Q1 2020 Earnings Call

Greetings and welcome to Gibraltar Industries, Q1, 2020, <unk> earnings Conference call.

At this time all participants are in listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. Please note. This conference call is being recorded it is now my pleasure to turn the conference over to your host Caroline.

Thank you you may begin.

Good morning, everyone and thank you for joining us today.

With me on the call is built by the way Gibraltar Industries, President and Chief Executive Officer, and Tim Murphy Gibraltars, Chief Financial Officer. The earnings press release that was issued this morning as well the slide presentation that management will use during the call are both available in the Investor section of the company's website Gibraltar, one dot com I've noted.

On slide to the presentation.

<unk> press release and slide presentation contain forward looking statements with respect to future financial results. These statements are not guarantees of future performance on the company's actual results may differ materially somebody anticipated events performance or results expressed or implied by these forward looking statement Gibraltar advisor you to read the risk factors D.

Well the necessity filing which can be also be accessed through the company website.

Additionally, Gibraltar to earnings press release and remarks contain non-GAAP financial measures reconciliations of GAAP to adjusted financial measures have been appended to the earnings release and flies.

Now I'll turn the call to Bill Bosley Bill.

Thanks Carolyn.

Good morning, everybody and thank you for joining our call today before we get started I just.

Want to say hope you and your family's trending.

Coworkers and everybody else, you know are safe and healthy and I remain so as we all continue to move forward through.

Its current situation this pandemic [noise].

I'll begin with summary, and where we are today and how we see things evolve in the near term and then 10 I will provide a detailed review of Q1 results.

[laughter] thoughts moving forward, then I'll try to shore up there.

Some of our key strategic initiatives and then we'll open the call for questions. So, let's turn to slide three which is.

Title, our Q1 overview.

As mentioned in this morning's earnings release, we didn't get off to start we expected in Q1, despite experiencing some disruption.

Due to the covered pandemic.

Overall revenue increased 9.7% adjusted EPS increased 68% or backlog grew 39% actually to a record.

Level of $258 million.

We had continued strengthen our growth businesses, particularly renewable energy conservation, which grew 49 just over 40%.

Which 17.5% of that was organic and our residential products business, we actually executed.

Additional product line simplification initiatives and still delivered.

Revenue equal to prior year.

Finally, our grow our strengthen our infrastructure revenue.

It was a bit offset by weakness in our industrial markets.

So, let's turn to slide four [noise].

Yeah, there are a well or few if any experiences that are.

Lifetime, I think that could have prepared us for what's going on today Oh. The closest experience for me was was living and working in Asia during during Sars.

Which if anything has at least provided me a framework for things to think about it maybe anticipate so you know the health and safety 14 economic impact.

To both our markets in her business and then now some of the social challenges.

That covers all the both.

We device and implemented a solid playbook and continue to be very disciplined with our approach is a cadence or we have our processors and actions early February we took a first step implementing travel ban that to China, and then formerly launched our task force.

Which is comprised of our business leaders are human resource leaders in our executive team. So we need every 48 hours that they reviewed make changes that your plans as necessary and we.

We're also on call 24 seven.

You bet that have issues carefirst unexpectedly as well over the last six weeks, we've been hosting a weekly livestream.

Communication.

For all our employees, where we talk about what's going out the business. We address concerns and then try to answer everybody's questions.

Of course in context.

All our businesses have then deemed essential by the states, where we operate in by many of the customers that we serve a which have also been deemed a central so as a result, all our businesses our operating somewhere at full strength somewhat less than 100%.

And so to operate safely and effectively we really focused on six key initiatives to support our team.

Our customers or supply chain as well as the communities that we operate in so let me give a brief summary of the six initiatives.

First Oh, we implemented operating protocols consistent with CDC guidelines, we also creating awareness initiatives, which I think it's really important to encourage our team to share C.D.C. best practices at home and throughout their communities secondly, implemented social distancing additional sanitization actions.

We reduced the number employees on the site onsite at a time.

Mitch just management or factories zoning management insider factories temperature checks employee tracking and follow up in and obviously, a new visitor policies.

Thirdly, I work from home protocol, which enabled us to continue supporting our customers and manufacturing opera operations.

And suppliers through distance management a in this effort I was obviously critical we execute our business continuity plan as well both processes and digital technology.

To support the transition to effective remote management with proven cyber security tools and processes.

For a we worked closely with customers supplier partners.

And if manage the landscape I think effectively.

Making sure that our folks are suppliers in particular have essential classification worked through demand management logistics and scheduling and then and then frankly working capital requirements.

Fifth.

We did re purpose three production lines to produce and distribute P E.

You are 2400 employees a this includes face mask say shields and sanitizer.

Which our team is using today in our facilities. Yeah. We are fortunate to have some core competency and technology enabled us to quickly period.

Produce critical P. P to protect our team in others, including employee family members local health care facilities suppliers dealers and some small businesses.

And then six community support no recently, we challenged ourselves raise money to provide wanting to half million meals to food banks in the communities, where we operate as you guys I'll know.

That's the banks cross country are experiencing a significant increase in demand as more people are struggling to make ends meet and so just six days. Our team responded exceptionally well we raised enough money to donate 3.3 million meals.

Which will provide approximately 85000 meals per feedback.

