Powell Industries - Q3 2023

Transcript

Operator (participant)

Good day, and welcome to the Powell Industries Fiscal Third Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press Star then one on your telephone keypad. To withdraw your question, please press Star, then two. Please note this event is being recorded. I would now like to turn the conference over to Ryan Coleman, Investor Relations. Please go ahead.

Ryan Coleman (Investor Relations)

Thank you, and good morning, everyone. Thank you for joining us for Powell Industries conference call today to review fiscal year 2023 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 9th. 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 2nd, 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 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 turn the call over to Brett.

Brett A. Cope (President and CEO)

Thank you, Ryan. Good morning, everyone. Thank you for joining us today to review Powell's fiscal 2023 third quarter results. I will make a few comments and then turn the call over to Mike for more financial commentary before we take your questions. Our third quarter marked another solid performance by the Powell team as we delivered financial results that were once again among the best in our history. Market dynamics in our core industrial end markets remained very favorable, particularly within LNG, while we also saw encouraging results in our utility and commercial and other industrial sectors. Total revenue in the third quarter was $192 million, which is 42% higher than the prior year and marks sequential growth of about 12%.

By market sector versus the same period a year ago, revenue from our oil and gas sector increased 25%. Petrochemical and utility revenue each grew by 45%, while revenue from our commercial and other industrial sector more than doubled. Traction saw a slight revenue decline compared to the prior year, largely a function of the conclusion of a large project in Canada, as well as our more selective bidding approach toward the sector. The strength of our results in recent quarters has been led by the sharp recovery of our core oil and gas and petrochemical markets, it is easy to lose track of the encouraging performance of both the utility and commercial and other industrial sectors.

On a year-to-date basis, our utility revenue of $115 million is 40% higher than the comparable period last year, while our commercial and other industrial sector revenue more than doubled over the same time period. These results speak both to the success of our strategic actions as well as the mix of our current backlog. Order activity in the third quarter was again very strong as new bookings exceeded $500 million for the 2nd consecutive quarter. The $505 million of new orders compares to $202 million last year and $508 million last quarter. Our book-to-bill ratio in the quarter of 2.6 times also marked the 7th straight quarter with a book to bill over 1 and consecutive quarters above 2 times.

I'm pleased to note that Powell was awarded two large greenfield LNG projects, both to be located along the U.S. Gulf Coast, that combined for roughly $200 million in awards in the quarter. This marks four straight quarters of significant project activity in this market sector, as the near and long-term setup remains favorable. Our bookings in the third quarter also speak to the breadth of new order activity, as we recorded roughly $300 million of new orders, excluding these large LNG projects. Notable highlights include a sizable carbon capture and sequestration facility that will be located within North America, strong regional performance from our Canadian team, and an uptick this quarter for new bookings from the traction sector. Gross margin in the third quarter was 22.2%, an increase of 810 basis points compared to the prior year.

Strong project execution, volume leverage, and positive closeouts are all helping to drive our margin growth. On a year-to-date basis, our gross margin of 19.5% is firmly within our unchanged target of the high teens. Moving to the bottom line, net income in the third quarter more than doubled to $18.5 million, or $1.52 per diluted share, compared to $9.1 million, or $0.76 per diluted share in the prior year. Lastly, we ended the quarter with an order backlog of over $1.3 billion, an increase of 31% compared to the end of the prior quarter, and more than double versus the prior year. As we've stated, we are very comfortable with the size, mix, and quality of our order book.

Our project backlog is well balanced across our eight manufacturing facilities, and project schedules are extending into fiscal 2025, providing us with a steady, balanced cadence of future activity. We previously shared that our teams have identified capital improvement projects that will facilitate both incremental capacity as well as improved production, production efficiency in several of our facilities. During the third quarter, we initiated an expansion of our Houston facility, located along the Gulf Coast. The capital investment in our offshore yard will provide for additional capacity of electrical substations, supporting the recent rise of our backlog, while also helping us remain competitive on our schedules for future business. The recovery of our end markets, led predominantly by our oil and gas sector, has been sharper and more pronounced than we had initially expected roughly one year ago.

