My name is John Franzreb. I'm a senior analyst at Sidoti and Company. Our next presentation for the day is Powell Industries ticker POWL. For those who are not familiar with the company, Powell is a manufacturer of products that manage and control the flow of electricity in medium to large facilities. You're fortunate to have with us today CEO Brett Cope and CFO Michael Metcalfe. Following the presentation, there will be time for Q and A. Please utilize the Q and A icon to submit your questions and I will present them to management. That said, gentlemen, thank you for being with us. The floor is yours.
Thank you, John. Good morning to everybody. Thank you to the Sidoti team. John Franzreb, for giving us the opportunity this morning. As John noted, I'm Brett Cope, CEO and Chairman of the company and with me is Mike Metcalf, CFO of the company. I'll start with a little bit of an overview of the company on the slide deck and then hand it over to Mike to cover some more in depth on the, on the business. As John noted, we are a manufacturer of electrical products and solutions and large substations, which I'll come back to, that help control the flow of energy safely. We generally are agnostic to the generating source and we are agnostic to how you use the energy. Just like in your place of residence, you have a circuit panel.
We build the big utility industrial scale version of those breaker panels, breaker the switchgear and the box they live in. On this first slide here, we are largely an ANSI company. We have seven manufacturing facilities, six of them in the U.S. and Canada, one in the U.K. I'll come back to that in a minute. In the U.S. North American market, very, very prevalent and able to kind of do some things in terms of history and market presence. We are largely oil and gas driven. That's historically how we grew up here in Houston. It accounts for roughly 50% of our number over time in terms of backlog and revenue.
We are driving into the utility market in our home countries of the U.S., Canada, and the U.K., and more recently in the middle of your slide there, there's a commercial and other industrial that perhaps is showing up as a yellowish orange that's currently 15%. Growing more recently around the pandemic, that sector was released by Mike and the team as it's, it's getting a lot of attention in the market today. I go to the next one here. Just a picture of what we do, you know, the gray and red thing on your screen there. If it's the big breaker, that's just a big version, 500 lb version of a 15, 20, 30 amp breaker that you might find in your local residential electrical panel. We take that breaker and we fabricate.
We fabricate all that, by the way, right here in Houston, Texas. We procure the metal from raw copper, steel, aluminum, fiberglass, and we manufacture every 270 parts that go into that breaker right here and assemble it. We take that, we put it into a switchgear, which is a bigger metal box, which is in your middle picture. That metal box will have the breaker, will have a lot of copper bussing. That breaker is controlling the flow of energy. There is a lot of instrumentation and measuring devices that help control the flow of that. A lot of digital technology is on the front of the gear, a lot of wiring and know-how that go into the development of that, that IP.
We take that and frequently will develop, deliver a large substation, the one on your picture there. It happens to be a very, very heavy build that we do at a facility about 20 miles from here. That is an offshore specific design in that particular picture. I will show you a few other ones here in a second. Our market focus is 0-38,000 volts. We don't do residential, but once you get into 480, 690 volt and up to 38,000 volts, which is utility scale distribution, that is our key focus. We are generally engineered to order. We are just about all long cycle project POC accounting on our model from PO to full conversion of revenue. We enjoy very complex.
We carry a lot of engineering know-how at Powell. When our partners bring an RFQ, we bid on it and we go into the delivery process. We generate thousands and thousands of drawings, whether that's a million dollar order or a $200 million order. It takes a lot of engineering to get it to the floor and start cutting metal. Just a quick pictorial to show you a couple areas in a very simplistic graphic where we exist, again agnostic to generation, and we exist in the utility world to step up that energy to the transformer before you get into bulk power transmission.
At the top of the picture here, when you get to the other side of distribution, whether that's utility or say a microgrid or turbine at an industrial facility, lots of distribution on the other side to provide energy to the drives and the motors in an industrial facility or the servers in a data center. Noted here. The two standards, this is the world. The one on your left, we grew up under the ANSI standard. That is the predominant part. We do have the single factory in the U.K. where we compete with an IEC factory that allows us to serve global customers, especially as we grew up. Oil and gas. You think about tier one suppliers. ExxonMobil, Chevron, BP, they're around the world. That allows us to build agreements and deliver Powell solutions to, to them and their projects and their facilities.
