Q1 2024 Atkore Inc Earnings Call
Good morning, My name is Rob and I'll be your conference operator today at this time I would like to welcome everyone to at Corp, first quarter fiscal year 2024 earnings conference call all lines have been placed on mute.
Listen only mode. After the Speakers' remarks, there will be a question and answer session. If you would.
To ask a question during this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question again prestige Star one as a reminder, this conference is being recorded I would now like to turn the conference over to your host John <unk>, Vice President of Treasury and Investor Relations. Thank you.
You may begin.
Thank you and good morning, everyone I'm joined today by Bill Waltz, President and CEO as well as David Johnson, Chief Financial Officer.
We will take your questions after comments by Bill and David I.
I would like to remind everyone that during this call we may make projections or forward looking statements regarding future events or financial performance of the company.
Such statements involve risks and uncertainties such that actual results may differ materially.
Please refer to our SEC filings and today's press release, which identify important factors that could cause actual results to differ materially from those contained in our projections or forward looking statements.
In addition, any reference in our discussion today to EBITDA means adjusted EBITDA and any reference to EPS or adjusted EPS means adjusted diluted earnings per share.
Adjusted EBITDA and adjusted diluted earnings per share are non-GAAP measures reconciliations of non-GAAP measures in our presentation of the most comparable GAAP measures are available in the appendix to today's presentation with that I'll turn it over to bill.
Thanks, John and good morning, everyone.
<unk> here on slide three <unk> is off to a strong start for FY 'twenty four and we are demonstrating the structural improvements and transformation that we made to our business over the past several years I am proud to share that volumes for the quarter were up 13% driven by contributions.
Across all key product areas.
We're focused on executing our capital deployment model as evidenced by the $96 million and shares repurchased in the first quarter and the continued activity in January.
In addition, I am very pleased to announce that we've officially declared our first quarterly dividend.
Exciting achievement for our company.
I also want to highlight the release of our fiscal year 2023 sustainability report, which was published last month. This report provides an update on the progress against our 2025 targets and covers additional important topics and initiatives.
I'd like to take a moment to thank all of our employees for everything they do to support our key stakeholders.
Overall in fiscal 2024, we're off to a great start and I continue to be excited for what's to come with that I'll now turn the call over to David to talk through the results from the first quarter and our outlook for the full year.
Thank you Bill and good morning, everyone.
Moving to our consolidated results on slide four in.
In the first quarter net sales were $798 million and adjusted EBITDA was $214 million.
We are pleased with our margin performance in the quarter with adjusted EBITDA margins over 26%.
Our tax rate in the quarter was favorable due to the vesting of previously granted stock compensation.
This outsized benefit was unique and contributing to our strong EPS performance.
Moving forward, we expect the rate to be closer to roughly 25% for the remaining quarters in the year.
Turning to slide five and our consolidated bridges.
I am pleased by our strong volume performance in the quarter with organic volumes up over 13%.
These gains were offset by the continued pricing normalization, but this impact was within expectations and aligns with the pricing trends, we have been discussing for the past several years.
Moving to slide six.
We're making good progress against the low double digit volume expectation for the full year with solid contributions across all key product areas.
Our plastic pipe and conduct category was up high single digits led by solid growth in our PVC products.
Across our electrical related categories volumes were slightly higher than anticipated in Q1 as several large customers met their calendar year end rebate levels.
Looking ahead, we expect Q2 to be softer than Q1 in terms of year over year volume percentage growth due to this timing of purchases at year end and the recent severe weather conditions have unfavorably impacted our January performance.
Turning to slide seven.
Both segments had positive volume growth in the first quarter.
Margins compressed in our electrical segment with the previously mentioned pricing normalization that remained very strong at 34%.
We also faced some year over year margin compression on the F&I side due to a tough comparison versus the prior year and the planned startup costs in Indiana to support the volume ramp.
Turning to slide eight.
We continue to execute our capital deployment model with cash generated from the business and our balance sheet has been tremendous position with no maturity repayments required until 2028.
Next on slide nine I am pleased to highlight a significant milestone for our company with the upcoming payment of our first regular quarterly dividend.
Earlier this week <unk> board of directors approved the first quarterly dividend payment of 32 per share.
This achievement was made possible by our sustained performance over a multiyear period and our confidence in the future.
Now for our fiscal year 2020 for outlook on page 10.
Our expectation of low double digit percentage volume growth for the year remains on track.
Also with our strong EPS performance in Q1, we are increasing our full year estimate accordingly.
As previously mentioned our performance in January was impacted by several factors, including the adverse weather conditions in many parts of the U S.
This is affecting our estimates for Q2.
But overall, we are maintaining our outlook for full year net sales and adjusted EBITDA.
Also as we've discussed before we've always built in an expectation that the back half of the year will be stronger than the first half for two main reasons.
First as we are ramping up these new facilities are volume from these sites will steadily increase throughout the year.
And second our overall business is always stronger in the spring and summer construction season versus the fall and winter.
Therefore, we expect adjusted EBITDA to improve sequentially from Q2 to Q3, and then Q3 to Q4.
With that I'll turn it back to bill.
Thanks, David we are very pleased with what we've accomplished this quarter and our outlook for this fiscal year, but we're even more excited about all the opportunities ahead.
Moving to slide 11, as we said before the electrical industry is a great place to be.
It's difficult to find a building or infrastructure project that does not require <unk> products with over 90% of <unk> product portfolio supporting electrical infrastructure, we are well positioned to benefit from the strong electrical churns projected across numerous end mark.
<unk> categories.
On slide 12, we've annualized product volume data to determine estimated density across key end markets with anticipated growth in data centers manufacturing life, <unk> health care education and multifamily over the next five years and at quarters.
<unk> ability to deliver a wide range of products that each of these buildings need I'm again reminded that accor in the electrical industry overall is a great place to be.
Better yet consensus agrees.
Experts and peers across the industry also have a positive outlook on 2024 and beyond in addition, where several other major public electrical contractors and electrical peers reporting record backlogs and project cost center grow a.
Reinforces our confidence in the future for this industry with.
With that we'll turn it back to the operator to open the line for questions.
At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad, we'll pause for just a moment to compile the Q&A roster.