So I'm pretty proud as part of our team.

Yeah, we know 2020 will be challenging year in and and how business is choose the deals that is really depend on their leadership position in financial strength I. You know I think we already unique position with a healthy balance sheet with a strong order backlog and good end markets I.

I think the ability to make money and generate cash during this crisis and a pipeline of attractive assets ready to go to join or be part of our journey. We've also developed flexibility adaptability within our organization to manage through.

The uncertainties such as the one we are experiencing now we continue to work on our business actually carried on the business, we have challenging our paradigms, improving our processes tools and products.

We continue to make investments for growth.

Currently we are making investment organization, yeah, we're keeping our team as much intact as possible even in our businesses, where we're not running at full speed.

I had the firm belief that this is this investment will put us in the best position to sprint out of this crisis faster then.

Anyone else in our respective markets.

And Oh, you know finished before we get to Tim with you I just I want to thank our entire team.

For their continued dedication commitment, particularly during this time and.

We are honestly grateful that gibraltars in this position to contribute to.

Hopefully easing the told at the crisis is taking on her own people, let alone a healthcare workers and emergency responders.

Serving all the communities, where we operate candidly you know across society. So.

Now, let's turn to slide.

Slide five and it'll have Tim review, our consolidated financial results.

Thank you Bill and good morning, everyone.

That's what it provide an overview of the first quarter results I'll provide some color on what we're seeing in each of the end markets we participated.

First quarter results were not significantly impacted by the economic disruption caused by the pandemic.

Elevated revenues increased 9.7% within our guidance range, there's renewable energy conservation segment revenues continued to accelerate.

Residential product segment revenues were flat and industrial and infrastructure decreased 9.8%.

Okay, and I, 0.7%, increasing consolidated revenue, 2.8% was driven by organic growth and six point I was generated by the acquisition of apex supercritical, which was completed in the third quarter of 29 team and thermal energy solutions and Delta separations, which were completed in the first quarter of 2020.

As Bill noted backlog at quarter end was 258 million up 39% for the prior year, driven by a renewable energy conservation and infrastructure businesses.

On organic basis backlog was up 13%.

Consolidated GAAP operating income was up 43.4% an adjusted operating income increased 42.9% in the first quarter.

First quarter 20 high teen operating income included a 3.4 million dollar charge incurred.

Related to the field improvements.

Our solar tracker product.

Consolidated GAAP and adjusted he asked for 94.7 at 67.9% respectively exceeding guidance.

The improvement from last year resulted from organic growth renewable energy conservation.

Better price material cost alignment continued benefits for 80, 20 operational excellence initiatives and lower interest expense [noise].

Included in GAAP results were costs, or 3.8 million or 10 cents per share associated with acquisitions restructuring and senior leadership transition.

During the quarter, we achieved interest savings from last year's first quarter repayment of our outstanding debt of 2 million under GAAP basis, and 1 million adjusted.

Now, let's review each of our three reporting segments, starting with slide six the renewable energy conservation segment.

Segment revenues increased 40.3%.

Driven by organic growth of 17.5% and 22.8%.

Just kind of apex, supercritical thermal energy solutions and Delta separations.

Organic growth was driven primarily by strong demand for our commercial greenhouse growing solutions, including designed structures system integration.

<unk> and project management and general contracting services.

Our core renewables and conservation business showed improved adjusted operating margins I continued execution and volume leverage along with favorable product and work on market mix, even after giving consideration to the prior year incremental costs related to the solar tracker.

Adjusted operating margins for the segment were impacted by the inclusion of the expected modest losses from acquisitions on seasonally lower volumes have all merger products.

We entered Q2 was strong backlog across the segment up 58% from the prior year as we gain further participation and see strong customer demand a bolt on markets.

Backlog for conservation is up 73% driven by our recent acquisitions and renewables is up 39% for the prior year on continued strong end market demand.

Let's move to slide seven to review our residential products.

Residential product segment revenues decreased 30 basis points for last year due to additional product line simplification initiatives.

Excluding the impact of these initiatives ready we expanded our continued participation in our postal and everything accessories businesses.

Adjusted operating margin increased 175 basis points results are strong execution improved price material cost management, and 80 20 simplification measures.

Let's move to slide eight toward your industrial and infrastructure product segments.

Segment revenues decreased 9.8% in the industrial and infrastructure business driven by lower industrial revenue are result of lower demand for core products can reduce selling prices in a declining steel cost environment.

The infrastructure business continued to grow on both volume and pricing backlog for this business continued to grow.

Adjusted operating margin was up 60 basis points through better priced material cost alignment continued execution on 80 20 profit improvement initiatives.

Let's move to slide nine title balance sheet provides was resilient supports growth to discuss our liquidity.

We used 43 million of cash from operations during the first quarter. This year driven by an investment of approximately 37 and a half million in working capital.

Overall energy solutions, which was undercapitalized to purchase.

During the quarter, we used cash of 54.5 million to fund acquisitions, and 2.8 million for the purchase of equipment.

At March 31st and today, a revolver remains undrawn.

So with the 86 million cash on our balance sheet and our Undrawn 400 million dollar revolving credit facility, we have strong liquidity position to weather the economic impacts of the pandemic, while continuing to invest the operational excellence growth and the development of our organization.

