Powell Industries (POWL) 1 May 242024 Q2 Earnings call transcript

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

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

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

make impressive of sectors. showed strong by your questions. Powell's take by markets, call financial from Mike then second quarter more levels and today continued Other commentary, the to our growth, Thank year-over-year a strength for Industrial will us both activity and XXXX review morning, Commercial quarter for and before to Powell's Utility everyone. from core complemented good and I and over fiscal we healthy turn few end comments Ryan, performances you the and financial Industrial project supported second you, Thank results the results. joining

quarter the quarter our strong orders of projects still bookings cadence no were a another second mega New $XXX with there is but a across our volume and million line medium-sized of our elevated $XXX well-balanced that of and our Notably, and in orders normalized Rather, totaled of comprised bookings. core the reflecting expectations strong included awards speak million, to awards. of of in quarter in competencies markets. small-

which $XXX mainly Gas Our strong revenue and in to same the and markets, XX%, period respectively, to performance compared Oil XX% and grew grew Petrochemical, by million, driven fiscal our XX% largest quarter from XXXX. of the

place pandemic have quarters into of continue our also well stakeholders. processes. operations of ramped also we efficient to the meet put operations while volumes, on more initiatives attractive our the are higher we execution capacity and today helped and manufacturing the operational as overall process remain to These create additional improvements benefiting work to for and from returns delivering improved streamlined operational the efficiencies. demand focused of Many As project lean project during

in gross basis XXX very revenue, year, was better same profit the versus to the points leading the XX% in than gross of or of period the Our prior strong XX.X% profit growing year. quarter, a prior

complex, less a profile of carry conversely, higher which strength work tends This favorable awarded selective margin requirements. to handling a and profile where expertise core projects by the carries type from margin this the benefiting our work also of lower a favorable nature are that due more driven our either lie, is how share and of than is We engineering quality Industrial content mainly of it more as years. of of a backlog to competencies recent of share heavier to or Powell's

that of to conscientious for we projects rarely our always projects, aspire are, to how track projects record we on provide engineered-to-order Powell's complex custom our allowing we on and important engineering relationships. expertise, we solutions change, that timing project for fostering and our of it technology deliver resources both the win value scope healthy product for focus equally means and project to adapt and the us utilize long-term our industry-leading customer course, closer quote every price. on strength pursue While to the quickly is we Rather, project throughout project. The be as customers is life teams our our of requirements, as enables to while customer cycle, us

diluted $X.XX income per $X.X period. per share, the or in $XX.X diluted which of net Xx million line, On than roughly the share we was $X.XX higher the bottom recorded or million year-ago

history Our near Powell's $X.X in and the billion. remains roughly at sequentially highest was flat backlog

capacity integration delivery initiatives, and water providing expansion Houston by our the complete. Coast support transport on projects power is with the for fabrication access. and support Gulf facility of And incremental expansion for control rooms, is Regarding especially that our us that large

of that our support the growth people in meet our electrical we factory Houston products to across progressing the is as schedules million have of new remain future coincides This with customers completed our project current staffing and middle of and backlog. be serve. We expansion the products levels and XXXX of in in are our addition, with In release in place the our we fiscal to markets comfortable demanding to confident the planned. expansion right $XX is expected initiative

period finding increase evaluate us markets However, talented as over remain to engineers and out we a a help critical focus the of area throughput multiyear will us. serve, our we look for

a just improve finding join help creative do to service us X that has HR well tripled staffing team to developing as to backlog efficiency a people plans in great Our and job Powell the as team years. terrific continues

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

dampening horizon. hydrogen. Activity also global Revenue Other this conducive for transition over continued remains gas LNG Commercial Within bid. that and sectors, not coming These likely biofuels, the remain That environmental Petrochemical in remain from and pushed fundamentals activity. long-term continue Natural quarter. underwrite many are year new market, U.S. assessment a have effect for this right which spreads on yet Powell's said, regarding and such grew Gas our projects, gas and to for the to the to U.S. expectation a market projects across is the have support energy permitting this for favorable earlier strength of export the U.S. and and Industrial our XX% capture market carbon comments projects economic U.S. planning long-term slight for attractive. natural LNG these Oil and the impacted price Oil and Gas also global market of Energy to being Department goals had segment as it out this markets within fundamentals our market. The includes markets our export

products future end that the market seen mostly Over center market. continue the in has several our for market so presence and we growing a of larger the offer. we quarters, that driven past that of for we of limited qualify growth fast-growing strong Powell by have believe this in driven to this could far in the data value the amount our by services more sector growth this has a been important We the potential and has been total as

can of value. for the X further data primarily increased Powell walls have to penetration outside potential the grid of connection the the data within where center provide center served see the We the and

