PGTI - Earnings call transcript Q2 2018

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Operator

Good day. Welcome to the PGT Innovations Incorporated Second Quarter 2018 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. to President. conference like Jackson, to now and CEO would turn over the Jeff I ahead. go Please

Jeffrey Jackson

Thanks, Michelle. President and morning conference PGT Good morning And by call. quarter Innovations’ Innovations. Innovations’s I’m XXXX Brad second West, Jeff CFO. joined Jackson, I’m and PGT of welcome CEO this to PGT

XXXX Private I’d cause XXXX, Before to statements the section within undertake revise that comments, remind to publicly and actual performance in that on Securities our Reform that of These any could like financial the Act release Litigation we our the remarks begin no uncertainties obligations our today’s forward-looking Factors These Risk Report you results including fall We of factors in other meaning are to XX-K. or detailed the and press formal involve remarks update forward-looking outlook. XXXX materially. of earnings statements. company’s contain risks, Annual differ Form factors

the using of report comparison of You should information the to facilitate also present results provide help believe – for note which, GAAP will website. reconciliation investors additional past Relations that website. our provide of we Investor available A available we section the is results to on section A these presentation the is non-GAAP counterparts of performance. our also we non-GAAP measures and of on quarterly relations our investor measures,

the to I’m and portfolio. driven across let’s another and by Now X. repair solid in on quarter pleased growth our and remodeling operating report call for kick off Innovations, continued this strong Slide channel PGT performance primarily start

quarter of of year. Earnings EBITDA $X.XX the last year-over-year. same diluted of quarter share adjusted both year, share XX.X%, XXXX. XX% sales XX.X% last delivered the compared and adjusted from same Strong XXXX, gross million, per $XX.X For the up the $X.XX quarter of of of $XXX second per increasing million, period in to $X.XX, margin in up XX% of earnings second we diluted

Importantly, adjusted marks history XX%. the we've achieved this the in of company’s margins EBITDA first time

increase repair channels team of enabled $XXX demonstrated commitment For X channels in a of million, adjusted compared we the $X.XX, six share This margin up XXXX; second significant the in leverage our XXXX as the first-half and adjusted percentage the per of months impressive operating of sales. first-half of our this with XX%; remodeling of of leverage the of first-half the $X.XX increase on continued in $X.XX, million, in into to sales with year. to to last the strong to compared both margin year, business from performance EBITDA share last first diluted solid continued our Demand continued business, and quarter XX.X%, the second year; to and construction diluted fixed The and XXXX. last compared as year-over-year gross a in of $X.XX in in the investments increasing first-half Recent demand XX.X% efficiencies quarter us to again in of of compared earnings performance. growing of to be to combined XXXX, $XX.X for our the deliver operating our excellence we earnings per of achieved compared XX%, point year. increase cost operating of momentum resulted increase of first to operational quarter, XXXX ability meet and sales in gross in new both

forward foundation guidance. our value on focused a entered to building are well we plan for increased enhanced execute positioned to exceptional to of as results, year, on in and We second-half the the our full-year strong to XXXX strategic shareholders. our deliver we reflected look As drive full-year

Slide to X. Turning

strategically Sales the our channel sector XX% in remodeling sales and in this overall driver the contribute on sales. increased and grew the of capitalizing to products continued and last to primary demand the over sales this by and same growth active in and year. and and net growth both expected We last hurricane demand represent the channels, growth impact-resistant repair this XX% While remodeling achieved across and now drive marketing repair investing season growth continued quarter, for repair up back-half of advertising to through was period following beyond. is remodeling, XXXX year’s

a As a us $XXX a result allow ended times in increased while million, maintaining customers’ manner. nearly strong consolidated of of with we the needs timely backlog that to this demand, quarter lead our serve

