Powell Industries - Q4 2023

Transcript

Operator (participant)

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 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 a touch-tone phone. 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. Thank you. You may begin.

Ryan Coleman (Head of Investor Relations)

Thank you, and good morning, everyone. Thank you for joining us for Powell Industries conference call today to review fiscal year 2023, fourth quarter and full year 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 December 13th. 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, December 6th, 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 now turn the call over to Brett.

Brett Cope (Chairman and CEO)

Thank you, Ryan, and good morning, everyone. Thank you for joining us today to review Powell's fiscal 2023 fourth quarter and full year results. I will make a few comments and then turn the call over to Mike for more financial commentary before we take your questions. We ended our fiscal year on a strong note as the Powell team delivered another great quarter to close out one of the best years in the company's history. The sharp recovery of our industrial end markets led to $1.4 billion of orders in fiscal 2024, by far the most we have ever recorded in a 12-month period and twice that of the prior year.

The demands that this sharp recovery have placed upon our team members continued to be significant, including tremendous front-end effort from our sales and estimating teams, as well as our project leadership teams as we ramp activity across all of our operating groups. I am incredibly proud of the entire Powell team performance. It is in years like these of elevated project activity, delivering on time and on budget, that we earn and build on our reputation with our customers as a reliable, trusted partner, as we continue to differentiate ourselves from our competition. Revenue in the fourth quarter grew 28% to $209 million, while revenue for the full year grew 31% to $699 million.

Strength across our core industrial end markets, particularly within LNG, as well as in our utility and commercial and other industrial market sectors, drove the substantial growth compared to the prior year. Mike will provide additional detail on our revenue growth by market sector in a moment. We recorded $171 million of net new orders in the fourth quarter, which reflects our previously communicated expectation that order activity will remain healthy, but return to a more normalized trend compared to previous quarters. We also delivered a gross margin in the fourth quarter of 24.9%, which is an increase of 430 basis points year-over-year. While our margins have certainly benefited from this higher volumes, our productivity initiatives, as well as strong project execution and subsequent closeouts, are all helping to support significantly improved margins compared to recent years.

We are confident that these measures, combined with our quality backlog, can support gross margins above our fiscal 2023 targets set in the high teens and deliver margins consistent with total fiscal 2023 levels in the low 20s for fiscal 2024. On the bottom line, we recorded earnings per diluted share of $2.17 in the fourth quarter, roughly 3x higher than the prior year, and $4.50 per diluted share for the full year, which was roughly 4x higher than fiscal 2022. Our backlog remains incredibly strong at just under $1.3 billion. It was roughly unchanged sequentially, but is more than double the $592 million from one year ago.

We continue to feel confident that our current backlog is comprised mainly of projects that speak to Powell's core competencies. Both the nature and scope of the project mix and our backlog are core to what we do best, and we are confident that we can deliver every dollar of our backlog on time and on budget. We previously discussed some of the capital improvement projects that will facilitate both incremental capacity as well as improved production efficiency in several of our facilities.... In the fiscal third quarter, we initiated an expansion of our Houston facility, located along the Gulf Coast, to support the rise of our backlog, while also helping us remain competitive on our schedules for future business. Work on the expansion largely concluded in November, and we are now productively using the expanded capacity.

As far as staffing levels are concerned, availability of quality labor, while always front of mind, is less of a headwind today than it was in recent quarters. This is in large part due to the hard work of our human resources team, as they have developed creative personnel solutions and continue to ensure our manufacturing floors remain adequately staffed. The availability and cost of certain engineered components remains a challenge, though, overall, the inflationary environment and costs of most raw materials have certainly moderated. The challenges that came with the period of lower project activity immediately after the pandemic, followed by the inflationary environment, required that we prioritize execution and identify efficiencies across the organization. Today, we are enjoying the benefits of those efforts, while the largest markets we serve have enjoyed a strong recovery. Quoting activity remains robust across most market sectors.

