POWL - Earnings call transcript Q3 2024

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Operator

Good day, and welcome to the Powell Industries Fiscal Third Quarter 2024 Results Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Ryan Coleman with Alpha IR. Please go ahead.

Ryan Coleman

Thank you, and good morning, everyone. Thank you for joining us for Powell Industries' conference call today to review fiscal year 2024 third quarter results. will call Metcalf, Cope, a company's Powell's today's and the CEO; Chairman replay website, on webcast until call, Mike via August telephonic and CFO. There it be powellind.com, me or are to replay Powell's Brett and of by a With going available will the available be will be X. may today, access information July in yesterday's only note that reported the The you time within this that provided as XXXX, the considered of are certain the includes related forward-looking the information be earnings of any may call meaning XX, to Reform Litigation was Private at of on and listening therefore, that replay time-sensitive the replay how company's XXXX. no expectations speaks on reading. This to accurate future Act call be advised conference including release. Please its of statements longer transcript statements statements, of information Securities or results operating cautioned industry that may differ raw Investors competition pressures, of results and materials, general risks forward-looking in limited those projected are include, and from risks, statements. These price political and not sensitivity future such these uncertainties, and competitive but involve strategies. are economic of to, and actual materially conditions, uncertainties that forward-looking international, business and statements risks economic to and availability execution and

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

Brett Cope

Powell's Thank XXXX results. you, joining third you for us today Ryan, good fiscal to review Thank and morning, everyone. quarter

many Houston as the Powell many has Hurricane the to recognize employees. the to so availability Beryl our company the well whom hit and moment had and were most documented the impact it lengthy at importantly, power by initial the of effect well in started, of on which Greater as get like of area is I'd to region, we a and the city to our members, storm's impacted our Houston home Before has team had on effect devastating take

them past month area and support not our resolve the beyond the our the job Powell's incredible and full time #X five the spend have concern were of They is shown with of also working facilities. here each extends without the returns time, of site power lengths the varied in have priority, they and normalcy. Houston for our well-being as dealing longest Houston Our here employees the facilities Operationally, for of was at our adversity safety impact days. only but nearly to

are with and impact on a minimize our to our impact With quarter. our expect subsequent that, results. quarterly outlook let's review clients We fourth working the any on do for schedules revenue fiscal material production not

to Powell continues industrial all deliver integrator complex grew Petrochemical fiscal execution end than the further third Oil the we as XXX%, Gas strength as sectors as core operational market our by year engineer-to-order revenue respectively. of XX% strong serve. growth nearly the reflects driven markets the Revenues we team and across strategy solutions. Our and higher prior saw XX% The the as and revenues quarter well our was market an of in were as and electrical unique validates our quarter position

greenfield awarded be America. increase order Electric market, driven by significant project further for quarter, million orders sector of and XXXX total in a North detail petrochemical a delivered by also we located markets. the sector to we end our We Utility saw strength moment. We the results Utility a our orders Mike spread a the broadly underscoring while in sector, that of Our also strong across are quarterly new seeing highest further provide key $XXX a in performance. on were our will were in booked fiscal notable

the addition focus efficiency revenues, project continued gross improved In our margins. and on to execution to support operational higher

period the improvement in -- versus of our points XXXX, profit compared nearly to quarterly XXX same has in basis quarter gross margin XX.X% XXXX an margin decade. over gross the the the doubled in a gross Our achieving fiscal and fiscal period revenue. is Powell of is a recorded of in gross same This margin highest

lower Another these the our margin of projects average we margins our highly markets complex electrical than are a improvement in solutions. across tend Historically, of including encouraging dynamic to observing markets. in many gross the is nonindustrial carry whole business, slightly gross

are delivery in gap and effective Powell as narrow economics improving manufacturing nonindustrial are now that we seeing However, and process. our markets more becomes the of these

sequentially the remains was history. backlog Powell's in and unchanged Our effectively highest at $X.X billion

We the well as composition overall margin the constitute of backlog of our continue book. as be the and to lines projects our very order time that pleased profile with

prior share period. bottom On we recorded $XX.X of million diluted was which $XX.X the the than in million $X.XX share line, net more income or or $X.XX per the per double