Here's another example, still the offshore module on your right. But you'll find the predominant substation that we build is more of an onshore design. This one, this Power Control Room, is a trademark design that Powell's been building for nearly 50 years. This is modified quite a bit just in the 15 years I've been at Powell. Energy codes, mechanical sourcing codes around minerals, conflict minerals, making sure we're safely sourcing steel appropriately. Lots of regulation today in the U.S., 50 states, the provinces of Canada. When I, I just sometimes tell people, when I got to Powell, the wall in that building was about 3 inches. Today it's about 7-10 inches. Because energy codes have become much more intense. What we do generates a lot of heat.
We do a lot of HVAC calculations, a lot of HVAC loads, we do a lot of thermal management in the mechanical structure. You think about data centers that are generating that much more heat. Interesting how we can apply our value add to that developing scenario. Typical Power Control Room, when we're asked to deliver the entire solution. Again, the advantages of this is you're not doing brick and mortar build. As you're building a facility, either brown and ground, brownfield or greenfield, you're able to do the construction timeline, to do the pier, to do the cement work, and the modular folks can build off site. It allows you to speed up the overall build of the facility as you are deploying the capital.
We do this start to finish when we bring a client in and have the opportunity to build the whole control room. The goal here is to have this substation leave your circuit panel, it gets to the site, you plug in the external wires and you've got an operating system to distribute power safely throughout your facility. This is a growing area for Powell. It's on our strategy slide, which I'll end with here in a second. Electrical automation. It's not the process control side. The electric world is a little behind in applying digital technologies. We feel like we have a great story here to tell. We've been investing in asset management as well as our application side of controlling power efficiently and applying new technologies to this space as it is really growing logarithmically.
We think there's a bright future here for the company on developing and applying this technology to the future distribution assets. The DERs out in the world talked a little bit about primary markets. Again, we grew up oil, gas, petrochemical. Even in the last couple of years with some of the newer technologies that are coming on, green diesel, sustainable air fuel, SAF, the hydrogen, probably more blue today, maybe not as much green. Even carbon capture, we would put all those types of projects into that vertical. In our CNI, you're going to capture some of the other things going on in mining.
We just announced a nice job up in Canada last quarter in the mining area along with anything that would happen direct or indirect on the data center piece, and then at the top there on the right, utility is, has been a really good theme for Powell over the last 10 years, and we expect and believe that will be a continuing area of growth for the company over the long term. Mentioned this a minute ago. You know, as the energy side of things is really evolving, we're participating, so we're able to take a lot and have taken a lot of our know-how in oil and gas and are taking that into these other developing areas. You know, an oil and gas facility, a refinery of old, is a large, complex industrial facility.
If you think about that complexity in any vein of making anything, there's a lot of similarity in that. We can take quickly what we know how to do and apply it to these other industries. I think that's what you're seeing over the last couple years as Powell has really broken out with some of the growth of the company. This is how we view our competition. You know every engagement that we go into there's always some, some or all of the folks there on your left. ABB, Eaton, Schneider, Siemens. I would note they're all based in Europe. We're the only US based manufacturer publicly traded that is here. We always see these folks, they know us, we know them. Where we start to differentiate again is how we make our things.
We're completely integrated in our factory for our electrical products and then on the substation four of our facilities here in North America. We make these buildings in various capacities and designs for the local market, they largely don't. Up until recently they're, you know, Eaton just announced an interesting acquisition of somebody that was previously on the right side. Company called Fiberbond, but largely regional players on the packaging side where we do it all under roof, largely our competition will go out into the market and work with those folks in a relationship, but we take on the entire responsibility at Powell. I'll end with this slide. Our strategy really going forward is in three areas. It's as a manufacturer, technology.
Starting from the bottom of your slide, we are investing capital organically into developing and solving problems for our customers, bringing more products to market to grow share of wallet. We are absolutely investing in our services business to go beyond install and commissioning to be more relevant in OpEx and maybe even on the upfront design side, leveraging our engineering capability. I noted earlier on the electrical automation piece, really us and a lot of our competition are all looking at this and there's just demographically less electrical engineers available to the world. Yet we have this huge expansion of electrical assets and distributed electrical generation and need and you've got to maintain it.
If you do not have the people to do it and you are going to use your scopes and your meters like the electrical engineers like to do, you have to solve it another way. The end of that equation is automation. Lots of opportunity here and we are working on defining our piece of that for the future right now. We believe that is a good area of growth for the company. With that, I will pass the mic here.