X. Slide to Turning

per to a growth XX,XXX. new nation. estimating We the approximately head, to is the of we single-family XXXX look starts result housing there believe expected continued fastest-growing in indicates we of key is normalize include, This XXX,XXX is in as potential Florida XX,XXX significant our drivers As to state growth will Florida, the starts construction remain year. this be housing are approximately and

continued remodeling see to repair and our in We growth channel. also expect

of severe every their openings that It in that last have among This homes safeguard that, XX% hurricane we Irma U.S. active have have Florida to storm year, severe impact-resistant Atlantic in Hurricane Florida can evacuated indicates to that demonstrated the coastal conditions. no estimated windows their tough have in shutters. ocean’s property increased not Florida, consumers can of have season XX% recorded least, people against at XX% protection storms. million homes of doors, Floridians It impacted history. In home homes and response last impact-resistant just seen ever Florida XX% weather. is that the another by on bee largest products X.X the impact-resistant is for also demand weather Following largest CATX only estimated Hurricane withstand storm. Irma, year,

begun which marketing believe benefit for result, the our state Florida growth. investments protection their searching and entire to we homeowners throughout a of have continue As why homes, our advertising hurricane for is

which targets efforts an at on homeowners line, affordable position product to July looking us to further window In an XX, greater to value to those a upgrade addition launched price. and custom capture we to impact-resistant share,

product no PGT believe CGI new further an help status our windows shutter Innovations Sparta those of supplier share to affordable is maintain the our market line impact-resistant well-positioned and We capture to market and an impact-resistant manufacturer our offers and a as protection. increasing penetrate that continue of core doors. nation’s expect to alternative for leading We and have

As while I in move quarterly highest discussed their last of the quarter, we’ve foot to I’m the report to facility into Miami. the executing that enjoyed recently expanded new new in level the square sales history, also XXX,XXX pleased facility. CGI operations a

of and facility XXXX will quarter to and new we full-year the Miami, in efficiencies. third in The facilitate expect our be productivity improvements operational first continued

expanded larger facility us Miami feet, office in square to additional XX,XXX commercial floor feet showroom with quarter, This we employees. manufacturing to XX,XXX also our multiple from facility the space square for and a production run CGI lines. features During which enables

segment Our CGI pressure commercial us. commercial applications. high This brand also for design introduced which made SlimFront to a Storefront a for growing is System, opportunity be continues new

opportunity Window door marks a as Finally, new as provides. and window we look a a chapter forward, leader milestone This the significant in and we of the premium are become space. we about in Western company, especially national Systems growth excited our

Financial of fact Officer on offer opportunity us a I to As Chief call, a a joining Zorge, Heather to Heather today’s words. matter like Systems. special Heather? say the I’d few of guest Western Window have

Heather Zorge

few today to Thank say thank you to for allowing and words. here me you, Jeff. a I’m honored be

you July agreement that entered The Window expected into Innovation this know, third to was year. in the Western to on As XX transaction Tuesday acquire announced PGT Systems. all is has it of close an quarter

Innovations the excited of is PGT becoming family incredibly team of about part Our brands.

manufacturer company Our stakeholders and in a indoor/outdoor create management of which Window to employees worked of an to PGT meet spaces great innovative most America. is proud forward quality, in build look create energy-efficiency manufacturer door satisfying Innovations America. as that products, premium, hard and company to unify team designed be the a stringent homes contemporary products stringent have Jeff? combined Systems to hard and award-winning of to most leading company working that the know its as North to the exciting Western It window to just of We codes is a living worked North some all ratings can by to and is families, businesses recognized very of team off. together protects building the has

Jeffrey Jackson

officially Heather. the profitable, value. and and as combined well-positioned that you, even Western XXX of We we a growth employees team and drive wait Systems welcome shareholder you and We to be Window believe will entire more Thank can’t Innovations family. we enhance to be company, to sustained PGT the will stronger

the let’s review of X. the key acquisition on highlights Now Slide

product portfolio. throughout Western United we a believe geographic strategic last Florida, important we and States the geographies Window outside platform growing an in Systems – As week, Western addition our providing of our diversifies announced and the supports expansion of support

in We leverage portfolio living while with energy-efficient believe combining accretion current cash have and those margins, diversified we than be we’ll expect able products EPS product adjusted at these designed Due or to high-end, our achieve this margins, indoor/outdoor that a entry to In we spaces. and unify impact will acquisition better niche, into products high to PGT our sheet. products flexibility also our to margins financial provide. more maintaining to EBITDA offerings, solid media Innovations balance grows

exciting aligning to Our us expected growth strategy. that with brand complimentary leadership sales cross-selling strategies our recognition generate opportunities and to are enable strengthen will

we the Systems officially We’re acquisition, the close look excited into third which expect forward occur about when to the possibilities PGT to house Window ahead in Innovations XXXX. brands of and quarter welcoming the of Western we brand

