Q4 2024 Gibraltar Industries Inc Earnings Call
Thank you for watching!
Speaker Change: Greetings and welcome to the Gibraltar Industries 4th Quarter 2024 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation.
If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.
Speaker Change: At this time, it is now my pleasure to introduce Carolyn Capaccio with Alliance Advisors IR. Thank you, Carolyn. You may now begin.
Carolyn Capaccio: Thanks, Rob. Good morning, everyone, and thank you for joining us today. With me on the call is Bill Bosway, Gibraltar Industries Chairman, President, Chief Executive Officer, and Joe Lovechio, Gibraltar's Chief Financial Officer.
Carolyn Capaccio: The earnings press release that was issued this morning, as well as a side presentation that management will use during the call, are both available in the investor's section of the company's website, GibraltarOne.com.
Carolyn Capaccio: Gibraltar's earnings press release and remarks contain non-GAAP financial measures. Tables of reconciliation of GAAP to adjusted financial measures can be found in the earnings press release that was issued today.
Carolyn Capaccio: Further, please note that adjusted results exclude the net sales and operating results of the Japan Renewables business that was sold on December 1st, 2023.
Carolyn Capaccio: Also, as noted on slide 2 of the presentation, the earnings press release and slide presentation contain forward-looking statements with respect to future financial results.
Carolyn Capaccio: These statements are not guarantees of future performance, and the company's actual results may differ materially from the anticipated events, performance, or results expressed or implied by these forward-looking statements.
Speaker Change: Gibraltar advises you to read the risk factors detailed in its SEC filings, which can also be accessed through the company's website. Now, I'll turn the call over to Bill Bosway. Bill?
Bill Bosway: Good morning everyone and thank you for joining today's call. I'll start with our 2024 results and then we'll review our outlook and plan for 2025 and then we'll open the call up for questions. So let's turn to slide three. We'll talk about our 2024 year in review and we'll start actually with our fourth quarter.
Bill Bosway: Our fourth quarter performance is closely aligned with expectations in each segment, ending the year with EPS at the top end of the outlook range and net sales just under the range.
Bill Bosway: During the quarter, net sales were down 7.9%, driven mainly by ongoing market issues facing the renewables business.
Bill Bosway: But, despite down revenue, we improved operating income 11%, or 210 basis points, we increased adjusted EPS 17.4%, and we improved adjusted EBITDA 220 basis points.
Bill Bosway: As well, when you look at the collective performance of the rest of the portfolio, the residential, ag tech, and infrastructure businesses,
Bill Bosway: Our results in the quarter showed additional performance improvement with net sales down 3.9% versus 7.9% for the total business.
Bill Bosway: and Operating Income Improving 45% and Operating Margin Expanding 480 Basis Points and EBITDA Improving 32% and EBITDA Margin Improving 460 Basis Points.
Bill Bosway: So solid performance in these three businesses which helped to offset some of the market and business challenges our renewables team continued to work through
Now let's talk about the full year.
Bill Bosway: Consolidated net sales were down 3.9 percent to 1.31 billion as both our residential renewables businesses navigated less-than-favorable in-market dynamics.
Bill Bosway: That being said, on an adjusted basis, Operating Margin, EVA to Margin, and EPS all expanded with margin improvement in three of our four segments.
Bill Bosway: We also generated $174 million in operating cash flow and $154 million in free cash flow for 12% of net sales.
Bill Bosway: The collective performance of the residential, ag tech, and infrastructure businesses was also positive for the full year.
Bill Bosway: Net sales were down slightly, 1.9%, versus 3.9% for the total business. And operating income improved 12%, with operating margin up 180 basis points. And EBITDA improved 10%, with EBITDA margin also up 180 basis points.
Bill Bosway: So again, solid performance in these three businesses as we work through market and execution improvements in the renewables business.
Bill Bosway: Backlog at year-end was down 24% as new bookings, driven mainly by the timing of new orders for both renewables and ag tech, moved from the fourth quarter into the first quarter of 2025.
Bill Bosway: Since the start of the year, order activity has increased for both businesses and to date, versus prior year, renewables bookings are up 33% and ag tech bookings are up over 300% and both businesses maintain an active pipeline of additional opportunities as well.
Bill Bosway: Our infrastructure business is also seeing solid demand with its backlog of 10% coming into 2025. And residential demand has also improved as participation gains awarded in 2024 are now beginning to materialize in the first quarter.
Bill Bosway: Relative to portfolio management, just last week we expanded our ag tech structures business with the acquisition of Lane Supply, an industry leader in the design, manufacture, and installation of canopies serving convenience stores, quick-serve restaurants, travel centers, food retailers, and EV charging stations.
Bill Bosway: We are very excited to have Lane join Gibraltar and we'll talk more about them later in the presentation.
Bill Bosway: Now we're going to jump into each of the business segments and Joe will get us started.
Thanks, Bill, and good morning, everyone.
Bill Bosway: Let's start with residential on slide 4. Net sales for our residential segment decreased by 8.6 million, or 4.8%, driven in part by point-of-sale softness in some regional residential markets.