In been on addition, scale center individual in sales smaller and products. customers data to have generally focused

scale. However, both will these by as only data in electrical in facilities power, grow centers the grow and computing size physical energy demanded

to power solutions the to of ensure result, servers like integrated to Powell centers and also required the and solutions a As sophistication grow fully uptime the will store by the and secure single within control customized a build and in require reliability power data. companies data performance room

for better of as as and with this engineered-to-order are building prepared facilities these are Powell's deliver both demands relationships solutions understand for We to customers. to the future colocators these well hyperscalers power

recently the in overall of in remain generation across for work. electrical in the seen this by increasing substations. to coming Powell such Utility the grown the grow Lastly, centers, leading must as U.S. the projects recent Helped data positive new provider return types power but is power has a of our demands, utility core market of to These market, become years. distribution years. our capacity results outlook among it that clear have we generation the is most

beginning sheet in new profitability we our up, We ability are and the stages see each remain that we increase serve to we projects into of to initial our the remain are performance the XXXX, as benefit XXXX projects pleased believe we orders The through fiscal a we of We Utility $X.X strong wrap and from sustain we with near- are favorable balance expected this first quality our of secure medium-term are the our demand. does this in market to in backlog and of pursue. To an optimistic billion financial meet fiscal favorable. on unchanged. projects and will remains markets that our outlook a for XXXX. Meanwhile, our priorities half seeing

pleased progress our portfolio. us and key financial over and to on focused are solutions call each Mike electrical in are of franchise, greater areas. With detail. I'd to in results electrical these expanding platform, expanding and growing our automation We services diversifying our initiatives and committed We products remain like we these walk making the the to our are turn with through to that,

total the In revenue of period fiscal $XXX and fiscal million, $XXX Brett, or compared XXXX. we good you, second in million of versus Thank XX% XXXX, reported everyone. to quarter the same higher morning,

of which a period lower in on same mega second project the orders New bookings. X booked fiscal the comparison million, as than $XXX was year were the XX% period prior ago X included difficult XXXX quarter

sector continue the and respectively. momentum our are and Commercial focus we sector, across by project diversifying Electric and Utility X%, positive which on Industrial both we XX% in higher experience new sequentially bookings to the Other backlog, both As

Gas million increased million a the higher, continued their quarter fiscal while by by our predominantly volume $XX $X.X sector and book-to-bill higher end ending end they domestic quarter improved sustained by order fiscal to billion, in year to quarter in revenues $XXX in in was Oil sector market generate to second nearly across quarter, the X% X.Xx by these our of second total, million, core sectors activity, and the up versus current the revenues combined quarter. From the lower Petrochemical The to international were momentum. versus $X sector addition contributing revenues X higher XX%, Gas activity our higher which to by solid $XX million Oil XXXX, Industrial while $XXX XX%. commercial ago the ratio fiscal second With at facility. million XXXX, XX% project to fiscal in sequentially. Compared doubled, were at results and In driven positive revenues and international a perspective Petrochemical markets, second markets Canadian of the backlog the

same to core lower XX%, lower be exiting focus XXX end addition tangential light of income favorable management. In generating and power continue continued sector. Gross lower were from X to million our period XXXX. Selling, sequentially. last very both period, outside same growth a performance Commercial in the In versus margin second points these X.X% the to all our continue sector net the Industrial quarter of current across X backlog and markets change Gross in to on lower XXXX. Industrial and or market of rates and this the the variable fiscal compared our $X.XX XXX projections in per to the sectors, manufacturing $XX a diluted There experienced the the solid as grow ongoing we market $XX XXXX, percentage to from reflecting quarter fiscal profit respectively, facilities. in same per to the in $XX.X revenue growth versus overhead the of of also rail basis leverage by was of period in $X.XX by million XX% basis $X.X percentage in the a gross $X market. Other Utility traction million, execution our period points of throughout fiscal year-over-year increasing benefit reported million we fiscal XX% we operational diluted low net profit fiscal points ago income by higher expenses share Electrical second share, a as and by million revenue year $XX year sectors, update in ago. basis our XX of the is to based in compensation revenue and administrative solid was the base selective of million increased mid-XXs The ago. increased volume profit on and XX.X% percentage as in general diligent quarter second year to current SG&A quarter level versus The no by decreased

