-year I be positioned I look that would steel, tools year at we if can best we price buy think we are what to – we're we commodities we the performance. seeing positioned my prepared as

John Franzreb

about bookings look do and revenue be Brett, favorable Okay. think profile from improving about way when profile, you concerned when months will months, you And side, incoming talking say most now? on bookings and where six six the the most the out, you

Brett Cope

still in And A through the situation investments to that Gulf lot economic I no in appears part the last while engineering think that the it know, concerned about of Coast, improving year, ‘XX. the The global what the States, we'll pull the still be demand good end actively work talking to half partners, in we you with for projects, that economic where clients uncertainty on the when jobs, industrial what we question, continued actually back big saw me, John, in large recovery, industrials, trigger. continue methodic most as probably still point really the our we on gets I'm market, but there's they'll business about this when in see in last it some will our those are XX days. change to and the actually drive, return especially has mid

continues, seeing make we of probably a continue biggest the support in of in new progress concern market Canada we levels. for that activity, the is utility I think. jobs out, in channel different there just and us that all the decent that there's six we pretty self-constrained environment traction market through to US OEM has Meanwhile, on are market out uncertainty we my timing channels different those the been market months which that just larger So become And levels traction distribution so. in contracting development because new with if

John Franzreb

Alright. last then into and question, I'll back queue. And one jump

services up you your to you now? when as comes where expanding You from as is talk P&L is two as priorities of business. in strategic say you about and are date Can it far a kind target, how think far us as service give revenue the what your reasonable years much

Brett Cope

to a so segment. kind not Well, yet I'm target of lay ready reportable out because it's not a

Our whole voltage that reportable - in we to or a is can leverage the put low in leadership first how in equipment goal about It to into geographies custom about the want to which breaker they pull their other take underpin ago, metal advantage XX our have do one the services to able strategy talk both things first in the to are is business they where markets, we we for revenue. know, base, quarters. we've and service new you we that through base, all reasons, select the can new establish us really in extend certain good and and we be want a is of what XX% to should CapEx custom But can where in as closely years XX bucket our the technology, in and it so. installed this in parts, parts examples strength to various this that XX obsolescence got a some that get pretty as things a get months, It's segment. and and really they first that that so future, infrastructure kind to true the working that engineering other total we or is, life where talk is go more and that area those after include motor you'll of of a of of be can into they put hear are have of aftermarket well, power, know much that XX coming go life build all and to it as design we control industrial client engineered months years it's team, and XX when the components attached of you us extend XX-XX install, you’ll don't out in that hear another out rip existing wires we XX

Operator

John from Deysher comes with Pinnacle. question Next

John Deysher

taking just if strategic morning, curious Thanks there that I ago a there Good are But everyone. are went weren't initiatives. for not recognized a the any you us for costs was could up notice three costs year were that ago? questions. R&D strategic tell there my for bit. there a extra I year initiatives? Were perhaps those there additional that

Mike Metcalf

retool technical the came of ago. and I about We couple portion two strategic of and accomplish talked R&D target, is a we out although John, path think raising quarter. on that the It the about foreseeable the into or in there. that recent challenge spend year ran to be no, that to a not plan our that in most quarter future, early goal. it won't years the in we started in next the had

We now. that working on are

point, recent talk So so. advance doing in But to we definitely of that quarter. when in I'll get it the not about most

John Deysher

Okay, so strategic was none to of initiatives the R&D increase related quarter? this the

Mike Metcalf

to things that Not typical a are, But as last that in of I I today are some say step is we're that money. we've the be in tied in R&D that line. call December, doing I there would not taken allocating on R&D can mean, there alluded directly. just

John Deysher

a it Yes. of is What XX%, revenue of Fair to the enough. segment XX%. the disclosable to total level service for revenue be have get to base?

Mike Metcalf

an the XX be to it sustain reportable aftermarket, team. that XX make in of I could it by XX%, not we our will accounting to think if I equipment think life the not to that will, of months excess again, challenge segment tied

John Deysher

And guess being you year referring what Okay. to exactly a less I refer project What you than ago? would are quarter to? finally, close as this

Brett Cope

of at timing of of how size on and that that we is taking in the It's were indicated questions. first ‘XX earlier Mike one of of end the ‘XX. of the the part the Some of projects some

a able and of close logistical some with little not challenges also to there is mix And it being out timing, mixed just in jobs. a bit certain

So now. over challenges all or extra economy two the for shortages they're holding or above right an month

enough. of a a mix and just QX. pretty close steady of good So that just we when not in running typically business see have cadence and we're didn't We outs

Operator

there questions. no this are time, At further

Cope So like back question-and-answer our Brett conference I'd session. the this turn to for will conclude over any to remarks. closing

Brett Cope

Thank you, Gran.

we in brought labor and are all pandemic, by stronger challenged strength uncertainties future. and an these the across by challenges positioned facilities. the conditions inflation team the has significant availability. well Powell people, the burden rise incredibly global lingering these added subsequent who emerge operational to challenges While remains The manufacturing is in our weathered our logistic underpin ongoing in of the on economy and strength through talented the of past Powell of and persevere our global

by supported customers sheet, with are We our suppliers. great balance a a relationships healthy and backlog, and strong

quarter. on thank our look And new interest appreciate to opportunities advancing With focused your continued next are on efforts our we that all speaking that, will in We encouraging Powell. backlog project you for and with your growth mix you participation call. diversify today's forward. forward and in Additionally, better going

Operator

The conference for has now concluded. attending you presentation. Thank today's

now may disconnect. You

Ryan Coleman	Alpha IR Group
Brett Cope	President and Chief Executive Officer
Mike Metcalf	Executive Vice President, Chief Financial Officer, Secretary and Treasurer
Jon Braatz	Kansas City Capital
John Franzreb	Sidoti & Company
John Deysher	Pinnacle

Powell Industries (POWL) 9 Feb 222022 Q1 Earnings call transcript