Thanks, Brett. Just on the heels of that last slide that Brett spoke to, we spent a lot of our heartbeats talking about capital allocation. You know, as we exited the second fiscal quarter, we had about $389 million of cash on the balance sheet, albeit 50% of that will be deployed to working capital. Our liquidity position is very, very good. We do recognize what we have to deploy to working capital. We are spending a lot of time on driving growth organically. We've doubled our R D over the last couple of years along with the revenue. We spent about a point of our revenue on our R D. We did just announce three new products this last quarter that are entering the market.
Shareholder return and inorganic growth are always top of mind as well. We're looking to deploy capital to grow the business as we look forward. Now, when we look at the financial picture, clearly over the last five or six years we have experienced tremendous growth, nearly doubled our revenue. As you can see, through the first half of this year, we're starting fiscal 2025 very, very strong, $520 million at 27.5% gross profit. In the first quarter, we were about 24.5%. It's a seasonally softer quarter. Last quarter, 2Q, we ended at about 30%. On a first six month basis, about 27.5%, resulting in just under 19% EBITDA. Cash is also a very good story.
You can see over the last two and a half years, substantial cash, cash growth and again, a lot of that is due to advance payments for these large projects that we're executing. Terrific cash performance really driven by T's and C's and milestones and execution. When you look at what's happened over the last few years, you can clearly see in the bottom left, the book to bill. In fiscal 2023, we experienced four consecutive quarters of mega order bookings. By mega, we define mega as anything over $50 million. These were all well over that hurdle rate you can see in 2Q and 3Q 2023. Both of those quarters we booked two mega, two large mega orders respectively in each quarter, none in 2024, fiscal 2024.
Fiscal 2024 was just a lot of nice strong $10 million, $20 million, $30 million jobs, no mega orders. As we enter the first half of this year, albeit on the smaller size of mega, we have announced three mega orders through the first six months of this year. Our backlog, we ended 2023 at $1.3 billion. We maintain that level while we grow our top line. Orders through the first six months have grown 20%, revenue's grown 16%. We are chewing through our backlog at a faster clip and increasing our book to bill, the stuff that does not necessarily impact backlog. We are generating more throughput in the business. As Brett alluded to, the ANSI, the IEC, this is kind of a pictorial view of the ANSI world, which is in the blue, in that peach color.
You can see it's mostly North America, some parts of South America, Latin America, Middle East, Southeast Asia. The rest of the world is all IEC, which is fed, as Brett said, by our U.K. facility, the ANSI. The ANSI volume is all fed by our North America facilities. Thus, you see most of our revenue is generated in the United States, the international revenue is much lighter. Most of that is really generated out of Canada and to a lesser extent the U.K. When you slice our revenue by vertical, if you will, clearly we are 50-60% oil and gas petrochem, you know, core industrial volume, where Powell is clearly dominant. Electric utility has grown substantially over the last five or so years.
If you took a look at our backlog, and I noted this on our last call, our backlog, 29% of our backlog is represented by utility, electrical, utility work. It is a growing theme within the business for a couple of different reasons. They say the commercial and other industrial. As Brett said, we broke this out in fiscal 2022 because data center work is captured in that segment. That exceeded our 10% threshold. We did break that out. If you took about half of that slice of the revenue, that's probably attributable to data centers. Just from a profitability perspective, I mentioned on the first page really doing quite well on gross profit. We finished the year last year at 27%.
We're slightly higher than that through the first half of this year due really to operational leverage in the business. We maintain we're levering our SG&A, which falls down to EBITDA as well. There's nothing crazy going on in SG&A other than we do spend a bit, about a point, on R&D, which is in that number, but very good cost management on the OpEx side. Finally, on the balance sheet, we have a very, very stellar balance sheet. As I said, we finished the quarter at $389 million of cash, zero debt. A few years ago, we did have an industrial revenue bond that we had in for our Chicago facility. We retired that. Working capital, that is probably the, you know, the heaviest use of capital deployment that the business does require.
As I said, about 50% of that $390 million will at some point over the next 12-18 months be deployed to working capital. Whether it's things we don't make, HVAC systems, battery systems, you know, or just commodities, steel, aluminum, things of that nature. We are capital intensive and we do deploy a large amount of that cash to our projects. We've gotten very good at levering our T's and C's such that we are not paying for that. The customer's paying for that upfront. We'll sit on that cash for, like I said, up to 12 months until we need to deploy that cash. It generates very good working capital turns and return on equity.
