Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Powell Industries Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] I will now turn the conference over to your host, Zach Vaughan with Dennard Lascar Investor Relations. Thank you. You may begin.

Thank you, operator and good morning everyone. We appreciate you joining us for Powell Industries conference call today to review fiscal 2020 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 where a telephonic replay will be available until August 12. The information on how to access the replay was provided in yesterday's earnings release. Please note that information reported on this call speaks only as of today, August 5th, 2020 and therefore you're 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 result 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. Now I will turn the call over to Powell's CEO, Brett Cope. Brett?

Thanks, Zach and good morning everyone. Thank you for joining us today to review Powell's fiscal 2020 third quarter results. I will make a few comments and then I will turn the call over to Mike for more financial commentary before we take your questions. As a result of the ongoing challenges created by the pandemic, the enhanced safety procedures and protocols that have been implemented across all of our operations continue to be in place across the business. Our top priority has been and remains the safety of our employees, customers and suppliers. I am proud of our people and our partners who have stepped up to this global challenge. We continue to support each other and our customers as an essential business and all of our facilities remain open and 100% operational. Despite the COVID related operational challenges, we experienced solid margin performance and reasonable cost efficiencies during the quarter. Third quarter revenues were $118 million, down 13% when compared to $136 million from the third quarter fiscal 2019. Revenue declined slightly in the quarter, largely due to a shift in our backlog profile. Over the past few months, as we have completed and shipped a large amount of shorter duration work, we have started the work on new projects that have a longer execution schedule and complexity profile. Despite lower year-over-year quarterly revenues, third quarter gross margin as a percentage of revenue was 18.1%, up 60 basis points from 17.5% in the third quarter last year. In addition to increase efficiencies and place a stronger focus on cost, we took the difficult but necessary step to restructure the business by making adjustments to both our fixed and variable costs in order to align the business with current and expected activity levels. We reported net income of $3.5…

Thank you, Brett and good morning everyone. Revenues for the third fiscal quarter of 2020 decreased 13% to $118 million compared to last year's third quarter of $136 million and continued softness across our core industrial end markets. Orders for the third fiscal quarter were up $81 million, a 44% decrease versus prior year. The fiscal third quarter book-to-bill ratio was 0.7 times revenue. Reported backlog at the end of the third fiscal quarter was $532 million, $125 million higher versus same period in the prior year. Domestic revenues decreased by $12 million or 12% to $91 million versus the same period one year ago and international revenues decreased by $5 million or 16% versus prior year. From an end market perspective versus the prior fiscal year, revenues from our industrial sector decreased by 10%, the utility sector was lower by 37% while the traction sector increased by 23%. This volume reduction from the industrial and utility sectors is driven by the execution of the existing project backlog, the increase in the longer lead time projects in our current backlog, as well as the overall market softness across our industrial end markets. Gross profit in the third fiscal quarter of 2020 was lower by $8 million versus the second quarter to $21 million on a 22% sequential volume decrease. Gross profit as a percentage of revenues increased by 60 basis points compared to one year ago to 18.1% of revenues in the third fiscal quarter, primarily driven by the improved project execution and operational efficiencies across our US facilities [Indiscernible] Selling, general and administrative expenses decreased by $1.6 million or 9% versus the prior year and were $15.5 million in the current or 13.1% of revenue compared to 12.6% of revenue a year ago on the lower volumes. On reported…

[Operator Instructions] Our first question is from John Franzreb with Sidoti.

Good morning, guys. How are you doing? I just actually want to start with the deferrals you're talking about, jobs that are moving, I guess, out of Q4 into 2021. Are they moving into the first half of 2021, to the latter half, what are your customers' kinds of -- what's that timing kind of look like at this point?

So -- hey, John. It's Brett. The push-outs would be Q3 and Q4. I don't know the exact timing or the total number, but it's -- it's about $15 million in planned revenue pushing into what I'd say the first half of '21 right now. Probably a little uncertain timing because things are still -- some of these projects that are moving out they're kind of -- some of them come back and say, hey, we need to kind of hold and so we put engineering on hold. So the schedule may not be firm yet. It may get revised again as they sort of replan.

