Welcome to the Powell Industries Earnings Conference Call. At this time, all participants are in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the * key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press * then one on your telephone keypad. To withdraw your question, please press * then two. Please also note this event is being recorded. I'd like to turn the conference over to Ryan Coleman, Investor Relations. Thank you. You may begin, sir. Thank you, operator, and good morning, everyone. Thank you for joining us for Powell Industries conference call today to review fiscal year 2023 first quarter results. With me on the call are Brett Cope, Powell's Chairman and CEO, and Mike Metcalf, Powell's CFO. There will be a replay of today's call, and it will be available via webcast by going to the company's website, powellind.com, or a telephonic replay will be available until February eighth. The information on how to access the replay was provided in yesterday's earnings release. Please note that the information reported on this call speaks only as of today, February first, 2023, and therefore you are advised that any time-sensitive information may no longer be accurate at the time of replay, listening, or transcript reading. This conference call includes certain statements, including statements related to the company's expectations of its future operating results that may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risks and uncertainties and that actual results may differ materially from those projected in these forward-looking statements. These risks and uncertainties include, but are not limited to, competition and competitive pressures, sensitivity to general economic and industry conditions, international political and economic risks, availability and price of raw materials, and execution of business strategies. For more information, please refer to the company's filings with the Securities and Exchange Commission. With that, I'll now turn the call over to Brett. Thanks, Ryan. Good morning, everyone. Thank you for joining us today to review Powell's fiscal 2023 first quarter results. I will make a few comments then turn the call over to Mike for more financial commentary before we take your questions. Powell delivered a great start to the fiscal year as the momentum we experienced in the second half of last year from our core oil and gas petrochemical markets carried into the start of 2023 and was further complemented by solid growth within the quarter in our utility and commercial and other industrial markets. These strong results remain the function of the team's commitment to our customers as well as our broader deliberate focus on our strategic initiatives to create a more resilient and diversified Powell that will lead to stronger growth across the economic cycle. Macroeconomic factors such as elevated costs and the global supply chain certainly remain headwinds. We are very pleased with our execution and the momentum built within the business over the past few quarters. Powell is well-positioned to deliver improved revenue growth and profitability in fiscal 2023. Total revenue in the first quarter was $127 million, which was 19% higher than the prior year. By market, revenues in our petrochemical sector were higher by 31%, while the oil and gas sector was roughly flat on a year-over-year basis. Our utility sector saw revenue jump 32% compared to the prior year, while the newly broken out commercial and other industrial sectors saw revenue triple. This was partially offset by the traction sector, which declined by 38%, mainly the function of wrapping up a large municipal project in Canada. Order activity in the quarter was very strong as we secured $212 million in new bookings. This is the best first fiscal quarter of bookings Powell has had since Q1 of fiscal 2013. Our book-to-bill ratio in the quarter of 1.7 times was equally strong and was the fifth straight quarter with a book-to-bill over 1. I'm also pleased to report that for a second consecutive quarter, we were fortunate to book another significant industrial order to support the production of liquefied natural gas as we continue to see favorable opportunities within LNG, gas pipeline, and gas to chemical sectors. Overall activity in our oil, gas, and petrochemical markets continues to improve as bookings in these markets nearly tripled compared to the prior year. Project activity and associated work on new bids across our utility, traction, and commercial and other industrial sectors remain favorable. Each of these sectors experienced a year-over-year growth in bookings and are largely supported by a steady volume of small to mid-size project activity. Our teams delivered a gross margin in the quarter of 15.3%, which increased 270 basis points compared to the same period in the prior year. Strong project execution, favorable services mix, and positive closeouts helped to deliver the underlying margin growth. Moving to the bottom line, we reported net income of $1.2 million in the quarter, or $0.10 per diluted share, compared to a net loss of $2.8 million or a loss of $0.24 per diluted share in the prior year. Lastly, we ended the quarter with a total backlog of $680 million. This is the second consecutive quarter that we have recorded the highest backlog in Powell's history and represents sequential growth of 15%, and is 63% higher than the end of Q1 last year. The significant increase in our