Slide turn X. to let’s Now

on strategic look the for the on we market growth expect Those has four XXXX developing and we continue believe have sales. advertising are, brand turn capitalized customer-first with customer focus relationships, For strong evidenced footprint. the By Florida. and will new quarter driven the believe on as we and builds investments to the of expand pillars second drive and driver successful customers increased the date. execution we to will of numbers have our focus by been our shareholder be and as awareness in main us customer brands, in as of pillars, on new customer which success our marketing across royalty, continue connected our and create our value. customer, our to deep We The has these we which focusing continued ahead, we core reported made one, to putting reach we long-term

to leaders and stock benefits to member team our and talented June, square that In make focused best plan. in we a rate. of we benefit on We dedicated talented families April, team offering also with young are X,XXX foot XX already Second, place affordable incentive we location. to hardworking a career. shares our to in strive are a of discounted provided our service a a company start is not succeed. key our the help believe company new at PGT team facility opened participants have the attracting childcare Innovations that childcare North to In long-term to we announced company’s each Venice grant This convenient offers one-time our who members children annual success

became proud time first of the for As I’m every X, in the PGT to employee a July company shareholder at history. Innovations say, also company’s

our investing demand unify country. continue innovative not energy-efficient the impact-resistant products, in for an we and our leader Likewise, to targeted saw its afforded to enable believe as we and Third, key continued increased increased importance as Miami finally, designed critical the this markets differentiated to stringent pillar underscoring product capacity in meeting we development, Window our Western last investing of cash making support includes we which view in long-term to And key free like production accretive the industry product. to our exceed in most which business, the in facility codes, we quarter, growth. growth. acquisition Innovations PGT operations new be week. capital acquisitions by but was and to of R&D cash driving indoor/outdoor flow in demand. due this We in Systems differentiator allocate to premium, to is our success. and our generated from four, in a products, innovation scaling The products business innovative our living to investment energy-efficient to demand to but regulations This core lean safest strong us our also Systems will the increased space the our that the strategic We serve and are meet, committed high-quality flow shareholder investment value. Window from increasing only view competitors as our announced Florida’s in Western building of are free meet strategically our

the Now the I’d in over to to like the to Brad? for second turn call more Brad detail. financial discuss quarter results

Brad West

second the X with begin you, results quarter. our Thank of on a Slide I’ll summary Jeff. for

Jeff to quarter, momentum of especially this as remodeling year, second continuing noted, $XXX quarter million from the repair year’s reported and As we net last sales compared increase first our in of was the XX% solid. season an

gross million in profit compared second to up the margin For points XXXX, second basis gross $XX.X was XXX our quarter the and to increased quarter XX.X%, our XX.X% XXXX.

of improved remains gross from effect offsetting effectiveness prices sales. of gross at in the the of at basis third and higher Gross benefited price of increases from costs. volume, including It higher that price the labor factors, in increases operating $X.XX our XXXX. benefits strong benefits moderate second Our increases in pound and enable per an from effects a second inflationary inflationary for XXX and fuel hedging quarter, negative margin year. the favorable aluminum aluminum in the during and impact of Those increase $X.XX of margins the costs. today. the up price per margin is a The on end took forward-buy After to price of pound the sales active us cover aluminum had considering increase also points mix in last these programs, and quarter quarter these

an our in have per today, covered of XXXX. $X.XX which per remainder for for at needs to approximately of compares estimated of XX% the $X.XX pound aluminum delivered of pound, price As XXXX we average

this Additionally, are approximately today the note not per covered for approximately just total costs, per of in $X.XX average pound at the which cost an include XX% price LME portion pound. delivery we of is XXXX. that $X.XX Please for the does

the of increase Going monitor price as and will and appropriate, the trade tariff make forward, environment, our or continue to of aluminum additional prudent price coverage and in we our products. the increases

– despite we And compared our our pressures. year, that margins as XXXX, inflationary we second XXX these positioned pleased prior believe are ahead. for looking expanded the margin pleased basis are than that to profile by We points we we quarter to strengthen are continued further more

that cost acquisition We to we offer Innovations’ expect – to go as energies upon depending Systems margins companies EBITDA Window and targeting forward, mix margin an accretive a XXX we are XXX broader the points, margins to and PGT be customer both immediately to Western realize brand high-value of to EBITDA products growth improvement even basis as adjusted continue base.