The complexity of LNG projects, combined with construction and startup schedules that have little room for error, speak to the strength and trust that our customers have placed in Powell. We are very grateful for that confidence as we aspire to be the supplier of choice for critical electrical infrastructure. Although our end markets remain strong, we expect the pace at which our backlog has grown over the last nine months to stabilize at levels that are higher than average historically, but will be more measured relative to the growth of recent quarters. That said, quoting activity across all of our markets remains active, and we are in a very strong position and expect that our focused efforts on our strategic initiatives and the health of our end markets will support the positive momentum into fiscal 2024.

Operationally, our teams across each of our facilities continues to perform well, driving our production volumes up over the last several quarters. We remain disciplined to ensure we are meeting project milestones while working to maintain high standards of quality for our products and solutions, while also eliminating inefficiencies throughout our manufacturing process. The investments that we have made in the tools, processes, and our people over the last 6+ years have prepared the business to meet this record backlog. Unfortunately, the price and availability of key engineered components continue to create challenges in the near term, including, in some cases, longer lead times. We continue to effectively manage through each of these headwinds and, where possible, factor contingencies and allowances for these components in our bidding activity and project schedules. Labor availability remains a challenge and is very much top of mind across the company.

While our ability to attract and retain quality team members has not had a significant impact on the business to date, it has become an item of increased importance and urgency given the growth in our backlog. Our operational leadership, along with our human resources teams, continue to work extremely hard and remain closely aligned as we plan our future work and engage the market to attract the talent to meet our future goals. Overall, project activity and our participation across the markets we serve remains robust. The LNG, gas pipeline, and gas to chemical sector all continue to be very active and favorable markets for Powell.

We've also been pleased with the quoting activity and our ability to win projects within the renewable markets, such as hydrogen, biodiesel, and related biofuels, such as sustainable aviation fuel, as well as increasing activity within carbon capture and sequestration, as previously noted. Our near and medium-term priorities remain unchanged. We are focused on growing our electrical automation platform, expanding our existing services franchise, and diversifying our product portfolio, be it through tangential applications that complement our existing offerings, as well as expanding the scope of our product catalog into new electrical technologies. Overall, we are pleased with our financial performance in both the third quarter and first nine months of the year. We have confidence that project activity across the markets we serve will continue to support healthy levels of order activity into fiscal 2024.

While we do expect new booking totals to moderate, we anticipate that they will remain healthy and well-balanced across market sectors. We have also improved the quality of the backlog, which is currently at the highest level in the company's history. Altogether, these factors should support solid financial performance that extends into fiscal 2024. With that, I'll turn the call over to Mike to provide more detail around our financial results.

Michael W. Metcalf (EVP and CFO)

Thank you, Brett, and good morning, everyone. In the third quarter of fiscal 2023, we reported net revenue of $192 million, compared to $136 million, or 42% higher versus the same period in the prior year. Commercial activity across most of our core markets remained strong, recording new orders booked in the third fiscal quarter of $505 million. This is the second consecutive quarter that we have recognized new orders booked in excess of $500 million, which has resulted in fiscal year to date new orders booked of $1.2 billion through the fiscal third quarter.

During the Fiscal Third Quarter, we booked two large projects that totaled roughly $200 million of the reported $505 million of new bookings, both of which are large greenfield LNG projects being constructed on the U.S. Gulf Coast. The Fiscal Third Quarter bookings results of $505 million is $304 million higher than the same period one year ago, and roughly flat sequentially. It is worth mentioning that the demand that we are currently supporting carries with it longer lead times, as a significant portion of these most recent large industrial orders will be executed well into our fiscal 2025. On a fiscal year-to-date basis, our book-to-bill ratio is 2.5 times, resulting in backlog growing to $1.3 billion at the close of our Fiscal Third Quarter.

Yet again, this is a record high backlog level for the company and is $836 million higher versus one year ago, and $318 million higher sequentially. Reflecting on the orders cadence over the last four quarters, we do anticipate that our backlog will begin to moderate as we expect the current pipeline of large projects to be awarded on a more measured basis going forward. Moving on to revenue. Domestic revenues were higher by 49% versus the prior year to $153 million, and international revenues were higher by 20% or $7 million compared to the prior year, driven by a volume uptick in our European and Middle East markets versus the prior year. In total, international revenues were $39 million in the third fiscal quarter of 2023.