Given economic uncertainty caused quite a pandemic and federal state and local governments responses to it. We currently paused or M&A activities are made in contact with companies were interested in.

We expect to Reengage in these processes when economic impact becomes clearer.

Can you get or we remain laser focused on managing our working capital through adjusting scheduled deliveries of inventory to match current demand levels and closely monitoring customer credit collection activities.

Let's move to slide 10 title the revenue sensitivity to current economic events.

This slide shows the relative impact the point that makes us having not our businesses and reflects the activity we've seen in the past month.

Our renewable some conservation business, which accounted for 39% first quarter revenue is well positioned and that market demand remains strong.

We continued to build backlog in this business in the weeks after the end of the quarter.

[noise] with customers in our core renewable and conservation business to address schedules, where we've been impacted by either local restriction on construction activities for permit delays.

We saw more pronounced pause in the processing market what stay at home orders were issue. However, we've recently seen increased interest from customers as harvest seasons approach.

Our residential business, which accounted for 41% of first quarter revenue assumes modest decreases in demand. While we continued increased participation both geographically and through channels.

Direct director homeowner market, where we sell better protection on systems that generate meaningful margins has seen a significant slowing and the second quarter is normally the peak of the going business.

In our industrial and infrastructure businesses, which provide 20% of first quarter revenue the infrastructure market remains strong.

We've seen continued expansion of the backlog since we got into first quarter.

I've seen delays and construction activities in certain states, where highway construction was cost.

Our industrial business has seen continued softness in demand for core products at a pause on shipments to the automotive customers.

We've not seen a disruption from our suppliers and our supply chain team remains in close contact with key suppliers and alternative supply sources to mitigate the risk of potential supply disruption.

As we continue to focus on execution, we are realizing the impact the work we have been doing to reshape our portfolio our focus on more attractive higher growth higher margin end markets, which better positions us to withstand a downturn.

Our teams are remaining close to our customers getting real time and market feedback from those with direct relationships.

We maintained full staffing to protect our team from negative economic impacts as we assessed the impact of the slowdown on our businesses continue to invest in our team to be position to sprint as we come through the other side of this pandemic prices.

We also continue to invest in process improvement digitization to emerge stronger.

Now I'll turn the call back to Bill.

Thanks, Tim Hey, let's move to slide 11 and.

Look at how we're leveraging our operating foundation to get through this pandemic, yeah as we discussed.

Last quarter and before our strategy is focused on like selling across our three pillars, that's business systems portfolio management, an organization development.

Pillar and I'm pillar, one our business system as a reminder, just focused on our business model optimization or 80 20.

Activities productivity supply chain management innovation, new product development, and I to digital systems and as it relates to today's situation.

We implemented our playbook, our business continuity plan and are in customer and supply chain initiatives.

While maintaining focus on on a day to day execution in parallel to that we continued to make our business stronger so as an example.

In the information systems and digital technology World, We launched our new corporate website. This past weekend, so to get a chance. Please go visit us at a Gibraltar one dot com.

Hello number two portfolio management is committed to optimizing our existing assets and allocating our time capital and energy to better execute our plans.

We are delivering integration plans for our recent acquisitions, that's apex Delta separations and thermal.

Energy.

Systems. We're also continuing discussions as Tim just mentioned with companies interested in joining our journey.

We are currently paused a until we collect will add more clarity.

And then a general economy in markets pillar three organization development really focused on our talent acquisition and development.

Assessing our org design answer and structure and then building best placed work environment for organization over the last let over the last eight weeks. Our main priority has been the health and safety of our team which will continue.

You know our task force has deployed our covered 19 operating protocols.

And I think the businesses continue to learn and optimize systems and processes and drive better performance in or modified operating environment. We're also strengthen an organization and we're continuing to fill critical positions from a broader more available pool of talent.

So to summarize our immediate priority remains the same to improve our revenue and income streams and stay focused on execution.

Working improve our business, helping our team our customers suppliers and partners.

Get through.

Today's environment.

As the economy does begin to recover.

We are ready to accelerate performance and continue faster growth.

Improved profitability.

Our utilization of our assets and higher return on invested capital.

So let's talk about guidance.

For the rest of 22000, given today's limited visibility across a number of our markets, we're going to resend, our previous guidance for the second quarter and full year 2020, and although we have a strong backlog in our renewables and conservation and infrastructure segments.

Yeah, we still have 55% of our business. It's still resides in residential building products and in industrial segments, which are more impacted by.

Today's environment, and consumer spending and general industrial market strength.

So once we start to see the state's open.

And how they open a little more confidence in consumer spending and less fear and the general economy recovery.

We'll be in a better position to provide guidance for business that being said Oh, we have been running scenarios to help us planned for an uncertain future.

So under a challenging case.

In which we experienced a significant reduction in demand relative to what we actually are experiencing today.

We are still and remain we still are confident remain confident that we will deliver positive earnings and generate cash from operations.

For 2020.

We're continuing to transition our revenue and income streams toward the end markets that are both vital to the economy's coordinate and that are less impacted by economic variables and and we continue to invest in long term growth our business model resiliency, coupled with the strength of our highly liquid balance sheet places us in a better position today.

I think to navigate through the current downtown downturn than ever.

[music].

[noise] than ever before in our company history.

And that's going allow us to further separate our businesses from the competition.

