Atkore (ATKR) 8 Aug 232023 Q3 Earnings call transcript

Good morning. My name is Jean Louis, and I will be your conference operator today. At this time, I would like to welcome everyone to the Atkore Third Quarter Fiscal Year 2023 Earnings Conference Call. All lines have been placed in a listen-only mode. After the speakers’ remarks, there will be a question-and-answer session. reminder, is a recorded. As Instructions] this being conference [Operator Thank you.

Relations. like I President conference Investor to over now of you. to and Vice the Deitzer, turn would John your Treasury Thank host,

You may begin.

everyone. morning, CEO, and as good and well you, I’m today Waltz, as Financial by Chief Johnson, joined David President Bill Officer. Thank

your questions take Bill will comments by and David. We after

involve results events I risks Company. today’s or may forward-looking projections we forward-looking results may would like make that the such to or uncertainties contained of remind differ could important filings materially. those Please regarding refer projections and everyone actual to press or future factors actual statements. our SEC that Such to cause performance identify from our statements during in differ materially this call, release, financial which in that Statements

any per are reference measures adjusted EPS to means presentation share. Adjusted are adjusted discussion any presentation. and comparable measures today the to EBITDA diluted per available of our today’s Reconciliations or and EBITDA, a the in appendix GAAP earnings share to most and adjusted non-GAAP earnings In measures. EBITDA of reference non-GAAP EPS, in adjusted means addition, diluted

turn Bill. over that, it With I’ll to

and everyone. John, morning, good Thanks,

no Atkore injured. thank the primary incident want are there local pipe the incredible facility our goods was Albuquerque, The our that discuss of team address I our efforts Poly safety in and of the our publicly our contained has United community finished a Before we New been ground. where officials stored. always occurred health and the Systems the in of to and on fire fire and facilities. briefly one quarter, was fire concern. The one I at local Mexico, Sunday, an HDPE is On exterior want yard to employees our of

the this our outlook. stakeholder majority expect of we meet at confident ability nationwide, seven terms our in financial HDPE as With impact customer needed. redirect orders XXXX this we and to are to incident do production impact of not our facilities time, In

third Now, for starting year, QX. delivered on we up growth higher Slide in than better X expectation Volume the QX. volume earnings full with X%, anticipate in quarter volumes which line and expected results digit mid-single the the for was in as will ramp quarter. We for is in our our performance up

record Our quarterly the for we results execute planned strategy. pricing XXXX. the strong, year to us have employment in compare very the seen to and of all-time reflect our last highs cashflow capital and remains enabling Year-to-date normalization

in we will share bringing During million. repurchases solar the we treatment to In of Act, cover the Reduction total related change of needed details and $XXX David our million shares, impact. third our $XXX accounting year-to-date quarter, credits to Inflation repurchased June, we determined the that to

of increased results three the today not take have our growth sustainability ago, earnings are quarters of performance by first our We EPS. model, the only in year year and encouraged our strength have outlook of the determination business full but our results for reflect stability the underlying released adjusted team from and fiscal The our those this to step the execute years initiatives. business are and we quarter and our compare of versus When into we this future. on back I improved strategic and several of the demonstrating deliver a structurally

With call to that, turn the I'll David. over

morning, everyone. and you, Bill, good Thank

model, in Bill or regarding credits that accounting transferability the could related X, treatment our Inflation grant use GGAM, accounting the the Slide Act mentioned. of assumed to credits to Reduction solar a address majority to I we the Previously, for government had we of to Turning solar want change the customers.

income as can fiscal of no XXXX, a these tax cost sales. them we'll September XXth we our provision. to year benefit for due reduction Instead, that of our to credits recognize determined we June, recognize in longer However, year-end as a

Under in and For QX these EBITDA of the million method, credits sales and $XXX of beyond, of $XXX using we a reported as benefits adjusted and million, sales. net would the to GGAM reduction will respectively. cost from grant accounting model FY’XX the government record we be have

our our would rate have In was been accounting tax that the Regardless been adjusted addition, $X.XX. have EPS expectations. framework, diluted and XX%, QX strong quarter a of our would surpassed

the in with million. Slide consolidated EBITDA Moving to sales We results margins adjusted our was of $XXX adjusted were our performance $XXX were net pleased on EBITDA the In X. quarter, third and million, with XX%. quarter, margin

down previous our business highs, record still of strength resiliency is versus this year-over-year While and model. it reflects the

slide, to quarters rate previous credits higher-than-expected expected on less helped treatment the benefit accounting our the quarter recognized lowered $X.XX. in that tax a three benefits for our the contribute tax As third IRA This I the have X% change solar our tax in since QX. mentioned with associated in we the to of adjusted of than lower rate effective EPSs $X.XX the

bridges. our QX resulting X% up X%, over down when ‘XX consolidated and with PVC outperformance, were S&I up to as volumes mid-single year-over-year. unfavorable the digits mix for to by X was FY Turning our Volume in expected Slide compared quarter.

