Atkore Inc. (NYSE:ATKR) Q1 2023 Earnings Call Transcript February 1, 2023
John Deitzer: Thank you, and good morning, everyone. I’m joined today by Bill Waltz, President and CEO; as well as David Johnson, Chief Financial Officer. We will take your questions after comments by Bill and David. I would like to remind everyone that during this call, we may make projections or forward-looking statements regarding future events or financial performance of the company. Such statements involve risks and uncertainties such that actual results may differ materially. Please refer to our SEC filings in today’s press release, which identify important factors that could cause actual results to differ materially from those contained in our projections or forward-looking statements. In addition, any reference in our discussion today to EBITDA means adjusted EBITDA.
Adjusted EBITDA is a non-GAAP measure. Reconciliations of non-GAAP measures and a presentation of the most comparable GAAP measures are available in the appendix to today’s presentation. With that, I’ll turn it over to Bill.
Bill Waltz: Thanks, John, and good morning, everyone. Starting on Slide 3, Atkore is off to a solid start for 2023. Volumes for the quarter were up over 5%, and adjusted EPS increased 1% year-over-year in the quarter. We continue to execute our playbook for capital deployment and strategic growth. As previously discussed, we expanded our HDPE product operating with the acquisition of Elite Polymer Solutions in November. HDPE represents a significant growth opportunity for us, and I’m pleased with the progress and integration so far. During the first quarter, we repurchase $150 million of shares, and in the second quarter, we’ve already repurchased over $100 million. Collectively, this brings our year-to-date total for repurchases above $250 million.
With our solid start to the year, we are increasing our full year outlook for adjusted EBITDA and adjusted EPS. It is my pleasure to also announce the release of our 2022 sustainability report, which was published this morning and posted on the ES&G section of our website. This report covers a broad range of topics, and I believe it demonstrates and articulates why Atkore is a great place to work and truly a special company. I would like to thank all of our employees for everything they do to support our customers and all of our stakeholders, is because of their tireless efforts that Atkore is able to achieve the results and successes that we have. With that, I’ll turn the call to David to talk through the results from the quarter and our outlook for the full year.
David Johnson: Thank you, Bill, and good morning, everyone. Moving to our consolidated results on Slide 4. In the first quarter, net sales were $834 million and adjusted EBITDA was $264 million. As we have mentioned several times, we expect our business to normalize in 2023 as compared to the past several years with our performance. That being said, we’re nonetheless pleased with our margin performance in the quarter with adjusted EBITDA margins of 32%. This was down year-over-year, but still a very strong and healthy level. Even with the decline in net sales and the adjusted EBITDA, we are pleased to see that our adjusted EPS increased in the quarter up to $4.61. Turning to Slide 5 in our consolidated bridges. Volumes were up over 5% in the quarter, and our recent acquisitions contributed an additional 7% of growth.
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These gains were offset by the decline in our average selling prices. Our average selling prices have declined as we continue to see normalization of pricing and a continued downward trend for several of our key input costs. During the quarter, we saw very strong pockets of performance related to data centers and several large chip fabrication projects globally. In addition, we are very pleased with the execution and integration performance from our recent acquisitions. Moving to Slide 6. Those segments had positive volume growth. Margins compressed in our electrical segment with the previously mentioned normalization of pricing, however, we saw very strong margin growth on the S&I side. Our S&I business had 22% growth in the adjusted EBITDA.
Turning to our outlook for fiscal year 2023 on Page 7. We continue to expect volumes to be up mid-single digits for FY 23. We expect net sales to be down approximately 5% to 10% in 2023. As prices normalize and we see declines in several of our key input cost categories. However, with the strong performance in the quarter and the resiliency of our Atkore business system model, we are increasing our outlook for adjusted EBITDA and adjusted EPS. For FY 23, we expect adjusted EBITDA of $1 billion at the midpoint with a range of plus or minus $50 million. This is an increase of $100 million versus our prior outlook. In addition, we are increasing our expectations for adjusted EPS up to a range of $15.85 to $17.75. As we mentioned last quarter, this outlook does not include any expected benefits from the tax credits associated with the Inflation Reduction Act, as we expect majority of these credits will flow through to our customers.
With the strength of our cash flow and our commitment to returning cash to stockholders, we are also increasing our expectations for share repurchases in the fiscal year. With that, I’ll turn it back to Bill.
Bill Waltz: Thanks, David. We are very pleased with what we’ve accomplished in this quarter and our outlook for this fiscal year, but we’re even more excited about all the opportunities ahead. Moving to Slide 8, as we’ve said before, we believe that sustainability is central to the strength, safety, and longevity of Atkore. This morning, we released our third sustainability report and seeing all the great work that our team has accomplished truly inspires me. This report details our initiatives involving our products, customers, and employees, and I would encourage everyone to read it. Inside the report and highlighted here is the progress we’ve made against our four external sustainability targets. As you may recall, we introduced these four targets last year and set very smart goals that we believe will help guide and focus our efforts to enable sustainable value creation.
We are making good strides for our targets for each of these goals, and we are confident in our ability to meet or even potentially exceed some of these items by 2025. Turning to Slide 9. We sincerely appreciate the external recognition that we’ve recently received from several leading independent organizations. We believe these acknowledgements demonstrate that we have a company culture and employees who are able to truly make Atkore a great place to work and a compelling investment opportunity. I’m confident in the team, strategy and processes we’ve put in place to continue Atkore strong trajectory, and I firmly believe that best is yet to come for our company. With that, we’ll turn it over to the operator to open the line for questions.
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