Over the past couple of years on a trailing 12 month basis, we've returned over 30% on the equity value. That kind of wraps it up from the financial perspective. John, if there's any questions on the line, we'd be willing to take those.
Okay. If anybody has a question, please utilize the Q and A icon and represent the management. We do have a couple lined up already. Gentlemen, let's start with the first one. Question about do you foresee battery storage at power plants as a large business opportunity for Powell?
It is an active opportunity. I'm not quite sure how large it'll be because one of the things in the electric side of what we do is very code driven. In the battery world we've debated, you know, years ago, should we go into this, should we actually take it on? The two key pieces of that are the specification on the battery and the inverter, neither of which we make. And the fact that you don't have a consistent spec on the battery. It's kind of a free for all for how they apply it. That said, you're switching power again no matter the source. We actually have some ongoing energy storage projects that are growing in size, kind of like data centers. The power, as the power level goes up 10, 20, 30 megawatt hours, it's attractive to us from a distribution standpoint.
Yes, I don't know how big it'll be, but we like the business.
Interesting question about the gross margin and EBITDA margin. There are multi-year highs. Is this the new normal or do you expect a bit of a pullback?
I mean look, we, when we exited COVID and we were sitting on backlog, you know, at margins in the, that we sold in probably the mid teens and then the inflation escalation really, it really stung us. I think in the fourth quarter of, we exited the quarter at 12.5% gross profit because we, I mean we did not have any recourse to go reprice our projects. We have since taken a number of commercial and operational actions. Whether it is shortening the validity time on our proposals or it is hedging copper or passing through the engineer component costs from our suppliers onto the customer. We have generated a lot of processes within the business that have helped buoy that gross, that gross profit that is in conjunction with, you know, the pricing action.
If you took a look at price over the last three or four years, it's not only offsetting the inflation that we're experiencing, but we're also getting incremental price due to the capacity constraints in the market. Thirdly, we have a very large footprint in Canada. 350,000 sq ft here, $500,000 sq ft under roof. We have just a very large footprint. When you fill that footprint up, you generate tremendous amounts of operating leverage. That is what we're seeing over the course of the last couple of years. You couple that with just fantastic project execution and risk mitigation that is culminating into the margins that we're seeing.
I noted on the last, the last earnings call that we experienced through the first half of this year in that 27.5%—roughly 125 basis points of project closeouts. Those project closeouts are over and above what we sell the project at because there are inherent risks in the project. So our base case is in the 26%-27% range. Once you strip that 125 basis points out, if you can maintain the discipline and the excellent project execution going forward, which we aspire to do, there will be some upside to that base case.
Certainly it's been great so far. Question about, you touched on this in your prepared comments about the data center market. Maybe just a little bit of color of what you actually do in the data center market.
Yeah, we've always built data centers. If you go back to the pre pandemic time, post pandemic really when the world became constrained on supply, the ships off the Los Angeles port which made the news, they all started coming here. So name brand colos, their engineering partners, really more what we would call contractors, companies like Clayco, Holder, Rosendin, we do the outside the data center really well. So the energy pipe, utility generation, genset that's going into the data center is primarily medium voltage and that's a sweet spot for Powell. When you get inside the data center, there is some medium voltage but there is a lot and from what we can tell, a growing voltage requirement for low voltage which we do make. We just don't make the particular kind that they like. Again, spec driven, we make a withdrawable breaker. It's called a UL 1558.
Most of the specs come out, it's called a UL 891. Most of the multinationals we compete have a version of this. We just released our version one I noted on the call last month. We are allocating some capital to that space looking for opportunity to match up and find our way thoughtfully in this space as it is big and the more we learn about it, you know, it's also a speed element to the construction that is very, very fast and I'm sure you might be hearing that from others in the space. It's an unbelievably fast cycle in the build. We are interested in it.
We aren't turning the whole company to it because we've got some really good things going in other verticals, especially utility, and we do see some data center pieces coming from the demand growth through the utility piece indirectly. We are interested into it and I believe we'll continue to find positive momentum in this market over time.
Fair enough. Question about the book to bill. You touched on this also in your prepared comments. It was over two years ago. Now it's running about 1.1. You talked about the mega projects. Maybe just some color on the opportunity profile with what's the demand profile across the industry on a go forward basis.