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

throughout we strength that end grow across core our to focus XXXX. optimistic markets will As end strategic are the we fiscal sustained in our forward, with tangential markets Industrial continue look combined

quality sustain perspective, questions. have solid may fiscal this to the we across our year. At of commercial in backlog cognizant, a favorably momentum impact are the the recent and performance near-term sustained the of point, throughout continue level minor activity the environment market experienced disruption other markets activity. Notwithstanding your happy timing remainder on that as financial positions in as and the be a however, We of the this both of end fiscal the business well XXXX our answer level our from market LNG we'll uncertainties half to this of that first macro

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

kind the with capacity start, top quarter, referenced at still me on full were Brett in strong able congratulations gains anything kind you that and that Can that of -- but quarter. really how running of level? revenue most line, solid should capacity how Is the I'd were Mike, Was you there I another of because generate generate like quarter. to personally. you surprised Last us guess, to the I'm think recognition? at a you can the walk that? as volume? far curious, we revenue revenue about full unusual size through sustainable as just kind that of

then in and start I'll I'll ask jump Brett. Mike to it's John, here, too.

midway quarter, looked we us as the a about the lumpy at the During did all buying. catch it surprised, It's little too. quarter, we're through a things little

So when the jumped there the buyout. amount large of for the results looked revenue it a bit. works the at was a And up fair POC of on way side, us, we little sort

that here. the into its potential. kind the looking schedules So But -- we jump of we expected to on don't I the level saw I'm that back depends a at to But half just it move we year just in of going the as ask around. went -- little think quarter. Mike than timing It was bit higher as

communicated typically, our XX total like. what is XX top given we John, the and sure. the and very that out it line business landscapes, next next our the from But But quarter last XX% is look no to we And convertible Yes. slightly introduce major does expectations this over will vary follow and between the To XX% at choppiness on projects how it for the major buyout Mike. quarterly falls. we the months. across major the buyout changes in Brett's months, profile And some in backlog comments, as

see will Does flatter? You we in that typically limited? quarter, a revenue think it see and be suggest that in maybe the the we bit bump little big seasonality about should fourth normal won't maybe

it normally is cadence year. from XQ, fiscal heavier XQ is. -- than will less standpoint we still fourth be think, I think usually the I a between cadence as the XQ seasonally and quarter probably the year fiscal traditionally, the delta profile standpoint quarter But a

that to margin to gross limits your are low expectations profile What Understood. And you're seeing? you better a mid-XXs. maintained margin gross of the

incrementals of, the kind limiting I the ramped-up, But this and side, that we're can. always we've of echoed maintaining cost I this butting spring, best out of the biggest on there's on management. leverage. getting reviews the best this eking our as them cost think employee at capacities, forward supporting operational against throughout on for team side. we're the one that to we're think watching our Well, is and productivity the good-quality been is down making avenue leverage, kind And has contributors the is forward, sure our question, factors, come your we earlier point kind organization on the that of kind cognizant can side. We're And one cost folks being up that of of

And Okay. working I the haven't And capital when think up? for a I seem Can statement cash how priorities has guess one revenues, flow talk good last special get I with along in excess the has something your the cash question, seen build ramp case. back jobs addressed cash potential about been about to be also The I'll those we maybe as had or doesn't sizable. the usage dividend historically, queue. yet, should you Board you but lines? it outflows. cash, mean,

in then Yes, John, and start Okay. I'll here. chime Brett can

First, feel marketable as and that cash roughly new orders fund to the securities we of advanced million in with the quarter. capital sit We of orders consumed offset to working here payments. has, million associated $XX the large capital part, today, replenishment the plateaued. in in this -- cadence and $XXX market backlog was balance The we

fund we providing So is, healthy as we maybe forward, in maintain second balance working it half. booking recede, should cadence, cash the slightly inflows, should -- about anticipate normalized CapEx where requirements given cash the and this capital the as look and we

