Powell Industries (POWL) 9 Dec 202020 Q4 Earnings call transcript

Good morning and welcome to the Powell Industries Fiscal 2020 Fourth Quarter Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I'll now like to turn the conference over to Ryan Coleman, Investor Relations. Please go ahead.

morning good and you everyone. Thank joining Thank call full Powell conference for to you year review and for today quarter fiscal Industries fourth us year results. XXXX CEO Brett me Powell's With call Metcalf, are the Chairman CFO. on and and Mike Powell's Cope, of a to be be going call and company's available replay will website powellind.com until There available replay it webcast XX. via will today's be telephonic December by the will where a to how earnings access the provided was yesterday's on replay release. in information The on this December replay reported accurate speaks only therefore Please advised today, information note time time-sensitive listening be call as of reading. no X, you're of that transcript at the longer and XXXX or information that any may 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 result forward-looking projected 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

continued of above make customers, in fiscal Ryan to comments our else. place suppliers we Thank to few over Powell's questions. have update, our have and morning fourth your XXXX Since joining all the I remained take safety for commentary a we review everyone. health turn and to and quarter enhanced will our good the year priorities us you, before more Thank you financial and employees, today last for and measures Mike call full then results.

business, we essential operational. remain fully As an

workstation, distancing operation. support continue to a when options team safe and where equipment basis, need safe stagger access in as follow roles to our pressure customers. quarter, on revenue they all the Throughout impressed crisis work possible this the a remain daily and personal manufacturing impacted has that under that quarter pandemic, I continue and result Powell for the work team's recommended at schedules, such fourth ensuring practices, our during to which work-from-home industrial by of protective and We new be their for end clouded and as to commitment markets our the response accordingly. orders our

points and Fourth just each compared a which of market, last XX% basis our of Sequential operation. to and May, domestic compared as resulted we one year in margin was XX% is sequentially. grew over fiscal our activity to roughly both The were by and and current to across However, Fourth lower were on quarter oil projects our prior offset cost XXXX. by sustained from compared and XX% Those respectively the lower year customers, when by decline able gas down the driven and contain restructuring well that quarter. XX utility traction executed all in was in decline percentage Powell, productivity were revenues declines XX effective. which operations well to million, a $XXX and for were to petrochemical partially quarter to revenue ago down as an strong XX% our compared gross X% revenue increase which increase activities of points last as basis XX.X%, compared took year.

due discretionary and environment, expenses in local, travel We partially stipulation. to federal this continue and to other restrict state,

activity. the conditions. while properly we evaluate Going in forward in quarter, current customer and We cost aligned the -- we will decrease decline on adverse project the new primarily remain gross with profit, from $X.X in we from continue in the are market down staffed our year, for million resulting million ensuring to revenues a environment, a $X prior eventual due structure orders project of to reported ensure income return and net to

our [ph] quarter. our continue cost capital combined working million structure; focus the on position, we cash our effectively to of manage free in We flow with generated $XX

was on booked were million basis previously $XX to large quarter our Powell partner. to testing orders. announced in totaling previously the request $XX was in engineering-only the ended support quarter offset solution. customer quarter order of the for a rooms orders manufacturer, includes of for their in were that million awarded an Within period. adjustments and quarter booked second previously the was $XX and our a that quarter multiple million, the to related design, contract fourth project of deliver the at fourth Net that gross as bookings This by integrated the $XX industrial control distribution million engineering revenue to a designed, support million. We with electrical the Powell of backlog backlog project and over which $XX was power three-year convert custom to a New $XXX million, project. integration, will the build, re-scoped

of the quarter, lower quarter we our experience to the as third During hit core rate impact pandemic with consistent market. continue bookings

the experience most quarter fourth our we across of However, did of improved quoting start activity operations. at the

cycles, keep the their One are clients our see in significant our as remains awards. of a relative teams till near-term an engineering-only of our while customers in the continue of grapple beginning the awards near-term, is engineering Powell's These they utilized our time outlook funding key prior differentiations extensive starting engineering value Visibility full approved. to Consistent economic progress increase to many in deterioration for with projects capability. we XXXX. with enabling model of to such challenge is

