Atkore (US:ATKR)2023-02-01 16:30Financial Data and Key Metrics Changes - In Q1 2023, net sales were $834 million and adjusted EBITDA was $264 million, with adjusted EPS increasing to $4.61, reflecting a 1% year-over-year increase [6][7][9] - Adjusted EBITDA margins were 32%, down year-over-year but still considered strong [7] - The company is increasing its full-year outlook for adjusted EBITDA to $1 billion, up by $100 million from previous guidance, and adjusted EPS is now expected to be in the range of $15.85 to $17.75 [9][10] Business Line Data and Key Metrics Changes - The Safety & Infrastructure (S&I) segment experienced a 22% growth in adjusted EBITDA, while the electrical segment saw margin compression due to normalization of pricing [8][10] - Volumes were up over 5% in the quarter, with recent acquisitions contributing an additional 7% growth [7][8] Market Data and Key Metrics Changes - The company noted strong performance in data centers and large chip fabrication projects globally, contributing to volume growth [7][8] - There is a noted decline in average selling prices as the market normalizes, alongside a downward trend in key input costs [7][8] Company Strategy and Development Direction - The company is focused on capital deployment and strategic growth, including the acquisition of Elite Polymer Solutions to expand HDPE product offerings [3][4] - Sustainability is emphasized as a core component of the company's strategy, with a third sustainability report released detailing progress against external targets [10][11] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about mid-single-digit volume growth for the remainder of the year, supported by strong customer backlogs [15][16] - The company is cautiously optimistic about growth in the industry, despite some weakness in residential markets [20][21] - Management highlighted the importance of the Inflation Reduction Act and other governmental actions, suggesting a more significant impact in 2024 [36][37] Other Important Information - The company has repurchased over $250 million in shares year-to-date, reflecting a commitment to returning cash to shareholders [4][9] - The management team is actively pursuing M&A opportunities and has increased the size of the M&A team to explore further acquisitions [31] Q&A Session Summary Question: Resilience of end markets and customer backlogs - Management expressed optimism about volume growth, citing 6 to 12 months of backlog with distributor partners, indicating confidence in continued demand [15] Question: Price versus cost dynamics and guidance adjustments - Management noted that they are retaining more pricing than previously expected, allowing for an increase in guidance for adjusted EBITDA [16][17] Question: Demand trends in metal electrical conduit and PVC markets - Management indicated that while there is residential weakness, multifamily homes and electrification trends are driving demand [20][21] Question: Normalization of EBITDA and input costs - Management acknowledged ongoing pressure on pricing but highlighted strong volume growth and new product development as factors supporting the EBITDA guidance [24][26] Question: M&A pipeline and competition - Management stated that there has been no increased trend in competition for acquisitions, emphasizing Atkore's unique position in the market [30][31] Question: Demand in Safety & Infrastructure segment - Management noted solid growth across product lines in the S&I segment, driven by data centers and fabrication plants [32] Question: Impact of governmental actions on volume guidance - Management indicated that the impact of governmental actions will be more significant in 2024, with some minor contributions expected in 2023 [36][37] Question: HDPE market opportunity - Management expressed excitement about the HDPE market, highlighting strong positioning and optimism for future growth [40] Question: Cash flow and inventory levels - Management indicated that inventory levels are where they want them to be, with a slight increase expected due to upcoming solar volume [41] Question: Solar and telecom conduit demand trends - Management is optimistic about both short-term and long-term demand in solar and telecom conduit markets, driven by new tax credits and domestic manufacturing [44][45]