No -- but just to make sure I understand, this is existing projects in backlog, this is not new quotation activity or new orders that you'd hope to get.

That's accurate.

That's accurate. Okay, great. And the sizable drop you saw in the utility market in the third quarter, can you kind of expand upon what you're seeing in utility market minding what happened in June quarter? Which [Indiscernible] I am kind of surprised about but also you expected to see in the coming six to nine months?

John, I'm sorry, I didn't catch the very first part of your question.

You just saw some drop in revenue in utility market --

Drop from the utility market?

Yes -- no?

Yes. John, this is Mike. That was really just a function. We had some large jobs that we've burned out of backlog. The utility market is, as we sit here today, is stable as is the traction market. But that's really just a function of the project timing.

Sorry, John, I misunderstood. Yes, it was on the report.

Okay. No problem. I'm actually on a sale, so I apologize for the -- if it's spotty connection here. And with that in mind, one last question. Regarding your restructurings, are there certain units that you're winding down more so than others as you reevaluate the outlook in the marketplace? And with that, I'll get back into queue.

So the restructuring of the business, John, hit predominantly a larger percentage of the Houston based operations where we do see a large -- a larger part of our revenue from the oil, gas and Petrochem market along the Gulf Coast. So, yes, it was heavier here in the southern part of United States. All the operations did adjust but heaviest here.

We have a follow-up question from John Franzreb with Sidoti.

Okay, guys. I actually want to ask about pricing of new jobs in the competitive landscape. Can you talk about what you're seeing out there and how new jobs pricing out for you?

So a lot of variability. I think for the -- what's available when you look at our comments around utility and T&D, generation as well as traction jobs no real change albeit those jobs typically are more competitive anyway. They tend to be a little smaller in size, a little less complex or -- in comparison to say a large LNG job or a large refiner job, a little more straightforward, not as much low voltage content sometimes. So there aren't as many changes throughout the job, straight medium voltage. So typically those prices lower anyway. So I haven't seen any marked changes in the overall pricing environment, but I would expect that to hold as the uncertainty continues. And if we look back and compare to '16, '17 as we entered the last economic down cycle, price competition I would expect to increase for infrastructure-related projects.

No, I guess along those lines what would your expectations be -- it sounds like you're bracing for a -- at least a modestly long down cycle. How long you think it's going to be? Are you thinking about a year, two, three, five, what are you kind of setting the business up for at this point?

A lot of scenarios, John. I think it's a lot earlier to tell. Again, there is a lot of data out there. There is positive data that says LNG pricing recovers and part of the momentum that we -- that less in this crisis. Could recover quicker than that and then there is data out there. Just look at the majors on their cash conservation moves, they're making big moves and you got to believe that's going to affect their CapEx and OpEx spend. So we're trying to triangulate and formulate like yourselves and everybody else. And as we said in the comments today in the prepared remarks, some of the projects already in the quarter are sliding out. There are a few others that people are trying to hold on to and we do have -- we're pretty busy on the inquiry activity but it's sort of a cost out, redo, and they're trying to figure out what their landed price of some of these contracts are going to be and how they're going to justify the job. So I think it's going to be pretty uncertain through the end of the calendar year, and can't really say into next year how far; but a lot of factors here. We're trying to watch and play for.

Ladies and gentlemen, we have reached the end of the question-and-answer session and I would like to turn the call back to management for closing remarks.

Thank you, David. The pandemic has caused a shift in how we manage our business; think about workforce planning and how we execute our work across our footprint. What has not changed is our commitment to our customers and to our highly talented and dedicated employees. The strength of Powell, including our proven operating expertise, is extraordinary economic environment. Beyond COVID-19, we continue to focus on our employees, customers and communities and maintaining liquidity without compromising our financial stability. By managing our business and aligning our cost structure to support customer activities, we will be well prepared to respond to favorable industry trends that remain a critical driver to the recovery. 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 all next quarter.

This concludes today's conference. Powell Industries thanks you for your participation. You may disconnect your lines at this time.