schedules have XXXX timetable. we while their to several handful into large the seen earliest, a evaluate their mid customers of to continue shift projects at discussed, we've As

mark. quarter As I a briefly mentioned, within in our activity the spot bright traction was utility and the

structure. downturns navigated activity in and These we past, has XXXX service, Additionally, typically are customer our in cost Powell smaller, have improvement. during cycle through OEM they work steady most successfully our XXXX. fiscal to continued numerous the have important recently show utilize short that our are parts through that but gone work projects assets and

than taking response we our during service are premier during a different; to in similar. Of history customers this from course is electrical continue deliver that we like this steps have the More as ever, times our year XX drivers solutions. expect distribution come Powell leader time it are critical to are a in

and the environment. navigate also short-term zero cash the us manage and sheet. ended debt. of necessary taking year are investment We balance million offers steps structure our cost and to essentially this as of We the $XXX our we This strength fiscal optionality incredible preserve

continue gas pipeline, and of abundant in to opportunities LNG, to believe we forward, cost chemical low the favorable the Looking economics provide industries. gas gas process natural will

would We future also plants hydrogen, the demand process biodiesel. Several the both the biofuels, the pipeline projects for in opportunities see renewable in stages supporting infrastructure. of that are planning and markets drive and

oil for more Additionally, we viable a will projects as projects. to prices anticipate support return become economically that these oil chemical

Powell's require the we electrical marketing Lastly, of distribution facilities initiatives future drive refiners make and tightening regulations emission of sulfur as improve to we level any customer to growth. future ensuring meet higher cycles, are a that improved upgrade demand activity that lower against required standards. are for our progress will industrial that will all will drive Like

technological and commitment development of research One and initiatives is these to innovation. Powell's ongoing

innovating new of back face the routes in founding. of date to market company's challenges Our the

tomorrow's of within as core develop opportunities progress and house of and continuing manage encouraging control as been has emerging for opportunities. of advantage the challenges, to fleet to piece managing We've and long technologies been of flexibility a the expertise the the solutions strategies electrical event-based both challenges. future. to distribution to have a customers The of a combined Powell's our safely but Powell's growing electrical will equipment, of of in provider to evaluate energy. for with this of digital business. of take new distribution well increasing past It be help component is acceptance solutions electrical automation integrated organically We electrical driving a assets Example our maintenance growing cost adoption critical solve

by of and our in developing automation customers' uptime the electrical to Powell's of and reduce with for unplanned policy new maximize sensors. helping are outages capabilities our application We assets the existing facility line combining

Our distribution heart the functions suite includes technology of of the of electrical the currently all monitoring system. breaker, the

its additional indicators effects, signals issues and development are and and electrical indicate costs of that dust heat stage, that distribution this system. the new in we electrical reduce These opportunity affect capital thermal higher the as solutions operation breakdown potential recently could will of a help help or We insulation, business. developed market safe protect but including our the traction This leading still have monitor margin that’s of is in to promising seeing humidity environmental sensors investment. customers their their conditions such

into fiscal over our call Before key areas outline focus as move Mike, to I I'll we the turn XXXX.

is foremost safety health and of and employees, and customers, First our the suppliers.

customers performance maintaining on focused ensure with continue meet to that high execution also we are expectation Powell. to have We solid our the

Next evaluation We markets, structure, the is growth call questions. provide future across before customers. optimize technological end expertise our Mike balance current certainly operations remain and capital, your planning also over to geographies, environment. human cost to possess continuous sheet to results the to critical pursue chain, for turn proactive strength, is we supply more we I'll financial around to our the detail and It opportunities current of continue that markets Powell. resource that, With in the take