$XX headquarters factory neighboring be further total initiatives and consideration of The with of on support support along announced volume markets year, completed to we our customers delivery large integration expansion million. XXXX the transport X facility in that initiative control our growth and Coast, execution our for planned. fabrication help as Houston the factory previously planned with coincides Gulf serve. Most across well expansion products modest which the forward. Last as Houston power the million July, and $X.X rooms early a projects of of in products as especially for for support incremental the is capacity our facilitate of Houston in expected acres recently, in acquired providing us backlog planned is by location future move completed property water of This we fiscal for new release and also our is progressing continue going as addition to middle to Our current we growth of electrical to access. our

our our expect up we people that XX% meet this innovation have use, and our additional We product schedules R&D staffing we remediation portfolio. We place Year-to-date, project to new property work advance right and to prepared are in revenue and currently is technologies current we with undertaking incremental broaden our initiatives some space are for the of remain to backlog. spend the to confident the develop contribute as minor our levels demanding comfortable fiscal in XXXX. get productive

However, long-term as we most we've key area across for with before, a all critical opportunities acquisition stated strategy of the to at focus Powell's talent along our see of of markets. remains support Powell levels growth

activity project new very for quoting across our relatively markets unchanged. expectations remains orders forward, Looking and balanced. activity Overall, are and healthy

subdued economic support of remain gas permitting. market, a long-term the Near-term and Department environmental Within U.S. LNG of the remain many gas over natural as Natural a policy export and spreads goals conducive to across Gas global fundamentals activity of the global result regarding Energy the price market horizon. U.S. activity. favorable Oil U.S. and LNG export remains markets

for Commercial carbon not of within capture also substantially includes strength not fundamentals our has attractive, higher market The have and we seeing within hydrogen, projects, we areas activity as activity. Activity and where planning for where volume but remains for energy includes which our such center for Other This our Industrial support Oil Gas and sector these biofuels, this to altered Petrochemical are historically the market. However, data markets market. project Powell a continue sectors. continued transition expectation long-term and our participated,

this that end as this have we quarter more for the strong a market. on seen outlined for services important in Powell second growth we larger products to the continue of our believe call, market future far qualify we our we so As has potential and of

Powell's composition very current to we thus position. positive, as market markets our remains Altogether, rate us the to customers for backlog substations. we advancing successfully quarter over in our for continue the generation greater outlook and pleased very our far. Overall, projects as market of booked leadership happy new and both third focus We've as of for return to detail. well supported we very projects orders to to as call addition favorable our in walk the and operating the Utility our to and strong results have as our performance, coming our on in strategy. With been key the Lastly, remain our volume with turn with we a win our to of we are distribution confident recent utility well by Powell the on near through Mike expect financial I'd that, the our delivering like end in financial medium-term outlook backlog, environment work

Michael Metcalf

morning, Thank and you, everyone. Brett, good

noted, higher versus million. our fiscal million $XXX period for Brett X same sequentially XXXX and year the of $XX quarter higher million XX% As ago, to revenues compared were by or the $XXX third

the period bookings. sequentially for XX% fiscal orders and New third or million LNG same mega challenging X comparison a prior project $XXX two as lower year ago were $XXX million, versus on $XXX quarter higher million period contained year or XX% the the

booked a in projects there While to most the there number sized were fiscal experience markets we as the compete third in and end continue quarter of current no geographies across quarter, strong of demand we that the in. bookings similar significant were

markets we Commercial As notably order our core markets our end Utility industrial increasing most tangential and the penetration respectively. our in sectors, experienced sectors, all Other into across outside and of broaden efforts and sequentially to continues, industrial growth market XX% XX%, but

positive the market we in year the billion, Revenues resulting Oil versus revenues fiscal sustained that industrial, to and third ratio booked higher of across petrochemical Kingdom. sequentially. a ago to higher were their exiting and the million up the $X Gas in majority million of $XXX and in of across XX% flat in both third while total, quarter driven and domestic by revenues Gas United sector healthy by international our in by the book-to-bill sectors third volume $XX versus momentum continue sectors. international all In of increased benefit fiscal million, large sectors, quarter Petrochemical with international the experienced backlog market we from As sector year, the across a to as and was a higher our our XX% on quarter. From XXXX. revenues which backlog sustained prior strength and perspective X XXXX, of revenues the X.Xx Petrochemical XX% fiscal operations higher, the were core XXX% recognize XXXX, the our Compared $X.X we result Canada by project sector the improved by to of fiscal $XX of ending Oil order growth by million was market the across

same markets. sector experienced as by profit was growth demonstrate we a this Industrial XX% continues in also and selectivity. XX%, that the increased rates The thoughtfully period and to and expanding quarter and versus light discipline Utility year by Electric the the fiscal XXXX our million million points ago current strong increased margin lower by on business X higher focus to basis Gross of increasing sector XXX reflecting and market traction Gross $XX by XX% a be these a year market project sequentially. The from respectively, same third basis was all benefited a rail in our in across volume sectors, solid power percentage and higher ago. the the Commercial Other as versus presence execution of We XXX project both our revenue period of $XX to profit closeouts, leverage. points operational quarter XX.X%

