Earnings call transcript Q2 2023

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Operator

Welcome to the Powell Industries earnings conference call. [Operator Instructions].

I'd like to turn the conference over to Ryan Coleman, Investor Relations. Thank you.

You may begin.

Ryan Coleman

morning, good and you, everyone. Thank joining Thank call Powell conference for to you review results. for today quarter fiscal Industries second us year XXXX and the Cope, Powell's on are CEO; Chairman CFO. me Metcalf, and With Mike call Powell's Brett

in on release. that of this May will you note replay be earnings be call it be the and of speaks time-sensitive XX. available X, therefore, to accurate on yesterday's company's until information reported longer available today's time a was any replay Please the or and information may going that will only today, website, by May are be powellind.com, a listening no at how webcast reading. telephonic information There the or of the as call advised XXXX, provided to replay transcript access via replay The will

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

Exchange Commission. to the company's more with refer Securities filings For information, and the please

to With call Brett. that, I'll over the turn now

Brett Cope

financial fiscal review the will results. few I and questions. make second to more for joining commentary turn Thank you, Ryan. quarter before morning. we Good your us XXXX over take for then today comments Mike a to call you Powell's Thank

record in backlog. over initiatives few combined execution results the second strategic increased driving with among improved accelerated core and are our in recovery of build to that the I'm markets quarters as momentum continued delivered very Powell margins cyclical industrial that against past that The our with another history in markets pleased quarter our were second share quarter. started achieving to our earnings along best the the the

located Two strength during for activity significant this an project, another of significant sector. were the of awards for also quarter, project during new received have quarters fortunate to which market. market underscored mega including the in project be facility domestic for a quarter. bookings domestic X the our a a is petrochemical We This large award U.S. consecutive award marks gas-to-chemical will LNG in greenfield that the

demand we While active. activity was commercial certainly our the by utility very the markets, our end strong end to and addition that strength and the we our in majority experienced geographies new Notably, core compete orders commercial during and gas remain sectors continuing of booking oil quarter. across also the strength from driven petrochemical and the sectors in of industrial core industrial markets, across activity other

Canada. which fiscal quarter sector, mainly million, project large to This traction the of industrial partially offset prior versus other while quarter municipal second the and million, gas commercial second increased was was in sector newer higher by sector sector period petrochemical the up XX%, the declined versus by revenue by the is higher by is nearly the year. function jump same the in prior year. of revenue XXXX, wrapping Xx the $XXX XX%, in fiscal of XX% saw increased second saw Total than XX% quarter and oil a utility and Revenue XXXX revenue our which market sector of revenue $XX which in compared XX%, the the by

bookings. more the strong more had XXXX, That we since as which in the and fiscal fiscal of XXXX. activity saw QX that than of our second until higher same in first period Xx was exceptionally year the has fiscal in this new figure of in the secured quarter the prior $XXX is million quarter Order we than best million quarter Powell than bookings double quarter $XXX was

ratio current book-to-bill equally of X. quarter Xx the was Our was in sixth over with a strong straight quarter the and book-to-bill

of leverage closeouts same margin in a growth. to Our team an period gross deliver helped project to the the points last delivered volume of increase is year. margin compared and quarter the positive XX.X%, basis XXX Strong underlying which execution,

the the the $X.X or prior net bottom million diluted to quarter share XXXX a in year. per second of diluted share reported compared per Moving we of line, to loss of or in $X.XX fiscal million a of $X.X income net $X.XX loss

order sectors, strength market than time Lastly, increase petrochemical the it backlog is over across of we of time our at gas the core $X exceeded an Powell's the growth that just with same the and quarter $X our billion. an the million and more double end ended XX% year. first oil, improved from nearly last first driven history of the backlog and has XXXX in is by billion, The $XXX of quarter

are book. the said, our we comfortable of very size, with mix order That quality and

XXXX, markets project fiscal The extended future and balanced in steady Our XXXX is us we balanced project of X best into are activity. core Powell these a well where and scope excel. through manufacturing across our and backlog providing does to what with projects of also schedules nature cadence facilities fiscal

backlog to and earned of history this has same comfortable fulfill our us that the has Our execution leadership and very us industry cycle current and in earned our our of our reputation. leaves us in position service the with success XX-year level with ability

thoughtfully that taken are schedules we our that have can dollar and every We achieve. we confident on backlog of

products, or very progress eliminating minimizing all productivity, of of to addressing processes, Turning a in and of demand. facilities measuring optimally with leverage we interest performance. systems market are headwinds sacrificing working the to Powell solutions that meet and synonymous proud to our our Powell inefficiencies teams rise team and the our of ever plants and I stakeholders, and but am making best operational our customers are as and across facilities our quickly the brand. the and to employees our improve our we ensure as the quality of without increase

the processes to The made we the people increased has and our business workload. that last have this tools, in meet the over investments X-plus years prepared