times $XXX prior a collections. down revenues prior productivity Net book-to-bill revenues fiscal versus while industrial From percentage decreased to fourth by fiscal perspective of for by Selling, XX% the while the points of the one traction the favorable the domestic which million versus million utility $XX at fiscal softness by by $XX net orders year. the were per or million core to consisted by XX% $X.XX The fourth prior share. international good $XX period decreased the and decline by roughly was as $X quarter same unfavorable by our overall and well of million of prior closeout CapEx in revenue This diluted end million million $XX.X a Thank of million were flat sequentially compared with ago benefits favorable offset attributable This the versus to of large in offset to fourth in gross strong in resulted $X was SG&A or prior fiscal cancellations million year and the end adjustments the $XXX cancellation. million million billings versus a decreased the net fourth the revenue an Compared period compared was or We revenue lower year, to our year-over-year the to year. by of gas period domestic million, from while ago. increased cost management. the led of fiscal profit million market of see international versus quarter during decreased Gross XXXX, milestone of a year to across XX%, basis XX% as and or a $XX was in revenues sector the fourth quarter. was higher generated XXXX the by and location by mix of petrochemical the volume, quarter $X across project of XX% fourth $XX a in our general, was administrative we benefits ago, X.X in last quarter at XX.X% most converted net driven morning year We quarter industrial of These a XX%. you, fourth the reported same basis, The $XXX,XXX. revenues versus new sector in quarter were our sector quarter. XX% re-scoped XX% our compared reported and fiscal XX versus free the reduction XX% year-over-year $XX was year million for in expenses quarter year fourth comparison. same period volume markets. $XX and Reported of profit expenses in was million locations. higher the encountered order ago. and On fourth as the backlog revenues the or $XXX the million our of Revenues in driven $XX of fiscal spending to $X.X Bret $XX reported year we one year's of decreased period results oil $XX working ratio quarter a year as prior cash million quarter versus revenues backlog. decrease part industrial everyone. XX% for and down $X were million performance million across partially continued as in was orders and projects less million of of on XX% reflect XX.X% by project lower booked quarter or restructuring fourth the fiscal by XXXX, the flow revenue value. fiscal XX.X% scope capital income

insurance Selling, Now, volume lower expenses $XXX costs Overall, of increased SG&A million of year. were per in of million recapping profit totaled XXXX prior $XXX were year-over-year and versus was XXXX or $XXX,XXX. as including the most higher a offset than diluted We partially $X.XX fiscal short-term benefiting and fiscal to in share in fiscal per lower XXXX. of million percentage we versus administrative million year. Revenues had fiscal leverage by debt This position. million million XXXX, basis year our North Gross XX% income and XXXX total increased end expenses fiscal flow was $XX XX.X%. of Long-term fiscal $X.X XXX diluted by to across revenues million versus in XXXX our at year Orders a as a cash the by share $X.X general, cash the reported or percentage Total non-repeatable of restructuring of fiscal prior productivity million of addition favorable maturities million compared At American to of settlement operation. net $X.XX by our XX.X% $XX.X free net XXXX. to million, were the $X.X investment and XXXX. revenues $XXX year. $XX fiscal $XX current points $XXX,XXX. yearend flat million, compared prior revenue $X

the persist to fiscal by Looking the said, are markets continue adversely maintaining variables, manage liquidity. the also may XXXX, be on That XXXX. and as throughout economic cyclical across well-positioned affected to conditions strong our we near-term navigate backlog, these end fiscal to forward continue that to end focus anticipate these our dynamics executing we uncertainty we market through industrial as we industrial while

We are fourth which respectively and and by also utility XX%, XX% seeing stronger quarter. our markets, higher activity in traction in the were

they're our smaller recover. scope, important our project keep markets orders these in leveraged that are utilized base end While markets until industrial in projects asset helped and to

continue beyond. margins efforts across As to into the in we've XXXX demonstrated the portfolio committed and we'll fiscal past, we're maximizing and these

business assess is opportunities sheet balance our Additionally, the and grow element diversify the of strong, into we optionality which future. as to provides with the

As encounter start be first time due a we our resulting such, to we'll to and point, and days At perspective, from holidays earnings reminder, paid be that prior answer we quarter. the will your fewer anticipate typically sequentially happy the the an a of fiscal this worked quarter do seasonality to compared from impact at as off year questions. softer

from John session. We go will now today comes Please Sidoti & Co. question-and-answer ahead. the Our begin question Franzreb [Operator first Instructions] with