Your first question comes from the line of Andy Kaplowitz from Citigroup. Your line is open.
Hey, good morning, guys.
Good morning, Andy Good morning.
Bill or David I know, you've guided to relatively strong volume growth for the year.
But you did have a nice positive bump in electrical volumes in Q1, I know you mentioned some of the bigger customers pulling forward their volume, but maybe you can quantify how much that was that pull forward did you at all see a turn in your HDD markets and could you quantify the weather impact in Q2.
That could impact future results.
Yeah, I'll start and Andy then turn it over to David always with what level of specificity here, but.
First HD PE very much on track for what we expected, but as David said in the past it's more of a fiscal 'twenty five and you can see that with I won't call out other public corporations, but even large fiber optic companies have announced earnings recently and is almost there slide could've been interchange with ours or what we've communicated.
Made it there.
Again, we can follow up with why we think that home here in a moment, what we saw and this is common for every year as we said in the industry not just us rebate level of scope you hit X number volume dollars, we'll give you whatever 2% whatever the number rebate is back and we try to state firm to that so some of.
Our customers literally just said, okay, we understand it I'm, assuming when we saw a spike in December was to get to their goals. So a little soft there and then not a surprise I think for anybody in January here that.
With the weather.
Yes across the country for example, I was talking to our customers.
For example, one large customer I won't be overly specific here, but had over 50 of their locations down for at least two days or more.
Dealing with the weather so with those two things January was light and <unk>.
But again, if you add up those strong organic growth in Q1 with what were kind of.
Forecast seen per se without precise number in Q2.
It's basically averages out and branches exactly to what we have for the year. So again to me. It's a good comfort thing that we're still on track and actually raised EPS, so hopefully somewhere in that level I answered your questions.
Steve Tusa: Thank you for watching. I'm your host, Steve Dray.
Rob: Good morning. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to ADCOR's first quarter fiscal year 2024 earnings conference call. All lines have been placed on mute in a listen-only mode.
You did though.
Let me sort of step back I think you've talked about contractor backlogs. When you step back obviously the lead indicators you kind of all over the place still now may be stabilizing at lower levels are you seeing sort of any changes in primary markets, we already talked about HCP, but clearly things like data centers and ramp.
Rob: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star one. As a reminder, this conference is being recorded. Thank you. I would now like to turn the conference over to your host, John Deitzer, Vice President of Treasury and Investor Relations. Thank you. You may begin. Thank you, and good morning everyone.
Not even working on underground and so like are things sort of better than they were a few months ago as rates have come down or like how do you sort of frame the market at this point I think either consistent but definitely not worse. So let's put it that way. So give me Andy to your point Theres. So many metrics out there and which metrics are irrelevant or even over time.
John Deitzer: I'm joined today by Bill Waltz, President and CEO, as well as David Johnson, Chief Financial Officer. We will take your questions after comments from Bill and David. I would like to remind everyone that during this call, we may make projections or forward-looking statements regarding future events or financial performance of the company. Such statements involve risks and uncertainties such that actual results may differ materially. Please refer to our SEC filings and today's press release, which identify important factors that could cause actual results to differ materially from those contained in our projections or forward-looking statements. In addition, any reference in our discussion today to EBITDA means adjusted EBITDA, and any reference to EPS or adjusted EPS means adjusted diluted earnings per share. Adjusted EBITDA and adjusted diluted earnings per share are non-GAAP measures.
How metrics.
Bob on the importance and why are the ones at least I'll say I, but <unk> gravitating to that we don't talk about in the earnings deck I don't thing, but was association of building contractors are still high eight plus months I forgot the exact 8688, but I do recall two things for example, one.
December they actually increased eight tenths of a month. So if their backlog is going up and then here in the last two days the association of building contractors set about they have even higher number of open jobs as they put jobs. So literally we could have written the script on the.
The biggest constraint to accor and it's a good thing isn't the market. So whether you read abi or something like that it's literally just curious around nine months of backlog right now with contractors Abi or ADC would talk to that.
John Deitzer: Reconciliations of Non-Gap Measures and a Presentation of the Most Comparable Gap Measures are available in the appendix to today's presentation. With that, I'll turn it over to Bill. Thanks, John, and good morning, everyone. Starting on slide three, ACOR is off to a strong start for FY24, and we are demonstrating the structural improvements and transformation that we've made to our business over the past several years. I'm proud to share that volumes for the quarter were up 13%, driven by contributions across all key product areas. We're focused on executing our capital deployment model, as evidenced by the $96 million in shares repurchased in the first quarter and the continued activity in January. In addition, I'm very pleased to announce that we've officially declared our first quarterly dividend, a very exciting achievement for our company. I also want to highlight the release of our fiscal year 2023 sustainability report, which was published last month. This report provides an update on the progress against our 2025 targets and covers additional important topics and initiatives. I'd like to take a moment to thank all of our employees for everything they do to support our key stakeholders.
And to the point of as other skilled trades, whether its a maintenance manager someplace else may have slowing Hari it's actually the economist for association of building contractors said, how thats good for the industry. So they can hire more people. So Andy at the end of the day I'm pretty confident we can talk about Q2.
Versus Q3 and.
When things ramp up in our own so self growth initiatives, but the backlogs are out there for us and everybody else.
And if you looked at.
Construction employment continues to go up although the estimate from this week from the contractors Association said that they estimate they need around 500000 more.
New folks entering construction and thats over and above the net normal so.
There is a lot of work out there I mean, when we talk about the contract backlog will be around it that's about as high as it's going to be because people are going to take jobs. Two years from now so I think that's a really healthy rate.
Is around again getting folks who can actually execute some of these projects.
And one more for me I know you said safety and infrastructure includes 7 million of startup costs, but did you contemplate those costs. When you were thinking about when you guided us to Q1, how are you factoring in any incremental startup costs going forward was there anything else holding down 16 infrastructure margin.
William E. Waltz: Overall, in fiscal 2024, we're off to a great start, and I continue to be excited for what's to come. With that, I'll now turn the call over to David to talk through the results from the first quarter and our outlook for the full year. Thank you, Bill, and good morning, everyone. Moving on to our consolidated results on slide four. In the first quarter, net sales were $798 million, and adjusted EBITDA was $214 million. We are pleased with our margin performance in the quarter, with adjusted EBITDA margins over 26 percent. Our tax rate in the quarter was favorable due to the vesting of previously granted stock compensation.