A market sector perspective, revenues across our petrochemical sector were higher by 45%, and the oil and gas sector was 25% higher on a year-over-year basis. Additionally, revenues across both utility and the commercial and other industrial sectors were also significantly stronger versus the same period one year ago, increasing 45% and 137% respectively. The traction sector was lower versus the third fiscal quarter of 2022 by 27% on lighter volume in the plants, driven by softer commercial activity across this sector through the first half of fiscal 2023. Gross profit reported in the period was $43 million, an increase of $24 million in the third fiscal quarter versus the same period one year ago.

As a percentage of revenues, reported gross profit in the fiscal third quarter increased by 810 basis points to 22.2% versus the same period a year ago. The favorable trend in the project margins is attributable to the continued balance across input costs and pricing dynamics, in addition to volume leverage and associated productivity across all of the manufacturing facilities, which contributed to favorable project closeouts during the quarter. Finally, we had a one-time project cancellation that contributed 60 basis points of margin to the quarter. Selling, general, and administrative expenses were $19.7 million in the current quarter, higher by $3 million versus the same period a year ago, on an increase in 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 by 190 basis points to 10.2% in the current quarter on the higher revenue base. In the third quarter of fiscal 2023, we reported net income of $18.5 million, generating $1.52 per diluted share, compared to net income of $9.1 million, or $0.76 per diluted share in the third quarter of fiscal 2022. The prior year comparison period did include two non-recurring items that, when combined, accounted for $7.5 million of net income or $0.63 per diluted share.

During the third quarter of fiscal 2023, cash flow from operating activities was a positive $50 million, as we have reached a point in the cycle where we're experiencing an uptick in cash related to the advanced payments on the large projects. This precedes the eventual outlay of cash required for the working capital attributable to the new projects that have recently been booked into the backlog. Investments in property, plant, and equipment totaled $650,000 during the fiscal third quarter, as we invest in capacity and productivity projects across the business. As part of this initiative, we recently committed to a critical project that will expand our capacity in one of our Houston locations. This roughly $3 million investment will help to ensure that we can confidently fulfill our delivery commitments to our customers.

At June thirtieth, 2023, we had cash and short-term investments of $210 million, $93 million higher than our fiscal 2022 year-end position. The company holds no long-term debt. Looking forward, we anticipate continued strength across most of our core end markets into fiscal 2024. We are encouraged by the progress that has been made on margin accretion through a variety of operational and commercial levers, will remain focused on our operational priorities as we execute the backlog. We do recognize the typical project challenges of timing and mix. However, we continue to target margins in the upper teens on an annualized basis, including the normal seasonality impact that we regularly experience in our fiscal first quarter.

We also recognize that we may deliver quarterly margin levels that are modestly higher than our target level as we navigate through the remainder of fiscal 2023 and into fiscal 2024. Considering this, in addition to the sustained level of commercial activity across most of our end markets, as well as the strength of our balance sheet, we anticipate that these variables will provide the foundation for continued momentum relative to our financial results as we close out fiscal 2023 and look forward to fiscal 2024. At this point, we'll be happy to answer your questions.

Operator (participant)

We will now begin the question-and-answer session. To ask a question, you may press Star, then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press Star then 2. At this time, we will pause momentarily to assemble our roster. Our first question comes from John Franzreb with Sidoti & Company. Please go ahead.

John Franzreb (Senior Equity Analys)

Good morning, guys, and congratulations on a really solid quarter. I'd like to kick it off, Brett, with your perspective on the overall market outlook. How much big game hunting is there still out there for large projects, maybe, like, in the coming year? Have you gotten past maybe the midpoint of maybe those large projects, you know, hitting the order book?

Brett A. Cope (President and CEO)

Well, good morning, John, and thanks, thanks for the comments. Team's done a fantastic job getting us to this point in the cycle. As we look out, I mean, clearly, the last 4 quarters, with the rate of mega projects that we booked, it's, it's unprecedented in our history, and, and certainly grateful, as I noted in my comments, to our customers for their trust. As we look out, there are, you know, there's, there's the potential projects that are, you know, wanting to push forward and those that are moving into their, their decisions in FID. A little uncertainty there. Are we at midpoint? It depends how many get funded, actually. I do think the pace of them is going to space out a little bit more looking forward.