Their the Our highs. operational to electrical have productivity refine constantly our efforts the are our revenue and complex sustained engineered-to-order approach to working teams best of throughout most historical company substations. share increased practices to

throughout of well both our improvement will facilitate production projects in fiscal teams capital that number several improve of to a identify efficiency Further, capacity incremental as facilities. XXXX, our as continue incremental

lead operational environment continue of and Additionally, teams challenges. the components to the to Key our effects mitigate create working longer inflationary continue availability times. cost engineering

managing are and these we for where However, factor our and possible, allowances contingencies these components through challenges, activity. bidding in

stabilized remains Meanwhile, steel commodities periods, and copper volatility. have to prices versus however, prior such as macroeconomic subject key for

hard Our inputs current ensure on do activity. and cost project these teams work to significant that future not create overruns

our our as Further continue current cost are teams pricing to protect point, possible together to evidenced and order presently, which performance. The will significant plan exercise initiatives the we labor that several ensure markets, by presenting environment next to for -- aligned in our margin where while diligence to margins, second strong commercial issues this when teams for remain as our years. quarter to an area the not

to last few are capacity But to comfortable levels the quarters, the that that backlog backlog. attentive are as of we staffing grow. with as currently to levels execution we shared Over our have growth support continues and work we our we current

and resources human with have to Order forecast teams Our extremely activity aligned been and hard future. remain working for across remains market robust plan closely the operational most teams our sectors.

see gas-to-chemical LNG, within to pipeline opportunities continue and favorable the We gas sector.

biodiesel related fuel renewable as biofuels, such in markets as of active also as capture well aviation and and are sequestration. hydrogen, We the carbon sustainable

through of new franchise that targeting our to growing improve platform, initiatives our technologies. Additionally, product we both incremental complement well our our XXXX, sector. market into to capitalize our each within services further steps fiscal as scope channels continue our applications as market tangential electrical strategic on our on and product growth which in adjacencies automation focused take commercial industrial include our the into of We existing diversifying remain product executing electrical offerings against and portfolio catalog order our to acutely expanding other in expanding existing

very are positioning we our our as with fiscal the the half well fact for the cyclical operate. and as in performance we financial second which fiscal pleased markets While half XXXX, quarter is that of nature year-to-date cognizant the second of first of this are we

and trusted than because have execution and maintained has our good lean its leader of but planning history, position an industry and our through focused over we partner more diligent been share process through XX-year years to years. its cycles as Powell fortified customers our and of

the We year taken Powell. coupled steps positive company another will are for of strong drive performance transformational the culture at that confident being improved this with financial internally

that, I'll to With over financial call to results. provide more detail the around turn Mike our

Michael Metcalf

Brett, you, and of be compared year. in of continues orders million. $XXX period markets $XXX fiscal to million core second in versus net In we the XXXX, fiscal booked $XXX XX% morning, quarter the recording robust, the or million of good Thank Commercial same industrial new to quarter everyone. revenue our of second reported prior activity the higher XXXX across

and current we quarter, an totaled the petrochemical project. roughly one $XXX that, when quarter million large combined, the reported projects, booked During project of LNG X orders:

activity to for commercial favorable across threefold reported within driving on bookings With of the year period however, the same predominantly fiscal a markets the over the increase $XXX gas exception a million domestic market, or reported by versus all sectors the is quarter ago. basis, market driven was industrial higher traction sector of second our total the year-over-year X the

reporting year-to-date million billion a ratio ago continued and sequentially. a versus X.Xx, $XXX the over $X basis, period, in X resulting which in book-to-bill backlog year is $XXX high On was backlog our fiscal record million of just higher higher growth,

result, times of and in we components select extend to committed and to such some capital The for fiscal in for supply And demand industrial our lead chain compared XXXX, that partially XX to times. resulted months cases due a assets ago. to current resulting and has XX capital into to challenges as extended electrical ensure and electrical products large execute orders many associated capacity our cycle can these XXXX fiscal ability well lead

while revenues to XX% markets international to lower across to second the by year were total, million, year international X ago, our prior the year. revenues volume million X% were versus lower versus XXXX. $X fiscal by compared In project prior by quarter $XX to year lower Middle the in $XXX domestic prior were of driven the higher Compared East revenues million

prior was sector higher oil gas a higher by sector XX%, by petrochemical and on From revenues the year-over-year sector versus were our XX% perspective basis. across market year, the a while

other project and completion was commercial strong year-over-year XX% a the sectors, we draw experienced The industrial both the XX% we utility the second traction Additionally, XXXX in by in on lower respectively. large of to quarter municipal close sector XXX%, increasing increases Canada. versus by and as and fiscal