Mike. and you Brett doing? morning Good How

John. morning Good

Thanks. Good. John. Hey

start background with orders, why considerably us what give on marketplace in? of a of you could happened little to want was cancelled the and occurrence bit actually I that [ph] rare

that and on Mike The straight -- a core is repeat assume $XX it's that come on from anticipate the us because Powell, what it customer, to just back, is chemical cash. of can balance up point, on unique detail. the longtime there though, we to spending I major the mentioned a call later committed pull a called project a in gas engineering-only. yes, disrupter so the gas wanted of little We they cancellations customer to to some But market the the they'll just I chemical back and John were that’s they time, convert re-scoping sheet to question it. sheet balance one in Of first million, see the a it and and up

in there -- more in Okay, re-scope, because was rare. what projects, obviously, in relatively I I any actually interested not Is the the consider commonality was more right, I that's them? cancelled

Yes. straight oil the type on were space, $X the so refining, balanced jobs. brick-and-mortar million in cancels more or

that the are concerned the bottomed sense trajectory market? Any about you that of Okay. business or has still

rate. of QX, QX, same the kind at was look you the If run

I think know of we've one we bottoming, that more might end I two but is if seen the or see don't yet.

you opportunities. company, they're Okay. at at some sale. in. inorganic interested growth think is assets, Recently, if a wonder company, put Because not you've assets looked those you're kind mention, comparable up are competitor attractive. from a I something you did I something you for is It's that also of rare, looking which you think

So expand can of kind upon that? this

Board wreck doing the I So, calls this subject to team, a around I'm to future, has strategies that the and on the And we're rip very a part and the I of been sure, the been focused management continue, the we're strategies. now asked in cash. been know couple going the with focused become work our of and question company that better has Those conversations working conversations previous year. for how the and what ultimately as with key on before, more mentioned

competitors many watching with are We the in marketplace, our senses.

And shareholders evaluating best be and in future the for so aware we're how that might that so. Powell's of

So opportunities that considering means you're inorganic not? or growth

We what's add to the try here for by build disciplined the we to and for market which see to we're company framework where forward to Powell. push going our what starting into are to stay we're strategy -- guidelines heading to

Got it. last I'll get question One and into queue.

which first kind fourth up the of with besides all us would the help reminding any done on relative with? you kind basis quarter how can it to about, nearly shaping that you the seasonality, comparable us quarter, You're is of

slowdown trying a was workplace the our and sort mix big or of off awards it's all sort QX the certainly from future. a pick quoting people I those place. offices, what but on in scattered running, reservation, difference core picked was up. their to to the gas, over oil of dollars, continues right in the prepared of when We're mentioned effect, QX, traction, some speak figure out we of engineering-only effect petrochem. -- large those so still a remarks, my not as that utility of are The seeing was remote was and the have whether activity run rate doesn't kind everybody Coming standpoint, just to still thing going is sort the activity, while aren't The up in in of upturn in

of no So, the they my forward rate, of good sense adding making looking be at quarter. run of into from things couple it optimism course change, those there's in backlog. an Other put which we're business, some the I actual will, more than progress first for fund those guarantee will sense to -- it's feel from the funded, when positive just get position if future mixes, no but good right the months a the of when and to want looking does, in rate

Great. taking my in Great. back queue. Thanks I'll for the questions. hop

John. Hey

question Capital. come Jon next with go will Our ahead. Braatz Please from City Kansas

Good morning guys

Good morning Jon.

tax Mike into see you soft, all be, be XXXX. deferrals by head the capital needs on but COVID to balances business need the do payroll legislation? we a maybe in this to any cash working were going capital? would second And as at boosted Obviously, question the is related build tax question your -- deferrals -- working to

forward capital the working XXXX and I'll legislation any into great through. fiscal impacts From milestone the as I that projects by large have no, for impact to by first, a have to so didn't is lot things, up of billings a overall second the Yes, half went driven as of COVID well couple digress, for first these working in looking project. a benefited the the of some take the XXXX, the capital the capital of that company, that year due we one answer the unwinding for really second XXXX, that finished working has cash

for and forward this XXXX, that in XXXX. working Looking we of cash we're sizable will for XXXX into use that some project executing capital

come bit little through So, a our expect work mid-XXXX. cash to down I as would way we