and increase providing including by year, additional to from but of slightly Selling lower million from personnel-related million to as shareholders a percentage of sales. company, and second This forward company incentive increase look an We administrative $XX.X performance deliver the following of expect was $X.X costs, value and mainly match. costs $X.X recruiting improved this quarters. compensation significant in details XXX(k) quarter estimated to the million general the last higher and expenses were quarter, driven higher and additional same of

levels. advertising million cost compensation compensation in Stock the first-half of quarter higher additional costs, in due to marketing we second sales in Additionally, increase $X million investment fuel resulting XXXX, distribution $XXX,XXX higher expense had to $X.X a of and nearly sales and million. $X costs and stock higher due of from initiatives. additional in was Remaining was

Our XXXX of be approximately estimate all $X.X million. continues to for

the the final the EBITDA. transfer We of We excluded related quarter, September quarter entered glass $X.X gain Cardinal gain and in from to in also recorded million purchase More manufacturing this in adjusted costs relating million we adjusted. the acquisition, XXXX, in costs EBITDA. be which Western into excluded Window our asset second though was from also door adjusted assets we to of approximately third recorded under $X agreement certain earnings will Systems will which be the a incurred to

we in a Interest million, $XX.X quarter million year. $X expense second in Cardinal $X.X from approximately cash the of received of million was quarter. from the proceeds the second part transfers, last decrease totaling As

last quarter point also As XXXX, we XXXX the is and stated in compared agreement of compares lower million our in decrease and made was loan year. year. Depreciation to last rate lower $X.X slightly than term second reduction facility. Tax the XX.X% been the year. higher resulted quarter exercises options, XXX borrowings last year. in of our second result XXXX equity $X.X decrease of for borrowings compared quarter, the XX.X%. first discussed We million the and vesting and for tax of $XXX,XXX credit interest we of The portion refinancing, in of tax of last of last XXXX amortization to million quarter, $X.X which under expense outstanding is expense prepayments of margin million excess tax of to expense an $XX related level reduced The of as the of awards under in average represents the of during a the to second second borrowings relating This to first-half recorded in of primarily which a of benefits basis interest the a borrowings. the rate quarter by stock voluntary effective quarter rate $X.X result a has million

been Excluding lower would year. compared from year tax the quarter last the in Tax corporate second XX.X% in and last the Act decrease in these of Jobs our with of tax tax to the effective end second enacted effective have of benefits, rate XXXX, quarter at the the resulting rate rate a Cuts XX.X% from

their of operational or the improved was expect impacts, second increase diluted year-over-year in the approximately asset continue for tax share million, quarter, announced line strong to and versus and $XX.X for per Adjusted share. $X.XX adjusted $XX.X XXXX payment our of second related million, the versus the our This to last XXXX quarter million, performance the EBITDA growth primarily quarter We quarter of to adjusted on of impacts in for net net under gains as of XX%. last for income Window tax of the second significant XX.X% driven second purchase costs acquisition sales per was recently was quarter or year. top rate $XX.X quarter After for compared year. XXXX margin EBITDA $XX.X Systems. the the as assets or XXXX. Cardinal by of removing a an of margin and to $X.XX efficiencies Net Western or transfers $XX.X well second $X.XX XX.X%, We of diluted income diluted quarter effective of or million, per million, recorded estimated share the

driven quarter. increases same products increase impact our XX% of products, year. profit growth higher XX% and XX% gross last breakdown our A their includes volumes for XX, in was which of quarter equivalents of operating solid of benefited measures compared and release net overall in sales of with we’ll sales you year. aluminum to the in demand from This the non-GAAP give our products last GAAP improved performance. versus As reconciliation Overall and our WinGuard margins, vinyl our period grew EBITDA and for impact adjusted gross adjusted by included sales income XX% have impact sales our of On for earnings of your net Slide reference. vinyl been same to financial the

capital new Turning expenditures prior facility million to our is to quarter, period. up our million, million balance more year We $X.X sheet driven in last in the – mainly with up second Miami. second in as balance approximately XXXX a spending quarter, compared which on related Slide by to $X.X $XX.X XX. $XX.X year’s than invested the We million, ended of quarter the cash from

the X.X income payments PGT-branded agreement glass September the to to and proceeds million reduced in times. tax totaling in purchase our our Cardinal quarter XXXX in asset door million. received pursuant leverage We federal XXXX. executed of to net estimated assets sale second $X.X related of state further made we Additionally, the cash We during $XX.X

we a of As that of to some delever back WinDoor. call and Systems, as Jeff? profile pro of of did at the for to expect XXXX capitalize previously on the following we times. the and to cash thoughts. increased free acquisition I’ll acquisitions CGI we the Western reported, forma comments on debt We turn X.X expect combined outlook intend closing company Jeff strong flow EBITDA the the other At from ratio close Window quickly over point, our approximately this to