Yes, I think Andy we're on track so both the fact that like one simple way to do this as we in our guide for Q1 actually exceeded the guide and the range slightly some of that now again is just.
Volume.
And I don't want it yet again, our transparency, but it was a good quarter and we're on for the full year for EBITDA and I'll make the plug again on EPS. So it's and one other thing I know David wants to jump in here to realize with the large complex factor I think one swap shareholders forget it it's like Oh, Youre, just making a torque to every size different.
Is it off the guidance certainly you can't do those things until you are actually up and running you don't have the air permit so literally getting all the machinery tuned for every new size determining things like whether you're using big or TIG welding theres. Just so many different complexities. There that we knew was going to take all year to ramp up but as David said in the prepared remarks.
David P. Johnson: This outsized benefit was unique and contributed to our strong EPS performance. Moving forward, we expect the rate to be closer to roughly 25% for the remaining quarters in the year. Turning to slide five in our consolidated bridges,
Why also as we look for our guide for the year Youll see a ramp up as we continue to hit our volume numbers and so forth. So both confidence as much as you can be confidence in our year end outlook for EBITDA confidence in our volume numbers as things pick up through the year.
David P. Johnson: I am pleased by our strong volume performance in the quarter, with organic volumes up over 13%. These gains were offset by continued pricing normalization, but this impact was within expectations and aligns with the pricing trends we have been discussing for the past several years. Moving to slide 6.
Got it thanks guys.
David P. Johnson: We're making good progress against the low double-digit volume expectation for the full year with solid contributions across all key product areas. Our plastic pipe and conduit category was up high single digits, led by solid growth in our PVC products. Across our electrical-related categories, volumes were slightly higher than anticipated in Q1, as several large customers met their calendar year-end rebate levels. Looking ahead, we expect Q2 to be softer than Q1 in terms of year-over-year volume percentage growth due to this timing of purchases at year-end and the recent severe weather conditions that have unfavorably impacted our gain-worth performance. Turning to slide seven.
Yes, Thanks, Andy.
Your next question comes from the line of Deane Dray from RBC. Your line is open.
Thank you and good morning, everyone.
Hey, good morning Deane.
It was great to see that volume come through.
This quarter, it, especially like slide six that shows us that balance across the portfolio. So.
Good to see that.
Oh, Yeah Deane. Thank you for that I mean purely from the standpoint it wasn't once in a while we get focused on one product line for us It wasn't a one trick pony every product line.
Was up there.
So I think what that chart shows as well for example, PVC and HTS important it's 31% of our sales. So there's a lot of other great products, some of which we're doing really well on pricing with and so forth. So it's a good environment for <unk>, great and that takes me to the heart of the question here is taken.
David P. Johnson: Both segments had positive volume growth in the first quarter. Margins compressed in our electrical segment with the previously mentioned pricing normalization that remains very strong at 34%. We also face some year-over-year margin compression on the F&I side due to a tough comparison versus the prior year and the planned startup costs in Indiana to support the volume ramp. Turning to slide 8.
Through the pricing dynamics this quarter and I know the recovery and the normalization is not going to be linear, but you know what.
The specific dynamics this quarter input costs competitive positioning.
The demand was.
I know geographically, that's a factor as well, but just take us through those dynamics. If you could start and then again, if David would like that specificity to this with the chart I would tell you is overall on track again without getting into each product line. There is some are a little bit lower but there is absolutely. Some gone hate general manager sales team keep doing what <unk>.
David P. Johnson: We continue to execute our capital deployment model with cash generated from the business, and our balance sheet is in a tremendous position with no maturity repayments required until 2020. Next, on slide nine, I am pleased to highlight a significant milestone for our company with the upcoming payment of our first regular quarterly dividend. Earlier this week, ACOR's Board of Directors approved the first quarterly dividend payment of $0.32 per share.
We're doing here.
And I can think of and if you again, if you go back to that page six referenced without me calling out specific on these products and at least two of those categories may have been maybe more others have led price increases. So I think we're a price leader because we had that one order one delivery one invoice and we have the ability to.
David P. Johnson: This achievement was made possible by our sustained performance in our multi-year period and our confidence in the future. Now for our fiscal year 2024 outlook on page 10. Our expectation of low double-digit percentage volume growth for their year remains on track. Also, with our strong EPS performance in Q1, we are increasing our full year estimate accordingly. As previously mentioned, our performance in January was impacted by several factors, including adverse weather conditions in many parts of the U.S.
More value that many of our competitors to the industry, but we're not the only one out there thinking about how you give good returns to their shareholders.
Right on track overall, and Dean and when you look at the slide five if you net on the EBITDA bridge.
Versus cost changes around $90 million and we had guided I believe a midpoint of around $250 for the year that was always going to be more front end loaded year over year. If you look at that because pricing went down all last year sequentially. So I would say no.
William E. Waltz: This is affecting our estimates for Q2, but overall, we are maintaining our outlook for full-year net sales and adjusted EBIT. Also, as we've discussed before, we've always built in an expectation that the back half of the year would be stronger than the first half for two main reasons. First, as we are ramping up these new facilities, our volume from these sites will steadily increase throughout the year. And second, our overall business is always stronger in the spring and summer construction seasons versus the fall and winter. Therefore, we expect adjusted EBITDA to improve sequentially from Q2 to Q3 and then from Q3 to Q4. With that, I'll turn it back to Bill.
Yeah.
So to what Phil said.
Totally on track for our expectations for the year.
Got it got it takes me to the next question on the <unk>.
Assumptions first half second half and I get the seasonality piece. It's clearly that's the construction season that drives that second half.
But just there's such a disparity here in first half EBIT.
If I have the numbers right.
Year over year down, 22%, and then second half coming to almost even to last year. So is that the expected ramp between the two and how much of that and I got the volume part because we're seeing that come through and Billy.
William E. Waltz: Thanks, David. We are very pleased with what we've accomplished this quarter and our outlook for this fiscal year, but we're even more excited about all the opportunities ahead. Moving to slide 11.
