Good day, and welcome to the Powell Industries Earnings Conference Call. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Ryan Coleman, Investor Relations. Thank you. You may begin..

Thank you, and good morning, everyone. Thank you for joining us for Powell Industries Conference Call today to review Fiscal Year 2022 Third 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 August 10. 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, August 3, 2022, 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 future 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..

growing our 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 into new electrical technologies.

We are beginning to see the benefits materialize as a result of these efforts, and we look forward to sharing additional examples of our success within each initiative. With that, I'll turn the call over to Mike to provide more detail around our financial results..

Thank you, Brett, and good morning, everyone. In the third quarter of fiscal 2022, we reported revenue of $135 million, higher by $20 million or 17% versus the same period in the prior year, and higher sequentially by 6%.

New orders booked for the third fiscal quarter of 2022 were $202 million, $98 million higher versus the prior year and $51 million higher sequentially. As a result, our book-to-bill ratio was 1.5x in the current period. Backlog was $503 million at the end of the third fiscal quarter and is $77 million higher as compared to the same period a year ago.

Compared to 1 year ago, domestic revenues were higher by 16% versus the prior year to $103 million, while international revenues were 19% higher compared to the prior year, driven by strong activity across our U.K. and Canadian operations. In total, international revenues were $32 million in the third fiscal quarter.

From a market sector perspective, revenues across our oil and gas and petrochemical sectors were higher by 14% versus the prior year, while the utility sector was higher by 15% on a year-over-year basis.

Additionally, we also experienced increasing volume across our other commercial end markets, which was 94% higher versus the third quarter of fiscal 2021. The volume in this sector is driven predominantly by product applications across data centers, universities and other miscellaneous commercial infrastructure.

Offsetting these year-over-year increases, the traction power sector was lower by 29% versus the third fiscal quarter of 2021 on the timing of new large traction projects. Gross profit increased by $2 million versus the same period 1 year ago to $19 million in the third fiscal quarter.

As a percentage of revenue, gross profit decreased by 76 basis points versus the prior year to 14.1% as we encountered operational challenges and select projects being executed out of 1 of our U.S. facilities. This generated a margin headwind of roughly 100 basis points on a gross profit level during the third fiscal quarter.

Overall, we are pleased with our positive progress on margin accretion in this very dynamic environment. As in prior periods, we continue to experience elevated costs from raw materials, buyout components, logistics and other overhead costs.

We are beginning to recognize the offsetting pricing actions that have been incrementally incorporated into our models over the past year. As well as continuing to focus on factory efficiencies through cost initiatives and increased volume leverage.

Selling, general and administrative expenses were $16 million in the current quarter, 2% lower versus the same period a year ago. SG&A as a percentage of revenue decreased to 12% in the current quarter on higher revenues and diligent cost management.

In the third quarter of fiscal 2022, we reported net income of $9.1 million or $0.76 per diluted share compared to a net loss of $2 million or a loss of $0.17 per diluted share in the third quarter of fiscal 2021. We did have 2 notable nonrecurring items impacting the third quarter net income and earnings per share.

First, during the quarter, the business recognized an after-tax gain of $1.6 million on the sale of a non-core industrial valve repair and servicing business within our Powell Canada entity. This transaction generated $4 million of cash and a gain of $0.14 per diluted share in the third fiscal quarter.

We do not anticipate this disposition will have a material impact to our future operating results. Secondly, as a result of our Canadian operations ongoing efforts to strategically diversify their markets coupled with strong and sustainable project execution, we have recognized positive operating results over the past 3 years.

Based on these results, we have sufficient positive evidence to release the valuation allowance that was previously established against our Canadian deferred tax assets, generating a noncash $5.9 million tax benefit or $0.49 per diluted share in the current period.

During the third quarter of fiscal 2022, net cash used in operating activities was $15 million as the business continues to build working capital, reflecting the increased orders cadence and higher levels of backlog.

We have invested $35 million in working capital resulting from orders and backlog growth on a fiscal year-to-date basis, including holding extra safety stock of critical components and materials in order to support execution. Investments in property, plant and equipment totaled $649,000.

At June 30, 2022, we had cash and short-term investments of $99 million, $35 million lower than our fiscal 2021 year-end position. The company holds 0 long-term debt. Looking forward, we anticipate continued strength and a sustained level of commercial activity across most of our end markets into fiscal 2023.

We remain focused on the operational priorities across the business as we execute our backlog, while also targeting to deliver consistent and sustainable improvements in operational profitability. We do recognize the typical challenges of project timing and mix, however, we are well positioned to effectively execute the order book for our customers.

In closing, considering the current commercial environment in the regions where Powell has a strong presence, along with the healthy backlog, strength of our balance sheet and the focus on execution, we expect that these attributes will provide the foundation for improved financial performance as we close out fiscal 2022 and look forward to fiscal 2023.

With that, we will be happy to open up the line for questions..

Operator:.

Thank you, Matt. As we stated on today's call, our third quarter results marked another significant and positive step in the recovery, and we are optimistic as we evaluate the resiliency of our end markets in the face of global headwinds.

We possess an incredibly talented team, a strong backlog and a robust balance sheet to allow us to execute over the coming quarters. With that, thank you for your participation on today's call. We appreciate your continued interest in Powell and look forward to speaking with you next quarter..

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