backlog volume provides an extended runway for Powell to sustain improved revenue growth for the next few years as we are beginning to book projects into fiscal 2025. Importantly, our project backlog remains well-balanced across our seven manufacturing facilities and across the markets that we serve. From a commercial standpoint, the quarter was another step in the right direction and marked the continued return of our key end markets. We are encouraged by the current demand environment and are comfortable with our capacity to execute on our order book efficiently and on time. It is also worth noting that these solid financial results came in what is typically a softer quarter due to seasonality effects, and is our best first fiscal quarter of financial performance in recent years. Turning to our operational performance, we continue working diligently to mitigate the effects of the higher cost environment. The price and availability of key engineered components remain material headwinds, and we are closely watching the price action for key commodities such as steel and copper. Our teams are working hard to identify and address these price increases early enough to factor them into our bidding process and ensure they do not create significant cost overruns on current and future project activity. We also maintain and emphasize an extremely strong focus on productivity and strong project closeouts to protect our margins. We continue to implement pricing initiatives to align projects to the current cost environment where and when possible. Labor also remains a challenging area to navigate. We closely monitor the cost of labor and our level of staffing across the business as we work to support the growth and timing of execution of our improved backlog. Similar to past quarters, labor issues have not yet presented material headwinds, but we remain attentive to our current capacity levels as our backlog grows to record levels. Our human resources team has been working extremely hard over the last several quarters and have facilitated our ability to effectively navigate the difficult labor environment thus far. I also wanted to take a moment to call out that yesterday afternoon, we announced that the board has approved a 1% increase to our common stock dividend. This is an important step for Powell and underscores our growing confidence, our long-term strategic direction, as well as our commitment to delivering value for our shareholders. The fundamentals and outlook for our business are improving. Our strong balance sheet leaves us in a very solid financial position. We remain acutely focused on executing against each of our strategic initiatives in fiscal 2023, which include growing our electrical automation platform, expanding our existing services franchise, and diversifying our product portfolio through both targeting tangential applications that complement our existing product offerings, as well as expanding the scope of our product catalog in the new electrical technologies. We are already seeing the impact of these initiatives in our financial results and will continue to share examples of our progress as appropriate. Overall, we are confident that the positive transformational steps being taken internally at the company, supported by improving conditions across our core end markets, will drive another strong year for Powell. With that, I'll turn the call over to Mike to provide more detail around our financial results. Thank you, Brett. Good morning, everyone. In the first quarter of fiscal 2023, we reported net revenue of $127 million, compared to $107 million, or 19% higher versus the same period in the prior year. New orders booked in the first fiscal quarter of 2023 were $212 million, which included 1 large domestic liquefied natural gas project order. This improved orders cadence is generally favorable across most of our reported market sectors. However, it was driven in large part this past quarter by the gas markets within the industrial sector, driving the total reported bookings for the first fiscal quarter to nearly a twofold increase or $104 million higher versus the same period 1 year ago. As a result, our book-to-bill ratio was 1.7 times in the period, with a record $680 million of backlog at the end of the first fiscal quarter, which was $264 million higher versus one year ago and $88 million higher sequentially. Compared to one year ago, domestic revenues were higher by 22% versus the prior year to $100 million, while international revenues were 10% higher compared to the prior year, driven by higher project volume in our Canadian facility. In total, international revenues were up by $2 million to $27 million in the first fiscal quarter. From a market sector perspective versus the prior year, revenues across our petrochemical sector were higher by 31%, while the oil and gas sector was essentially flat on a year-over-year basis. In addition to this, we experienced year-over-year increases in both the utility and the commercial and other industrial sectors, increasing by 32% and 202% respectively. Finally, the traction sector was lower versus the first fiscal quarter of 2022 by 38% as we wrap up a large municipal project in Canada. Gross profit in the period increased by $6 million to $20 million in the first fiscal quarter versus the same period one year ago. As a percentage of revenue, gross profit increased by 270 basis points to 15.3% versus the same period