As I said before listen I'm very proud of our team we remain committed.

Passionate and focus to helping our customers suppliers partners and communities.

And the effort frankly has just been outstanding today situation is incredibly challenging for everyone around the world, but we do believe things will improve with time.

And we're going to continue stay focused we're going to work hard we're going to contribute as much as possible to the solution.

And and we look forward to seen everybody emerged from from today's crisis. So with that now we'll open the call for questions.

Thank you at this time will be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad confirmation tell indicate your line is in the question Q.

You May press star to if you'd like to remove your question from the Q4 participants use and speaker equipment, maybe necessary to pick up your handset before pressing the star keys. One moment. Please why we poll for questions.

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My first question comes from Ken Zener with Keybanc capital markets. Please proceed with your question.

Good morning, everybody.

Hey, Ken how are you.

Well, so very nice to hear you being so positive and proactive in your communities.

I know the.

It obviously a couple different questions here, but first of all odd given the absence of the.

At Investor Day could you just break out where we are now in renewable in terms of sales mix between solar and.

Conservation, What's your best guess, we everything not solar.

Yeah, you know candidates.

Frankly, it hasn't changed the mic hasn't changed a whole lot just because yes, we've had some acquisitions on the growing side, but we've also had organic growth on the solar side. So the mix between the two hasn't changed a whole lot.

Year over year Uh Huh.

Yeah. So now were.

Go ahead.

Okay. That's good I appreciate that.

So when you talked about you know if we could just talking about the.

Renewable conservation is I think that was the area that you know many investors would have gained abided insight into at the Investor Day can you talk to some of the items in terms of that recently acquired businesses that are affected.

Your margins they talked about the seasonality Tim I think you mentioned people are waiting for harvest I mean could you just give us a little better feel for.

Those acquisitions that you did there both in the.

Hot area as well as the vegetable business you bought out of Canada.

Yeah. So on the processing side, that's really apex and delta separation.

Yeah, we'll talk to that first that that that industry paused during a lot as the stay at home orders that were where mandate across various states and that had initially to do with love the dispensers, where people would go for product.

And then needs those and then the states started to open up different times and I think most of them are opened that's that was deemed essential. So initially wasn't in it so we had a little bit about.

A roller coaster right there on the end demand side of things end demand for for those products.

Have continued to grow.

So we we've been tracking that we've we've tracked that monthly and that continues to to be solid growth. So that's good news.

Maybe why it's growing isn't a great news I think a lot of people are anxious right now obviously in today's environment, but but the end demand continues to grow.

But remember the makeup of the industry being relatively new there's a lot of small companies and I think when you like a lot of industry is when you saw things.

Actively shut down or slow down significantly a lot of the company's an industry said, hey, let's pause as well and gather ourselves to see what this is really going to be so that really caused.

The processing industry to slow.

And then Tim referred to well you got harvest season approaching so we've seen more activity.

Meaning inquiries and things of that nature really over the last 30 days than we saw the previous probably 45 or six week as well.

I'm going out of the pause in.

And people are moving more towards the summer months when harvests starts to kick. It. So you know that impacted our processing.

Businesses during that time because of that.

That makes sense.

It does the reason maybe.

These are such uncertain times, but for you guys operating across trying to look into the business. It seems like you'll have maybe about 10%.

Revenue growth.

For your whole company tied to recent acquisitions.

That's using well I guess it depends exactly how much but I mean, a high mid to high single digit contribution from FX odd from acquisitions does that mean.

Other companies have talked about sales being down.

Anywhere from 10% to 30% and the second quarter is there a broad generalization that you might be able to give us about the quarter I.

Hi, Tim perhaps about the EBIT leverage just so we can get as a general sense of where youre.

April sales trends are in terms of the different businesses that that would be helpful. Just to give some sense of.

What you're seeing for the month of April and perhaps some type of EBIT leveraged general question, but.

It's hard to get specific in times like these as well.

Okay all right.

Yes, I'll try against that so Uh huh.

Okay. So you know I've gotten generally I'm sure.

We saw revenues.

Below prior year levels below our expectations as we came into the year right nothing really surprising or were still closing April so I'm basing that on basically the <unk> internal sales flashes and conversations we have so.

I don't really have a great percentage for you I will say that.

Our certainly our total sales will be down last because we did acquisitions. This year that we didnt have last year again sort of a captain obvious comment.

And then.

Right.

<unk> de leveraging basis.

It will it's kind of depends a little bit on which businesses some are more profitable than the others.

So we didnt give guidance because we didn't really have.

Enough clarity to feel confident so I don't want to.

You have answers that trends the guidance, but I don't have enough confidence.

Understood. It just is that a lot of companies and to the extent I'll go out of the questioning but to the extent you guys can ILLUMENATE April trends, where possible a lot of companies have been kind of talking about that.

Thank you guys very much.

Sure.

And you guys. There's one thing I would say because I'm sure it's on everybody's mind and.

And I think what we thought going into second quarter.

Particularly for April.

When you think about that that forecast going into the month now where a month later.

We're still seeing ourselves down versus last year, but but our experience in April was better than we originally thought.

And again, where we don't have things closed yet but.

But.

No that's how I'd characterize one month into the quarter. That's what we saw in April.

Thank you.