We're still working a number of what-if scenarios on various projects that are out there, especially in the LNG space, again, as previously noted. A little more uncertainty. You know, there are not, not as many lined up as quick as they were coming in the last four quarters, midpoint's up to them. If the spreads still look good, gas was at $2.68 a million therm yesterday. What happens, you know, internationally? It could run a while. A lot of factors in there, I do think it spaces out and, you know, construction resources and other things that may affect just availability of resources for the constructors. There's a lot of factors in, in how that will look over the next one to two years.

John Franzreb (Senior Equity Analys)

Okay. In your pre- prepared remarks, you highlighted, you know, an underappreciation of maybe the utility market for one.

Brett A. Cope (President and CEO)

Yes.

John Franzreb (Senior Equity Analys)

What's changed in the utility sector, today versus maybe six months ago?

Brett A. Cope (President and CEO)

I don't think things changed. You know, I, in previous calls, I've highlighted that coming out of, out of the pandemic, it was a sector that returned. It, it also went through a period of not as robust activity for the company during late 2021. It did come back nicely. You know, it's an area we've been focused on for the better part of a decade in, in trying to add to the portfolio and expand our presence, especially within the North American and on our home markets, including the U.K. I think it's been a nice progression. The team on our, on our front-end marketing teams and, and project teams have done a great job just staying methodic in, in our home countries. I think that, that, that is really...

I like to point to it as, as one of our strategic goals, to build a stronger presence in that market. We're just, we're just, very focused on executing, so.

John Franzreb (Senior Equity Analys)

Great. You've, you had a great gross margin in the quarter, but you said your, your target gross margin is still the high teens. What could weigh on the gross margin profile, on a go-forward basis that wasn't evident in the June Quarter Results?

Brett A. Cope (President and CEO)

Hey, John, this is Mike. I'll, I'll take that one. Yeah, look, we're really pleased with our third quarter results as well as our year-to-date margin results. Through the first three quarters of fiscal 2023, we've reported 19.5% gross, gross profit. If you exclude the non-recurring item that I mentioned in my prepared statements, we're at 19.2%. We're still squarely in our targeted range of the high teens. You know, looking forward, as you consider the quality of our backlog, which we're, we're very pleased with as well, the ongoing productivity and efficiency projects in the business, you know, we're comfortable maintaining this, this margin target as we close out 2023 and head into 2024.

John Franzreb (Senior Equity Analys)

Okay. Fair enough. One last question, I'll get back into queue. I mean, cash is building. I know you're gonna use it at some point in this process, but at the end of the day, you're still gonna have a sizable cash position, a year or so from now at least. Can you talk a little bit about priorities for the use of cash?

Brett A. Cope (President and CEO)

Yeah. I, I mean, over the last six months, with the, with the large projects entering our backlog, we've built a considerable cash balance, about $105 million over the last six months. Over the next six months, I think we would begin to consume some of that cash as we begin the, the procurement and manufacturing cycle for these large projects. We'll start to use some of that cash in, in those cycles as we build working capital.

John Franzreb (Senior Equity Analys)

Okay, guys. Thanks. I'll get back in the queue.

Brett A. Cope (President and CEO)

Thanks, John.

Operator (participant)

If you'd like to ask a question, please press star then one. Our next question comes from Jon Braatz with Kansas City Capital. Please go ahead.

Jon Braatz (Partner and Research Analyst)

Morning, guys.

Brett A. Cope (President and CEO)

Morning, John.

Jon Braatz (Partner and Research Analyst)

Congratulations on a, a wonderful quarter. One question I have is, when you look out towards 2024, and you look at your backlog and the incoming orders and, and so on, how much of that production is already spoken for? How do you look at the, your, your 2024 schedules and, and how complete it, production schedules and how complete is it, you know, as you see it right now?

Brett A. Cope (President and CEO)

As we look out, you know, as we end up the fiscal year, it's, it's roughly half the backlog is already, is already planned into the next year. You know, that's how we're, we're, we're heading into planning right now as we speak, as we kind of conclude Q4. You know, most of the constraints with the build are hitting, you know, more of the Houston facilities than some of our other facilities, although all our, all, all of our facilities have, have risen with the wave here. We're, we're doing a lot more, you know, looking at each opportunity carefully to see where we can put it, especially on things that come in and, and have a need from our customers to execute a little quicker. There are still slots.