Jeffrey Jackson

ranges. increasing that Brad. expect diluted of increased to sales provided to the Thanks, XX% net million, disciplined and flow for income remainder to free week, that $XX wanted the to increasing EBITDA diluted to million solid shares high-end of we $XXX and million remind for which of capital everyone of Last $XXX guidance average to to million I to XX%; and share $X.XX XX%; new of finish net Those ranges $X.XX, per XX% the $XX we a adjusted at $XXX increase are: assumes XXX of our of million $XXX, expectations growth reflecting million, $XX outstanding; weighted spending. cash XXXX.

the As benefit include a legacy relates Innovations Western Systems. and reminder, PGT operations this any forma Window does outlook to not for pro only

impact able details consolidated We the closing more will financials our and to be on the Western to acquisition. provide Systems’ after guidance Window related

to our Before strong by Innovations shareholders, saying for to continued questions, you and want support. to thank quarter you your thank every and close for family customers member taking partners, I your PGT another

PGT safety, and at sustainable such incredible and team. grateful culture an innovation of integrity, I part to Our be growth, encourages Innovations feel

fully members Operator? effort turn Systems collectively acquisition Q&A. XXX team and further And to like value. generating I enhance Western Window will. growth the begin Our we the believe time, from leadership X,XXX on and confident over enhance I’m will to And team members once call closed. approximately operator in the that that focused and shareholder are team profitable At this our I’d this is to join

Operator

begin of [Operator the comes Instructions] Please SunTrust. The ahead. Hughes go first question-and-answer session. question Keith now from will We

Jake Cohen

rates detail how weaker these Were how that quarter the quarter, more towards just heading growth was to Thanks. the seen a of This or trended did given little actually. on the some housing look consistent data for June? Cohen hoping through is Jake we’ve on Keith I get just bit recently?

Jeffrey Jackson

Yes.

quarter-to-quarter. was we As move it consistent through quarter, pretty the

into third third backlog quarter started so $XXX our a is of strong quarter going quarter, off like well. million as third the The the quarter

the months of terms they year-over-year second, of So increases. the consistently growth were throughout in

Jake Cohen

real ready or any forma would a pro if just then And R&R construction going in how give great. quick forward? But on I’m not terms sure if and of mix. look to detail sales Okay, you’re that gross new margin

Jeffrey Jackson

of about of that roughly comment be integration and can’t we XX% out will on I on complete, the XX% mix sales. Well, overall state once integration kind – about the in-state with is

my In to the I’m construction terms be we’re at is to this I XX-XX, of Window now, which and R&R but that mix, remarks, construction, Western point. that our acquisition to going and release it’ll Window said Systems closer XX-XX. for pretty to annual so margins to going a quarter, close third new we the will bring Right in closed, in is remainder our XXXX. around the new press much Western we’ll roughly issue once Systems gross of even. include the expect on not guidance it impact mix of Like revise we’re comment pretty the

Jake Cohen

appreciate it. I was great. That right. All

Operator

Raymond from The Please of comes next Darkatsh Sam go question James. ahead.

Sam Darkatsh

Good you? morning, Brad, Jeff, how are

Jeffrey Jackson

Sam. Good,

Brad West

Sam. morning, Good

Sam Darkatsh

indulge you if me. questions, Three could

First, question, Brad. clarification the

the exclusive On what little tax we excess rate? second-half as benefits recorded QX rate, and confused XX% the Is should or inclusive guidance is for the for tax putting QX? be you’re in of having the in I’m that a that to you year. tax there

Brad West

what we’d that excess No, any XX% exclusive. in that Basically, is quarter, – not where that’s there’s roughly Sam, tax any see yes, benefits.

Sam Darkatsh

Okay.

modeling our purposes? use XX% XQ, XQ you So the in for rate

Brad West

Right.