We continue to see favorable opportunities within LNG, gas pipeline, and the gas-to-chemical end markets. We've also been pleased with overall activity within the renewable markets of hydrogen, biodiesel, and related biofuels, such as sustainable aviation fuel, as well as carbon capture and sequestration. We envision these markets being larger contributors to our financial results going forward. Additionally, we continue to capitalize on opportunities within our commercial and other industrial sector. Data centers have been and remain an active area of growth in this sector. Expanding our market breadth has been a focus across the business, and our ability to leverage our products and expertise into a fast-growing market like data centers is a perfect example of these efforts. Critically, this is a market in secular growth that reduces the cyclicality of our order book and is a perfect complement to our core industrial markets.

Our near- and medium-term priorities remain unchanged as we enter fiscal 2024. We are focused on growing our electrical automation platform, expanding our existing services franchise, and diversifying our product portfolio, either through tangential applications that complement our existing offerings, as well as expanding the scope of our product catalog into new electrical technologies. We expect our R&D spend to increase in 2024 as we work toward this end. In summary, we are entering fiscal 2024 with roughly $1.3 billion in backlog, which provides durable and predictable project schedules to build upon. We continue to see healthy levels of project activity across our end markets and believe that the fundamentals supporting our core industrial markets remain favorable and robust.

We've also taken successful steps to unlock operational efficiencies, improve staffing levels, and optimize our procurement of raw materials, all of which have had a significant positive impact on our profitability. We are confident that our execution and our strategic initiatives, coupled with favorable industry dynamics, will support another successful year for Powell. With that, I'll turn the call over to Mike to walk us through our financial results in greater detail.

Mike Metcalf (CFO)

Thank you, Brett, and good morning, everyone. I will begin first with the fiscal fourth quarter business results and then move to the total year fiscal 2023 results. Revenues for the fourth fiscal quarter of 2023 increased by 28% to $209 million, compared to the fiscal 2022 fourth quarter of $163 million, and improved sequentially by $16 million, with strong growth across our core industrial, oil and gas, and petrochemical market sectors. Net orders for the fourth fiscal quarter were $171 million, $87 million lower than the same period one year ago on a challenging year-over-year comparison, as we secured a large LNG order in the fourth quarter of fiscal 2022. In general, the industrial end markets remain active, specifically within the LNG, gas to chemical, and hydrogen end markets.

We also continue to see sustained commercial activity across our utility, as well as the commercial and other industrial market sectors. As a result of the strong revenue performance, offset by a healthy but moderate orders cadence, our book-to-bill ratio was 0.8x in fiscal fourth quarter. Reported backlog at the end of our fiscal fourth quarter was $1.3 billion, $701 million higher versus the end of fiscal 2022. The substantial increase in the order book was across the majority of our market sectors: oil and gas, petrochemical, utility, as well as the commercial and other industrial end markets. Overall, we're very pleased with the total year orders performance across the business and the resulting backlog position as we enter our fiscal 2024.

Compared to the fourth quarter of fiscal 2022, domestic revenues of $171 million increased by $38 million, or 28%, while international revenues also increased by 28% to $38 million on higher volume across all of our international locations. From a market sector perspective, revenues from our oil and gas and petrochemical sectors grew 56%, largely driven by higher LNG and petrochemical revenues. In the fourth quarter of fiscal 2023, the utility sector was higher by 8%, while the commercial and other industrial sector was higher by 13% versus the prior year. This year-over-year growth was offset somewhat by the traction sector, which was lower by 52%, as we successfully completed a large municipal project in Canada in the first half of fiscal 2023, combined with softer commercial order activity in this sector throughout fiscal 2023.

We reported $52 million of gross profit in the fiscal fourth quarter of 2023, which was higher by $19 million or 55% versus the same period in the prior year. Gross profit as a percentage of revenues increased by 430 basis points to 24.9% of revenues in the fourth fiscal quarter compared to one year ago. The higher margin rate is in large part the result of favorable volume leverage and productivity initiatives, strong project execution and subsequent closeouts, as well as the pricing actions that have been aimed at offsetting inflationary pressures as we continue to navigate through a challenging supply chain landscape. Albeit negligible, the margin rate also benefited from two order cancellations, which generated $1 million of gross profit, or an incremental 35 basis points to the margin rate in the quarter.