been have or $X margin third period diluted building the a on year overall steadily million rates, diluted fiscal quarter fiscal higher expenses that XXXX, they million, this by of infrastructure general the the geographies as sectors in the same a of higher we the quarter versus improvements in book but net to also as revenue fiscal the of had revenue a percentage to to decreased we per in are basis $X.XX historically quarter a $XX $XX.X third period, income income share of of the exit million per and administrative and points XXXX. today X.X% ago. healthy the as in margin lower quarter and current SG&A $XX.X story order spending higher share generating backlog. Selling, net million compared current base. In reported XXX were We $X.XX adding carry market

million in generated cash partially in by we book. flow XXXX, the the capital During of in we order driven million million quarter by and to capital quarter, the had at $XXX third $XXX XXXX, $X.X as allocate generated fiscal The any XX, XXXX, Investments in totaled and increase in higher XXXX. $XXX June investments property, earnings fiscal debt. September cash operating third projects $XX.X XX, of At million equipment of quarter million. the plant working an not short-term offset does to at XX, we hold company compared the March and

answer our we quarter last Powell where progress with encouraged the enter fiscal providing financial across of fourth a XXXX to our well the projects-based also of fiscal a the we'll execute business, necessary the we our the most expand quarter backlog thoughtfully XXXX. backlog sectors to that we very capabilities. Notwithstanding our close to performance remains and as for XXXX. At providing our plans remain are we to also quality sustain questions. fourth year-to-date quarter point continuing infrastructure and look typical your be are XXXX tailwind growing our through associated prepare position, is strong, strong we as liquidity we forward, fiscal entry this forward we based while challenges happy and of to to upon Operationally, positioned with as a positioned fiscal point, the of XXXX. confident Looking fiscal the have of resources activity Commercial out market while

Operator

Franzreb [Operator Instructions] Company. Sidoti comes with John Our & from first question

John Franzreb

another I'd quarter, that like the start -- results Mike, second and you suggest capacity. congratulations Brett with quarter. max at on the seem you in to are stellar to in operating

exceeded revenue expectations threshold. However, is? our capacity we that of what How really should max reset

Brett Cope

the So profile if the you ago over we as we when -- a initiatives when the closeouts. comments of some of in I effects against decade QX, prepared back the breadth the in different we back of kind are up element still accounting. were of shared today, still of model over capacity a build you and did always definitely think business, coming given hit But healthy POC John, project backlog. the an were and time, in mean timing we a are provides looking there size There's some the time. there some timing facility investments buyout wide being on There really projects limits.

little on it the in side. So the hit sort choppiness, I of top QX think,

John Franzreb

have we the in revenue do quarter? much closeout How in project

Michael Metcalf

to rate, calibrate XXX to a which quarter at gross business the John, this not way their mind, across discrete as that accretive third on XX.X% was probably project to the for tag basis year-to-date a closeouts, amount kind we would what's landscape, quarterly of unusual appropriate to to probably I in base parameter respect XXX system. it's backlog. experience the Yes, the XQ is the this that -- basis of making is exited in with the on us precisely through exiting what it's projects-based said, given And Brett roughly to profit things we buyouts, With margin that choppiness points. nature

John Franzreb

that new Got it. That's is very to helpful, Mike. And then a regarding the margin it you've gross margin, assume bookings, ago? that than the higher year in are there bookings fair taken

Brett Cope

that. quarter stabilized this last as we big that and I in and year with we It's noted, market through this constant, two have pretty for the markets latter into we say seen And but in ramped the and the we of continued quarters. And calendar up the up coming even competing. in of wouldn't where quarters out on last do the I'd to say John, part are year previous hold year radar from the our to them, then the sort changes our we've haven't anything, outlook cracks pricing. story. if shifted quarter, as

John Franzreb

Okay.