Our next question is from Daniel Moore with CJS Securities. Please proceed with your question.

Bill Tim Good morning, Thanks for taking my questions in the color.

Well you and your families are well also.

Wanted to obviously.

I know you want to kind of.

Stay away from the guidance, but in the scenarios that you mentioned.

I guess number one maybe a little color around the challenging or bear case.

Is it you would expect to remain profitable for each quarter for the rest of the year in aggregate or for the full year, including Q1, just trying to get a little granularity there.

I think we booked.

As a way to think about that Dan and timid correct me, if im wrong, but I mean, we look at it from a full year perspective, and if you take the worst case scenario, obviously with with the country being shut down in April the the second quarter be the most challenging third would be the second most in the fourth would be the third most challenging in that you know.

Worst case scenario and as I mentioned earlier.

You know what Weve what's happened in April we think is rolling up in April is better than we thought.

Going into the months so that gives us some some you know.

Confidence that our worst case scenario is we're probably not on track for that if that makes any sense.

[noise] It does it does and then.

Would you be willing to comment on sort of the best case scenario I mean, it seems given there's no. We haven't had any guidance update one or two folks.

Some of the estimates out there are still close to your guidance range and just trying to one of your prior guidance range wondering if that is just.

Absolutely to Pollyannish, you know given the likely impact that were to see here in Q2.

Yeah, I would love to be able to do I seriously, we talk about it a lot but.

Unfortunately.

The thing that that we struggle with is like everybody else I mean, we're not Tony anything in any different than probably any of the company right now, but trying to predict what states are gonna open when and what construction sites are going to be allowed and what permits are going to be done and what big box guys are going to do and it's it's a every two days it seems like.

We're learning something new so.

As with the downside, it's tough to do it on the deposit side of this so.

Yeah, not try and I wish I wish it didn't have to give you that answer but unfortunately, that's that's kind of where we are and like I said April was better than what we thought.

Thank you.

I would not have predicted what.

We think has happened in April again, we're still down versus last year, but it's better than what we thought that is not what I thought just a week ago, where we can half ago. So that's that.

That's kind of a situation that we're trying to manage through but.

So I understand it's at.

Maybe broader question you know what what are the key indicators Mileposts you will be looking to to get more clarity on the overall environment and how long would you maintained full production capacity if demand levels were to remain.

A little bit more depressed then then perhaps you hope to see in terms of recovery.

Yeah, you know I I would suggest in our thinking right now is that Q twos, probably the toughest quarter right and in April was the month of the entire country shutting down effect away and you can argue it started to really happening in March that's when they mandates really started kicking in so.

You got US you got to think in some respects the toughest a piece of this has been the last six weeks and we've been able to manage through that.

Relatively well with all the things we talked about so.

No we're not assuming that that may or June is going to be better than April, but we're not assuming it's going to be worse either.

So right now the way we're sized in our operations most of our operations or.

She all our operations are running right now and and where we're not running at full speed you know we made some adjustments there but.

I think it's it's a you know again, it's going to be week to week.

To see how things evolve on the demand side.

We're obviously, we have more visibility in some of our businesses and others. So if you look at infrastructure and you look at renewables or conservation you look into backlog that continues to build.

And that's positive the question for US is when does it all fall in into what time slot because again.

Starts and stops and 10 states opening and when they open how the open and all that.

As a Sunday were trying to deal with now I would tell you proactively what we're trying to do in that example is.

Yeah, we have a a number of of subcontractors that help us implement and execute in the field right now as you would with any major project business.

We're out now trying to make pp easy for them. So they can actually go to work because of states open up you know there you're being required in some cases to have that with you whether you're worried at all the time or not so just trying to get a our folks our supply chain in that scenario available to work in certain states. We're doing some things to help them through that but those starts.

And stops are those things like that or and make it even difficult on the most predictable part of our business let alone the other the other piece so I.

I think backlog is a good indicator for us on you know thing, but that's 45% of our business. The other 55, which is residential industrial.

Those metrics in what we're tracking there.

Are literally just point of sale.

On the retail on the residential side point of sale through a big box partners.

As well as our wholesale order entry week to week.

We're mainly just remind everybody. We are we're not I wouldn't say where is consumer spending driven as maybe some but most of our stuff is repaired replacing remodel.

So you know maybe that a weather is this a little bit better than others, but again still a lot of unknowns out there that we're trying to deal with.

So there was probably more in you're looking for but.

That's how we're now we're walking through at every 48 hours were talking to our business leaders and trying to see how demand is evolving.

That's fine more better than less lastly, just in terms of capital allocation, obviously M&A as seen on the back burner for the for the near term maybe you just updated view of Capex in any other changes in your thought process in terms of allocating capital. Thank you again for the color.

Yeah from an M&A perspective, we mentioned earlier were on pause I, we don't want to get an impression we're not active we're very active on M&A side and we continue all the discussions we had in flight and there's more work that we were working on there'll be things that will happen in our respective industries through this.

And then make that.

That will come about and as they do we'll consider we'll take that in consideration. That's part of the reason for the pause a is just trying to understand what's going on in the world and then b.

Keeping a keeping all our relationships warm and moving forward.

And then you know C are there any structural shifts or changes in the markets that were operated as well so as we learn through all three of those.

I will will come out of this with.