Bill Bosway: 8020 Product Line Simplification Initiatives for Safety Harnesses and Drywall Metals and by the Delayed Transition of New Business Awarded in 2024.
Bill Bosway: Order activity in our building products business has accelerated since January and we're now benefiting from participation gains earned last year.
Bill Bosway: New products that we launched in the second half of 2024 are gaining momentum and we expect that to contribute to 2025.
Bill Bosway: Now turning to margins, our adjusted operating and EBITDA margins decreased slightly and were flat respectively, primarily related to volume and product mix. Our execution, price-cost management, and 80-20 initiatives delivered solid results in the quarter and largely offset this volume and mix pressure.
Bill Bosway: During 2024 we successfully rolled out our ERP system to additional locations and expect to have all locations completed by the beginning of 2026.
Bill Bosway: Also during the quarter, we divested our electronic locker business and reported a $25 million gain on that sale.
Bill Bosway: Let's move to slide 5 for an update on the residential market and our participation expansion initiatives.
Bill Bosway: For most of the year, really starting in the second quarter, the market has been relatively sluggish with ongoing softness and new and existing home sales. The degree or magnitude of market strength or weakness really has varied by region.
Bill Bosway: statement in many cases at the local MSA market level. In general, point-of-sale comps reflect a down market of three to four percent, but again it's important to understand this data at the store and local market level to get a more accurate depiction of the market.
Bill Bosway: When you review the ARMA data, which really reflects shingle shipments or receipts,
Bill Bosway: around the country. For 2024, and you look at it from the state level, you'll see a wide variety of results. For example, Texas, which is the number one state, or which was the number one state for shingles receipts in 2024, was up 10% for the year.
Bill Bosway: but has been growing in acclaim right over the last few quarters. If you break that down by individual MSA within the state, you'll see different trends as well.
Bill Bosway: Florida which was the number two state for shingle receipts in 2024 was down 18% for the year which showed positive growth in the fourth quarter.
Bill Bosway: And we expect the Florida market to normalize more in 2025 now that the impact of Hurricane Ida is no longer a factor.
Bill Bosway: So ultimately the market and our ability to grow is dependent on unique circumstances impacting specific MSAs Really interest rate levels and general affordability and how well we are positioned in the most attractive MSAs, which we continue to work on
Also, as Joe mentioned, our revenue in the quarter is...
Speaker Change: was impacted by 80-20 product line simplification initiatives, exiting both our safety harness and drywall metal accessories product lines, both of which were not providing the revenue growth and margin profile we need to support our overall plan.
In addition, as I mentioned in our last...
Speaker Change: The timing of orders for new business awards in 2024 did not come in 2024 as originally expected, but we have started to see orders materialize since the beginning of the year. So we are looking forward to 2025 with our top priority being the expansion of our presence in the local markets. We've identified
Speaker Change: that are the most attractive for us. We recently opened a new location in Boise, Idaho, and we will expand and optimize our presence in the West, the Pacific Northwest, and three additional locations in two other regions.
Speaker Change: We'll execute this plan for both organic and inorganic initiatives, and I would say we are actively involved in both at this time. As well, our new products, both our rolled vent and our pipe boot ventilation, are getting traction and will contribute to growth in 2025.
Speaker Change: We will also continue to invest in our omni-channel customer market initiatives, both technology and competencies, to best support and optimize local market channel requirements.
Speaker Change: And finally, we've been developing plans since January in each of our businesses to deal with the potential impact of recently announced tariffs on aluminum and steel.
Speaker Change: Each of our businesses will approach this in a timely manner with solutions tailored for their businesses, the market, and customer situation. Our businesses will be proactive and flexible as it is likely the tariff landscape will continue to be dynamic, but change is driven by a number of reasons.
Speaker Change: Overall, we expect to generate growth and margin expansion in our residential business in 2025.
So let's move on to renewables.
Speaker Change: So turning to slide 6, Renewables Adjusted Net Sales decreased $16.3 million or 18.8%
Speaker Change: and backlog decreased 32% during the quarter. As we discussed in our third quarter call, sales and bookings were suppressed in the second half of the year as customers focused on completing panel installations and administrative documentation ahead of the December 3rd, 2024 deadline related to the June 2024 expiration of the Presidential Proclamation.
Speaker Change: Since the start of 2025, new bookings have accelerated and were up 33% versus prior year.
Speaker Change: Adjusted operating EBITDA margins decreased 630 and 550 basis points respectively, impacted by the ramp-up in product mix shift toward our recently launched 1P tracker product, along with lower volumes that resulted from the above-mentioned deadline.
Speaker Change: Adjusted margins expanded sequentially by 70 basis points as a result of improving tractor operating efficiencies.
Speaker Change: And on a gap basis, we incurred a $5.3 million non-cash charge for the discontinuation of our legacy RBI trade names in this sector.
Speaker Change: So let's move to slide 7 and I'll give you an update on overall renewables demand and 1P tracker launch.