strength products. impact, Excluding as our a work way trends normalization would X%, the have volume up been XX approximately plus through us entire This lot percent PVC-related business confidence our in benefit. with of these Atkore’s the a of gives we in the incremental PVC

QX, our volume sequential growth Regarding XX% with saw we in products, continued quarter-over-quarter. PVC up

of segment products. market's Moving declines pricing driven Margins the and than continued to offering. volume with expected, and compressed our our and year-over-year segment, margins by were PVC-related very Slide service X our normalization and better electrical we're in Nonetheless, the value in results. recognition our pleased

costs the particularly dollars Hobart we incurred challenges related magnitude Under is achieved conduit of startup strong Ramping but cost S&I This will still given GGAM adjusted the facility and to one-time our input excited XX% this segment margins growth which electrical our due now and future additional margin we're X% very have very of S&I adjustment the adjusted S&I some portion in the robust due sales. selling is facility. incur, new supply EBITDA of during EBITDA resolved. in million some in we a costs that lower plant. credit recent the the have in up on to been year-over-year our business side, of the our largely chain for primarily quarter. recognition changes would've segment. from steel to average compressed infrastructure sales Net simple, never up This the one-time EBITDA declined benefit In the volume the to XX% to were volumes at startup performance, solar market S&I quarter. this Adjusted due reflects of steel costs. method, several in products primarily is prices, the the of to a addition,

to the XX% with the and sheet. the be period period, our continue Year-to-date, Moving up to our Slide same balance strength net our cashflow and fiscal from income X, of cashflow XXX% pleased of compared was over operating we of activities to XXXX.

drive and going portion the We As we continue year, year, with an our drive of that expenditures to believe positive many in sheet will initiatives results strong of facility invested come. strength of investment record that large to against our provides balance growth capital cashflow for highs years to more million this important results and the company's our we future. than for last expansions a foundation $XXX

back I'll turn Bill. it that, to With

Thanks David.

lies as XXXX the through prepare out close look with we've pleased year, ahead progressed for how future. we're and are we excited towards to and We the what fiscal

our $XXX variation the Moving has in is provided outlook in projections back we the QX that X, our accounting, our Therefore, adjusted caused midpoint in associated some earlier Without to a to products our in and Slide solar on would've we million. outlook the of EBITDA projections. EBITDA for current in current discussed change sales of May. credits our slightly outlook adjusted for tax year this full position increase versus the year been

by processes adjusted and raising strategy, and incredibly still Turning in comparing illustrated year. Taking adjusted the EPS the a quarters have EPSs despite proud XX, between back, the against of to and we've we this for outlook Slide variation I'm adjusted methodology. team, we expectations, the both EBITDA are changes place. for previous under step these

market, focused future the our sheet, of and long-term goals. in look growth With excited into strength remain our the I'm position achieving leadership we the and on balance trajectory, as

we'll the that, line open for questions. to it turn the operator over With to

first question the line [Operator comes Instructions] from Chris Your of Markets. Capital Dankert Loop of

is open. line Your

guys. morning, Hey,

quarter, and first of off, walk but me quarter benefit the guess a EPS. a little was the hindrance the it accounting, like terms me in into I if is on in slow a fourth you can forgive seems the GGAM So, third I'm through, just but it

for Can using I me if misunderstanding the that think kind I'm is of - XQ. you that how both same like XQ why like frame that up we're accounting in just again? in just and

I'll Sure. this one take Chris.

models, when a basically had to the make adjustment. So, we we switched year-to-date

worth different quarters and of three QX in that's impact why actual numbers. numbers than in have the the we QX adjustment you QX, therefore, see So, the

I because was fiscal got couple on of because quick our the changed that this questions. just think a everyone's this, some of sure why I'm reason points we year. Basically,

our us in you read period IRA in We due transferable time time a if fiscal are our September, would fiscal during period just would here year-end. are a transferable the had They generated our ends this will the that you where ‘XX this unusual from they're future. calendar year have If have for to and not. the be been transferable. we realize obviously of in FY of the bill that year not They credits