We profit year X second ago. $XX the reported gross of the versus of million, an $XX period increase in fiscal quarter in the same million period

revenue, and points across targeting same persistent versus well the service As a all pressures inflationary by driven as percentage project project year of X a ongoing -- ago, gross increased to period volume XX.X% strong execution as initiatives basis largely leverage the facilities. and by manufacturing year Powell closeouts, of profit XXX pricing

for revenue on levels decreased base. in percentage variable prior higher million administrative in the by performance-based period same to the by the operating expectation million were a versus based as $XX in year upon Selling, versus XX.X% quarter, general higher basis of $X of the quarter points expenses XXX the the revenue a compensation ago an SG&A year. on current current higher increase and performance

loss the of of of XXXX, compared or reported In diluted diluted second second million quarter net of of quarter per per a we fiscal in to $X.X net the share XXXX. a generating $X.XX income million, $X.XX fiscal share $X.X loss

new activities project flow projects During the booked the cycle building as cash from advance into cash to a early attributable the of generate was XXXX, working backlog. in fiscal capital second positive flow we free quarter the of in million operating $XX

be we our leverage higher to enhance operational focus and in a balance XXXX, more leverage million, totaled and Investments to cash core capacity strong in sheet than XX, March $XXX,XXX position thoughtfully competencies, productivity projects property, across of helping efficiently million to our as our invest we business. teams company year-end no and and our the The customers. and for fiscal deliver investments holds continue continue XXXX At as This plant we position. equipment liquidity short-term $XXX had expand long-term debt. our $XX our will

we XXXX, $XXX of capacity of previous the to our million our banking second fiscal increasing the $XX from during Finally, Bank million. our amended partner, credit quarter ceiling of facility facility with America,

market solely for felt order utilize we in we current presently ensure across letters the success that activity was considering this of action credit As in a facility our commercial continued global prudent sectors, these to our and markets. this

on to over to to while the execute half As XX customers' Operationally, we activity remain fiscal we develop expand XXXX, remain with focused is second that the positioned. initiatives XX in of plans confident and our deliver we traction. to market to we forward in to order the are where gaining margin continue our the months ability XXXX sectors look backlog, into to most across very our been expectations. and Commercial Powell business encouraged fiscal has capacity past growing strong our are

and to also to the for provides overall both business for remainder capital working position and increasing into fiscal Powell's and meeting of organic finally, variables revenues sheet momentum the liquidity all support these pursue inorganic our strength XXXX. and fiscal options balance flexibility earnings requirements. Combined, XXXX while And positive the of grow the

At questions. point, we'll answer happy your this to be

Operator

Instructions]. [Operator

Franzreb is of Company. question John from first & Our Sidoti

John Franzreb

the with opening was Congratulations quarter. Presumably, business in months itself. I'd and and in to like this X the an to of X ago. quarter profile start locked of on revenues eye margin

there excess as was stellar drove closeouts quarter? quarter if equation curious in unusual I'm results So cost revenue in or that far anything March the the the as project or

Michael Metcalf

Mike is and Yes. address John, that. this I'll

under at margin, the behind XX%, we're a it. First, And XX.X%. has it just year-to-date drivers look few you if

price -- we've cost We're and months. the the both to that First, XX see to for managing exit backlog. last here been XX beginning

under levers. So control we feel very our confident via we've pricing component got inflation the

carries of are little backlog that it in a the mix which on We've -- more favors the margin a industrial Secondly, side, more. the been little to backlog today. build fortunate the projects very

X all And generate well across the backlog backlog comments, that really then all third balanced leverage generating as system. pretty is, our is pretty his volume will revenue, -- we prepared a as to good Brett from of are And the of mentioned in are facilities converts perspective. and

So to level of profit. we backlog the similar support continue the anticipate will

John Franzreb

significantly have a problem your the the the your increase good have, are practices and $X CapEx I support is going And to to the this here? backlog? guess capacity have you billion and to personnel hiring to Or line but do you of to to get end