Speaker Change: If you recall, as we discussed in our last earnings call, we said we would expect new orders to start approving once we finished helping customers meet the December 3rd deadline that Joe just referenced.
Speaker Change: Since the start of 2025, new bookings have accelerated and are up 33% versus prior, as Joe mentioned. And all of our technologies, whether it's Tracker, Fixed Tilt, Canopy, and eBoss are contributing accordingly.
Speaker Change: The pipeline of new opportunities is also positive, as customers continue to invest in solar and build their project portfolios. On the next slide, I'll share more thoughts on the latest industry dynamics and how customers seem to be approaching the current environment.
Speaker Change: The right side of this slide provides an update on our Terratrack 1P technology, which continues to see positive customer support, and we see that through ongoing growth and new bookings. Since our launch on November 23, we've booked over 400 megawatt.
Speaker Change: projects across 77, well across 77 projects with 22 different customers. We started at seven additional projects in Q4 with another 18 scheduled for the first half of 2025.
Speaker Change: As well, we are actively pursuing and engaging customers that are looking to build up to 1.9 gigawatt in the U.S. distributed generation market. So the market remains relatively robust.
Speaker Change: On the operations front, our team worked diligently throughout 2024 to keep pace with the speed and magnitude of demand we experienced shortly after our 1P pilot launch.
Speaker Change: Frankly, we did not anticipate the customer uptake, nor were we or our key suppliers ready to support the demand in the time frame it happened.
Speaker Change: We were also challenged with quickly scaling the processes required to coordinate and ship a tracker project in an effective way, and we did not have our internal distribution center operating to support our growing list of projects.
Speaker Change: Throughout the year, we've improved our supply chain really on three fronts. First, we now have most of our suppliers permanently tooled versus temporary tooling that we started this with. And we are close to being caught up with our demand.
Speaker Change: Secondly, we have unshored and insourced some of our most critical components, thus reducing some of the logistics complexity, as well as working capital and costs.
Speaker Change: And third, we have a single site for suppliers to ship to, which is our internal distribution center. And our first shipments from our distribution center to the field are happening as we speak.
Speaker Change: So we know we have more work to do, but I would say our ability to execute 1P projects today and in the future has improved substantially versus where we started over a year ago.
Speaker Change: and I believe this will drive improved performance as we move through 2025.
Speaker Change: Let's turn to the next slide, slide 8. I'll give you a quick update on the market.
Speaker Change: I believe everyone is somewhat familiar with the various regulatory and trade issues the industry has or continues to manage.
Speaker Change: Today, I highlight the second AD-CBD complaint which was filed last April.
This complaint alleged illegal trade practices by Cambodia
Speaker Change: Malaysia, Thailand, and Vietnam, and asked the Department of Commerce as well as the U.S. International Trade Commission to apply new tariffs for both anti-dumping and countervailing duties related to imported solar cells and modules from these countries.
Speaker Change: Effectively, as you can see in the table in the bottom right hand corner of the slide, issuance of final orders for both anti-dumping and countervailing duties should be complete by April 3rd, 2025. At that point, there should be more clarity for our customers as to the cost associated panels imported from these countries.
Thank you for watching!
Speaker Change: Now let's switch gears and talk about the current environment, which like the rest of the industry, we are also monitoring daily.
Speaker Change: In general, there is the potential for a number of scenarios to evolve, but our view today for 2025 is that there may be some, but not drastic, change in the various tax benefits currently available to the industry.
Speaker Change: Currently tax credits do not seem to be in focus for the administration but there is a view the administration may take some changes or modifications like lowering the ITC benefit or phasing it down faster and potentially assigning a domestic content requirement on developers to earn it.
Speaker Change: If a domestic content requirement happens, domestic sourcing will become more critical. So the fact that we started our U.S. supply chain on-choring effort in 2024 should put us in a solid position to support this new requirement.
Speaker Change: Regardless, we and our customers will need to be prepared for change and be flexible accordingly.
Speaker Change: For 2025, again as I mentioned last quarter, a revenue plan is built
Speaker Change: On a slower first half and a stronger second half, the rationale is relatively straightforward.
Speaker Change: Down bookings in the second half of 2024 drive lower sales in the first half of 2025, and positive bookings early in 2025, which are up 33% to date, support higher sales in the second half of 2025.
Speaker Change: Also, without better clarity on what changes the administration might take in 2025, if any, we are taking a conservative view on industry demand for now.
Speaker Change: As a result, we built our full-year renewables plan based on flat-to-down revenue and delivering stronger margin performance through better execution versus prior year.
Speaker Change: Finally, I believe the second half run rate for this business in 2025 should be very reflective of the operating cadence we expect going forward and into 2026. So with that, let's move on to AgTech.
Thank you for watching.
Speaker Change: So moving to slide 9, AgTech net sales increased about 1% as project start dates moved from the fourth quarter into the first half of 2025.