Some opportunities that we think are pretty positive in will move forward on those timing that yeah, let's see how the next next quarter evolves and and when we have little more confidence in what the broader economy is going to do then then you'll make a decision then but we're very active and continue that.

As a capex.

Where we have opportunities to deploy the capital and we see the returns and they make sense, we'll do that but in general you know you can imagine that we'll probably spend a little less than we had originally plan.

Just because of the giant pause right you can only spend so you can only spend so much in a certain period of time, but.

We're not a we don't have a a complete pause on that as a projects come round. It makes sense that give returns that improve our safety performance et cetera, we're not holding back we're moving forward on those key initiatives.

Our next question comes some currently over Merrell with Sidoti. Please proceed with your question.

Hey, good morning, I Hope you folks are doing well.

I really how are you accordingly.

Wanted to ask about.

[noise] the headwinds you're seeing ready.

And if you could quantify at all.

How much of that would be.

The sales channels through which some of those products are sold versus maybe.

More of just consumer confidence and bolts holding back on discretionary spend.

Or some combination of the two there.

Yeah. So I read these kind of broken in a couple different buckets.

Tim mentioned that our home and prudent business, where we sell gutters and owning that.

That's not a big piece of the overall Gibraltar, it's a it's a higher margin business, but that's one of those businesses that requires an in home sale right and you can imagine right now.

Any people are inviting others in to talk to about those kind of thing. So we saw.

That really fall off we anticipated that.

That is actually the group that we pivoted to start making the P. P for the rest of organization because the come see around.

So in fabric right makes sense. So so we pivoted quickly in done that we've started to see more activity in that business as states have opened up and as some of our dealers had been able to go online and engage customers in that way still not anywhere near where we'd like to be but at least or is there some activity. So that's that.

So the residential did the rest of the then we have two other buckets in residential that's more roof related.

So we think about ventilation in our building accessories roofing accessories businesses.

Those are doing actually a relatively well with our big box. So the residential if you look at the marketplace residential.

Product to have done much better and I'd say the retail channel then they have in the wholesale channel and that makes sense I mean, it then today you've got large big box guys have been deemed essential they've got good balance sheets. They they can manage through this probably in a way that is a bit easier.

And so.

We've seen sales through that channel actually be positive year to date.

On the wholesale side of things a little bit different where you are more private in some respects in terms of companies and if not you may be just smaller and so there's there's you know you got to figure out how to manage your balance sheet and how to move inventory and such and I think thats been a bit more challenge for that particular.

Channel.

You know eventually they're going to be a shift or permanent shift as with contractors going to one of the other it's hard to say today, obviously, we've seen it because of the convenience.

Okay with the big box guys be open.

And being everywhere, but I'm not sure what I don't mean longer term. So we do see a tale of two stories on that front.

<unk> sales one part of the channel in and not some positive up the other.

And.

We'll see I think that will continue for some time, but eventually we'll see how that kind of work.

And then last piece of our residential businesses. The postal piece of that actually has stayed relatively strong throughout this time.

Timeframe.

And part of that I think is a good orders for the business in Q1, and then you start to realize that a lot of projects cannot be signed off unless they physically have a mailbox onsite.

You can't get your you you literally can't close.

On these projects without having that its its is deemed necessary. If you will to make that happen. So.

We saw a lot of activity I think as shutdown started to come in we started to see more activity people wanting to move a little bit quicker, there and but that business has stayed relatively strong.

Some of that goes on line.

Which is held in some goes through a big box and then some goes through other means.

It's really make a different thing could it be honest, but it's interesting to see how the market is is is kind of shift moving as it relates to what's driving it we've been tracking probably like yourself.

The amount of activity of people wanting to do home improvement or do it yourself kind of home improvement there are different types of home improvement right. So do it yourself home improvement is just you know really accelerating I think we saw something the other day from a from a webinar, where I think paint searches were up searches on paint were up 700% and like a two.

Week period, So I do think people are being very active.

I do think the unemployment level that you're that we all see today needs. It yet to think about how to stratify that in terms of looking at the makeup of that employed group of people and who owns homes and and and so forth.

But there is definitely a lot more activity and do it yourself kind of things right now the last.

I would say a quarter, yeah, I'd say the last month or two definitely we've seen a spike there.

So you know a lot of moving parts.

You know, we've got a series of storms anything coming through as you know a in the southeast a lot of hail will that translate into.

We you know again, there's a lag behind that don't know what that'll mean, yet but.

We're trying to watch everything and <unk> and again it in a day. The said earlier every 48 hours are just getting the pulse of what's going on the residential world as with our other businesses.

[noise] helpful. I appreciate the color there that kind of close to my next question is.

From a strategic standpoint, the system in disruption up kind of create any opportunities for you or perhaps greater adoption of some via new products or.

Any changes in market share that's kind of more progress.

Yeah, you know it's a great question, then we get that asked a lot across all our businesses, but in particular I I've mentioned, a couple times, where we've been doing I'm much more work to understand the market right trade focus and and we do have new products that we were introducing last year. We do have some regions, where we put people we didn't have before.

[noise], we had been.

Product line expansion in some are big box guys and all of those things I think our opportunities for us and we're seeing those discussions kind of manifests.

Well I should say manifest I think we're seeing those kinds of activities.

And discussions around the actually accelerate right now so.