And what's talk Just were, -- profile it you the going say, sounds see on more X market Can like on about as ago. utility Brett, bit months what's you little you're there? you a than the opportunity it? constructive

Brett Cope

rate but our a building hardening, the absolutely the really our I on. intentionally question, it on U.S., the some a where if in coming market. Utility then strategy, And spend U.K. but the utilities and bulk international John. the new you're focused. participation away, spot distribution we've seeing over specific There's are are market. More we're resilience there, the as you side. some Canada, -- long know, that's we in won't and stronger. with did haul, market, infrastructure of core I back of the will, stronger. went sort The recently, that you say the it's especially little of is -- Yes. generation last appreciate the over I built

and There or our it's or profile a the a of in win about a bit some prepared And comments -- to public discussions the the of so be it's Powell longer increased into they're thus and future, whether the of outlook the with little IOU chat, percentage. kind and resurgence. brought very co-op we're seems an how these and mix some for back planning on healthy by excited pretty

John Franzreb

be how project large that It's to seem I'll Historically, is last during queue. to one into building. forward? ignore would it of times little helpful. going use we additional seems bit question, really cash Okay. there of playing same think out Can should cash flow a doesn't work, hard results. a about And cash how current get color was talk the use but quickly of the magnitude the cash there back be you in about Any

Brett Cope

and there, in. let start I'll jump I'll Mike

I you some a working to point. When nice Mike So on a in with work good gets the the raised did like the milestones there. help We expect do bookings, will put QX buoy that until we later provide that part and color cash, capital to a payment grow in period. quarter we have mean, will the

sort is flow cash of certainly quarter-over-quarter. good raising overall and providing that of free profile cash the So

ramping you we 'XX that land see acquired, capital get at we to hit. forward, through 'XX, I that we when will it side, that look if the just As you'll look 'XX the -- we is QX, we think shared to

out lot a R&D in That from we I to years up will remarks. to that along at looking a rise that today, continues continue that spend what of the the we're then the world last incrementally. equipment earnest. And that nothing there's rise into of active for there's figure we're couple believe, announcing fit with number on side, is And about if XX% means talked continue the the will prepared and to So areas future. our capital coming spend, in quarters. they the out and how in M&A portfolio while

So chew the XX dividend. up some the discussion the it's quarter active that we're to the every Board. of cash. in next hopeful discussion XX an active That's increasing And a and will area, months, with on continuing that also that pretty then

Michael Metcalf

our a We which on, the of see right. you as Yes. projects, And big stay you absolutely on happening -- working X, a a the is stay we to chew today. business, a current the kind discrete curve of do But you results, from up win from that of XQ you as cash of are the going with at book-to-bill shop. capital, book-to-bill cash perspective. John, Traditionally, ratio X.X, X-plus you've got ratio, inflow follow lot this in ahead lot

point So -- $XXX that will the $XXX deployed at million mind and in that, some keep roughly half of the under projects. million of time cash these balance, of to so it of in just execution of support be

Operator

Capital. comes next with And Braatz the question John from Kansas City

Jon Braatz

your is, Brett, you And I getting of you a a specifically, guess rates compete in that of win to mentioned your couple question rates commentary and better. improving. guys are are what my win that you your big against lot ascribe times do

You're taking you what win that to? improve can pinpoint rate share --

Brett Cope

intentionality let's John. going has on start go I'll for with to distribution back plus. The the side been Well, XX-years -- Utility,

the room renewal the storage at there been than isn't here the As sit PCR battery Powell's the as the of reliability. little up numbers, systems, call we're looking new power of through I the to The It breakers, longer-term in. a fewer do changed. here. course, us compete XX going really And I for tough bit U.K. that the market letting energy price it and and competing. became the that's has has not and infrastructure out but Powell, channels different what there's been that the to fewer solution, a proposition. full of see they're all do It the I'll a the for and generation. There's control well. at with out as not bit Canada very working to -- as -- seem transitional. It historically in you little value We're come XX, power sense for lot really things does core and have the very, a control PowlVac going always maybe after Power/Vac engineering makes in [indiscernible] changed point We've in going -- numbers. firms and were and U.S., traditional I'm years generation well in enclosed look just tell that others all that winning as the us. We're are taking better best the we're [indiscernible] area part

the part quality that winning we're higher company the makes so the sense And and shareholder. for

the So that there's did of post-pandemic, other I a as well. When little very look I as came LNG think segments, back, there well. bit at mixed yes, we

Powell moderated more under go now Powell to approach that roof a they the going executing have ensure focus when I about are at of needs models meeting that think our eye and in very need don't that on the as to argument. say critical big ever under market. then I one that versus it's an sort take Powell if our I it, we and just area client something hard need And that option intend traditional We're have. something at market. I the we're time losing of differentiators run the other off. best of of it, can't that don't that -- customers, just our rate value they one we that the a It talk is when customers that's element, And dates,

Jon Braatz

thought little your And rates, right. Mike, a was the you of at X.X. your million sort sort that? talk per $XX be it past, sort of you million the us about that. $XX tell What book-to-burn your All book Can of must you like quarter? year-over-year about bill it seems a business like I your quarter, can than or flat had bit Okay. in during backlog was we've, think better

Michael Metcalf

call, aspect elevating months the at in substantially, backlog. quarter, you of over the we after convertibility Last range. changed has convertibility the you'll when our billion the up XX if hasn't in this what revenue John. next that roughly, the as see the looked mid-XX% Q, $X.X range. of you're this really quarter, -- seeing that's the XX-percentage right in it it What backlog, other the No in is was changed publish

our So and revenue elevate little as from more helping we're door that's getting the level backlog, a bit well. out the

Jon Braatz

Okay.