Selling, general, and administrative expenses decreased by $1 million, or 5% in the quarter versus the prior year, attributable to lower fiscal fourth quarter variable performance-based compensation expense. SG&A expenses were $20 million in the fiscal fourth quarter, or 9.8% of revenue, compared to 13.2% of revenues a year ago on both volume leverage and lower expenses in the fourth fiscal quarter of 2023. These results demonstrate our continued focus on cost management, while also focusing on the critical resource requirements necessary to execute on the order book. In the fourth quarter of fiscal 2023, we reported net income of $26.4 million, generating $2.17 per diluted share, compared to net income of $8.7 million, or $0.73 per diluted share in the fourth quarter of fiscal 2022.

We generated $77 million of operating cash flow in the fiscal fourth quarter, driven by early cycle advanced payments on the projects added to the order book over the past couple of quarters, in addition to generally strong working capital performance across the business through this period. CapEx spending during the quarter was $3.8 million, with the capacity expansion at our offshore facility in Houston, attributable to a large portion of the spending during the quarter. Now recapping our total year fiscal 2023. Revenues of $699 million increased by $167 million, or 31% compared to fiscal 2022.

Orders were $1.4 billion, nearly double fiscal 2022 orders of $718 million, led by the strength in oil and gas and petrochemical end markets, coupled with the sustained market activity in the utility sector, as well as the incremental growth in all of the other end markets. Gross profit as a percent of revenues grew 510 basis points year-over-year to 21.1%, or $148 million, demonstrating continued success in offsetting inflationary headwinds and supply chain challenges, while also leveraging higher volume and productivity initiatives throughout fiscal 2023.

Considering these factors, in addition to the quality of our backlog, we do anticipate that we can maintain this profitability level on a total year basis in fiscal 2024, notwithstanding the lower volume and profitability impact resulting from seasonality in the first fiscal quarter of 2024. Selling, general, and administrative expenses were higher by $8 million versus the prior year. Overall, net SG&A expenses as a percentage of revenues were lower versus the prior year by 200 basis points at 11.3% of revenues in fiscal 2023 versus 13.3% in the prior year. We reported net income of $54.5 million, or $4.50 per diluted share, compared to $13.7 million, or $1.15 per diluted share in the prior year.

During fiscal 2023, we recognized 38 cents per diluted share of gains from unusual items, which include order cancellations and a non-cash tax credit resulting from the reversal of a valuation allowance previously established in our United Kingdom entity. Total year fiscal 2023 operating cash flow generated was $183 million, versus a cash usage of $4 million in the prior year.

At the end of fiscal 2023, we had cash and short-term investments of $279 million, $163 million higher than our fiscal 2022 year-end position, reflecting the growth in our backlog and the associated advanced payments for the large industrial projects, combined with strong working capital management. As we navigate through the coming fiscal year, we anticipate that our cash balance will continue to build as a result of the large projects in backlog before cash levels plateau and ultimately recede somewhat towards the middle or the back half of fiscal 2024, as a direct result of increasing working capital requirements in order to support project execution. The company holds 0 long-term debt.

Finally, in October 2023, we entered into a third amendment of our credit facility with Bank of America and included Texas Capital Bank as an additional lender under this agreement. Combined, this amendment increased our facility capacity to $150 million from the previous ceiling of $125 million. As we utilize this facility solely for commercial letters of credit, we felt that this was a prudent action in order to ensure our continued success across our end markets. Looking forward, we remain optimistic that the commercial momentum across our core end markets will remain robust throughout fiscal 2024. We are also encouraged by the profitability resulting from the operating leverage, as well as the commercial levers implemented over the past several quarters, and we'll remain acutely focused on executing our growing backlog as we navigate through fiscal 2024.