Brett Cope

and tools, capacity it's also just to credible deliver, and this. not with out for customers lay identified been the years recently, that We what and could we've going We've be to predictive Brett. of we're in this investments half. land -- systems. the and the the John, we've have for the our as we've terms partners planning absolutely order supporting taken schedules in we processes engineering their investments in had convert second into in brand. But -- the More the worked to

suspect, And I just we've handle the laydown to then QX area substations. some increases. of some in for an and uptick see productivity CapEx, additional you'll over incremental, identified So QX,

But making those. we've been

that back there's go and up attending X, systems, we redid have our the to capacity maintenance. this, do keeping definitely here there. good to go. to you still we've on we our entire when been But We'll feel up If to date, years handle some to we the methodic and room pieces additive machinery speed, X all

John Franzreb

will there? $XXX enthusiastic still don't for? Okay. bidding out long it how about the really the sounds But Can you think out the profile? it talk you're of orders. I you last And what there. And pipeline on remains do of booking you're sustainability Brett, million like opportunity -- in kind about expect what

Brett Cope

you John. large some the total -- at am gave second Mike of if the I quarter roughly of look color around -- the optimistic, million X The orders, million. $XXX $XXX

next a the of we talked things broadened going this if this And and haven't on. in performance possibly of look as timing right I as still the middle that piece. a a And in pretty through certainly, about the year So into shut terms calendar that still things But lot certainly we've balance year, well. on. booking of still market going that active. in significant there's lot -- think activity really There's the we're off know we of -- market, forward, gas of

Operator

The next Kansas from Capital. question of is City Jonathan Braatz

Jonathan Braatz

that to can you even question. projects back see And is been on? selective? going previous more we out, that on the that to put a better go may as of Sort of more better good, we flows quarters Order selective that business are And margins the down does you've be because a couple you strong. into position be

Brett Cope

let Mike in. John, me jump this, and on jump can

I'd the the projects on this cycle, in first of in all, nice comment, a a from out Canada, one all of the are we're core like feel U.K. seeing engineering our our and U.S., the at gas have especially all thing the home that side, with customers the is chance a So and question we're these make to take of chats thing a really nicely. -- look to your is the about markets share I perspective, there. teams getting

answer integration. aren't we bidding best or in And these selective it, to but we're out to projects?" of for we'd not delivering go, are the versus what what from terms standpoint, a So the bidding, everybody we we have being do timing the able for buy on availability "What's right of

best So needs deliver working participate and end project. transparently this terms their for selective Powell very cycle of can our with of how in customer in the on

Jonathan Braatz

Okay.

sounds like all you my Was I there at in... train significant in quarter there's thought. that Mike, mentioned closeouts. the of some that was favorable it margin the And margin -- gross in Okay. -- the that -- lost

Michael Metcalf

No.

XX months was The ago, John, nothing they're closing to booked it out, unusual XX Nothing in they're you process. that projects about flat. quarter-over-quarter, that whole exiting, If we unusual. look

some diligently the was the working actions year, it really along we've great to over the So system. actions, I as -- been with starting we're last years, said, pricing of see execution that through flowing project cost X.X

Jonathan Braatz

the quarter mention the margin looking does number Because does more of the second ahead, year-to-date the -- reflective did gross So XX.X%. the look versus year-to-date? you

of opposed is first number second to quarter So the forward as more going reflective half? the

Michael Metcalf

accretive accretive litmus would out as all will layer -- of I the communicated that in to the think in I and fiscal be I to initiatives high will of then at really kind exit laid we number that first XX.X%. look No, be half test the we're our and as year. aspire be targeting the the have past, as in the But teens we that

Operator

Instructions]. [Operator like would This over Cope time. closing concludes no back question-and-answer conference at There remarks. to our I are turn questions session. Brett to the this for

Brett Cope

Thank you, Kate.

solid Our quarter bottom the top performance our and delivered and of line through first both improvements half XXXX. second in with our year-to-date sequential

Powell Our a first job. through do fiscal on employees is of and have XXXX. of The display to our continue resilience the tremendous half

incredible more not part I sheet second solid be our I our half of of thank and The provides could backlog be our of supplier strength would their to Powell. customers we support partners momentum valued our like head and trust continued proud the into of to quality for XXXX. with balance of fiscal team. as the this our combined

call. for you next quarter. in thank your participation on appreciate that, Powell and With look forward with We you interest speaking to your continued today's

Operator

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

disconnect. You may now

Powell Industries (POWL) 3 May 232023 Q2 Earnings call transcript