Part of the reason that we're keeping our team intact as best we can is because we do believe there. There are companies are just may not be able to do that in so service levels are you know fall I think in some areas and then when that happens you know we're in a position step in and.

And maybe that solution. So we are seeing opportunities.

How much they flown through you know have flowed through yet a yet to be determine just because everything's depressed. If you will but I would say that or our ability to gain participation. During this time is something that we're looking forward to how much that will be don't know yet but.

Again, very active in trying to to make that happen as much as we can.

[noise] understood. Thanks for taking the questions they stay healthy.

Yeah, you too.

As a reminder, if you'd like to ask a question. Please press star one on your telephone keypad. One moment. Please why we poll for questions.

Our next question comes from Walter Liptak with Seaport Global. Please proceed with your question.

Hi, good morning, guys.

Hey, Walter you.

Good. Good are you guys are all safe.

[noise], one do want to try and.

And talk a little bit about you know that.

The employment levels and kind of your your fixed levels of employment and variable levels of employment.

With the idea and see how much of your costs are variable.

So if you know if we are slowing.

In the resi part of the business and April May June.

Whatever the amount it's double digit.

How much of your costs are variable like have you.

When you talk about employment and keeping the team together I imagine that some of your workers are our hourly workers that there might have been some layoffs or for loans.

As you know they may be able to to make more money on unemployment.

Just temporarily and bring in a back I Wonder if you can just discuss that a little bit. So we can have an idea about how some of those costs and manufacturing flex during the second quarter.

Yeah. So so today, while we haven't late anybody else.

We've kept the team together and so really what we did initially if you go back again eight weeks and just for context here and this is something that Oh, it's a little bit softer, but I think it's really important to us but when you.

And again, it's not is if a for me Sars was a.

The prepared us 100% for this because it doesn't right. This is unique but I would tell you. This is varies eerily similar if you lived in the world of of where I was just felt very much the same so.

The two things that really get people.

In New England organization.

It really challenges are psyche is obviously you have the health and safety piece of this and then you had the the economic or financial concerns that go along with it our strategy from day. One was we're going to take one of those off the table for people.

We don't want them to worry about that had been focused on health and safety. This thing was moving so quickly last thing they need to do is think about and this is prior to understanding you know all the government support that's come sensor the stimulus that's come sense, but but no idea behind that was let's take that off the table right now so we actually for our production and.

Please offer are provided we call kogan pay so it's not hazard pay.

It's it's a hours that you can use with a take or whatever you need to so if your child care went away if you've got a sick relative if you're sick if.

If you have anxiety, if you're just scared and you cannot and do not want to be it on site for some period of time you can use those hours stay employed keep your health benefits and then circle back when you're when you're ready and you have a bucket of a bank to use if you will and.

And we did that because one we knew all these issues were coming quickly to people what do I do a child care and now it's been shut down my schools are shut down now I've got kids at home don't have they you know all those things that people were dealing with so we want to help people navigate through that and as we did that are our demand stayed relatively strong.

And and that kind of work just up through kind of where we are today.

We have some businesses that are slower than others and where that's the case people have.

Started for though it's a small group of our of our organization or they will start to again, there's some benefit for them to do that personally but for the most part the rest of our team is staying intact and still have their bank of hours to use accordingly. So.

Strategically that's that's been our our our approach.

It is to help people through this within our own team.

Stay intact, not knowing exactly how long this would last and knowing that you know week to week, it's changing as we see as we as we see.

As we've talked about to be in a position and ready to be ready to go. So you know as we start see see things turned back I think we'll be in a good position. It things really go in a different direction than there are still levers to pull and actions to take but right now that's not in our foreseeable plan.

Based on what we know today and what we're seeing a in a as we've come through April with our business.

About half of our employees are or production or maybe a little bit more than that and the rest is oh, well deem salary.

That's helpful. Okay, Great <unk> Yep Yep. That's helpful. Thanks for that and maybe another way to think about though the cost of goods sold.

Could be if maybe we can just got a breakdown of.

What's labor.

The Cogs, what's a material on whats manufacturing overhead.

Yeah, I don't have the exact commensurate labors are relatively small piece and what we do but I don't have exact number in front of again, Tim if you want to.

Yeah, well I.

I can overall, Bob material costs are a little bit less than 50% of Cogs.

And labors, probably you know 12 13, depending on.

What quarter hearing, but on a normalized basis sort of like that the rest is either.

Fixed or variable overheads.

Okay great.

Okay. Thanks for that you know maybe the last one for me is just to talk about the the M&A deals and Ah just help us understand it sounded like there were some dilution from the M&A deals because of that pause that took place and was that too.

The dilution related to.

You know kind of deal charges or and you know other upfront posture was that because of the pause that took place then.

Those businesses are certain too.

To get back.

You are can you get a accretion from the deals you know throughout the year.

I go let me take the first pass it that would add some color.

So while I would say that the.

The results that were talking about where adjusted so they don't include the actual deal costs.

But I remember the.

The processing businesses are.

Relatively small and it's a seasonal business.

Where people by processing equipment, right now sort of running up to harvest season, So I think.

When we look at their Historicals, it's sort of like first and second our slower.

For the third and fourth.

It is where the historically the bulk of businesses.