Just in general capacity, it, you know, we're doing an expansion at offshore for, for just capacity expansion. We're also doing things like, you know, we've gone to a third shift here at, at a couple of the facilities. We're doing other creative things on the, on the production side to help address and expand capacity. Really more of a people-driven equation, trying to get our teams in and, and, and get, and get, get our talent to lead us forward here. We still have some capability there to kind of round out and, and handle that need. I think we've got. That's why we still feel, we feel confident for the prepared remarks and feel good heading into the next year competitively.

Jon Braatz (Partner and Research Analyst)

Okay. Okay, good. When you look at the big projects that you're that you're being awarded, how might the the the margin on those projects be relative to some of the other projects, the the one-off projects and, you know, in the industrial area and so on? How might those those margins compare to with the other, other, other projects you're earning? And maybe are the margins on the bigger projects a little bit higher than maybe where they were, you know, a couple of years ago? Because maybe conditions are a little bit tighter.

Brett A. Cope (President and CEO)

Well, you know, certainly coming out of the pandemic in general, if I, you know, take a couple of year snapshot to, say, the last 24 months, we've risen the profile out in the market. You know, a little bit in price, a lot on efficiency and execution through the team. You know, in general, what I'd tell you, John, is the more complex a project, that's really where Powell shines. We carry a lot of fixed costs on the engineering side, because not just on the product development side of what we build and what we develop and what we aspire to do in the future, but these projects are very, very big.

There's a lot of changes to the life of the project for the things that we make and build, as well as the things that we buy and integrate into the overall solution. Typically, the larger the project, there's, you know, there's, there's a life to it, and, and I think Powell gets a lot of credit for being able to respond to our customers and, and take care of their need and, and, you know, and then, and then be properly, rewarded for our ability to, to hit our, to hit our schedules, deliver that trust to our customers.

Jon Braatz (Partner and Research Analyst)

Okay, one, one last question. With the, with the two large LNG awards this quarter, were, were those greenfield facilities or expansions?

Brett A. Cope (President and CEO)

No, those are both greenfields.

Jon Braatz (Partner and Research Analyst)

Okay. All right. Thank you very much.

Brett A. Cope (President and CEO)

All right, John. Thanks.

Operator (participant)

Our next question is a follow-up from John Franzreb with Sidoti & Company. Please go ahead.

John Franzreb (Senior Equity Analys)

Hi, hi, guys. Just on the facility expansion, does that change your CapEx budget? You can just remind us what you're going to spend as far as capital expenditures this year.

Brett A. Cope (President and CEO)

Yeah, John, it'll bump the CapEx spend this year. It's, it's roughly a $3 million project. A little of that will fall into fiscal 2024, but the majority of it will, will hit fiscal 2023, so it will be a, a little higher CapEx spend this year.

John Franzreb (Senior Equity Analys)

I'm curious about, the revenue mix in the June quarter. How much of revenue was derived from some of those shorter duration kind of equipment s- sales? You know, typically, I believe it's like $25 million-$40 million a quarter. Has that fluctuated positively or negatively, and does that impact the profit profile one way or the other?

Brett A. Cope (President and CEO)

Yeah. I mean, typically, the book to bill within the quarter, you know, runs $30 million-$40 million. That's, that's kind of consistent. Hasn't changed much to speak of, John. That's, that's really kind of a constant running through the business.

John Franzreb (Senior Equity Analys)

Okay. Rick, you mentioned that labor is, is a priority, I think is how you phrased it as far as management is concerned. Can you talk a little bit about how challenging the labor markets are in the jurisdictions you operate and what we should think about as potential margin pressure from higher labor costs?

Brett A. Cope (President and CEO)

Coming out of the, you know, the calendar year, I think in previous calls I noted, and we're still seeing the trend on. We've had better success after the first year on the variable costs, the variable side of the, the equation, where we're adding heads to, to address the increased volume. We're still methodically working through that fairly well. We're feeling a little bit more pressure on the fixed cost side, so bringing in the, the supervision and management, as we expand out the, the labor force, whether it be on the professional side and on our front-end project engineering resources or out in the production supervision. That's, that's been a little bit more of a challenge here of, as of, as of late.