Sam Darkatsh

Okay.

this sustainability – expectations clearly, talk I of gross – pending business But margin acquisition? give terrific. on quarter you’re specificity I of exclusive about said the forward. going the hesitant was you that Jeff, the directionally, XX% the the directionally to you Could on PGT question, legacy know gross Second spec margin

Jeffrey Jackson

now we’ve at we’ve We that volume. of things really scrap, throughput, to the really starting Sam, but seeing grow, in drive of through off we’ve margin that all the with with of a done in XXXX business XXXX Yes. driving started frankly, investment gross really a XXXX I what lines, of least, we we’ve volume. we’ve Quite now increased and in enhancement started our plant Sam, increased first, a invested also number mean, in that’s demonstrating throwing some improvements. exclusivity off efficiencies, the operationally the that glass done EBITDA we this as legacy lot handsomely to paying company margin investment reduced

cost leveraging have investment that So you fixed we’re that anything else? over in Brad, increase volume.

Brad West

Yes.

year. it, So, Sam, labor improvements of we’ve our I we as think this have costs it’s material And and do feel part seen improved that efficiencies sustainable. in our

fluctuate QX. overhead Our just our third QX sales more tend to will gross and with because margins leverage second our than volume get quarter obviously and leverage

So mind, as any you forward. I keep would that just go modeling in do

Sam Darkatsh

gross of basis realistic But type sense points that XXX just the year-on-year think get realistic I’m had to you in back-half? that of is expansion margin. to is trying in a of, cadence

Brad West

as well than what of kind level, beat be Yes, the a would is I same the XX% than sales with saying. I’m but less mean, yes, sales if level it’s grew, less margin little bit

Sam Darkatsh

then do your times, weeks. serves, And running where my memory lead specifically, And industry Where are or last they you my they’re think, we’re final versus running more it. Got four I quarter running if question, competitors? think the versus now? about

Brad West

weeks, that really Sam, from changed. four to anywhere now, Right three hasn’t Yes.

the four-week to we’re added window. have part, spoke. we that last three most for capacity hitting since some But We either

see with Now up line. that will think, kind and have Sparta come of obviously down. Miami running, on I line that of times The better lead launch you’ll to also the start

lead get well. more, terms here third-party lot competition, here four to obviously what is as out-of-state times. so that’s local. have same. they and that or we’re it’s more into But same of the weeks time the there’s about we’re is a by In glass, Out-of-state three kind lead of it because Competition goes about that hearing

Sam Darkatsh

about late competitive pricing? now aluminum too right concerned not you’re and So then influencing coming of that prices off

Brad West

mean, you aluminum of pricing of ,No about input the time? cost lead or the you talking charge the we are

Sam Darkatsh

costs, least, like looks competitive costs whether might aluminum three input I’m influence the curious we as over come should I pricing? what at so. to it down I externally, see that apologize. two, sorry, The or can was past months

Brad West

And around. hadn’t the impact, the will, still Yes. still honest its I be you. the to are roughly Midwest because Sam, premium, that it transportation with same. trying piece don’t it’s figure tariff The to still think bouncing talk is out people changed,

LME have We drop… seen some

Sam Darkatsh

Yes.

Brad West

some …but hopefully we point. would user in at affected to in we’ll that this downward drive be hedges. haven’t lock But to meaningful change pricing try seen in any pricing

Jeffrey Jackson

while dropped a meaningfully area. ago, still Yes, of would over little is pretty and add, bit it’s up the pricing driving it’s which time a in what’s recently, competitive kind this I year

Sam Darkatsh

on pricing be I would more would determinations sequential action think of a going play now? that forward

Jeffrey Jackson

Once get come don’t projects. into market. housing not they bid typically those they’re Yes, with large in you prices, quarter-to-quarter it’s out R&D the in quotes pricing, people on getting It really an unless projects come into because ahead and of in be sequential would pricing, quarter XXXX, large a if play go there’s if lock input less headwinds can or in potentially on it depending say, more can you starting cost. fluctuate project,

Sam Darkatsh

gentlemen. you, Thank helpful. Very

Jeffrey Jackson

You’re welcome.

Brad West

Thanks.