Okay.

seeing that at the business door. the environment any new you're any the looking -- And in in Okay. that business How week margin any -- does front? -- look this new renewed coming Are margin on you opportunity pressure? seeing

to the starting those QX, we Coming asked QX, typically on where competition pressure. distribution more see into pressure, in side traditional will think it difficult, -- we see QX; you these a not, coming And to again, some some there. so are. a much that Jon see we and it's didn't is markets we're this in question, isn't they're price to see if bit little were markets but utility of which open I as start some in in that generation We more

reading business, Okay, about about oil some was one earnest And are seen how gas or day And oil long and offshore recently. offshore probably business? of shot, activity and comments these production Brett and other business offshore And higher Gulf in legacy and a I gas in in last we've may question. Brazil little of there begin and your so oil bit activity the that on, production than technology, platform with more this a oil about is and prices new you Mexico drilling seeing there maybe talking the maybe but sort production. was any

for bit it, I market a struggle doing a you Well, effectively these field bit ago. do we watch We offshore legacy in job smaller market really little of in We a really that competed is a little the years those and year, last CapEx sort we see changed of Powell last customer do several from have did took right it's the better expansions one extensions. one the side legacy job, we market now mentioned. FPSO that where traditional to do year have market, Jon, a markets for you little offshore not compete. actually

watching So, we're it. yes,

short distribution strategy, that of existing work a power or watching sides thinking And platform extend they on-deck due those rework what or new or type fields extensions. from to design. top it? customers for they're the technologies thought either would And structure, do new lot legacy what are even how and these won't these power even We about an take applications new to though

definitely, our So, that. with [ph] sticking brush

much. All Okay. Thank right. you very

John Our next go Deysher question Pinnacle. come ahead. Please with will from

Good morning, everyone. Thanks for taking my question.

John. Hey

going just Are curious into walking current mentioned pressure was you margin the business price? because any away I quarter. from you of

did yet. not as I and that a of the prepared back QX, the my XX/XX not there was everything we again board. Didn't I started oil little price There talked really the driven in happened select comments, just see recall a to cycle at -- much where we that the in reach in No, bit yet. pressure again, that you QX, we limit. tail the to about cycle by We're point drop beginning started go kind of seeing John, parallel. across it that Well, and led markets, to that a in see end. not down price, some

of compete. sheet at you guess the the you that competitors you price would some reach gain when I your that share solid have I'm just market balance which guys because a won't do. don't Okay, And concerned rock little those

we on job, how put we there's light the customer checks discussion we're risk we're pressure looking No, profile we're but first about we're an end is the we purchase and the to know help at what yet a expand whole worried of which their job, manage more do what open and can risk the needs a scope the area site, there of jobs can mix not are getting can are the onsite terms around about services, of in to before partner where which the how the do with upon? on building, how price, to we the what the best And have lot in Powell we the have engineering meet project the to scope price the Powell best. or

those the conversations are conversation. we're that substantive and by happening on cognizant of customer now engaging and So, are profile risk the

we can yet, margin well. as the sure the job, managed lose meet do their for is the best lower while Powell need side, on budget make what's and not help them risk So, but

there hear. move? figuring there that up been for to strategic want that which good year, Good. plan out terms exactly on okay. you And of of better in That's you part the to timeline you've wrapping and is on indicated, right, All the a direction working a

on direction yet. be updating to the deck, but where go, get we the working Not a give we of our aspire We're published when that quite point Investor I Board Relations team timeframe to and couple so the money management we're with will we're to will can't around that yet out the options today we'll think and give of for and coalescing work see the very a lay with there be we're the to and Powell, the where and sort the strategic we hopefully putting of near future share best able shareholders all soon in to

a or last of has is mix finally And the or the good. at from the it of over how gas shifted? year the shifted mix mean backlog more Okay, or so? me, has as backlog the percentage same the all I is it non-petrochemical, and non-oil

lower is we are gas oil we this traction are backlog, in utility and forward, prepared at kind I way of more industrial Mike. the the John, seeing last however, what in Yes we as comments. is the we petrochem clearly we year as look believe as The backlog and go the work, over seeing mix mentioned lower,

from So, carry we are different well as a shift, product a strong as we've application they but margins as backlog standpoint seeing little well. facility mix got a standpoint Canadian as U.K. in our our well both as product facility, very geographically --