We expect that even out overtime, but that's the market as it is today and show you know as expected I would say those results were.

The first quarter much more.

Seasonally impacted.

The pause.

Towards the end of the quarter, we started to see that.

And into the first part of of a problem like we said you know the last 30 days or so we see more activity than just 30 days before that but.

I think that's that and then the other business the greenhouse business up in Canada, Bob We just acquired relatively low margin.

Sort of work in process right. These are big projects and so.

We will we're working on that business just like we did when we bought.

Our VI back in 2015.

That we think overtime, we can get that up to.

Segment levels, but you know it doesn't happen the day after we bought it.

Yes.

Yes, sorry to go ahead.

Bob I think you know, we expect all profitable for the year.

I think the thing on a thermal business.

It's just.

Just kind of as we expected, but but like our core.

Business growing business. We've had we've had some starts and stops on permits and things that nature as well so.

The backlog is good it continues to build its really set up for a strong 2021.

I believe with the types of projects that we're closing now and and so we're excited about that but an intermediate term.

Yes, again puts puts and takes as growers themselves, we're trying to figure out things and now we're starting to see people kind of get to feed on the ground vehicle [noise].

Be able to think through what they want to do next and so you know.

It's a it's just something we're managing through but.

Hey, what.

Okay, Alright, Thanks, you haven't thanks for that.

And then the last one on the M&A.

During the financial strengths and.

When you looked at look at distressed assets you know if if that's a target you know ran into a liquidity situation is there the possibility to find something like that and.

Would you I know, you're you're you're you want to buy good strategic businesses, but if you found one that was in a tough liquidity situation or even though profitability crunch because of the virus.

Actually changed a little bit of your strategy to cook to take advantage of those opportunities.

Yeah, It's a it's a great question [noise].

Is it something fits.

Our strategy that's the most important thing and if it's in the marketplace, where it drives the fundamental.

[noise] strategy, what we're trying to do become more relevant lead that industry.

And so forth a then absolutely.

We'll take a look at it we had a number of calls.

Every week, so as I said earlier, we're very active we had a slew discussions ongoing before this hit those those discussions continue and we've had a number of call sense at the same time across a couple or different industry. So.

The opportunities there and it makes sense, absolutely we'll act on it.

And.

We're keeping every one of those opportunities warm right now.

Hey, great. Okay. Thank you good luck guys.

Thanks.

Our next question comes on Ken Zener with Keybanc capital markets. Please proceed with your question.

Thank you gentlemen for one more on the solar side can you talk to you know given the turmoil and a debt market and stuff can you talk to specifically a you know developers access to capital to develop your I guess two to five.

Gigawatt targeted market. Thank you.

Yeah, So can I don't have that.

I, probably can't give you a just because of general a understanding down to the detailed level everyone of those developers, but let me just contacts around that business.

We implemented a new CRM system, Oh, probably six months ago.

Our our new leader there that came on board.

[noise] named Dean Booth traffic is a and his team have done a great job, putting some business processes in place that I think it really helped us see some opportunities that we weren't seen before.

As a result with bad I would say our broader activity is a much improved in terms of opportunity quote.

Finding projects and bringing those to the finish line I think that's one reason our backlog.

In solar has gone up so much as we're just winning more we're winning more because we have visibility and we have different engagement, we're winning more because.

Our ability to deliver.

Which we've always been proud of but we're getting better at that we've been implementing and investing in better processes project management.

And so forth. So I think a in a broad brush we've done some things in the business that just make us that much more effective that much more productive.

And I think our customers are starting to see it. That's one thing second thing is you know we've had some competitors that maybe have not been able to deliver or struggled last year and struggle a little bit more this year because of the current situation. So again, we're in a better position and I think our customers are recognizing that in and so.

Again, we have an opportunity to bid more and win more now which is what's happening I would say in general the strength from an end demand perspective, and again I think this whole event that were in the middle of right now probably supports it even further when you start thinking about renewables and sources of energy and and so forth.

But the general strength continues to be very solid so I think the funding.

That at least the developers were working with US is there I mean these are we see backlog you know people ask where you think that may go away and.

We don't think so the activity going into April and going into May and that the number of jobs that are being quoted in and and taking cross. The finish line continued to be at a very high high pace.

So I think you know the developers are are funded I think they.

And should moving forward.

I mean, when each of those projects falls I can't tell exactly but but.

We feel pretty good about the strength of the end market developer positions in our ability to to participate differently than we have in the past. So yeah. So far it's been pretty positive this year.

Thank you.

We have reached the end of the question and answer session. At this time I'd like to turn the call back over to Mr. Bill Bosley for closing comments.

Well so.

Just wanted to thank everybody again for joining us today and again I I hope.

Everybody stay safe and healthy we are in.

Clearly a unique time and it's not easy for everybody.

Yeah, <unk> around the world for sure but are we.

We I do believe we'll get through it I do believe you have to we have to attack the problem and and we're trying to do that as a company and as an organization.

And we're going to continue to do so so look forward to two speaking with you a we have a number of virtual conferences and non deal road shows coming up looking forward to having more conversation with you and update you as to where we are.

And then we'll we'll circle back at the Oh for a second quarter call. So have a great day and again, thanks for a thanks for your interest take care.

This concludes todays conference you may disconnect your lines at this time and we thank you for your participation.