William E. Waltz: As we've said before, the electrical industry is a great place to be; it's difficult to find a building or infrastructure project that does not require ACOR's products. With over 90% of ACOR's product portfolio supporting electrical infrastructure, we are well positioned to benefit from the strong electrical trends projected across numerous end market categories. On slide 12, we've analyzed product volume data to determine estimated density across key and markets, with anticipated growth in data centers, manufacturing, lodging, health care, education, and multifamily over the next five years and ACCOR's ability to deliver a wide range of products that each of these buildings need. I am again reminded that ACCOR and the electrical industry overall is a great place to be.
<unk> in the end market demand so it was pricing.
The key component there.
So.
Couple of things I would look at it more sequentially in the year of FY 'twenty for it because when you compare it versus FY2023 of last year, we still had some really strong quarters at the beginning of the year as pricing went out through the year. So said another way our comps will get easier as the <unk>.
Back half of the year. So when you look at what we have in the second half of our fiscal year this year versus the first half.
You will see a number that youll need like in the $242 50 kind of the EBITDA range versus.
The 210, 15 or whatever average for Q1, maybe a little bit lower that for the first half that is definitely again increases in khobar normal seasonality, where you see the construction season picking up and then pricing firming versus last year, where pricing was still going.
Rob: Better yet, consensus agreed, experts and peers across the industry also have a positive outlook on 2024 and beyond. In addition, with several other major public electrical contractors and electrical peers reporting record backlogs and projecting positive growth, it reinforces our confidence in the future for this industry. With that, we'll turn it back to the operator to open the line for questions. At this time, I would like to remind everyone that in order to ask a question, press star, then the number 1 on your telephone keypad.
So I think you add that all together I would say the <unk>.
Seasonality is fairly atypical just a little bit more backend loaded because of our growth initiatives hitting in the back half of the year.
Alright that was really helpful. David I appreciate the precision, especially the reminder, about the dynamics second half than those of last year on the comps so.
That was really helpful and just last one for me you referenced the Indiana plant can you give us an update.
The startup where does it stand in terms of productivity efficiencies and so forth.
Yes, so first thing, but to your question a little bit.
Rob: We'll pause for just a moment to compile the Q&A roster. Your first question comes from a line called Andy Kaplowitz from Citigroup. Your line is open. Hey, good morning, guys. Good morning, Andy.
Hansard with Andy it's on track. So now on track means that as David called out and we had the $7 million, it's not generating the profits that we expect long term, but that's to be expected, but just again the complexity of every product SKU, it's not like starting up a light bulb factory or a catch.
William E. Waltz: Bill or David, I know you've got relatively strong volume growth for the year, but you did have a nice positive bump in electrical volumes in Q1. I know you mentioned some of the bigger customers pulling forward their volume, but maybe you can quantify how much that was that pull forward. Did you at all see a turn in your HDP markets and could you quantify the weather impact in Q2, how much that could impact Q2 results? Yeah, I'll start, Andy, then turn it over to David, always asking what level of specificity here.
Truck manufacturer that you just have one SKU and you run it it starts or it doesn't start here as each customer each product running at taken the machines down for a couple of days, bringing up a second share it bring it up a third shift, but we're still I mean, we have a phenomenal leadership team there and it's progressing basically is the way we expected.
As their profits short term as you get a plant up and running yet, but again to me. The reaffirmation is we have the forecast for the rest of the year. We're still on it everything is moving as expected at this time.
William E. Waltz: First, HDPE, very much on track for what we expected, but as David said in the past, it's more of a fiscal 25, and you can see that with other public corporations, but even large fiber optic companies have announced earnings recently, and it's almost as if their slide could have been interchanged with ours or what we've communicated there. And again, we can follow up with why we think that home here in a moment. What we saw, and this is common for every year, is we set, and the industry sets, not just us, rebate levels. If you hit X number, volume, dollars, we'll give you, you know, whatever, 2%, whatever the number of rebates is back, and we try to stay firm to that.
All good to hear thank you.
Okay. Thanks Dean.
Your next question comes from the line of Chris Moore from CJS Securities. Your line is open.
Hey, good morning, guys. Thanks for taking a couple of questions.
Yes, maybe.
On PVC pricing for for January was there much change.
No.
We expected volume, yes, Chris like a water products you can imagine, especially the products that go underground, which is PVC in HD and so forth there Avi fiberglass kind of do it again. These are smaller lines fiberglass is actually under bridges, so misspoke by them, but those type are definitely being impacted.
William E. Waltz: So some of our customers literally just said, okay, we understand, and I'm assuming that when we saw a spike in December it was to get to their goals. So a little soft there, and then not a surprise, I think, for anybody in January here that with the weather, you know, across the country, for example, talking to our customers, for example, one large customer, I won't be overly specific here, but had over 50 of their locations down for at least two days or more, dealing with the weather. So with those two things, January was light.
By the weather across the country, but pricing basically on track and we've.
Put it in one or two price increases it's harder when the demand isn't there to get them to realize but we're still optimistic going forward on you said attempting to push the prices in the industry up that Chris If you as you recall you know our backlog is less than a couple of weeks, we do cut it up every week look at where volumes are and what have you.
Bill mentioned, we mentioned our prepared remarks January was light due to several factors.
William E. Waltz: But again, if you add up the strong organic growth in Q1 with what we're kind of forecasting per se without precise numbers in Q2, it basically averages out and bridges exactly to what we have for the year. So again, to me, it's a good comfort thing that we're still on track and actually raising DPS. So hopefully, somewhere at that level, I answered your question. You did, though.
The first started this week has been much stronger so, we'll see and we'll see where it versus our expectations here in Q2, how it lays out for the rest of the quarter.
Got it I appreciate that.
Maybe just one more on Indiana, So obviously.
Talk quite a bit about the driver from the inflation reduction Act.
You guys are getting getting up and getting going how would you characterize kind of <unk>.
William E. Waltz: But let me sort of step back. I think you talked about contractor backlogs. You know, when you step back, obviously, the lead indicators are kind of all over the place, still, you know, maybe stabilizing at lower levels. Are you seeing sort of any changes in primary markets? You know, we already talked about HDP, but, you know, clearly things like data centers are ramping up. You've been working on undergrounding. So, like, are things sort of better than they were a few months ago as rates have come down? Or worse?
