Atkore (ATKR) - 2024 Q2 - Quarterly Results

Q2 2024 Performance Highlights Atkore Inc. reported a decline in Q2 2024 net sales, net income, and Adjusted EBITDA compared to the prior year Q2 2024 Key Financial Metrics (vs. Prior Year, in millions) | Metric | Q2 2024 | Change vs. Q2 2023 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $792.9 million | -$103.0 million | -11.5% | | Net Income | $138.0 million | -$36.2 million | -20.8% | | Adjusted EBITDA | $211.9 million | -$64.1 million | -23.2% | | Net Income per Diluted Share (GAAP) | $3.67 | -$0.64 | -14.8% | | Adjusted Net Income per Diluted Share | $4.08 | -$0.79 | -16.2% | - The Board of Directors declared a quarterly cash dividend of $0.32 per share, payable on May 31, 2024[1] Management Commentary Management highlighted meeting sales and exceeding profit targets, with continued capital deployment despite a revised full-year outlook - CEO Bill Waltz noted that Q2 results met Net Sales projections and exceeded projections for Adjusted EBITDA and Adjusted Diluted EPS[2] - Organic volume was down 1% for the second quarter but grew 6% for the first half of the fiscal year[2] - The company continued its capital deployment by repurchasing $59 million in stock during Q2, totaling over $150 million year-to-date[2] - The full-year outlook was adjusted due to factors impacting HDPE and solar-related initiatives[2] Financial Results Analysis This section analyzes Atkore's consolidated and segment financial performance, highlighting revenue and profitability trends Consolidated Results Atkore's Q2 2024 consolidated net sales, net income, and Adjusted EBITDA declined year-over-year due to lower average selling prices - The decrease in net sales was primarily driven by a $85.5 million reduction from lower average selling prices, a $10.8 million impact from the economic value of solar tax credits, and a $7.5 million decrease from lower sales volume[3] - Gross profit decreased by 17.4% to $291.6 million, with gross margin contracting to 36.8% from 39.4% in the prior-year period, as declines in selling prices outpaced the reduction in input costs[4] Q2 2024 Consolidated Financial Performance (vs. Q2 2023, in millions) | Metric | Q2 2024 | Q2 2023 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $792.9M | $895.9M | -$103.0M | -11.5% | | Gross Profit | $291.6M | $352.9M | -$61.3M | -17.4% | | Net Income | $138.0M | $174.2M | -$36.2M | -20.8% | | Adjusted EBITDA | $211.9M | $276.0M | -$64.1M | -23.2% | | Diluted EPS (GAAP) | $3.67 | $4.31 | -$0.64 | -14.8% | | Adjusted Diluted EPS | $4.08 | $4.87 | -$0.79 | -16.2% | Segment Performance Both operating segments experienced year-over-year declines in Q2 2024, driven by price normalization and lower volumes Electrical Segment The Electrical segment's net sales and Adjusted EBITDA decreased due to lower average selling prices outpacing input cost reductions Electrical Segment Q2 Performance (vs. Q2 2023, in millions) | Metric | Q2 2024 | Q2 2023 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $590.8M | $681.0M | -13.2% | | Adjusted EBITDA | $195.8M | $256.9M | -23.8% | | Adjusted EBITDA Margin | 33.1% | 37.7% | -4.6 p.p. | - The decrease in net sales was attributed to decreased average selling prices of $87.1 million and decreased sales volume of $3.8 million[5] Safety & Infrastructure Segment The Safety & Infrastructure segment's net sales and Adjusted EBITDA declined due to lower volumes and solar tax credit transfers Safety & Infrastructure Segment Q2 Performance (vs. Q2 2023, in millions) | Metric | Q2 2024 | Q2 2023 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $202.4M | $215.1M | -5.9% | | Adjusted EBITDA | $25.5M | $33.2M | -23.1% | | Adjusted EBITDA Margin | 12.6% | 15.4% | -2.8 p.p. | - The decrease in net sales was primarily due to lower volumes ($3.7 million) and the economic value of solar tax credits transferred to customers ($10.8 million), partially offset by increased average selling prices ($1.6 million)[7] Liquidity & Capital Resources Atkore continued capital returns through share repurchases and quarterly cash dividends to shareholders - The company repurchased $59 million in stock during Q2, bringing the fiscal year-to-date total to over $150 million[2] - The Board of Directors declared a quarterly cash dividend of $0.32 per share on January 30, 2024, and again on May 2, 2024[8][9] Full-Year 2024 Outlook The company provides its adjusted fiscal year 2024 outlook, including projections for Adjusted EBITDA and Diluted EPS Adjusted Fiscal Year 2024 Outlook (in millions, except EPS) | Metric | Adjusted Outlook Range | | :--- | :--- | | Adjusted EBITDA | $850 million - $900 million | | Adjusted Net Income per Diluted Share | $16.00 - $17.00 | Financial Statements This section presents the company's condensed consolidated financial statements: operations, balance sheets, and cash flows Consolidated Statements of Operations The statement of operations for the three and six months ended March 29, 2024, shows a year-over-year decline in key metrics Six Months Ended Performance (vs. Prior Year, in thousands) | Metric (in thousands) | March 29, 2024 | March 31, 2023 | | :--- | :--- | :--- | | Net Sales | $1,591,392 | $1,729,755 | | Gross Profit | $582,115 | $687,235 | | Operating Income | $354,267 | $471,471 | | Net Income | $276,335 | $347,686 | | Diluted EPS | $7.28 | $8.52 | Consolidated Balance Sheets Atkore's total assets slightly increased, while total liabilities decreased, leading to a rise in total equity as of March 29, 2024 Key Balance Sheet Items (in thousands) | Account | March 29, 2024 | September 30, 2023 | | :--- | :--- | :--- | | Total Current Assets | $1,575,293 | $1,538,490 | | Total Assets | $3,014,728 | $2,935,009 | | Total Current Liabilities | $510,403 | $564,604 | | Long-term Debt | $763,762 | $762,687 | | Total Liabilities | $1,442,832 | $1,466,890 | | Total Equity | $1,571,896 | $1,468,119 | Consolidated Statements of Cash Flows Net cash from operating activities decreased, with significant cash used in investing and financing activities, primarily for stock repurchases Six Months Ended Cash Flow Summary (in thousands) | Activity | March 29, 2024 | March 31, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $245,323 | $403,396 | | Net cash used in investing activities | ($78,971) | ($156,074) | | Net cash used for financing activities | ($187,529) | ($284,262) | | Free Cash Flow | $171,777 | $330,706 | Non-GAAP Reconciliations This section provides detailed reconciliations of non-GAAP financial measures to their GAAP counterparts Adjusted EBITDA Reconciliation This section reconciles GAAP Net Income to Adjusted EBITDA, showing the adjustments made for non-operating items Q2 Net Income to Adjusted EBITDA Reconciliation (in thousands) | Line Item | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Net Income | $137,955 | $174,194 | | Interest expense, net | $8,321 | $8,475 | | Income tax expense | $31,804 | $53,364 | | Depreciation and amortization | $29,455 | $28,598 | | Stock-based compensation | $5,028 | $6,863 | | Other | ($649) | $4,547 | | Adjusted EBITDA | $211,914 | $276,041 | Segment Information and Adjusted EBITDA Margin This table provides a detailed breakdown of Net Sales, Adjusted EBITDA, and Adjusted EBITDA Margin for each operating segment Q2 2024 Segment Performance (in thousands) | Segment | Net Sales | Adjusted EBITDA | Adjusted EBITDA Margin | | :--- | :--- | :--- | :--- | | Electrical | $590,820 | $195,752 | 33.1% | | Safety & Infrastructure | $202,419 | $25,529 | 12.6% | Adjusted Net Income per Diluted Share Reconciliation This section reconciles GAAP Net Income to Adjusted Net Income and calculates the corresponding per-share figures Q2 Net Income to Adjusted Net Income Reconciliation (in thousands) | Line Item | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Net Income | $137,955 | $174,194 | | Pre-tax adjustments | $18,310 | $25,929 | | Tax effect | ($4,578) | ($6,482) | | Adjusted Net Income | $151,687 | $193,641 | | Net Income per Diluted Share | $3.67 | $4.31 | | Adjusted Net Income per Diluted Share | $4.08 | $4.87 | Net Debt Reconciliation The company calculates Net Debt by subtracting cash and cash equivalents from total long-term debt Net Debt Calculation as of March 29, 2024 (in thousands) | Line Item | Amount | | :--- | :--- | | Long-term debt | $763,762 | | Less: Cash and cash equivalents | $368,050 | | Net debt | $395,712 | Trailing Twelve Months (TTM) Adjusted EBITDA This table details the calculation of Trailing Twelve Months (TTM) Adjusted EBITDA by summing the results of the last four quarters TTM Adjusted EBITDA Calculation (in thousands) | Period | Adjusted EBITDA | | :--- | :--- | | Q2 FY24 (ended Mar 29, 2024) | $211,914 | | Q1 FY24 (ended Dec 29, 2023) | $213,523 | | Q4 FY23 (ended Sep 30, 2023) | $231,978 | | Q3 FY23 (ended Jun 30, 2023) | $270,262 | | TTM Total | $927,676 | Other Information This section includes conference call details, forward-looking statements, and non-GAAP financial measure definitions Conference Call Information Atkore management scheduled a conference call to discuss financial results, with webcast and replay options available - A conference call to discuss financial results was scheduled for May 7, 2024, at 8 a.m. Eastern time[9] - A webcast of the call and an online replay are available on the Investor Relations section of the Company's website[10] Forward-Looking Statements & Risk Factors This section provides a standard safe harbor statement, outlining potential risk factors that could impact future performance - The press release contains forward-looking statements regarding financial outlook and future performance, which are subject to risks and uncertainties[11] - Key risk factors include general economic conditions, non-residential construction industry weakness, raw material price changes, intense competition, and changes in governmental regulations[12] Non-GAAP Financial Measures Definitions The company explains its use of non-GAAP financial measures and provides specific definitions for key metrics - Adjusted EBITDA is defined as net income adjusted for items like taxes, interest, D&A, stock-based compensation, and other specific adjustments[17] - Adjusted Net Income is defined as net income excluding items such as stock-based compensation, intangible asset amortization, and their related tax effects[18] - Free Cash Flow is defined as net cash provided by operating activities less capital expenditures[21]