Powell(US:POWL)2020-02-05 22:00Financial Data and Key Metrics Changes - Revenues increased by $134 million in the first quarter, representing a 23% increase compared to the first quarter of fiscal 2019 [9] - Net income improved to $2.8 million from a net loss of $2.7 million in the prior year [9][21] - Gross profit increased by $7 million to $22 million, with gross profit as a percentage of revenues rising by 290 basis points to 16% [20] - Selling, general and administrative expenses were $17 million, up by $1 million year-over-year, but as a percentage of revenues, it decreased by 190 basis points to 13% [21] Business Line Data and Key Metrics Changes - Domestic revenues increased by $16 million or 18% to $106 million, driven primarily by strong demand in the oil, gas, and petrochemical sectors, which saw a 30% revenue increase [19] - International revenues rose by $9 million to $28 million, reflecting growth from foreign operations and export shipments [20] Market Data and Key Metrics Changes - Inquiry activity has been active, with a focus on larger projects, although there has been a pushback in schedules for midsized projects in the $3 million to $10 million range [11] - The Gulf Coast region remains a key area for project activity, supported by low-priced natural gas [12] Company Strategy and Development Direction - The company aims to fill open capacity in the second half of fiscal 2020 while managing delays in customer timelines for midsized projects [15] - Investments in R&D programs and employee development are prioritized to maintain technological leadership in electrical distribution products [13][14] - The company is exploring opportunities in commercial markets to offset cyclical nature in core end markets [44] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding production capacity in the second half of 2020, despite challenges in the inquiry levels for smaller to midsized projects [15][24] - The company anticipates variability across quarterly results due to project timing and market conditions [24] Other Important Information - The company booked $137 million in new orders during the quarter, including a significant municipal contract in Canada [10] - Cash and short-term investments at the end of the first quarter totaled $121 million, an increase of $50 million year-over-year [23] Q&A Session Summary Question: Inquiry about gross margin drop - Management indicated that project pricing and margins in the backlog are flat, with seasonal impacts contributing to the drop in gross margin [30] Question: R&D spending expectations - Management acknowledged a slower start in R&D spending but remains committed to ramping up efforts in the second quarter [31][32] Question: Size and margin profile of large order - The large order exceeds $100 million, with competitive pricing in line with recent trends [34] Question: Reasons for delays in midsized projects - Management noted a consensus of a temporary pause in the market without a long-term fundamental driver [37] Question: Backlog liquidation schedule - Approximately two-thirds of the backlog is scheduled to liquidate within the year [39]