Demand for torque tubes overall.
And.
How would you view that kind of against the current domestic capacity to meet that demand as it enough.
Beyond where you guys are at and what are you seeing overall, yes.
Yes, Chris the best I can tell you and again its estimates and so forth is there was more demand out there than capacity in the industry to aboard and again I think as we've given in prepared remarks or answering questions over the years and again, others, including public customers could probably comment on this but.
William E. Waltz: Like, how do you sort of frame the market at this point? Yeah, I think it's either consistent, but definitely not worse. Let's put it that way. So, DVAndy, to your point, there are so many metrics out there, and which metrics are relevant, or even over time, how metrics evolve in importance. And one of the ones that, at least I'll say I, but of course, Gravits, 82, that we don't talk about on the earnings deck, I don't think, but was the Association of Building Contractors. They're still high after eight plus months. I forgot the exact 8.6, 8.8.
With inflation reduction act it should move.
All of the volume into the space, which is a great thing for the U S and its economy, but that literally EBIT.
The solar market did not grow which we'll come back to in a second.
Most of them out of software torque tubes, and right now I don't think that capacity exists by anybody out there. So again as we add.
William E. Waltz: But I do recall two things, for example, one, in December, they actually increased by a tenth of a month. So, their backlog is going up. And then here in the last two days, the Association of Building Contractors said that they have an even higher number of open jobs as they put jobs out. Literally, we could have written their script on the biggest constraint to ACOR.
The capacity of fine tuning, you're getting multiple shifts up I have to believe some of our competitors are doing the same thing and so forth, but you add doubling the size of the domestic talk to market plus whatever double digit plus growth of the solar market I don't think anyone would dispute that it's a really healthy and exciting.
David P. Johnson: And it's a good thing the market isn't as bad as it is. So, whether you read ABI or something like that, there is literally around nine months of backlog right now with contractors. ABI or ABC would talk to that. And to the point that as other skilled trades, whether it's a maintenance manager somewhere else, may have slowing hiring, the economists for the Association of Building Contractors have said how that's good for the industry, so they can hire more people. So, Andy, at the end of the day, I'm pretty confident we can talk about Q2 versus Q3 and when things ramp up in our own self-growth initiatives, but the backlogs Yeah, Andy, construction employment continues to go up, although the estimate from this week from the Contractors Association said that they estimate they need around 500,000 more new folks entering construction, and that's over above the net normal.
<unk> for both <unk> and I think just the countries we've become more carbon free.
Got it I appreciate that maybe just one last one here.
Obviously, you guys sell the majority of products through distributors, but you've talked about marketing efforts efforts that go way beyond this distribution channels develop relationships with the big players in markets like Rainmakers fab owners et cetera, with the goal of becoming a partner just wondering if you can provide.
Any update there and thoughts on I know, that's a longer term process, but kind of how you're viewing that.
Oh, it's a really say, it's almost Chris I'm teasing because we did not do this but if you could give me a softball question here up to your point, it's a multiyear process, but what I'm proud of and I think we did a press release here in the last month or two was Nieca, which is the national electrical contractors Association. So represents all the construction contractors and electrical.
David P. Johnson: So there's just, there is a lot of work out there. I mean, when we talk about the contractor backlog in Iran, that's about as high as it's going to be because people aren't going to take jobs two years from now, you know, so I think that's just a really healthy rate. This is around, again, getting folks who can actually execute some of these projects. And one more for me.
Space that are union vendors, so quickly non union organization name.
Aimed us as one of the Premier partners and to give you a feel there is around 13 give or take premier partners and Thats everything from a freight carrier to electrical energy generator company for their planned Seo tools, so in our space across PVC products across steel.
David P. Johnson: I know you said safety and infrastructure included $7 million in startup costs, but did you contemplate those costs when you were thinking about when you guided us to Q1, how you're factoring in any incremental startup costs going forward? And, you know, was there anything else holding down safety and infrastructure margins? Yeah, I think Andy, we're on track. So both the fact that, like one simple way to do this, we hit our guide for Q1, actually exceeded the guide in the range slightly. Some of that, again, is just the volume pull ahead. I don't want to, you know, again, our transparency, but you know, it was a good quarter, and we're on for the full year for EBITDA. I'll make the plug again on EPS.
Onto our products across metal framing price used go through we are the only premier partner basically for all of our set of products. There. There is some other quick product manufacturers in certain spaces, but it just shows the relationships that <unk> building out there and it's a real complement to our organization.
Our products are value in it.
The partnership we're doing so it's exciting Chris.
Got it I appreciate that I will leave it there.
Okay.
Thanks, Chris.
Your next question comes from the line of Alex <unk> from B Riley Your line is open.
David P. Johnson: So it's and one other thing I know David wants to jump in here to realize with a large, complex factory, I think once a lot of shareholders forget, it's like, oh, you're just making a torque tube. Every size difference is an octagon, it's a circle, you can't do those things until you're actually up and running; you don't have the air permit.
Thank you and good morning, gentlemen, very nice quarter.
Thank you Alex.
Couple of quick questions here first as we think about the second quarter guidance versus the first quarter Directionally, what does your guidance imply for price and volume and I guess, what I'm getting at here is have we seen the correction in raw materials sort of fully reflected in either first quarter or the second.
David P. Johnson: So literally, getting all the machines retuned for every new size, determining things like whether you're using MIG or TIG welding, there's just so many different complexities there that we knew it was going to take all year to ramp up. But as David said in his prepared remarks, that's why also, as we look for our guide for the year, you'll see a ramp-up as we continue to hit our volume numbers and so forth. So both confidence in our, as much as you can be, confidence in our year and outlook for EBITDA, and confidence in our volume numbers as things pick up through the year. I got it.
Guide.
Well I would say when the in the second quarter guide.
We get from our comments that our volume year over year, we expect it to be lower than it was in Q1 as a growth year over year, but still a growth modest growth year over year I would say pricing. When you look at these and Theres been steel's been its way up no I'd be honest way down what have you.
Deane Dray: Thanks, guys. Yeah, thanks, Andy. Your next question comes from a line called Deane Dray from RBC. Your line is open. Thank you. Good morning, everyone.