EBITDA, back accounting, and overall for to year a had to negative therefore, a the EPS. change and go to adjusted full slight improvement So, impact the see we you'll

next in a to rate. we'll when no in effective I will EBITDA and think make because impact think a transferable, slight year into have going other more we back because they our tax sense lot almost I be model forward benefit it'll adjusted switch the

in as that stocking channel That's the the to what much past pretty on healthy comment in can still out you here, a you there? were extremely the mentioning maybe Thank quick terms cases. looking even And of you're levels? and think follow-up I things inventory were some in seeing just helpful. so in the breakdown. I case lean you mean, for Is

Bill Yes, In to Chris, would - ahead. say Yes, healthy. I It's I lean. to healthy here. buy words, expect don't it's anyone other

our thing, and are get on we time should the as of frankly really basically because our competitors stage, shipping be fiscal product this line. year at us of quite a that good next for even into type So, spring

of adjustments I therefore, us. need any the in no but behind are So, inventory there's channel, think type

we mid-single mentioned shipping as volume we're full means healthy really the year here. in that call, a and up we expect QX So, coming during well, the for and digits

you. Thank

The Dray comes next line from is open. the of Your question Deane of line RBC.

of giving bridges Thank the on provided for I page really an all you. for the what kind to especially kind that midpoint us Good appreciate Hey, it basis, morning, year. and keep you've of XQ the nine, apples-to-apples been would've everyone.

appreciate So, that.

spirit Just guidance, know for in for accounting the give of and the having of but you for us ‘XX be into color you're year well. not change framework COGS - any ‘XX transparency, because I helpful a start model? on as would It that next to GGAM to can ready

basically solar tax impact is, look quarters, our what through you two so if little we suggest had into first COGS. at I of Yes, the a would year-to-date bit

and online, if been November. next And into switching a QX things have would've new these which so clarity that the on have offsetting in little slightly year, with will and more forth. to bit give back to will be consistent will plant that you be be some QX all we'll going then together. model, pricing more because so credit it slight would because one I it be So, that mean, more of favorable sort of we we'll probably GTM we will add some the what on

for I’ll questions, we're Yes, and XXXX at and know day we're - all year, not I the and of defer still EPS. EPS the end then the plus but throughout of $XX Deane, the comfortable this, with financial raising

days. ahead So, be we been and a that up throughout through in to contained, changing facility in that's fire we in couple are this going a anticipate already we're running of accounting methods

straight system business what. ahead are Atkore and the leadership So, no moving matter

All appreciate that. all right,

hearing can noise about inbound that's in accounting more we the the normalization, quarter, biggest then aside pricing talk set that get. we calls of we area around in been if could. specifics the because the So, probably of some interested I'm fundamentals and really

Thanks. - any in So, changes the including and and being it demand market on pricing, how which competition Bill, the us thought for geographic, would quarter, better ended estimated. just this costs up end than into what had factored side, what any - how we frame we input those

question it's your going it last statement, Yes, to anticipated. face better I but some so as part still go we forward, headwinds better than Deane, We're we your think of anticipated. was than to

if out in quarter, we PVC, prepared David even X%. you remarks, covered think were this the I in pull up

predicted to David, products want last we track this compliment probably still with we've to team the year than management So, on the normalization year, I exactly out everything going emphasize, for anticipated, but some doing or next over better two. play here. how is anticipated. the we're We within PVC like A, well We're price

again, You off. see delivered I'm But and accounting here, XXX I'm we anybody correct if that changes. guided XXX - before accounting the talking this before talking all directional where I'm stuff. we so

have really up pull anticipated. really quarter, doing And you X% when things, with going a the those to So, better a even all QX we strong had is strong volume. Pricing out PVC. we're

attributable is to more markets solar in coming the out. playing the initiatives other to The from mill is think but I that everything good, us. quarter it are up Now,

So, reasonable in we self-help addition our markets. definitely are doing to

I'm I So, future. Deane, been, as for ever excited the have

Thank you.