Okay. And question. All right. one final

You've ramped up What might an investment you the your what your on of what you're in the next might portfolio and be expectations give of what can like you working what of in R&D X, sort spending. us potential R&D be and the that me tell X Can the impact? years. idea

Brett Cope

curve the just out development the folks to to So It's John, there a a that It's new It's breaker an you out rolled new first year, -- market. targeted There utility product. station technology. many this make not just are example. renewable so for station give got unique a up robust We XX some proposition we've very kV, voltage. of high of Powell the the in the design the we've value come breaker. what strategy of targeted the the think end on with. We've higher end

at needs a then what's there you the be looking at if So is we're segments, out all of what kind is that's solved. to problem look that

think management product and a on job great helping his us working road out figure that and doing are and map. I with team sales Marshall

supporting very see product a switchgear not channels that supporting the electrically next And the year, through so things are centric market. based, side, but other projects subsequent strategy in product the the also only into business, on you'll quarters in

where we on So the help all the win parts strategy some of stuff, of can rate noted of business. as the I

back supplier sectors So to electrical the that channels need. to well and of getting distribution goal for the solving market our as a fulfill roots go-to as our being

Operator

Franzreb comes Sidoti next And & with question John Company. our from

John Franzreb

the I mean Are there you purchased. use X located something. is to it going thinking on I'm greenfield actually about addition property that to a your that property of outlay the acreage, curious about and of convert? you in you're What's capital intended you put purchase? that terms in acres facility

Brett Cope

Yes.

looking the the came at to offering. of in especially engineered market, into So the We spec warehousing short options that that some opportunity acquire were an we into equipment engineered really was term goes -- the John, integrated comes and out along. Powell, material that that the how that initially some

And largest at opportunity open seven so it it did worth -- that was and forth, good sense. almost facility make X our quarters in back really behind of just it, chats the it came had facility, our main of here Houston. We and when right an over looked

so look kit little bit There is some organized. And factory some ideation several work our ability land. And expanded over could buildings. the that office sitting can longer capability a It's couple about There on build. that and in a we then, we of will third-party productive so capacity term, here, it we needs free clutter existing locations some and offload where work. and a as use some forward, we to lines up us the have in of facilities the of of are do of there some quite going better there immediately, getting we'll the give bit warehousing to by that's in just yes, move some of the around

it. is in across then It behind question the as -- street, might we parts there the that other think it's of able move not from staffing is start coming over it's could it be to so one footprint. it's pipeline -- about put our And contiguous, rationalize even lineups we of previous You it about there, Braatz, or facility. the gear immediately down our John others the what but

John Franzreb

me? you're parking the equipment that telling what lot. in Is So more no

Brett Cope

parking but come in pretty definitely if going that the we're Well, little we lot bit. you here are today, full to a try use

John Franzreb

Okay.

way how up number to everything put the additional much it CapEx to a You don't would to on want want get take you it.

Brett Cope

then lot And that with million. diligence. in invest $X little than the be be increase would to productively, will less and and in I calls. get side to come over actually fabrication It material, we'll ]. something the into higher go windup [ will capital and put going it some share or, out beyond quick. than think But assembly X.X be and QX. that mean It will to in spent up a the start warehousing be it shareholders you a I we we we pretty fabrication minor expand Mosley unless would say, add actually a coming If there.

Operator

This Brett conference concludes remarks. I back question-and-answer over any for like to closing turn Cope to session. would our the

Brett Cope

our Overall, to work proud a and it our very your quality your for of was third the of Thank and of you, commitment execution quarter, Thank employees. every for success am hard you exceptional solid I and David. one customers. X,XXX

to Our our we momentum participation. We us to and quarter. Thank you current Powell backlog, for as you next market XXXX. look experience continued all excellent of combined across most with appreciate your forward plan the your sectors, broad with in continue market provides interest we activity speaking fiscal

Operator

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

You disconnect. may now

Powell Industries (POWL) 31 Jul 242024 Q3 Earnings call transcript