That gets reflected fairly quickly and are in our numbers.
Are you able to price on a daily basis.
We might not see an increase or decrease four weeks as we work through our inventory. So I would say, it's pretty dynamic so there isn't really.
William E. Waltz: Hey, good morning, Dean. It was great to see that volume come through this quarter and especially like slide six that shows you that balance across the portfolio. So good to see that. Oh, yeah, Dean. Thank you for that.
Situation, where it lags in any meaningful way except for the <unk>.
<unk> segment, where that tends to be more quarterly based and so.
William E. Waltz: I mean, purely from the standpoint that we get focused on one product line versus another, it wasn't a one-trick pony; every product line was up there. And also, I think what that chart shows is, well, for example, PVC and HD are important. It's 31% of our sale. So there are a lot of other great products, some of which that we're doing really well on pricing with and so forth. So it's a good environment for action.
A little bit behind when steel is on its way up a little bit of headwinds sales on its way down but that again tends to normalize over a couple of quarters and then Alex if I can reach off your question a little bit again, David it's better at giving you the bridge, but just for you or other shareholders out there the way, we think about our profit and pricing.
First thing is just general industry volume, obviously, if there is strength tight capacity.
William E. Waltz: Great. And that takes me to the heart of the question here, which is, take us through the pricing dynamics this quarter. And I know the recovery and the normalization are not going to be linear, but what were the specific dynamics this quarter, input costs, competitive positioning, where the demand was? I know geographically that's a factor as well, but just take us through those dynamics, if you could.
Like any project you can solve for more because you have multiple options and multiple customers that want it. So volume second thing, where I think we are absolutely the industry leader as our capability and we're really doubling down on this the one order one delivery one invoice that just as competitive.
Competitive sustainable advantage that I don't think anyone else can match period in the next decade my own personal opinion, then it gets to where your question was to go walk a steel up it's still down and I think David answered there we do.
David P. Johnson: I'll start and then again, if David would like to add specificity to this with the charts, I'd say it's overall on track. Again, without getting into each product line, there are some that are a little bit lower, but there's absolutely some going, hey, general manager, sales team, keep doing what you're doing here. And I can think of, and again, if you go back to that page six reference, without me calling out specific products, and at least two of those categories, maybe more, others have led price increases.
Nominal real time pricing that.
It's not a large driver of our our EBITDA for example.
And then secondly can you give us an update on the expansion of distribution centers.
Yeah, So great Wow, great question, there not that every other question hasn't been good.
We're right on track with the filing things, we have several of them up and running well.
William E. Waltz: So, I think we're a price leader because we have that one order, one delivery, one invoice, and we have the ability to bring more value than many of our competitors to the industry, but we're not the only one out there thinking about how we give good returns to our shareholders. So, right on track overall. Yeah.
Now we're working on one in the Dallas area and went on the Atlanta area. We have the facilities purchase lease we're putting in racking starting to bring products up. It's really also something as David talked earlier to other questions that we talk about this fiscal year ago eight Deane Dray question like Bridge me the average.
David P. Johnson: And Dean, when you look at slide five, if you net on the EBITDA bridge, the price versus cost changes, you're around 90 million, and we had guided, I believe, a midpoint of around 250 for the year. That was always going to be more front-end loaded year over year, if you look at that, because pricing went down all last year sequentially. So, I would say to, you know, go with what Bill said. We're definitely on track for our experience. Got it. And that kind of takes me to the next question on the assumptions, first half, second half, and I get the seasonality piece. It's clearly the construction season that drives that second half.
Turn to the $2 50 in the second half of the year I think <unk> are more of a thing that's going to help us in fiscal year 2006, just to go until we fully get them up and fully get the value prop we're getting it now but the leverage of that as we go forward is what again gives us confidence in the $18 plus EPS that we've put out there a couple of years ago now.
Very helpful. Thank you very much.
Yes, Thanks, Alex.
Your final question comes from the line of Chris Dankert from Loop capital. Your line is open.
Hey, good morning, guys. Thanks for taking the question.
Thanks, I guess first off.
I guess first off you mentioned there was probably some a little.
A little bit of rebate bind to hit those break points at the end of the year here.
David P. Johnson: But just there's such a disparity here in first half EBITDA, if I have the numbers right, year over year down 22 percent and then second half coming to almost even with last year. So is that the expected ramp between the two and how much of that is it? And I get the volume part because we're seeing that come through, and we're believers in the end market demand. But is pricing the key component there? So, I would look at it more sequentially in the year of FY24 because when you compare it versus FY23 of last year, we still had some really strong quotes at the beginning of the year as pricing went down through the year. So said another way, our comps will get easier in the back half.
Do you feel like distribution inventories are still in a good place as we kind of move into the second quarter here. So maybe any kind of comment on how you see the inventory landscape at the distribution level.
I think we're back.
Last year to normal pre COVID-19 or in other words, there is inventory out there, but the appropriate amount for this through at this time of year and then.
As we get it is hard to predict to David's earlier point to the out with one or two weeks of backlog are we talking in March or April but has some time customers will even put more in because they know that the spring season in summer season will be stronger and therefore, we will start to stock up more but at this stage.
Right on track I Wouldnt say they are low, but they are definitely not high and there is no reason to be in other words factor earlier questions. You know commodity prices are pretty stable, we could talk about steel going down a little bit PVC, maybe going up a little bit you know those type of things and even our pricing, while we always aspire to increase our pricing there is no.
David P. Johnson: So when you look at what we have in the second half of our fiscal year this year versus the first half, you will see a number that you'll need like in the 240, 250 kind of EBITDA range versus the 210, 15 or whatever average for Q1, maybe a little bit lower than for the first half. That is definitely, again, increases in COBART, normal seasonality where you see the construction season picking up, and then pricing firming versus last year, where prices were still going down. So I think you add that all together, and I would say the seasonality is fairly atypical, just a little bit more back and loaded because of our gross initiatives hitting in the back half.
Dramatic swings or supplier shortages, so business is back to normal.
Got it correct glad to hear that.
And then maybe just to zoom out to 30000 feet for a second.