of the uses tweaking do, growing some the we're expansion. capacities of and for And be the the fiscal update million we're and Yes. sustainable the there the above different rest of capital would are what facilities are an in looking markets we about kind future, $XX as on can through John, for the made share year. where product we in the in then what's calendar to There and with got that we've out comments, our on on But and go strategy. discussions what prepared Nothing things plans. Nothing books today. already other

a earnest, and quarter in are pretty Mike, what couple immediate spending time has And the things I, reporting bigger then few store subsequent inorganic by but part that this of continues become are back in on. And nothing the it there So continues funnel. of just years the the I us to Mike I'm at the think we're in there. quarters next year-over-year. management Again, to we'll that looking excited share, to a be for team, Board. I That

next comes Jon Kansas of Capital. Our Instructions] Braatz from question [Operator City

the the accelerated? Mike, are you to than Back revenue what quarterly We've sort case? seeing side of of the and numbers? past, Brett that business, that more Is about typically Mike. in has But terms is what in this book-to-burn the of talked the

past pretty quarter That's burn. several of to quarters. typically Jon, over we top $XX million book-to-bill $XX run on million the been static, traditional a of the backlog And

So no, stable. that's been pretty

look we Okay. pricing good. benefit pricing, when Very at the throughout any And from quarter, pricing?

but much a out what on Powell, we're gradually market. of Been got still factor now. at the and but most and not as, for dictates for become in flat in where of on competition pricing couple market, more we're and a improved. But overall, so of engineered -- still the it's No. some throttle always I'd components quarters There's compete it's the has pretty we that schedule say, opportunity there,

to I much And eroded, more don't think that, It's going so pricing a not little accretive. be it's but settled the bit. market with

the Anything of on international we seeing U.S. the see ahead? front most Brett, suggests standpoint, some geographical you're that days has been, the that a strength in might Okay. stronger from

compete a resurgence best the were Middle their X where just have the We're potential we some in for having light Yes. very a by Also of of years. But East. They're in many we been years well, U.K. We the the there It's IEC. little way. talking in couple were years. internationally. seeing factory doing we one

pretty see some us. potential interesting that's So some also And for international. we growing in work Africa to

the of work resurge base Africa the side of brownfield got pretty have our good around a seeing of some mostly We interest. that west to base installed Africa, we're north and has from

So that year. yes, next feel pretty good for about

getting spoke a center little talk data data outside. you And about a last, going a then size the little the inside And walls, bit of to bit the market about the walls and Brett, X you opposed this into see from potential where as be opportunity Okay. can process what might X what of it you and might be, here? and center the getting

Sure.

discussion are fixed-mount lot about ideation space that. they on or get products our down our breaker? X provide breaker folks some strongly to that very you But a And today is inside it stepping electrical go by products a of with competitive, lot now started what bit substantive course, but of lower of scale we line over the and as not the And to having when to R&D That compete. But X one foothold services. the how a us voltages. side very the more last multinational we and little Powell years, a it's large them of could optionality about or what we're to optimized you're can walls, competitors. on if into a discussion we've X wider drawable also these make So pretty got a a designs. in client we're giving compete, with it's, and dictates the Do we do compete good want to to

of bidirectional. approved list, vendor little process a it's bit So AVL, a but on the the it's

things to the have to improve we So product. definitely do some

that I And of with large solve that relationships for to think build go. ready out and sticky of that hopeful the a side the really few come. is equation I'm time Powell matter we'll a to of service there some just years folks it's

of where your lot -- your spending of that area? that R&D going, is a some in Is

R&D. Some of the more recent

we'll the have right we for think years technical We us. we one have at there But a think learning. that Utility recently, and core some we Industrials very now products really the a become have, Utility. ground has for we that, we're We ideas more running market that for already the important solve in going that differentiator. things have have are some can that plus been the problem, projects on are targeted some if segment we're

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

Overall, a Alan. second and with our pleased organization. performance very Thank it you, the solid we across was quarter, are

teams to the like productivity our raised across of appreciate operations, with would participation and We thank for appreciate valued have as bar on efficiency incredible and are growth in and of and on a we all of to your look commitments. I you delivering We Powell. Thank our focus with Also, interest We to schedule backlog. our the thank all budget customers. course, great their on quarter. energy commitment speaking trust have Powell, our in continued to our our and your you forward you all today. for next your employees

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

You may disconnect. now