Speaker Change: The timing of new project signings caused Q4 backlog to decrease 23%, which is already reversed in the first quarter. Since Q4, we have signed over 45 million of new bookings, and demand remains strong with a solid pipeline of opportunities in process. For the year, AgTech net sales grew over 8%.
Speaker Change: Segment-adjusted operating EBITDA margins each expanded over 2,200 basis points, driven by strong execution and business mix, as well as a benefit from a customer payment received this quarter that had been written off in the prior year's quarter. Excluding this payment, operating margins expanded 1,000 basis points to approximately 15%.
Speaker Change: Our GAAP results also include a $6 million non-cash charge for the discontinuation of our legacy RBI trade names in this segment.
Thank you for watching!
Speaker Change: Alright, let's move to slide 10. I want to talk a little bit more about our revenue momentum in this business as well as the work being done to broaden our customer base.
Speaker Change: Click the Yellow Thumbnail to the Left for a FREE Gift
Speaker Change: You know, we do continue to broaden our customer base across North America and win opportunities to support customers as they expand and bring capacity through not just the construction of new facilities, but also opportunities to retrofit, expand, and service existing facilities.
Speaker Change: In the last six weeks, as Joe just mentioned, we've signed $45 million in new contracts, which represents an increase of over 300% versus last year. And I expect positive booking momentum to continue in 2025.
Speaker Change: We are fortunate to have great customers that are continuously pushing us to help them innovate, solve problems, and create opportunities. And today, I wanted to highlight two customers, Sensei Group, which is founded by Larry Ellison and Dr. David Haggis.
Speaker Change: and Tommy's Car Wash, a large family-owned car wash business operating across North America.
Speaker Change: The SIPSAG group has a vision to improve human nutrition while preserving the world's natural resources using controlled environment agriculture.
Speaker Change: facilities to supply fresh produce for local communities. Fundamentally, the group understands there are more people than there is food. And this imbalance is something they would like to focus on and fix.
Speaker Change: Sensei now has growing capacity of 15 million pounds per year of fresh lettuce, melons, and tomatoes. This picture shows one of the SENSIC facilities we have worked together to redesign and retrofit.
Speaker Change: to increase capacity as well as flexibility to grow additional types of produce.
Speaker Change: Our respective design, engineering, and project teams meet every week and are fully engaged on what's next.
Speaker Change: On the structure side of the business, we are partnering with Tommie's Car Wash for Tarrant Key Solutions including design, manufacturing, and installation.
Speaker Change: This is an example of applying our many years of structural engineering and structures competency to a car wash application where performance, aesthetics, and structural integrity can contribute significantly to our customer strategy.
Speaker Change: For this business in 2020-25, organically, we expect the ag-tech business to deliver solid growth and operating margin improvement versus 2024. Based on the current timing and project schedules, the business should accelerate in Q2 with a good cadence and pace throughout 2025.
Speaker Change: We also expect to book additional projects and further build a backlog for 2025 and 2026.
Speaker Change: Now let's move to slide 11 and I'll talk a little bit about the acquisition of lane supply.
Speaker Change: So on February 11th, just last week, we acquired Lane Supply, who is a market leader in the design, manufacturing, and installation of canopies applied in a variety of in-use applications as I mentioned earlier.
Speaker Change: U.S. canopy market is approximately 1.8 billion dollars, growing at mid-single digits, and Lane has established itself as one of the industry leaders.
Speaker Change: Lane was founded in 1950 and is headquartered in Arlington, Texas.
Speaker Change: And it's core competencies match really well with Gibraltar and include structural engineering, construction management, water moisture management, electrical design optimization, and applying customer branding badging solutions to its structures.
Speaker Change: We paid $120 million dollars in cash and in 2024 a lane recorded net sales of $112 million dollars and adjusted EBITDA margin of 14.8%.
Speaker Change: We expect this transition to be accretive in 2025, and Lane currently has over $150 million backlog heading into this year. And we really look forward to partnering on customer and operating synergy opportunities.
Speaker Change: Now let's move on and we'll talk about the infrastructure business.
Speaker Change: Let's move to slide 12. Our infrastructure net sales decreased 1.3 million impacted by the timing of a large project in the prior year. Backlog at quarter end increased 10% driven by new projects and strong conversion of bid volume.
Speaker Change: Demand and quoting remained robust, supported by ongoing investment at the federal and state levels. Segments adjusted operating and EBITDA margins improved 180 and 170 basis points respectively, driven by a favorable mix shift and continued strong operating execution.
Speaker Change: and we expect continued strength in sales and margin expansion in 2025.
Speaker Change: Let's now move to slide 13 to discuss our balance sheet and cash flow. At December 31st, we had cash on hand at $270 million and $395 million available on our revolver.
Speaker Change: During the quarter, we generated $19.9 million in cash from operations for net income, which funded a working capital investment of $23.3 million.
Speaker Change: For the year, we generated $174 million in cash from operations, including cash generated from working capital of approximately $7 million.
Speaker Change: Our free cash flow generation for the year was 11.8% of sales, above our outlook of approximately 10% of sales for the year.