Obviously competitive dynamic swing too much quarter to quarter, but certainly we are getting a lot of questions. On just are there any changes in the competitive landscape and pricing would suggest theres nothing dramatic going on at the moment, but maybe just a quick comment on how you see the competitive landscape and what's what's going on and what might be changing a little bit incrementally here.
Nothing of significance there it's always.
Minor players had tried to enter in.
Noise level things that somebody you're importing a product because of things, but literally there's as much opportunity without me getting specific.
David P. Johnson: All right, that was really helpful, David. I appreciate the precision, especially the reminder about the dynamics of the second half of last year in the comp. So that was really helpful. And just last one for me, you referenced the Indiana plant. Can you give us an update?
One.
Things that U S government may do or you saw flashes. This morning, if Trump was elected he would stop imports and all the different things that at the end of the day. It's the earlier questions others. The demand out there almost nine months a contractor backlog is our self help things are growing with the solar industry.
William E. Waltz: The startup, where does it stand in terms of productivity, efficiencies, and so forth? Yeah, so my first thing, but Deane, to your question a little bit about how I answered it with Andy, it's on track. So now on track means that, as David called out, and we had the $7 million, it's not generating the profits that we expect long term, but that's to be expected. If you just, again, consider the complexity of every product SKU, it's not like starting up a light bulb factory or a ketchup manufacturer where you just have one SKU and you run it, you know, it starts or it doesn't start.
Growing with ADP and so forth, but those are really the drivers of the business and.
And Chris just to remember I mean, I think we've talked about this many times.
You still have to have agents you have to have distribution you have to have a brand that people know so there are a lot of reasons why.
We do well in the competitive landscape is fairly stable.
William E. Waltz: Here is each customer, each product, running it, taking the machines down for a couple of days, bringing up a second shift, bringing up a third shift. But we're still, I mean, we have a phenomenal leadership team there, and it's progressing basically as we expected. Are there profits in the short term as you get a plan up and running?
Year over year.
Makes sense. Thanks, so much guys and congrats on a nice start to the year here.
Great. Thank you Chris.
This concludes the question and answer session I would now like to turn the call back over to Bill Waltz for closing remarks.
Thank you let me take a moment to summarize my key three takeaways from today's discussion.
William E. Waltz: Yes. But it's like, again, to me, the reaffirmation is we have the forecast for the rest of the year. We're still on it. Everything's moving as expected at this time. All good to hear, thank you.
Q1 was a solid start the year with organic volumes up 13%.
Second the declaration of our first quarterly dividend is another recognition of our structural improvements in transformation over the past several years.
Deane Dray: Thanks, Deane. Your next question comes from Chris Moore from CJS Securities. Your line is open. Hey, good morning, guys.
Chris Moore: Thanks for taking a couple of questions. Yeah, maybe just on PVC pricing for January, was there much change? No, not that I mean, what's the expected volume, you know, Chris, for a lot of products, you can imagine, especially the products that go underground, which are PVC and HDPE, and so forth. They're probably fiberglass conduit.
Third with a great team.
<unk> portfolio and strategy supported by strong secular tailwind we believe the best is yet to come at <unk>.
Before we conclude today's call I'd like to mention a planned rotation of key talent that demonstrates the <unk> business system at work.
William E. Waltz: Again, these are smaller lines, fiberglass actually under bridges, so I misspoke, but those types are definitely being impacted by the weather across the country, but pricing is basically on track. And we've, you know, put in one or two price increases. It's harder when the demand isn't there to get them to realize, but we're still optimistic going forward on attempting to push the prices in the industry up. So we do kind of every week look at where volumes are and what have you. And, like Bill mentioned, we mentioned our prepared remarks. January was light due to several factors.
John date, Sir will be transitioning into the role of VP of electrical finance and Matt Klein, who is currently our VP of electrical finance as well as the general manager of our fiberglass conduit business unit will be moving into the treasury and IR role we wish.
Then both continue success in their new positions with that thank you for your support and interest in our company. We look forward to speaking with you during our next quarterly call. This concludes the call for today.
This concludes today's conference call.
In connect.
David P. Johnson: The first start of this week has been much stronger. So, you know, we'll see where versus our expectations here in Q2, how it lays out for us. God, I appreciate that, and maybe just one more on Indiana. So, you know, obviously, you talk quite a bit about the driver from the Inflation Reduction Act. You guys are getting up and getting going. How would you characterize demand for torque tubes overall? How would you view that against the current domestic capacity to meet that demand? Is that enough?
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Chris Moore: What are you seeing overall? Yeah Chris, the best I can tell, and again it's estimates and so forth, is that there is more demand out there than capacity. And again, I think as we've given prepared remarks or answered questions over the years, and again, others, including public customers, could probably comment on this, but with the Inflation Reduction Act, it should move all the volume into the states, which is a great thing for the U.S. and its economy. But that literally doubles the amount of solar torque tubes. And right now, I don't think that capacity exists for anybody out there.
Yes.
William E. Waltz: So, you know, again, as we add the capacity for fine tuning, getting multiple shifts up, I have to believe some of our competitors are doing the same thing, and so forth. But you add doubling the size of the domestic torque tube market, plus whatever double-digit plus growth of the solar market, I don't think anyone would dispute that. It's a really healthy and exciting market for both Accor and, I think, just the country as we become more carbon free. I appreciate that. Maybe just one last one.
William E. Waltz: Obviously, you guys sell a majority of products through distributors, but you've talked about marketing efforts that go kind of way beyond this distribution channel and develop relationships with the big players in markets like array makers, fab owners, et cetera, with the goal of becoming a partner. Just wondering if you can provide kind of any update there and thoughts on, I know that's a longer-term process, but kind of how you're Oh, it's really exciting. It's almost, Chris, I'm teasing you because we did not do this, but if you would give me a softball question here,
William E. Waltz: To your point, it's a multi-year process, but what I'm proud of, and I think we did a press release here in the last month or two, was NECA, which is the National Electrical Contractor Association. So, it represents all the construction contractors in the electrical space that are union, or that are sort of an equivalent non-union organization, named us as one of the premier partners. And to give you a feel, there are around 13, give or take, premier partners, and that's everything from a freight carrier to electrical, you know, like an energy generator company for their plants, you know, tools.