Your from Andy comes next Citigroup. the question line Kaplowitz of of

line open. Your is

Hey, loose have. peers, good mentioned haven't destocking so you everyone. seen you call but morning, let's other, it Bill,

you in you What if eight modestly from small then sort maybe non-res is XX versus your there's how sales would characterize you to could marketplace to for in GGAM that? and of outlook five the from you res what's ‘XX And know XX. think So, to lowered remind volumes? I differentiating down a there. impact do I us

precise like talked With look a ago if destocking, volume we, something, their about other to part you or year Andy. regards our I question, their in but I back Andy, behind us product to lines. at have products. that's great then forgot In to and so - time, months you others, Yes, nine think words, went would've regards again, or ago,

the forth obviously Residential go come is we there. really other is than going forward. The Manufacturing's good and think infrastructure best we're markets. so going yet well to So, well. weaker the is and I as

to again, all what we self-help our to but there. expected I'll of if within own separate … kind revenue, regards you then So, anticipated or with turn over David, And

It's little Yes, look impact it's saying. in versus kind that's what had we've up. at with of been Andy, the just it's exactly be expected a the you difference, commodity of line you going where ending if topline if we just volume, to see what

right really focusing in is So, we've been on to number me, that volume line what important and predicting. it's

And performance? to color your give talked in electrical increasing the pressure. all really And just end, that you last maybe degraded of that's guys, at a sequentially quarters bit, us little margin guys. pricing helpful, You it could little into more adjusted couple despite but slash margin a EBITDA hasn't about

XXs you helping fast simply here as is it is dropping maybe how into So, for Atkore, just productivity increased costs and much so that sustain are margins forward? the well moving

inflation the have team's as in operators and but Commodity everything having we're good different forth, not conservative as in the dropped Yes, Obviously, I driving facilities doing said think our maybe there. but yes, so there, we're you costs productivity and much pricing. is are ways. we Andy, with

well. So, doing that's

outlook, guidance our fiscal for moment. the November We look we're good year, I'm I going into think the to you is raised at really Deane be that the asking But through it's we still say but set when we to to a next year just probably as do made here. mid-XXs talking to would I go earlier I forward but guidance going foreshadow and a this statements, question, about, high not think and too comfortable was yet. is haven't with I next year XXXX really all year

spot. but So, Andy, hopefully we're in a your good follow-up

then Volume one infrastructure Bill. in moving And safety thought just I and capacity helpful, color growth for still more bit. and forward. a good. Volume no, your little to starting ramp decelerated is was Maybe me, QX. is solar volume good. And Yes, still

So, what in forward do you see segment? moving that

the two Yes, self-help. because that divisions of be the stronger of a will

here We month. the just electrical fiscal a year literally last have will that just shift you will on hit probably solar expect, But perspective in making to in more division that other that. shipments a But the a could happening like from are the mill started as management in the And get growth ‘XX. there's to from shifts and you sense like shifts volume one help in both guys up bullish and three that when drive two I team ramp hopefully QX. things things

Some of that including will self-help, be solar. our

Very helpful, guys.

you. Thank

Chris Securities. Your comes the next Moore of from line question CJS of

open. is line Your

taking a questions. guys. good Thanks for of morning, couple Hey,

Just, some we're characterize in last little positive that Any how HDPE a you to and of XX maybe the the hearing months? I'm carriers. kind there? or just curious from XX seeing at XG bit over would surprises you're CapEx people if that slowing advancements spending negatives

very have, - what but of much - the Inflation different, things back Yes, optimistic the for little be I and Reduction seems now, to least you part a - slower. go the at billion. Act How I directionally, bit feel Right big of one number every hear $XX future. we was is, I

So, do if so out to deal that way the with called access funds this to someone other where infrastructure the with you time already government US and sees first XX in Unlike to home. and bead, had do money, what's allocating fiber that versus a broadband has the the allocate the the regards States optic forth. have to is how government XX

but stage, it's we keep again, isn't is Chris, at we just back is delayed news and last a ready So, that to in raised and bit your still strong we've than HDPE hitting good experienced my as The point, money trouble decade. guidance, this all expect, over going infamous saying, they I anticipated the what States little the mind, as the coming. that to

what a you this in year through ‘XX. of get performed fiscal on that year, team's where So, top it, look of confident out and fiscal you next the to add question halfway add starts that just year, we management where it's to we

cylinders. cranking the great are right, short-term ago slightly we're investing, we would HDPE, stronger. and be to full again, We're of year you expect So, cash flow,

‘XX we're I or versus calendar Got it. there might ‘XX in Very versus big - do look are might one, be giving helpful. was ‘XX? in I a know actually not picture, maybe concern just things you November. here, ‘XX that And next you more at my that guidance in better we'll things little ‘XX, that

more that optimistic at reason year had slightly I'm to looking think precision forecast are least single the to X%, back. reasons. I ‘XX of I'm start like I Dodge Dodge residential here, and of supposed markets like at a level down One lot the and for this two up markets is for for coordinated XX% ‘XX. in XX% false mean getting the bounce