Speaker Change: During the year, we used $10 million to repurchase approximately 155,000 shares of common stock.
Speaker Change: At year end, over the life of our current share repurchase program, we have repurchased approximately 2.7 million shares of common stock at an average price of $45.14. And we had approximately 79 million, or roughly 40%, remaining under this 200 million stock purchase authorization.
Speaker Change: Our revolving credit facility remains untapped and we remain debt-free. As mentioned, we acquired Lane Supply on February 11th for $120 million in cash, subject to customary working capital and other adjustments.
Speaker Change: We expect to continue to generate strong cash flow in 2025, and our capital allocation priorities for 2025 are to continue to invest in our organic growth in operating systems for scale, with capital expenditures approximately 3% of sales.
Speaker Change: As Bill indicated, we're exploring inorganic growth opportunities and have an active pipeline of high-quality M&A.
Speaker Change: Our strong balance sheet provides optionality and flexibility, and we're focused in the near term on our residential and ag tech sectors. Last, we plan to continue to opportunistically return value to shareholders through the remaining authorization under our share repurchase program.
Speaker Change: Funded by cash generated from operations and the use of our revolver, depending on the timing of any M&A or repurchases.
Now I'll turn the call back to Bill.
Bill Bosway: All right, so let's turn to slide 14 and let's talk about our 2025 guidance.
Bill Bosway: Let me first clear the chart. The first column represents our 2024 results as reported. The second column represents our 2024 results excluding our electronic locker business which was divested in late 2024.
Bill Bosway: For 2025, here's our guidance. We expect net sales will range between 1.4 and 1.45 billion, growing between 8 and 12 percent, driven by organic growth and residential, ag tech, and infrastructure, flattened down sales and renewals, and the inclusion of land supply results from operations.
Bill Bosway: Adjusted operating margin will range between 13.9 and 14.2 percent, expanding 110 to 140 basis points.
Speaker Change: Just that even a margin will range between 16.7% and 17%, expanding 100 to 130 basis points.
Speaker Change: Gap EPS will be in the range of $4.25 to $4.50, approximately flat to 2024.
Speaker Change: Adjusted EPS will be in the range of $4.80 to $5.05, representing growth of 13% to 19%. In pre-cash flows, the percent of net sales will reach 10% or greater.
Speaker Change: Our 2025 plan is balanced and is built with consideration for the current macro environment as well as specific end market dynamics our businesses have planned for and or continue to work through.
Speaker Change: Overall, we expect to grow, expand margins, and generate strong cash flow. We will drive growth through participation gains in our existing businesses and the addition of lane supply. And we improve margins in each business through CORE 8020, productivity, price-cost management, and better execution of renewables.
Speaker Change: Overall margin expansion, stronger working capital will drive our cash performance as well.
Speaker Change: I do want to thank our entire team for delivering a solid year and closing out 2024 with good momentum. We are prepared and ready for 2025 and looking forward to delivering our commitment. So with that, let's open the call up and we'll take your questions.
Speaker Change: Thank you. We'll now be conducting a question and answer session. If you'd like to ask a question, please press star 1 from your telephone keypad, and a confirmation tone will indicate your line is in the question queue.
Speaker Change: You may press star 2 to remove yourself from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Thank you.
Thank you for watching!
Speaker Change: Thank you. And our first question today is from the line of Daniel Mott with CJS Securities. Please receive your question.
Thank you for watching!
Daniel Mott: Thank you. Good morning, Bill. Good morning, Joe. Thanks for taking questions.
again
Speaker Change: Let me start with residential. You know, revenue obviously last year held up really well in a tough demand environment through the first half. Started to feel the effects of kind of a slower resi and R&R market by H2.
Daniel Mott: Do you see perhaps 25 being kind of a mirror of 24 and what kind of organic revenue growth range should we think about for H1 versus H2 on a year-over-year basis?
Daniel Mott: I don't know if it's going to be a mirror per se.
Daniel Mott: Yeah, we went into this year's plan with a very, with a, you know, obviously a view of the market continue to be where it has been.
We went into last year with something similar
Daniel Mott: and we had participation gains that were driving, you know, the top line, which we talked about, kind of got delayed and now those are starting to kick in. So, you know, we don't have a, I wouldn't say we have a ton of growth built into the plan, but I think it's reasonable based on our market assumptions and the participation.
Daniel Mott: gains that are starting to kick in in January and and so I'd say you know low mid single digits in that range for the residential top line.
Got it, that's helpful.
Daniel Mott: I was going to ask the revenue contribution from, you know, some of the divested businesses, but it looks like if I build in about $100 million for lane supply, organic growth kind of zero to 4%. Is that how you're thinking about 2025 top line?
Daniel Mott: Yeah, I think that's fair. I'd say more closer towards four than zero, but...
But, and listen, I'll also tell you that...
Daniel Mott: With the macro environment the way it's been, you know, there's still a lot of questions out there. I mean, we're fairly confident, as I mentioned, the way we built the plan was taking a lot of that in consideration. But I would also tell we're probably leaning a little bit more on the conservative side than we would
otherwise just because but
Yeah, hopefully we'll see how things evolve.