So, have little mix impact. it a of bit a does

point? the at lion's the this of backlog that's And still industrial gas, and share oil

correct At this point, yes,

And not mentioned is that, traction. what Okay, I'm traction? good. familiar you with

Washington that's Bay Rapid Metro, Toronto John Transit, mostly -- think so Transit, and Area in you North markets rail America Chicago Transit. light about

powering and rectifiers published do the we rail. a switchgear So, we that think the the DC or

Okay, great. Thanks and good luck.

Thanks.

will Franzreb John question from ahead. Please go & next come Sidoti Co. with The

the the that's bit back everybody the you at I with you you you go just Have also furloughed? summer, configuration the and anybody or And anticipate announced -- firm? structure. any there actions Yes, -- do little the guess a they workforce of more that forward completed cost been all that's you are been on the brought satisfied contemplated the load? are restructuring are over Are current

add and I'll its Mike color John, here. can some Brett. start

May So, bring work, out it of nothing since bit. the we we're this back? engineering-only more going yeah adjustment, significant. to people Do nothing Some us challenging a little is

this in So, of we're turn decide at little some resources a to back does a to load, and it people how can get of those trying sort looking is it we go. long handle there QX, bit

are quo. only now. the That's process status of So, the really rest that the in is we thought sort right function;

forward, Looking it's right get better quarter-by-quarter now until clarity. we

is for the one is this in you do on instance it don't, do different with these way. if engineering-only drags that need a could do You there desire they very interesting, -- when to this it be get market, else, -- they sense you funded, there something awards

a time cost it get So, door. thoughtful trying long-term until if is be know split about the we're to a the quarter let the as because to and us to you very not structure clarity we quarter knowledge out it little long model takes to handicap we up

want to we So, our really people. keep

to anything add? Mike, Okay.

activity the the doing we're just in really every think the we what I quarter-to-quarter, did week. May benefited out Brett's of three it's the and to cadence, the looking around and year worst corner June, understanding and commercial mean half that there, causing I second point,

So, very it. close staying to

it order recovery we quarters? incoming a you bounce tell? visibility around Brett to may to seen the or maybe Should is the and sharp next for that just or decades. the in Okay be down I've expect does is book, How this in coming it lowest

clouded. very visibility The is

QX that in job, As isn't as awards we question, The and and is it's earlier these through the economy, I different we're John on whole some see significantly a that the your in aren't pace world. certainly different. going what's the in little market, mix pandemic the seeing mentioned in the the here across the on phases in get the what's played helps Powell effect has going -- started macro early on

get they So, some to the the on of, job we we more it's through so funding bit little end think because a the work going this let's get return the in get sense want user. positive and full

significantly but number -- So, the absolute isn't different.

carefully certainly rate now, to if of but a that have there quarter-over-quarter, run but start I cautious any could forward, be potential the right there'll up is there or very jump in nicely, in don't two, potential up that term aka next big but use in still I John, is don't we look that change the near very, and the couple I I quarter. So, don't the quarter know, coming quarters pop is word think to

Okay. Thanks taking Brett. my for ups follow

further conclude Brett for the will Cope, this to our I over questions, remarks. no would like CEO conference any turn being question-and-answer session. back closing to There

The Grant. challenging is our and day. we how pandemic certainly you, each operate customers Thank

storm. the weather to positioned uniquely is Powell However,

customers talented We balance healthy have great and backlog, suppliers. a team, relationships a with and strong an our sheet, incredibly

our across are We markets we standing for while by operation firing length's to wait not at on all industrial cylinders our we are and recover.

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

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

may You disconnect. now