Okay. So in the oil and gas petrochem sector, I mean gas fundamentals have and continue to be solid. You know, with the current administration, it's clear activity really started getting going right after the election and it just has continued to amplify in the months since. It's always timing and certainty around FID and funding and financing. You know, behind the scenes estimating and engineering what ifs, it's very broad and very, very, and I made a comment last earnings call about maybe having to invest in one of our facilities. That does really well when you have coastal facilities, large substation requirements accessed by water. We have a very large 60 acre construction yard that has available land that we picked up over a decade ago. We may, we've done two expansions over the last six, seven years.
We may be looking at another one here if we can be convinced that the timing of this thing, this next tranche, gets real utility piece. You know, again, I'm very tuned to this market. I have been, as I noted, my entire time at Powell. It's great, it's great conversation. I mean, to see the utility folks engaging us and I'm sure our competitors in much more strategic discussion about the demand growth over the next 10-20 years. Not something I've experienced before, you know, a lot of questions on the regulated side how quick they can really move. And then there's a lot of conversation about behind the meter opportunities to quickly move and fill gaps. Those are going on outside of the utility piece.
You know, it's a broad conversation and it's very active. As I already noted on the CNI side, it's still opportunistic for Powell, but we are investing in it and hard to predict how far that can go. If any one of our products that we're rolling out now, as we expect, will be successful in the market, we'll be challenged with capacity in the near to midterm with doing the next thing.
Question from the ROTH on LNG market, what are you seeing now with the moratorium lifted?
Yeah, the potential is, it's big. One of isn't John Sedoti, but I do get asked on the calls about, you know, how much out there, is there more out there, what inning are we in from an MPTA standpoint in terms of what we've executed as Powell? I haven't really done the math on like all available MPTA produced in the North American market, but I suspect there's more in total that's being considered, at least going forward than it's already been produced. That's through expansions and new greenfields. Because some of these expansions that are being considered are pretty large and you could almost call them their independent greenfield. I don't know if they all get through because you got to build these things.
A lot of resources on the construction side, you know, each one of these when they're built are anywhere from 3,000-7,000 people at peak. You need a lot of resources, but the potential is very large over the next five to seven years.
Certainly sounds. We'll sneak one more question in. After the phenomenal growth in recent years, are there any operational constraints? You also touched on this, Brett, labor capacity, supply chain, that could maybe delay execution?
No, I don't think so. I mean we have shared that we are, you know, the growth of the backlog and the revenue profile, existing facilities, fixed assets, we're probably running 80-85%. We continue to look at our shift work. How do we work more thoughtfully? Mike noted on the productivity piece really still opportunity, productivity wise, applying technologies and machine learning and AI in our facilities. We're working on that through our manufacturing teams. The products that we're launching now into the space that just came online. The 56,000 sq ft. We expect, hope, expect to be challenged with the next capacity need. We are building playbooks of what that means about buying or building out in the world and how we would do that efficiently. On the long cycle stuff that makes Powell Powell today.
Historically we've shared that we've solved, we think, the next step of engineering, that front end work that you've got to do to produce thousands and thousands of drawings. That's the first piece of everything we do. We've now grown beyond our facilities. We opened up a center here in west west Houston that is growing nicely. We're engaging some low cost engineering relationships that we've been in for a long time in other parts of the world. What can they do and how do we grow their capability beyond just takeoff engineering to now engineering start to finish certain elements of the product to enhance productivity. We think that we're addressing all that all the way through the factory fabrication. We've got plans in place to continue to pull the trigger at the right time, spend the capital.
We are well positioned to take on as much as we can as the market's going to give.
Okay gentlemen, we are out of time. Any closing comments?
Look again, we appreciate the opportunity, really. Thank you for the participation today. I always like to focus on the people of Powell. You know, the long cycle project business is not easy. I've spent my career in IT at ABB 20 years. And the 15 years I've been here at Powell, I can't say enough of how important it is that you also analyze that part. To take a project over three years and deliver it and get all your cash as a supplier, it's not easy. I can point to engineering companies that have gotten chewed up in this business. I can point to suppliers. Powell's the best. We do it really well. It isn't easy. It takes a lot of effort and it is a differentiating factor for our model.
Thank you both. Enjoy the rest of your day. We appreciate you here at Sidoti and Company. Have a great one guys.