Daniel Mott: throughout the year but I but we feel good about the way the top line is plan is built between organic and inorganic at this stage. Okay and then maybe one more and I'll jump back but the shifting to renewables
Daniel Mott: New bookings accelerated up 33% in January, obviously a good initial sign.
Speaker Change: Can you just put that in perspective? Is that mainly catch-up from Q4 bookings, or are we seeing more sustained turn? And then a similar question, you know, H1 revenue versus H2, how do we think about the cadence of revenue built out over the year? Thanks again.
Speaker Change: Yeah, so if you guys, if everyone remembers a little bit, we talked about this a bit. Our bookings were down in the second half of last year, which we knew that was going to be the case because we had a lot of our customers laser focused on
Speaker Change: getting through this December 3rd deadline and it was quite consuming and if you recall the last call I said that'll start to turn beginning of the year as we get these everyone gets this stuff behind them.
Speaker Change: The second thing I'd mention was, you know, the ADCVD, the DOC Investigation No. 2,
Speaker Change: That should be close to getting behind us and initially it was supposed to be done in February now It's April, but but ultimately at the end of the day that was kind of the last big I'd say market item
Speaker Change: prior to the new administration coming on that people were thinking through. So we were suppressed, I would say, on bookings. We knew that would turn, and the team's done a nice job of making that happen.
Speaker Change: Because your bookings, you know, from time we sign a contract and get a deposit until we start generating revenue, we can do that in the same year, but it's about a six to nine month time frame. So if your bookings were down the second half of last year, your first half of revenue this year is going to be suppressed.
Speaker Change: As a result of that, the bookings that have been coming in beginning of this year will actually contribute to
Speaker Change: revenue starting in the second half of 2025. So our second half is going to be stronger. It normally is anyway because of seasonality, but because of the bookings phenomenon I just described,
It's going to be stronger than the first half.
Speaker Change: We've said that we would start out slow and we would start to build momentum in Q3 and Q4.
Speaker Change: We needed the bookings to start happening the way they have for that to be the case. So we built our plan, as I mentioned, to be down to five a little bit, but it's assuming first half light, second half more indicative of where we think the business will be running.
Speaker Change: from both a cadence and pace perspective. So that's what I'd look for, both top and bottom line, first half versus second half.
Okay, helpful. I'll jump back with any follow-ups. Thanks.
Yep.
Speaker Change: Our next questions are from the line of Julio Romero with Sidonian Company. Please proceed with your questions.
Thank you for watching!
Speaker Change: Good morning, this is Justin Machete on for Julio. Thank you for taking questions.
Hey, Justin.
Thank you.
Speaker Change: So, on M&A, could you tell us more about your decision to acquire Lane Supply, maybe how you filtered down to that business, and how you're thinking about its immediately accretive nature?
Speaker Change: So number one, we've been in the structures business for quite a long time, Justin, really going back about 80 years. And it started in our basic greenhouse business, but we do have a lot of different types of structures that we design and create.
Speaker Change: manufacturer installed today, whether it's botanical gardens or retail centers, car watches as I showed on the slide today. We've been at that for quite a long time.
Speaker Change: And so the types of things that Lane does are very much similar to what we've grown up with and they've grown up with.
Speaker Change: So we think it's a good fit on a number of fronts. The synergies around what we do really do overlap.
Speaker Change: And we found an end market that we've been looking at for some time that...
One is quite sizable, and secondly,
Speaker Change: is experiencing some pretty solid growth rate, mid-single digits, both historically and projected. So, yeah, we're excited about them coming into the fold. It's a nice compliment to what we've been doing for quite a long time.
Speaker Change: There's a nice opportunity to leverage not only just on the customer side but also on the
on the supply side.
as well as field installation and construction.
Speaker Change: That's how we got to that point. Lane is a good operating company, and we feel like there's a lot of runway. And yeah, we believe if you just took the last year's results, they would be credive to us. And so we expect that to happen again in 2025.
Speaker Change: and looking forward to that being the case. So that's the story around Lane.
Thank you for watching!
Great. Thanks for the caller there.
Speaker Change: And then on guidance, looking out on the year beyond the first half and second half cadence, can you talk about what would bring you to the upper and lower ends of guidance in terms of revenue and EPS?
Speaker Change: Well, there's a story for each business that kind of is built up to get to that total, as you see, but, you know, the way that we thought about this year's plan.
Speaker Change: what's going to happen in this renewables end market, what's the administration going to do with energy policy and so forth. So, you know, I would say there's a bit of that built into the downside piece of this, and if, you know, things don't...
Speaker Change: get thrown a wrench, if you will, in that particular marketplace around the IRA or the ITC benefits, then then you know, that's one scenario if and we don't and we think we kind of think that's probably the case in renewables this year, but but again, there's still a lot of
Speaker Change: pause going on in portions of the market as to what is going to happen and and so We'll play that by ear and as we see things evolve this year It'll be quarter to quarter from an in-market perspective that'll give us a better feel, but we we took a conservative approach coming in
just because there's still a lot of things in flight.
