Atkore (ATKR) - 2024 Q3 - Quarterly Results

Part I Financial Highlights Atkore's Q3 2024 financial results show a 10.5% net sales decrease to $822.4 million, a 38.7% net income drop to $123.4 million, and a 23.7% Adjusted EBITDA decline to $206.1 million, leading to a revised full-year outlook Financial Highlights Summary | Metric | Q3 2024 (in millions) | Q3 2023 (in millions) | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $822.4 | $919.1 | (10.5)% | | Net Income | $123.4 | $201.3 | (38.7)% | | Diluted EPS | $3.33 | $5.13 | (35.1)% | | Adjusted Diluted EPS | $3.80 | $5.72 | (33.6)% | | Adjusted EBITDA | $206.1 | $270.3 | (23.7)% | - The company's performance was impacted by a limited increase in demand from the summer construction season and a soft pricing environment in the Electrical business[2] - Capital allocation activities included repurchasing $125 million in shares and the Board of Directors declaring a quarterly cash dividend of $0.32 per share[1][2] Full-Year 2024 Outlook | Full-Year 2024 Outlook | Adjusted Range (in millions) | | :--- | :--- | | Adjusted EBITDA | $772 - $782 | | Adjusted net income per diluted share | $14.30 - $14.52 | Third Quarter 2024 Performance Analysis Q3 performance was marked by a significant decline in the Electrical segment due to lower prices and volume, offsetting growth in Safety & Infrastructure, resulting in a 20.3% gross profit decrease and margin contraction Consolidated Results Consolidated net sales decreased 10.5% to $822.4 million, primarily due to lower selling prices, leading to a 20.3% decline in gross profit and a 38.7% drop in net income - The decrease in net sales was primarily attributed to decreased average selling prices ($87.5 million), the increased economic value of solar tax credits transferred to customers ($7.2 million), and a slight decrease in sales volume ($1.2 million)[4] - Gross profit decreased mainly due to declines in average selling prices and increased freight costs, which were partially offset by the net benefit of solar credits and lower input costs[5] Earnings Per Share (Diluted) | Earnings Per Share (Diluted) | Q3 2024 | Q3 2023 | | :--- | :--- | :--- | | GAAP EPS | $3.33 | $5.13 | | Adjusted EPS | $3.80 | $5.72 | Segment Results The Electrical segment experienced a 14.1% net sales decline and a 31.5% Adjusted EBITDA drop, while the Safety & Infrastructure segment grew 1.6% in sales and 39.8% in Adjusted EBITDA due to higher volumes and solar tax credits - Electrical Segment: Net sales decreased by $99.7 million (14.1%) due to lower average selling prices ($80.8 million) and decreased sales volume ($18.2 million). Adjusted EBITDA margin contracted from 37.8% to 30.1%[6][7] - Safety & Infrastructure Segment: Net sales increased by $3.4 million (1.6%) primarily due to higher volumes ($17.0 million). Adjusted EBITDA increased by $8.5 million (39.8%), with the margin expanding from 10.1% to 13.8%, largely due to higher sales volume and the increased net benefit of solar tax credits[8] Capital Allocation and Outlook Atkore declared a $0.32 per share quarterly dividend and revised its full-year fiscal 2024 outlook, projecting Adjusted EBITDA between $772 million and $782 million and Adjusted EPS between $14.30 and $14.52 - On July 31, 2024, the Board of Directors declared a quarterly cash dividend of $0.32 per share of common stock, payable on August 30, 2024[1][9] Full-Year 2024 Adjusted Outlook | Full-Year 2024 Adjusted Outlook | New Range (in millions) | | :--- | :--- | | Adjusted EBITDA | $772 - $782 | | Adjusted net income per diluted share | $14.30 - $14.52 | Financial Statements This section presents unaudited condensed consolidated financial statements, highlighting year-over-year declines in net income and operating cash flow, a stable balance sheet with increased equity, and significant cash usage for share repurchases Condensed Consolidated Statements of Operations For Q3 2024, Atkore's Net Sales decreased to $822.4 million, Operating Income fell to $168.5 million, Net Income dropped to $123.4 million, and Diluted EPS declined to $3.33 Condensed Consolidated Statements of Operations (in thousands) | Metric | Three Months Ended June 28, 2024 | Three Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net sales | $822,364 | $919,117 | | Gross profit | $279,655 | $350,801 | | Operating income | $168,452 | $232,590 | | Net income | $123,417 | $201,288 | | Diluted EPS | $3.33 | $5.13 | Condensed Consolidated Balance Sheets As of June 28, 2024, Atkore's total assets increased slightly to $2.96 billion, total liabilities decreased to $1.40 billion, and total equity rose to $1.56 billion, primarily driven by retained earnings Condensed