So, those of interest come starting as those things. back markets we type rates drop, to get

can own, self-help, you keep order, biggest invoice. And thing debate deployed, going use Now, initiatives, back growth capital we our if go you delivery, last to I'll those. one Atkore, then into two of one our have lot for the a over back years, is I the one word but the

that a that We model. service lot of love key have customers

everything and So, as more we initiatives go and for forward, premium like gives come, charge future. what service, delivery, higher for we're both that's optimistic other think from the things we're us our doing ability to for confidence here, our I a to that solar

there. Very guys. helpful. leave I Thanks, will it

you. Thank

line RBC. line the is follow-up from The of Deane We of Dray have another open. question

cash question that. what out? but for the flow to you. CapEx can seasonally CapEx quarter, for than A higher. working else conversion the take call see, dynamics. us the typically Is capital just lower certainly It Great, some anything in to I of was David, know swing we of through want is you'd thank there kind

swung Yes, imagine, the some also of we I I of the had inventory, can startup and plant. you solar say as would it, into Deane, going new say would buildup CapEx that that our

had really volume several and weeks increase ahead we of in you inventory the that So, yet. seen of startup, haven't

I that to would QX. point the things So, probably was two

if commentary the that. you could are digit as growth? for some highlight then verticals of to Thanks. And what you as on it. July, volume tracking if Got kind could driving Bill, what And are indicators about well mid-single

still so month but kind getting average enough is, the any quarter, this Yes, mid-single remarks unprepared August, strong three Deane, very the too QX the into with good means whatever you comfortable math Atkore digit. without through that here. quarter specific our And date are on here or more did that that specific, pretty overall quarters, on sitting a without we're weighted as good we're if that of

through in us, questions, contractors earlier I before buying needed. and the distributors to worked So, are think and as inventory's quarters been

that anything good regarding I really but earlier, I And think So, strong, infrastructure. are verticals there. the then mentioned

again, So, everybody, therefore, with even have - distributors to manufacturers. we be always to don't we transparent manufacturing sell that companies, very and I'll sell as

Dodge looking feel, according like good a have I calendar and here least it - Dodge XX%, this at manufacturing's we of would rely to So, but up in some year. going just you on

from there's things work the think that. with So, things like future as projects, then manufacturers really I monies we chip are strong. in stimulus are we'll that Institutional the the globe. kind utilities of and strong. call still And across spend around global things forth a things just mega so lot and And talk obviously, imagine like we about what but more of

really have of good a some those with We customers. relationship

right like to I week thing than add this seem in is, variability now, market typical. week other would does the it Deane, more there's

It but - the I strong July that market, a just of was, constraint good, I know the don't other Bill the expect and just issues is. or we don't chain it pieces supply So, - if it's electrical labor mentioned, as why know QX. and

it. Got

of quarters? one that for still over of like on the me capital allocation, and plenty Where buybacks, couple And have left. authorization M&A the pipeline? how might what’s equation seeing fit Just next the into last you

good. It's just a or discussion great there's capital on four to of week. rank, last we great was a pipeline's not mixture had I have here things, that - board the five If a Yes, Deane. allocation,

new productivity. looking still give organic at take on growth $XXX So, where CapEx obviously, investment for we're million, internal and or

have - that's active. we I confidentiality get numerous that here, deals specific are under agreements. very won't will too pipeline I a say but deals have We

We any get mentioned, have continue way any shown fever, that stock do, to group into conversation because our been things an without will mining again, in strategic performances November a much having deals. as And active more all in in-depth around phenomenal deal in of here last are buyback, we'll and allocation. other then November, capital it's type we've you we

Great. Thank you.

This concludes the would now to Waltz question-and-answer call turn like for back I remarks. to session. the over closing Bill

As takeaways we conclude, let my me from today's discussion. summarize key

still expect the we volume volume full for growth mid-single a First, digit year up ramp as QX. we expecting in are in

are for EPSs. Second, expectations full-year our adjusted we increasing

Third, balance our flow which we're the continue pleased enabling invest business. cash are with our strength of and to sheet, in to us

growth position Our of are financial the our long-term and foundation remain capital future plan and outlook. solid our in confident deployment

we share. I'd that celebrated Last David Atkore the will there next to XX-year one anniversary with be item like with I the end call, week. is company, his final and five-year month, my Before anniversary celebrating

our to With speaking for quarterly for of with interest concludes accomplishments. we that, hard of you look dedication all and yet support employees, thank best humbled Atkore. next to call because the you team, truly management of their that and work are This Atkore, the by in in forward a values we our commitment our for to It's is awe the believe As and are call. we and come your today. their during of

conference today's concludes call. This

all You now may disconnect.