Speaker Change: You know, I think on the, on the, if you think about residential...
Speaker Change: You know, we're not expecting that market to be super robust.
Speaker Change: Industrates aren't going to move dramatically different. All those base assumptions are probably consistent with last year and it really comes down to the time in our participation gain. So if some of those happen a little bit sooner, if we open up additional locations a little bit quicker, then you know there may be more upside in that business than what we're showing.
Speaker Change: Vice versa, if they don't all happen at the time that's built in a plan, maybe there's a little downside. But that's not gonna swing one way or the other dramatically in the residential business. Then ag tech is gonna be a big contributor this year. So is there more upside opportunity there with the way orders are flowing in? Yeah, there could be.
Speaker Change: But, again, these are large projects and, you know, you've got a timing element there sometimes that can play into that. But then you have something like Lane that's being added to the business that should bring more of a cadence in the ag tech business because the way their projects roll out are really weekly.
Speaker Change: In other words, if you think about where they support and the types of customers they support, they get a view, you know, of words of, you know, 10 to up to 50 weeks' worth of a schedule around installing canopies, designing and installing canopies around these applications.
Speaker Change: Hopefully that will give us a little more cadence and understanding and foundation on the core business.
Speaker Change: We'll see how that evolves. It's a new business for us, but we think that it's a solid business. We've kind of got that built in with a little bit of growth over last year. As I said right up front,
Speaker Change: You could give us for a little bit of being conservative this year going into this plan, but I feel it's really balanced based on the things that are going on in the market. I think our businesses are in a good position. We're not requiring renewables to...
Speaker Change: You know have a blowout year to deliver this plan I think that's prudent a way to think about that given anything we talked about So, you know, I think we're balanced and I think we're you know, we have a solid plan, but that's
Speaker Change: It's probably more than you're looking for, but that's the way we've been thinking about it.
Thank you for watching!
Speaker Change: Thanks very much. That's all for me. I'll turn it back.
Thank you for watching!
Thank you for watching!
Speaker Change: Thank you. If you'd like to ask a question at this time, please press star 1 from your telephone keypad.
Speaker Change: Our next question is from the line of Walt Liptack with Seaport Research. Please proceed with your questions.
Walt Liptack: One to ask first about the the resi delays is sort of a follow-on.
Speaker Change: So there's been a couple of earnings releases so far with these delays, and I wonder if you could help us...
Walt Liptack: understand a little bit more maybe about the size of these games and you know how much is kind of layering in now and how much more is there to go get.
Walt Liptack: Yeah, so you remember, I think I said in Q3, it impacts around $4 million.
Walt Liptack: I would say, just on seasonality, it's probably a little less than Q4, but that was probably the, you know, for 2024, I'd say that, you know, five to six million dollar range was the impact.
Thank you. Bye.
Speaker Change: That has started as I mentioned started. We started to see those orders So, you know our views will pick that up this year and and hopefully get a full year effect of that. So We'll see how that evolves, but
Speaker Change: you know, that's at a minimum the starting point to be incremental growth versus the previous year, right? You know, if you just do the simple math. So that's one thing that I think...
Speaker Change: You know, we're excited about the fact that we started to see, I think, our new products, particularly the pipe boot that I've shown pictures of here the last couple quarters, those orders are starting to materialize. The opening of our Boise, Idaho facility, which we didn't have last year.
Speaker Change: is going to be impactful in 2025, and that was through a really asset acquisition. So it enabled us to get up quicker going there. So we've got a variety of these things sprinkled around the country and certain markets, and whether it's.
Speaker Change: geographic play, or we've won, you know, more branches at a wholesaler, or we've been awarded more business with a retailer. We've got a number of those things happening, but I look for our participation gains to be
Speaker Change: pretty impactful in the year. I don't think we're going to have, you know, right now in the docket, we don't really have anything planned from a PLS perspective.
Speaker Change: where we'd impact sales negatively, meaning, you know, getting out of something like we did with our safety harness and...
some of our metal business.
Speaker Change: our drywall metal business, which was also impactful during 2024, and I think it was probably that's five to seven million dollars on the top line, so I think we've cleared the decks on that and so our focus is really about those participation gains and taking advantage of the ones that we won last year and the ones that we're working on this year at the same time, so that's how the plan has been built.
Okay, great. Yeah, thanks, and thanks for
Speaker Change: product line simplification program that you did. We generally think of those as being pretty healthy and like a good thing, even though the red line goes away.
Speaker Change: and you know I wonder are you doing regular reviews of product lines as part of your 80-20 program? I mean how robust is the 80-20 program at this point?
Speaker Change: Yeah, I wouldn't say we've let our foot off the gas which is why you saw some of those PLS activities.
Speaker Change: in our building accessories business last year. But yeah, our pipeline of different types of 80-20 initiatives is as big as it's ever been.
Speaker Change: It's kind of core to what we do, but there are other things that obviously each business is working on that will make a big difference, but it's a big contributor towards our margin.
