Brett Cope: I don’t — I mean I think long term, John, it certainly could have an impact. It does have administration, but there’s always a time phasing to it. If I go back to the administration change, that happened in the last election, there was more regulation put in place. I mean there just simply was. We saw products go on hold, there renew environmental studies and redo’s on the engineering side. We can see it all the way down to the design and how they’re 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. We are starting to see again, not 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 right now.
So yes, 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: Okay. 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 — when you look at the $279 million, how much of it, if I could say, is yours as opposed to cash advances?
Brett Cope: John, really quick, it’s Brett. Let me — I just realized I missed the back part of your question, capacity. We are looking at an additional expansion in ’24. So, we did the one in ’23, we’re looking at a production capacity at one of our facilities in ’24, and we’ll report on that in Q2.
Michael Metcalf : And John, to address your question, this is kind of the rule of thumb for us. We typically earmark about 15 or so percent of revenues to working capital. This new facility that we just entered into that I spoke about in the prepared comments 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.
Operator: The next question comes from John Franzreb with Sidoti & Company. Please go ahead.
John Franzreb : Yes. I guess just a little bit about the tax rate on a go-forward basis. What kind of tax rate should be building into our models for fiscal 2024?
Michael Metcalf : Yes. We’re building in an ETR of 24% on a global basis, John.
John Franzreb : Okay. And what’s the CapEx budget? What was the final CapEx budget for 2023 and you expect to win in 2024?
Michael Metcalf : 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 ’24.
John Franzreb : What should be the baseline number then excluding the expansion maybe?
Michael Metcalf : Typically, I would say probably $4 million to $5 million would be our typical spend per annum. But then you have some of these other anomalies that you have to put on top of that.
John Franzreb : Okay. And I guess maybe just 1 more question about the cadence of revenue recognition in 2024. You typically have a fair amount of the book business flow through, but — we talked about the seasonality in 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?
Michael Metcalf : Yes. 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 will ramp up 2Q, 3Q and then 4Q is typically the strongest quarter of the year.
Brett Cope: Yes. And then we talked about that I want to call — you asked a question about spikes, John. I don’t it’s pretty level laid out the way we kind of entered kind of finished up ’23 and kind of the planning pretty steady as it goes, just following the trends. So…
John Franzreb : And I guess one last question, if I may. Are you still seeing a fair amount of small book and turn jobs flow through the P&L? Or is this all project-based work? And does that impact the margin profile at all one way or the other?
Brett Cope: We absolutely remind all of our operating units to take care of all our customers. Those small jobs and whether they are a service-led quick turns because there was an event at a facility that needs quick attention on the service side or 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.
Operator: This concludes our question-and-answer session. I would like to turn the conference over to Brett Cope for any closing remarks.
Brett Cope: 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’m 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: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.