Making progress, just that looking at the ramp that's gonna, you know, hit us, as we hit in the next year, a little bit more effort into that to, to prepare for it. We've, we've been through the ramp before at Powell. We know the challenges of the ramp, and, and so, it's just a little bit more of a urgency as we come out of the summer and get ready for that heading into, into the fall. From a cost standpoint, look, through the pandemic, we, we maintained, taking care of our people. You know, we're, we're planning well for that as, as we look forward to ensure that we're, taking care of them as well as we look forward.

it has been a much bigger issue. It's, it's relaxed a little bit with some of the other sectors that we don't participate, becoming a little softer. That certainly helped on the variable side with attracting talent and understanding what that price point is and cost is for, for the labor on, on direct costs and, and overhead. We've, we've... I think we've got it pretty well factored into the models for the next 2 years, John.

John Franzreb (Senior Equity Analys)

Okay. That was a great call, holding on to that, the personnel, during the downturn. One other, one other question, I guess I haven't brought this up in, in quite some time, especially considering the recovery in the margin profile. You know, give us some of your thoughts on the competitive landscape. You know, what's the pricing environment like with the competition out there? Just some thoughts in general.

Brett A. Cope (President and CEO)

Yeah. Well, I again, on the mega projects, certainly, very, very grateful. As I noted, it is unprecedented in our history to have four straight quarters of mega awards like this. So, you know, we're humbled by the awards. It isn't without, you know, competitive notice, we know in the market, whether it be a mega or, or, you know, a bread-and-butter, you know, $1 million substation for the utility. So, we're cognizant of that. We are very sensitive to the pricing in the market. We, we certainly like to be rewarded for that, that we do best.

Keeping a note that we are a long-term relationship-paced company, so we are always gonna, we're always gonna approach our customer relationships with that in mind and being very fair for the outlook. Competitively, I do think I know the last quarter on the pricing side, probably a little bit more competitive. Nothing like we've seen in the past down cycles, but it is certainly not as urgent on, you know, short-term needs. We're a little bit more thoughtful around that to adjust so we can ensure that we're taking care of as many of our customers as we can as they come in with their needs.

John Franzreb (Senior Equity Analys)

Okay, fair enough. Congratulations again. Thank you.

Brett A. Cope (President and CEO)

Thanks, John.

Operator (participant)

The next question is a follow-up from Jon Braatz with Kansas City Capital. Please go ahead.

Jon Braatz (Partner and Research Analyst)

One follow-up. I, I think you mentioned that international revenues were ticking up in the quarter, or I think they were up 20% or something like that. Do you see some momentum building there, or would you characterize it more as possibly sort of a one-off increase?

Brett A. Cope (President and CEO)

I, I think it's generally momentum. I don't, I don't think it's any one thing as I think about the past couple quarters. It's kind of more of a, also a multi-sector participation. You know, in the U.K., the dynamics there are interesting, given what they're going through in their break from the EU. We are certainly looking to capitalize where we can in the markets and expand in areas that we historically have not been as strong, AKA utility, like I noted earlier, John.

Jon Braatz (Partner and Research Analyst)

Mm-hmm.

Brett A. Cope (President and CEO)

That has been an area we've been hunting in and winning in, in the U.K. Not something that we, we've done-- we did a lot, years ago, but we are definitely doing it there today. The Middle East, another area where we, we see both electrical standards, IEC and ANSI. We have a big, we have a big footprint there. little bit more of an uptick here of lately, not relative to the rest of the business, but, but for the region and our historical profile, it's, it's been on a little bit of an upturn, this summer. I was there, first calendar quarter, making a visit in the region. I'm generally positive on the region and our, and our prospects.

Again, nothing that would spike the profile relative to everything else, but it is a market we know very well. We, we love being there, and I think we'll be there for decades to come. That just generally kind of, boats floating up and, and having the right people in the right time and not losing sight of it, amidst, amidst, you know, the gas wave that we're experiencing.

Jon Braatz (Partner and Research Analyst)

Yep. Okay. All right. Thanks so much.

Brett A. Cope (President and CEO)

Yep.

Operator (participant)

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

Brett A. Cope (President and CEO)

Thank you, Sarah. Our third quarter delivered solid performance with sequential improvements in our top and bottom line. The significant growth and improving quality of our backlog, combined with the strength of our balance sheet, provides solid momentum as we enter our final quarter of the fiscal year and plan for 2024 and beyond. I would like to thank our incredibly talented employees. Through their talent, leadership, and tenacity, they have prepared Powell well for this growth cycle in our business. Thanks also to our valued customers and our supplier partners for their continued trust and support of Powell. 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.

Operator (participant)

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