Consolidated Balance Sheets (in thousands) | Metric | June 28, 2024 | September 30, 2023 | | :--- | :--- | :--- | | Total current assets | $1,520,254 | $1,538,490 | | Total Assets | $2,964,044 | $2,935,009 | | Total current liabilities | $465,836 | $564,604 | | Total Liabilities | $1,402,516 | $1,466,890 | | Total Equity | $1,561,528 | $1,468,119 | Condensed Consolidated Statements of Cash Flows For the nine months ended June 28, 2024, net cash from operations decreased to $350.0 million, with $281.0 million used for share repurchases and $23.2 million for dividends, resulting in free cash flow of $244.9 million Condensed Consolidated Statements of Cash Flows (in thousands) | Metric | Nine Months Ended June 28, 2024 | Nine Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $349,957 | $563,748 | | Net cash used in investing activities | ($110,677) | ($205,890) | | Net cash used for financing activities | ($324,595) | ($431,603) | | Decrease in cash and cash equivalents | ($84,457) | ($70,942) | - Significant cash uses in financing activities for the nine months ended June 28, 2024 included $281.0 million for common stock repurchases and $23.2 million for dividend payments[31] Free Cash Flow (in thousands) | Metric | Nine Months Ended June 28, 2024 | Nine Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $349,957 | $563,748 | | Capital expenditures | ($105,098) | ($122,535) | | Free Cash Flow | $244,859 | $441,213 | Non-GAAP Financial Measures and Reconciliations This section reconciles non-GAAP measures, showing Q3 2024 Adjusted EBITDA of $206.1 million, Adjusted Net Income of $139.0 million, Adjusted Net Income per diluted share of $3.80, and net debt of $460.6 million Adjusted EBITDA Reconciliation Q3 2024 Net Income of $123.4 million is reconciled to Adjusted EBITDA of $206.1 million, reflecting adjustments for interest, taxes, depreciation, amortization, and stock-based compensation Adjusted EBITDA Reconciliation (in thousands) | Metric | Three Months Ended June 28, 2024 | Three Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net income | $123,417 | $201,288 | | Interest expense, net | $9,944 | $8,682 | | Income tax expense | $34,531 | $18,931 | | Depreciation and amortization | $29,932 | $30,105 | | Stock-based compensation | $4,488 | $5,966 | | Other | $3,813 | $5,289 | | Adjusted EBITDA | $206,124 | $270,262 | Segment Information and Adjusted EBITDA Margin In Q3 2024, the Electrical segment's Adjusted EBITDA was $182.6 million with a 30.1% margin, while Safety & Infrastructure's Adjusted EBITDA grew to $30.0 million with a 13.8% margin Q3 2024 Segment Performance (in thousands) | Segment | Net sales | Adjusted EBITDA | Adjusted EBITDA Margin | | :--- | :--- | :--- | :--- | | Electrical | $605,962 | $182,568 | 30.1% | | Safety & Infrastructure | $217,024 | $30,042 | 13.8% | Adjusted Net Income Per Diluted Share Reconciliation Atkore's Q3 2024 GAAP Net Income of $123.4 million is reconciled to an Adjusted Net Income of $139.0 million, resulting in an Adjusted Net Income per diluted share of $3.80 Adjusted Net Income Reconciliation (in thousands) | Metric | Three Months Ended June 28, 2024 | | :--- | :--- | | Net income | $123,417 | | Pre-tax adjustments | $20,838 | | Tax effect | ($5,210) | | Adjusted net income | $139,046 | Adjusted Net Income Per Diluted Share | Per Diluted Share | Q3 2024 | Q3 2023 | | :--- | :--- | :--- | | Net income per diluted share | $3.33 | $5.13 | | Adjusted net income per diluted share | $3.80 | $5.72 | Net Debt and Trailing Twelve Months (TTM) Adjusted EBITDA As of June 28, 2024, Atkore's net debt stood at $460.6 million, derived from $764.3 million in total debt and $303.7 million in cash, with TTM Adjusted EBITDA at $863.5 million Net Debt Calculation (in thousands) | Metric | June 28, 2024 | | :--- | :--- | | Total debt | $764,300 | | Less cash and cash equivalents | $303,657 | | Net debt | $460,643 | - The Trailing Twelve Months (TTM) Adjusted EBITDA as of June 28, 2024 was $863.5 million[48] Forward-Looking Statements This section includes standard legal disclaimers for forward-looking statements, cautioning that actual results may differ from projections due to various risks including economic conditions, industry performance, raw material prices, and competition - The report contains forward-looking statements concerning financial outlook which are not guarantees of future performance and are subject to known and unknown risks[12] - Key risk factors that could cause actual results to differ include: declines in general business and economic conditions, weakness in the U.S. non-residential construction industry, changes in raw material prices, and intense competition[13]