Atkore (ATKR) - 2023 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q2 2023, net sales were $896 million, adjusted EBITDA was$ 276 million, and adjusted EPS was $4.87, reflecting a sequential increase from Q1 [6][4] - Volume in the quarter was up 4%, aligning with expectations for mid-single digit volume growth for the full year [4][6] - Adjusted EBITDA margins were 31%, down year-over-year but still considered strong [6][8] Business Line Data and Key Metrics Changes - The S&I business experienced a 20% volume increase, driven by demand for metal framing and solar-related products, with adjusted EBITDA margins over 15% [8][9] - PVC volumes were down double digits compared to the previous year's strong performance, primarily due to reduced utility project activity on the West Coast and a slowdown in residential activity [7][8] - Excluding the impact of PVC, overall volume would have been up close to mid-teens [7] Market Data and Key Metrics Changes - The company noted that market demand remains solid, with no excess supply in the channel as buyers are purchasing only what they need [16][18] - Input costs for materials like steel and copper have shown volatility, with steel costs down 30% year-over-year but up 20% sequentially from Q1 to Q2 [18][19] - The contractor's backlog remains strong, indicating ongoing demand for construction-related products [40][42] Company Strategy and Development Direction - The company is focused on three conduits of growth: M&A, category expansion in solar and HDPE, and new product innovation, which reached 9% of net sales in Q2 [11][12] - The integration of recent acquisitions is on track, with expectations of exceeding integration models and achieving synergies [31][52] - The company is optimistic about future growth opportunities in mega projects and international markets [9][30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving mid-single-digit volume growth for the full year and has raised guidance for adjusted EBITDA and adjusted EPS based on strong performance [12][61] - The company is optimistic about the impact of upcoming stimulus funding on future growth [40][42] - Management highlighted the importance of maintaining strong cash flow and a solid balance sheet as foundations for future growth [10][61] Other Important Information - The company repurchased$ 119 million in shares during Q2 and continued share repurchases in Q3 [4][10] - Cash flow from operating activities was 116% of net income for the first half of fiscal 2023, up 150% compared to the same period in fiscal 2022 [9][10] Q&A Session Summary Question: Can you provide more details on the pricing dynamics this quarter? - Management indicated that market demand is solid, with no excess supply, and input costs are volatile, with steel down 30% year-over-year but up 20% sequentially [14][18] Question: What is the status of backlogs and pricing retention? - Backlogs are back to normal levels, and while pricing has decreased, it is not down as much as input costs [20][21] Question: Can you elaborate on the S&I business and mega projects? - The S&I business is benefiting from increased demand in mega projects, particularly in data centers and EV battery facilities [27][30] Question: What are the volume assumptions for the rest of the year? - The company expects mid-single-digit volume growth, with no signs of destocking observed [35][36] Question: How is the solar business contributing to performance? - Solar-related products are expected to significantly contribute to growth, particularly in FY 2024 as new facilities come online [46][48] Question: What is the market dynamic for HDP? - The integration of HDP acquisitions is on track, with optimistic future growth expected despite some short-term weather-related challenges [50][52]