a year ago, driven largely by improved pricing on projects that are now exiting the backlog, as well as strong project execution across most of the Powell manufacturing and service facilities. Selling, general, and administrative expenses were $17 million in the current quarter, higher by $1 million versus the same period a year ago on increased variable performance-based compensation based upon the expectation for higher levels of operating performance versus the prior year. SG&A, as a percentage of revenue, decreased 160 basis points to 13% in the quarter on a higher revenue base. In the first quarter of fiscal 2023, we reported net income of $1.2 million, generating $0.10 per diluted share compared to a net loss of $2.8 million or a loss of $0.24 per diluted share in the first quarter of fiscal 2022. During the first quarter of fiscal 2023, net cash used in operating activities was $549,000 as we continue to build working capital and enhance our capabilities to support our growing backlog of new projects. Investments in property, plant, and equipment totaled $2.7 million as we put capital to work enhancing our fabrication capacity and investing in additional productivity initiatives that will help our operational teams deliver for our customers throughout 2023 and beyond. At December 31st, 2022, we had cash and short-term investments of $111 million compared to $117 million at September 30, 2022. The company holds no long-term debt. Finally, and as Brett noted, yesterday we announced a 1% increase to our common stock dividend. This incremental step demonstrates both our prudent and conservative approach towards delivering shareholder returns while also ensuring sufficient liquidity to fund our growing working capital requirements, as well as balancing our organic and inorganic growth objectives. Looking forward, we remain very encouraged by the continued commercial success that we've experienced across most of our core end markets, specifically in our industrial and utility end markets, and are optimistic that this momentum will continue. This, combined with the level and quality of our backlog, our continued focus on accretive margin initiatives, as well as the strength of our balance sheet, positions Powell to continue to deliver improved revenue and earnings throughout the remainder of fiscal 2023. At this point, we will be happy to answer your questions. Thank you. We will now begin the question and answer session. To ask a question, you may press * then one on your touch tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press * then two. We ask that you please limit yourself to one question and one follow-up. If you have additional questions, you may reenter the question queue. At this time, we will pause momentarily to assemble our roster. The first question today will be from John Franzreb with Sidoti & Company. Please go ahead. Good morning, Brett and Mike, and thanks for taking the questions. Good morning. Brett, I'd like to start with one of your comments in your prepared remarks about your booking projects into fiscal 2025. That made me wonder, what does the timing of revenue recognition kinda look like today as you on the backlog profile? I mean, what's the bell curve kinda looking at, based on your current bookings? John, as we look at the growth in the backlog and, as we look out into time on how we're plotting the revenue. Mm-hmm. No big spikes. It, you know, with the recovery in the core market there in the last year, going from last summer, and we've kinda been plotting these out, and we look at, you know, how we're managing factory capacity and labor capacity, we've been able to work effectively with our clients to time it out. These are, you know, larger projects. Normally have a longer burn anyway, but, you know. Mm-hmm. Just there's no big spikes. It's laid out pretty, consistently out into time. Okay. Great. Another thing that you mentioned was about, and you just mentioned it again, the labor market. How's your staffing look today, and will you be staffing up at all anytime in the near future to kinda capitalize on the jobs that you're winning? Yes. We are. I think we talked a little bit about it last quarter, but you know, if I break it into two parts, both the factory support teams and then the front-end part on engineering and project management is kind of the areas we constantly are looking at every week. It's kinda shifted. A year ago, we had some trouble in various factories with some of the talented folks out in our factories helping us to produce the goods and get it out to our clients. That has improved as of last summer. As we build the backlog into the fall, we're out building some of the front-end teams right now, and that's been a little bit more of a challenge, but so far been able to navigate it. Okay. Those are my two questions, so I'll get back into queue. Thank you. Thanks, John. Thank you. once again, if you have a question, please press * then one. The next question is from Jon Braatz from Kansas City Capital. Please go ahead. Morning, Brett, Mike. Good morning, John. Hey, John. Mike, a couple questions. On the expense ratio, you know, obviously you're able to leverage off the top line. Even if it's even more impressive, you know, given the $1 million increase in incentive comp. How do you see that expense ratio going forward, given the leverage that we saw here in the first quarter? Yeah. I think as we navigate through fiscal 