William E. Waltz: So, in our space, across PVC products, across steel conduit products, across metal framing products, just go through them. We are the only premier partner, basically, for all of our set of products there. There are some other product manufacturers in certain spaces, but it just shows the relationships that Accor is building out there. It's a real complement to our organization, our products, our values, the partnership we're doing, so it's exciting
Chris Moore: I appreciate that. I will leave it there. Thanks, Chris. Your next question comes from a line from Alex Rydell on B. Reilly. Your line is open.
Alexander John Rygiel: Thank you. Good morning, gentlemen. A very nice quarter. Thank you, Alex. A couple quick questions here.
David P. Johnson: First, as we think about the second quarter guidance versus the first quarter, directionally, what is your guidance applied for price and volume? And I guess what I'm getting at here is, have we seen the correction in raw materials sort of fully reflected in either this first quarter or the second quarter guidance? I would say, you know, in the second quarter guide, get from our comments that our volume year over year is expected to be lower than it was in Q1 as a growth year over year, but still a growth, you know, modest growth year over year. I would say pricing, you know, when you look at modis and there's been, steel's been on its way up now, maybe on its way down, what have you, I think that We might not see an increase or decrease for weeks as we work through our inventory. So I would say it's pretty dynamic, so there isn't really any... where it lags in any meaningful way, except for the S&I segment, where that tends to be more quarterly based.
William E. Waltz: And so, you know, a little bit behind when Steel's on its way up, a little bit ahead when Steel's on its way down, but that again tends to normalize over a couple of months. And then, Alex, if I can bridge off your question a little bit. Again, David's better at giving you the bridge, but just for you or other shareholders out there, the way we think about our profit and pricing is, first thing is just general industry volume. Obviously, if there's strike-tight capacity, like any product, you can sell it for more because you have multiple options and multiple customers that want it, so volume.
William E. Waltz: The second thing where I think we are absolutely the industry leader is our capability, and we're really doubling down on this, of the one-order, one-delivery, one-invoice that just is a competitive, sustainable advantage that I don't think anyone else can match, period, in the next decade, in my own personal opinion. Then it gets to where your question was to go, okay, it's deal up, it's deal down We do phenomenal real-time pricing, not a large driver of our EBITDA. And then, secondly, can you give us an update on the expansion and distribution center? Yeah, so great. Wow, great question there.
William E. Waltz: Not that every other question has to be good. We're right on track with the following things. We have several of them up and running well. Now we're working on one in the Dallas area and one in the Atlanta area.
William E. Waltz: We have the facilities, you know; purchase, lease, we're putting in racking, starting to bring products in. It's really also something, as David talked earlier about other questions, as we talk about this fiscal year and go, hey, to Dean Dray's question, like bridge me between the average $2.10 and the $2.50 in the second half of the year, I think the RSCs are more of a thing that's going to help us in fiscal year 26, just to go until we fully get them up and fully get the value prop. We're getting it now, but the leverage of that as we go forward is what, again, gives us confidence in the $18 plus EPS that we put out there a couple years ago. Very helpful. Thank you very much.
Alexander John Rygiel: Yeah, thanks, Alex. Your final question comes from a line Chris Dankert from Loop Capital. Your line is open. Hey, morning guys. Thanks for taking the question. I guess first...
Chris Dankert: I guess first off, you've mentioned there was probably some, you know, a little bit of rebate buying to hit those breakpoints at the end of the year here. Do you feel like distribution inventories are still in a good place as we kind of move into the second quarter here? So maybe any kind of comment on how you see the inventory landscape at the distribution level? I think we're back, God bless us here, to normal pre-COVID. In other words, there's inventory out there, but the appropriate amount for this, at this time of year, and then, you know, as we get, it's hard to predict, to David's earlier point, you know, with one or two weeks of backlog, are we talking March or April, but at some point, customers will even put more in because they know that, you know, the spring season and summer season will be, you know, stronger, I wouldn't say they're low, but they're definitely not high.
William E. Waltz: And there's no reason to be. In other words, back to earlier questions, you know, commodity prices are pretty stable. We could talk about steel going down a little bit, PVC maybe going up a little bit, you know, those types of things. And even our pricing, while we always aspire to increase our pricing some, there's no dramatic swings or supplier shortages. So business is back to normal. Got it. Glad to hear that. And then maybe just to zoom out to 30,000 feet for a second.
Chris Dankert: Obviously, competitive dynamics don't swing too much quarter to quarter, but certainly, we're getting a lot of questions on just, are there any changes in the competitive landscape? I mean, pricing would suggest there's nothing dramatic going on at the moment. But maybe just a quick comment on how you see the competitive landscape and what's going on or what might be changing a little bit incrementally here. I won't say anything of significance. There's always, you know, minor players that try to enter and, you know, noise level things like somebody importing a product because of things, but literally, there's as much opportunity, without me getting specific on things the US government may do, or you saw flashes this morning of if Trump was elected, he would stop imports and, you know, all the different things that, at the end of the day, it's the earlier questions You still have to have agents, you have to have distribution, and you have to have a brand that people know.
David P. Johnson: I mean, there are a lot of reasons why we do well and that the competitive landscape is fairly stable. It makes sense. Well, thanks so much, guys, and congrats on a nice start to the year here. Thank you, Chris. This concludes the question and answer session. I would now like to turn the call back over to Bill Waltz for closing remarks. Thank you. Let me take a moment to summarize my key three takeaways from today's discussion. First, Q1 was a solid start to the year with organic volumes up 13%.
William E. Waltz: Second, the declaration of our first quarterly dividend is another recognition of our structural improvements and transformation over the past several years. Third, with a great team, product portfolio, and strategy supported by strong secular tailwinds, we believe the best is yet to come at Accor. Before we conclude today's call, I'd like to mention a planned rotation of key talent that demonstrates the ACOR Business System at work. John Deitzer will be transitioning into the role of VP of Electrical Finance, and Matt Klein, who is currently our VP of Electrical Finance, as well as the General Manager of our Fiberglass Conduit Business Unit, will be moving into the Treasury and IR role. We wish them both continued success in their new positions. With that, I thank you for your support and interest in our company. We look forward to speaking with you during our next quarterly call. This concludes the call for today. This concludes today's conference call, and Andrew Krasinski. Thank you. Thank you.
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