Powell(POWL) - 2019 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q1 2019, the company reported net revenues of $109 million, a $19 million increase, representing a 21% increase compared to Q1 2018 [19] - Gross profit increased by $4 million to $15 million, with gross profit as a percentage of revenues rising 170 basis points to 13% [22] - The company recorded a net loss of $2.7 million or $0.23 per share, an improvement from a loss of $5.7 million or $0.49 per share in Q1 2018 [24] - Cash generated by operating activities was $9 million, an improvement of $23 million compared to Q1 2018 [26] - The backlog increased to $322 million, up 24% year-over-year and sequentially [11][25] Business Line Data and Key Metrics Changes - Domestic revenues increased by $30 million to $90 million, reflecting continued market recovery, particularly in the industrial sector, which saw a 30% revenue increase [19][20] - International revenues decreased by $11 million to $19 million, indicating ongoing softness in the international sector [21] Market Data and Key Metrics Changes - The company experienced improved international activity for new bookings, although these markets have generally lagged behind the U.S. recovery [11] - The core oil, gas, and petrochemical customers are planning larger projects, with several awards valued at $10 million or more received in Q1 [12] Company Strategy and Development Direction - The company is focused on optimizing operational efficiency and enhancing training and execution processes [13] - Continued commitment to research and development has strengthened the company's competitive position, with new products developed to meet updated energy and building code requirements [14] - The company anticipates variability in quarterly results due to project execution timing but expects improved performance in the second half of fiscal 2019 [28] Management Comments on Operating Environment and Future Outlook - Management expressed optimism about the favorable demand environment and project award momentum, particularly in core markets [16] - While near-term visibility remains challenging, the company is encouraged by the backlog growth and expects stronger performance into 2020 [17][88] Other Important Information - The company maintains a strong financial position with cash and short-term investments of $62 million, $12.6 million higher than the previous year-end [27] - Long-term debt stands at $1.2 million, indicating a manageable debt level [27] Q&A Session Summary Question: What does the opportunity pipeline look like for large jobs in fiscal 2019? - Management noted that large orders are expected to grow slowly, with some upside in Q1 but still modest growth anticipated in the coming quarters [35][38] Question: Can you elaborate on concerns regarding project variability? - Management indicated that many new orders will not convert to revenue until early next year, making timing and execution critical [39] Question: Are the large orders hitting this fiscal year? - Some early revenue milestones may be recognized this year, but the bulk of larger orders will likely ship in Q1 and Q2 of 2020 [44] Question: What is the mix of the backlog in terms of industry? - Management estimated that oil and gas projects make up approximately 60% of the backlog, reflecting a return to strength in core markets [78][80] Question: How firm is the backlog? - The backlog is considered firm, with milestone billing practices in place to ensure cash flow neutrality [81][82]