2023 and into 2024, we do expect volume to pick up and that SG&A bucket we manage very closely. It's more of a fixed bucket. It's not necessarily got a lot of variability to it. It hurts us when volume's down. It'll bump up to, you know, 14+% as a percent of revenue. As volume picks up, we like to see that in the 13% range. Did you say mid-13? Yeah. Okay. Okay. Okay. Secondly, sort of a big picture standpoint, when you look back at your history, and I know it's, today is different than what it was back in 2012, 13, 14 when you were hitting on all cylinders and your operating margins were, you know, what? Upper single digit, something like that, and your gross margin around 20%. When you think about the business today compared to then, you know, structurally and fundamentally, how different is the business today? Is there a capability of being of returning to those margins as we move forward here and things begin to pick up on the top line? Yeah. Certainly, we aspire to get back to those margin rates, John. If you look at the business fundamentally, how the business was structured, the footprint of the business back in 2012, 2013, it's much different. You know, we have a Canadian presence now. We didn't have one back at that point in time. We've built a sizable breaker facility here in Houston. There are some differences, we've divested an automation business sometime back. We've changed the mix of the business, that's one variable. The other variable is the amount of oil and gas volume, particularly offshore- Mm-hmm. was really quite high back in 2012, 2013. Price was very robust. That environment hasn't necessarily returned. I don't expect it to re-return to those levels anytime soon. There are some different dynamics when you compare the two points in time. Okay. Is there anything different, sort of on a positive note, compared today compared to, you know, eight years ago, nine years, 10 years ago? Oh, I mean, absolutely. I think our capacity today is very robust. I mentioned the Canadian facility. Yep. You know, we've penetrated the utility markets up in Canada and doing a lot of work as the oil and gas infrastructure comes back. Yeah, there's a lot of positives with respect to the current structure today. Okay. All right. Thank you very much. Once again, if you would like to ask a question, please press star then one. The next question is a follow-up from John Franzreb from Sidoti. Please go ahead. Yeah. I guess, again, going to your prepared remarks, I think Mike might have mentioned something about utility and the industrial end markets seem to offer the best near-term prospects. I just wonder, get maybe some more color about the overall opportunity pipeline and how it looks today versus three to six months ago. Any kind of updated color on the puts and takes and what's driving, you know, the ongoing bidding process in the near term? John, I'll take that one, Brett, and Mike can follow up with anything he wants to add here. The core market is, as we noted also in the December comments, I think there was a question then about, you know, what's the outlook. I think it's gonna be robust through the balance of the fiscal year. There's a lot going on. These are complicated jobs. This is how the power was built in the last 75 years. Again, on the industrial front, these things have a life. There's a lot of people lining up. I don't think they're all gonna get through over the next, you know, three to five years, but there's a lot of momentum built and we're thinking of things there. Mm-hmm. On the utility side, I think You know, I think the jump in the revenue this past quarter is really looking back in time out of COVID, sort of the return of a nice cadence to the business and the process that we had built over the last decade. That's sort of that methodic return of the utility piece. A little bit more of a variable is this newer sector that we're reporting on now, which probably has some of the best price right now because it's a little faster turn, a little more uncertainty on how that factors into the profile of the backlog and turning on the revenue line the next, you know, year to two years. It is a market that we, you know, we've always participated in. It's just become a bigger part of our pie today. There's still a lot of activity, but I'd say higher uncertainty there. As of this last quarter, still pretty solid with the revenue line. Anything to add? I just wanna make sure. No, I don't have anything to add. I mean, Okay. The commercial and other industrial bucket that went up 202% that I mentioned in my prepared remarks, it's really driven by the items that Brett mentioned, data centers and things of that nature. Okay. Okay, fair enough. When you think about the... Maybe this goes back to the gross margin profile. Is it a bigger function of the pricing environment, the competitive landscape, the inflationary environment, or the mix that's gonna keep you from hitting those higher 19%, 20% gross margins? If you kind of maybe rank them all, just your thoughts about those three pieces? That's a good question. it's certainly all three. the price takes time to, you know, 'cause of the project, the way we kind of lead off the old revenue and then the phasing of the timing of that revenue. It has an impact, and I think at some point we'll see it. I mean, the pricing environment for all of our sectors is better than it was certainly, you know, a couple of years ago. It's