As we continue to assess the impact of these levers and associated quality of our backlog, notwithstanding the typical project challenges of timing and mix, we anticipate our total year margins for fiscal 2024 to be similar to what we experienced in fiscal 2023. Considering these variables, in addition to the strong commercial outlook across most of our end markets, as well as our liquidity position and the strength of our balance sheet, we are confident that we can sustain the solid results that we've delivered in fiscal 2023 and continue this into 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 one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press Star then two. Our first question comes from John Franzreb with Sidoti & Company. Please go ahead.

John Franzreb (Senior Equity Analyst)

Good morning, guys, and thanks for taking the questions, and congratulations on a great quarter. I'd like to start with the booking profile. The incoming order book of $171 million. If I compare it to the 10 years prior to fiscal 2023, you're roughly doing about $150 million of incoming order book. But we just came off two consecutive quarters of over $500 million of bookings. Can you kind of put into context what the opportunity profile looks like, what you would expect the booking profile to look like in the coming year?

Brett Cope (Chairman and CEO)

Well, good morning, John, and thanks for the comments and the questions. It's Brett.

John Franzreb (Senior Equity Analyst)

Mm-hmm.

Brett Cope (Chairman and CEO)

Yeah, I appreciate the lead in on the question on the two previous quarters. A little bit of timing, of course, in that Q3, what was gonna book, and as we went into Q4, we were very pleased with the $171 net for the quarter. When I look at what made up in the sectors of the quarter, it was kind of on average with the core oil and gas, good, strong utility content in the fourth quarter, along with good contribution to the new sector that we're reporting out in the commercial and light industrial market. As I look forward, I think that the cadence continues. You know, there weren't any mega projects in the Q4, given the run we had in the previous three quarters to Q4.

But that said, in my prepared comments, activity is still robust. There's. In fact, you asked a question, which I was thinking about as we were—as we prepared for today. You know, you asked me a question, a call or two about, you know, are we at halftime or where are we at relative to that? You know, I'm gonna hold to my, my answer in that last call. It's—there's, there's still a lot out there. We're very engaged. Timing is a little bit more uncertain, you know, given the run we just went through over the last 12-18 months, but, there's, there's still a lot in front of us.

John Franzreb (Senior Equity Analyst)

Okay. And just to narrow it down, you mentioned also in the press release and in your prepared comments, that we should be cognizant about the seasonality of Q1 versus Q4. And looking back again, pre-COVID, you know, normal seasonal revenue declines, I eyeballed it to be around 15% or so in Q1 versus Q4, but we've had some real strong bookings. You know, how should we think about the seasonality on a sequential basis this year versus historical norms?

Mike Metcalf (CFO)

Good morning, John. This is Mike. I'll take that one. Given where we are with our backlog, very healthy backlog, as we talked about in the prepared comments, I would kind of calibrate that a little more aggressive than the typical 15% that we've seen historically, probably somewhere in the 10% range, this coming year.

John Franzreb (Senior Equity Analyst)

Got it. Got it. You know, I'll just ask one more question, then I go back into queue. You know, the gross margin profile has been outstanding in the last couple of quarters, but you've kind of indicated that fiscal 2024 should be more like the full year tally versus the full year tally. What's the primary counterweight that makes it tougher to hold the second half 2023 gross margins on a go-forward basis?

Brett Cope (Chairman and CEO)

... the big one is just timing quarter to quarter. So, you know, as we framed up the prepared comments that Mike shared in his remarks, you know, in the project business, it's always timing. So even with the backlog that we have, there's still challenges quarter to quarter on timing, holds on projects, changes, where can we pull things in and move slots? That fundamental part of our model never changes, even with the rise in the backlog. So Q4, you're looking back over the number of years that you profiled this morning, you know, we do well, given the timing of when our fiscal lays against the end of the calendar year, construction schedules, and people are getting things done and closeouts.

But Q1, definitely both on the factory side with productivity and some ramp downs and ramp ups, and then just timing of people in the office, getting things done, signed, and in the house is always a challenge from November to end of the year run.