Speaker Change: improvement opportunities and frankly in a lot of cases our top-line growth opportunities as well.
Speaker Change: The issue of you know at some point do prices if prices go up
Speaker Change: Is there a chance for like alternatives in the regions that you operate, or is there no alternative, you know, is it too cost prohibitive, I guess, to switch to an alternative?
No, it's a good question, and I would say...
Speaker Change: We get our leadership team together twice a year or for a couple days and it's the business unit leaders and the corporate team and 12 of us if you will. But in early January we went ahead and said look let's assume that we're going to get tariffs. There was a lot of room around it but let's start factoring that in.
Speaker Change: And so each business has a different starting point with what that might mean from either a competitive customer or internal perspective, right? So if you're in the construction businesses, if you recall when we all went through this in a much more extraordinarily challenging way three years ago,
Thank you.
Speaker Change: You know, people got caught, and so we want to make sure, number one, we're proactive in front of it. So whether you're in project-based businesses, you have contracts, you want to make sure you have your clauses right, you want to have your supply chain aligned appropriately with you, and so on and so forth.
If you're in the build-and-ship kind of business, like residential...
You want to go through the...
Speaker Change: The same type of assessment, except for in residential, if you recall, we have indexes already built into our contracts that support movement on things like our costs. And so whether it's driven by tariffs or general inflation or otherwise.
That process is in place.
Get in a position where you're ready to roll.
Speaker Change: Be prepared to make adjustments as needed. But we've been through hell and back with inflation three years ago that was much more challenging in a lot of ways than whatever this tariff situation is going to lend itself to be.
for 50 straight weeks, right? That's not what this is.
Speaker Change: And so, you know, getting our plans in place, having initial conversations with customers the last four weeks, planting seeds about what's coming. Everyone knows this is going to happen or some element of it will happen. So just getting each business ready to go, whether it's whatever those actions are.
Speaker Change: looking at and understanding your inventory, looking at and understanding where you're getting all your key components, and trying to understand how far the tariffs go down. Is it just the raw material? Is it value-added products? And putting a plan in place for each of those. So the work's been...
Speaker Change: You know ongoing now for the last five six weeks. We have plans I think in place and most of our businesses To execute when the time is right and when things come into play But I suspect some things will change between now and then and that's okay. We'll be ready to go. So it's
it's a non-issue from a standpoint of
Speaker Change: We've been there, done that. We know how to deal with it. We have processes in place. We've got a playbook. It's still an issue, ultimately at the end of the day, if it impacts.
Speaker Change: other things, you know, macro-wise. So, you know, we'll take it as it comes and I think we're well prepared to deal with it accordingly. So that's where we are today across each of the bases.
Speaker Change: Okay, thank you for that. And in your review, are there anywhere, if the price goes up, there might be a switch to an alternative, especially in residential?
Speaker Change: Um, you know, I don't think so. Here's the reason why.
First and foremost, in residential, remember it's a very conservative
marketplace. So contractors in general don't like to change quickly.
Speaker Change: back them up into a corner to where they don't have a choice, that might be the case. But when this happened, remember we have an experience that's only...
Speaker Change: 24 months old, you know, 30 months old where that was the case and what options did they have and oftentimes I think what happens
Speaker Change: I suspect that people will take advantage and raise that price as well. That's what we saw a couple years ago.
Speaker Change: I'm not as concerned about that, but some of our new products, by the way.
Speaker Change: are putting us in a better position than we would have been two years ago as well. They're either patented and or cost-reduced such that we have some flexibility in how we can support the environment differently and would have otherwise. So a lot of different levers there Walt will play, but I'm not...
overly concerned about a substitution issue at this stage.
Speaker Change: low-revenue, lower margins and I just wondered with the portfolio do you go through regular annual reviews of the different businesses and segments and you know do they fit you know you know is that is that part of the the annual process?
Speaker Change: It is and we just had our board together for two days in January on that very topic, well as one of many topics, is that
Speaker Change: as we go through our next strategy plan or the continuation of our strategic plan. So, yes, and if you recall, we do have a committee in place and we discuss that every quarter.
Speaker Change: So if there's something with the portfolio that we say we're going to go do, that's reviewed.
Speaker Change: annually at a minimum and you know those can be big or small. But whatever it is we decide to do every quarter we track that progress with the committee to see how we're doing and how that's coming along. So yes it's front and center from the board.
Speaker Change: throughout our leadership team on a regular basis. Okay, great. Appreciate it. Thank you. Good luck this year. Yeah, thank you.
Speaker Change: Thank you. At this time there are no further questions and I'll turn the floor back to Mr. Bosway for closing remarks.
Bill Bosway: Yeah, listen, I just want to thank everyone again for joining us today. Coming up, we do plan to present at the Cabele Pump Valve and Water Symposium, the City of Small Cap Conference.
Speaker Change: Thank you. This will conclude today's conference. You may disconnect your lines at this time. We thank you for your participation and have a wonderful day.