not. There'll be a limit to that as there always is in a recycle. mix to me is probably a big issue, but lately, you can't discount the inflation piece. Mm-hmm. You know, certainly hit us a year ago in Q1, on the engineer side. You know, the steel index is back up more recently, something we're really attuned to. Mm-hmm. Just watching the incoming steel prices and how that lays out into the future piece. That probably has as much attention for us as anything on the cost side right now. We're heavily bird-dogging the input costs. Mike. Yeah. If I could add here, John, I think both the pricing initiatives and the cost management, you know, we've been really focused on that over the last 12, 24 months. Starting to see that exit the backlog now. If you look at the quality of the backlog, with those elements in it, we're really happy with where we are. The other item that is... can't be discounted as you look across the facilities- Mm-hmm. In the, you know, or on the Powell landscape. Most of the plants, if not all the plants, have very healthy backlog. With that increased volume, we expect to see volume leverage, productivity, cost efficiencies come through the system. You know, again, we aspire to get up to that 20% level, and those are, those are kind of the levers that we would look to get there. Got it. I guess one other part that may get you there, is I guess maybe the service side of the business. Just a quick update on what% of revenue is that kind of coming in at the current quarter. Any thoughts or updated thoughts about how that business is gonna play out for the balance of the year? You know, building on the momentum that we kind of talked about last year, the strategic initiative that embodies the service piece. You have the kind of the stuff that tags on to the existing business, which is still the predominant part of the service revenue. Right. The installation, conditioning, the parts, the kind of short burn stuff. The more strategic stuff is going well and, you know, we hope that in the coming quarters we'll be able to share more, as we feel confident that it sustains. You know, we're still running on average annually 15, 20 points against the whole revenue profile, but we're optimistic that that will sustain as we hope strategically and be able to break it out and provide some more color about it. 'Cause there are some things that we've noted throughout last year that we're taking some steps on that front to leverage the engineering piece to grab more spend with the client and more service capability as well. not just winning the job, but really expanding our ability to provide value to our clients. It's going well and if it continues throughout this year, I think we'll be in a better position, you know, towards the end of the fiscal year to really start talking about what structural reporting we can make on a consistent basis going forward, John. Okay. If I may, just one last question regarding uses of cash and potential M&A. Brett, just some updated thoughts on what you're thinking about as far as the M&A market. You did mention you upped the dividend as far as use of cash. You know, are you out there aggressively looking? Updated thoughts about maybe the size or the nature of any kind of potential acquisition. We are out in the market looking on the non-organic side. Again, you know, our profile at Powell and operationally as well as in this process with the board and the conversations will continue to be, you know, an overly or a conservative bent to our approach. There are things. Mm-hmm. That we wanna do and we think we can add in. There's always the question of availability and affordability and of course our ability to integrate when we get to that point. We are out looking. Meanwhile, we aren't discounting. I know this has been a question in the past, John, on, you know, the CapEx side. We had a little pop this last quarter. We see some opportunity pro-productivity-wise and the teams around the company, you know, invested in the business. I feel good about that'll be really good capital spent for the shareholder. Then the dividend. You know, I think it's, it's a directional step strategically as we look forward over the next couple of years to take a step. We've shared that we're gonna actively continue looking at that at the board. This is a directional step and we're gonna continue to evaluate that in the coming years as we build the success behind the strategies and the core business. Great. thanks again, Brett and Mike for taking my questions. You bet, John. Take care. Once again, if you would like to ask a question, please press * then one. Ladies and gentlemen, this concludes our question and answer session. I would like to turn the conference back over to Brett Cope for any closing remarks. Thanks, Chad. As you've heard from Mike and me this morning, we view our first quarter as a positive indicator for the rest of the fiscal year. The outlook for our core end markets is favorable and improving, while the project funnel for our non-industrial markets remains robust. A special thank you to the Powell team for their hard work, tenacity, and incredible resilience. Of course, thank you to our customers for their business and their trust in our company. Thank you for joining us this morning. We appreciate your continued interest in Powell and look forward to updating everyone next quarter. Thank you, sir. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.