Mike Metcalf (CFO)

And if I could add, John, you know, if we calibrate on our trailing 12-month rate of gross profit to 21.1%, ex unusual is 20.8%, that's kind of the range that we're looking at going into 2024, you know, the low 20s. That's what we're targeting the business at.

John Franzreb (Senior Equity Analyst)

Okay, thanks, guys. I'm going to get back into queue.

Operator (participant)

Again, if you have 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 Senior Equity Analyst)

Good morning, Brett. Good morning, Mike.

Brett Cope (Chairman and CEO)

Good morning.

Mike Metcalf (CFO)

Good morning.

Jon Braatz (Partner and Senior Equity Analyst)

Brett, can you talk a little bit about the LNG landscape going forward? You know, are there still big projects being planned? And maybe what about additional capacity being added at current at existing facilities? You know, I read a lot about new LNG facilities, but I get—I guess, sometimes I get a little confused what's possible and what's not. Can you discuss a little bit about what the LNG opportunities remain?

Brett Cope (Chairman and CEO)

Yep. Thanks, John. Good morning. So as I mentioned a couple times throughout the last couple of calls, really, really pleased with Powell's position and where we stand in the market on the domestic LNG landscape. I don't think there was a project last year that happened that we weren't involved with in some capacity, including the ones certainly that we brought home and booked. As I look out, there are a number of LNG expansions and some greenfield that are still sitting out there. You know, comment earlier there to Mr. Franzreb that there's still some uncertain time in an FID circumstance around it.

But if I go back two years prior to the wave that we started a year ago last summer, you know, the cost outs, the estimating, the working with engineering firms, very, very active on a lot of these to size them up with the engineering partners and the end clients. And then you add into that, the growing business around hydrogen. We're seeing a number of those opportunities. They're sizable. And then there's a, you know, on the renewable side, around batteries and how those are going to get applied to a very, from utility scale, all the way down to the EV drive and the IRA money. We're seeing a number of process plants as well in the future.

So again, some kind of the same sort of comment around timing, scope, what's right for Powell. But again, the activity is very broad, much more broad than it was just LNG, two years ago.

Jon Braatz (Partner and Senior Equity Analyst)

Mm-hmm.

Brett Cope (Chairman and CEO)

We feel pretty good about all three sectors looking forward.

Jon Braatz (Partner and Senior Equity Analyst)

Okay. Brett, in your conversations with your clients, and 2024 is going to be an election year, and, you know, I don't know who's going to win, who's going to lose, but, you know-

Brett Cope (Chairman and CEO)

Yeah

Jon Braatz (Partner and Senior Equity Analyst)

If we have a executive branch that's a little bit more friendly towards oil and gas, would you see any significant change in the capital spending programs of your oil and gas clients, you know, under a new regime?

Brett Cope (Chairman and CEO)

You know, I don't—I mean, I think long term, John, it does every administration, but there's always a time phasing to it. If I go back to the administration change that happened in the last election, you know, there was more regulation put in place. I mean, there just simply was. We saw projects go on hold. There were new environmental studies and redos on the engineering side. We could see it all the way down to the design and how they were going to power the facilities, from having on-site turbines to putting all electric designs. So a lot of impact studies were done, and it reworked some projects.

You know, we are, we are starting to see, again, not to whether you believe it's good or not, we are starting to see some projects with more of the IRA credits leaking into some of the projects-

Mm-hmm

... right now. So yeah, I think clearly, if we have an administration change, it will have an effect. If it turns parties from the current regime, I think it would have an impact on the core oil and gas stuff longer term, for sure.

Jon Braatz (Partner and Senior Equity Analyst)

Okay, thank you. Mike, you talked a little bit about your cash flow and the cash balances are at $279 million, and you expect them to build a little bit here before fading in the second half. But, you know, when you look at the $279 million, how much of it, if I could say, is yours as opposed to cash advances?

Brett Cope (Chairman and CEO)

Hey, John, real quick. It's Brett. Let me, I, I just realized I missed the back part of your question, capacity. We are looking at an additional expansion in 2024. So we did the one in 2023. We're looking at a production capacity at one of our facilities.

Jon Braatz (Partner and Senior Equity Analyst)

Okay

Brett Cope (Chairman and CEO)

... in 2024, and we'll report on that in Q2.

Jon Braatz (Partner and Senior Equity Analyst)

Okay.

Mike Metcalf (CFO)

Yeah. And John, to address your question, you know, this is kind of the rule of thumb for us. We typically earmark about 15% or so of revenues to working capital. This new facility that we just entered into, that I spoke about in the prepared comments-

Jon Braatz (Partner and Senior Equity Analyst)

Mm-hmm

Mike Metcalf (CFO)

... that requires us to hold $60 million of liquidity at any point in time. So you kind of do that math, and you get a number in the range of $200 million.

Jon Braatz (Partner and Senior Equity Analyst)

Okay. All right. Thank you very much.

Operator (participant)

The next question comes from John Franzreb with Sidoti & Company. Please go ahead.

John Franzreb (Senior Equity Analyst)

Yeah, I guess just a little bit about the tax rate on a go-forward basis. What kind of tax rate should we be building into our models for fiscal 2024?

Mike Metcalf (CFO)

Yeah, we're building in a ETR of 24% on a global basis, John.

John Franzreb (Senior Equity Analyst)

Okay. And what's the CapEx budget? What was the final CapEx budget for 2023 and the expected one in 2024?

Mike Metcalf (CFO)

We spent $7.8 million in 2023. A large portion of that, as I mentioned, was the offshore capacity expansion. In 2024, as Brett mentioned, we are considering some other capacity initiatives that could move the number as we navigate through the early part of 2024.

John Franzreb (Senior Equity Analyst)

What should be a baseline number then, excluding the expansion, maybe?

Mike Metcalf (CFO)

Typically, I would say probably $4 million-$5 million would be your typical spend per annum. But then you have some of these, you know, some of these other anomalies that you have to put on top of that.

John Franzreb (Senior Equity Analyst)

Okay. Okay, and I guess maybe just one more question about the cadence of revenue recognition in 2024. You know, you typically have a fair amount of the book business flow through, but you know, we talked about the seasonality of the first quarter and the seasonality of the fourth quarter. Did Q2 and Q3 look similar, or is there an improving profile as the year progresses?

Mike Metcalf (CFO)

Yeah, I, I think if you looked at the, kind of the trajectory of past fiscal years, I don't think we would see a different trajectory. First quarter will be softer than the other three, and then it'll ramp up to Q3, Q4, and then Q4 is typically the strongest quarter of the year.

Brett Cope (Chairman and CEO)

Yeah, I think we talked about that when we want to call... So you asked a question about spikes, John. I, I don't, I don't—I think it's pretty level, level laid out the way we kind of entered, kind of finished up 2023 and kind of did the planning. Pretty, pretty steady as it goes, just following the trends, so.

John Franzreb (Senior Equity Analyst)

I, and I guess one last question, if I may. Are you still seeing a fair amount of smaller, you know, book and turn jobs flow through the P&L, or is this all project-based work, you know? And does that affect the margin profile at all one way or the other?

Brett Cope (Chairman and CEO)

We absolutely remind all of our operating units to take care of all our customers. Those small jobs and whether they're service-led, you know, quick turns because there was an event at a facility that needs quick attention on the service side or you know, a gear-only job, one or two sections, absolutely, we don't lose sight of those at all, and we're constantly reminding everybody to not just chase the big ones.

John Franzreb (Senior Equity Analyst)

Okay. Thank you. Thanks for taking my follow-ups.

Mike Metcalf (CFO)

Thanks, John.

Operator (participant)

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

Brett Cope (Chairman and CEO)

Thank you, Dave. As you've heard from both Mike and me this morning, we are very pleased with our fiscal 2023 and the fantastic financial performance that the Powell team delivered. I am extremely proud and appreciative of every one of our employees and how they are meeting the challenge the market has presented to our company. Based upon the markets that we serve, we continue to believe that fiscal 2024 will be another strong year for 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.