Operator

question The Hamblin Jeremy & go from next of Company. Dougherty comes ahead. Please

Jeremy Hamblin

on have when winds I of your that end much you Yes. the ROIs the Any of that that, you or R&R to again little you that’s been? of positive advertising on year-to-date is slow? year sustainable product of think, The of into attributable But tailwind how just advertising? how on see new provide as the start And you the to itself? TV color getting kind side wrapped has mix. that, can typically year, do at obviously, this storm in with well contribution you and this some from do the a beginning kind you business, sew TV effective the things much did of those to how of XX% a Are storm? tail attribute And better last the margins to momentum increase, the gross I think over

Jeffrey Jackson

do of But Okay, this the through This years, Brad let I’ll is and Jeff. it I’ve went here. in the those few been a on comment XX I’ll is – storm. well. as Jeremy, We since first

growth. R&R you had see that people in it and we’ve What we’re the to storm? going is you really that So see We see one. couldn’t impact their say upgrade ask definitely a what’s we of wanting awareness non-impact/impact products, heightened sustainability, our seen to how and until

the see $XXX what this of labor backlog, not to is You but Florida, shortfall. Governor acting ability products R&R-driven homes, stretch it hurricane. as will, labor have that the is I we of like in industry if a building And well. tailwind, also backlog, you homes, And out unique kind well of a products million put this, as and a install tempering that’s to guess, build in as is is to into our lot from

to I continues continues stretched. think, and it get it

the So repaired midway the are yet. hurricane no doors season, roughly through season, almost, house far we

lot but storm, our there the you still, So, this But guess, we yes, evacuating U.S. year evacuation kind make I least that last year’s challenge as of out safe on their It’s not we’re history, secured a folks at in or ongoing again want do sure Florida, look do. million of that of reported see largest hesitant is the well. and market. X.X in that to even people an impact when at house if they

into potential Brad, out have… XXXX. get you will take keep do through – will of market. on the right benefit R&R keep in time to And the we that the think will so terms And

Brad West

mentioned his think, Jeremy, from deck. back to remarks prepared the refer in Jeff and will I our Yes, X Slide everyone I

this storm grandfathered market repair But deciding think when said of a has work more of have And so certainly impact-resistant a lot homes about last windows in don’t still data before it’s key of that that we’ve that is And anymore. lot actually from a got that. an grow I benefit that our homes through, going or and protection. estimate people interesting helps they not that windows, out for awareness we doing of be have with able on from comes I is doors year’s plywood to deal And and lot that the in to came storm, that think, we’re impact-resistant very awhile. mostly no in their has shutters recently Some the and impact-resistant obviously, the and a who homes. storms it’s takeaway put that, to we’re to

for will sure that’s to that people, of Our front to try keep always keeps things mind. was and front very of make advertising strong that going and mind do that we’re we something

Jeffrey Jackson

as point building ads a lot a Window and though Systems, heavy well. note, do of they too, to Western even into ads. as brand just print They’re architectural magazine And

on the I last, year’s of you never think Florida we’ve company that as side, this you even lot TV last our awareness a and our that’s user. it’s year. storm base, into of in has hey, off window the positive over go about say, awareness, as campaigns years, And then Florida, two hurricane have PGT think Innovations, building year the house last kicked the what And building received until end the the incredibly very folks dealer that’s People a positively I had brand done brand also been we they different well equity. market. XX new and ran had to experienced We’ve season. from feedback that, move brands to our

Jeremy Hamblin

the might in some it’s getting of there more you’ve that historically, let’s advertising question So are calculate that ROIs, that of or events you’re better of what and TV say, But past, How you returns the second marketing customer answer that we sure of than, done kind the getting does part not the of advertising on that kind on. the TV my that you suggesting discounts the of some you’re how on other see I’m you’ve or do that internally. dollars in run use of is future? better whether ROIs

Jeffrey Jackson

same general promo, a doing whether our our of the trucks, our amount a as percent, see at. done at in a want our advertising we the is, TV of have it currently we’re And budget. four fleets. You it’s you we’ve kind could It’s this instance, allocate market – least all on all What for that with will discount just print trucks didn’t rewrapping who we that’s future. change it, you wrapping the another brands ad, piece to business marketing matter

a the recognition components our customer fit. dollars last have you and year year. The will, every and will component various to areas. then, we’ll suite on just broad our market. or emphasize Florida if that of years, as and two that we We switch the – local doesn’t TV we promotions we by listen base strength, mean there’s we’ll base, and within dealer pull to each marketing influenced more That a redo big highlight So we been allocated targeted of as see that say, more

Jeremy Hamblin

color. I the the line, And value for on thanks that your just want then you custom line Sparta Great, launched. to ask a question

going up get you of In construction business how up terms think do your with do How the your couple than R&R? that your that long be efficiencies of thinking manufacturing profile facility is of for a see line more to and shaping you bit and throughput lower And your years margin new margin side that running on little a how of perspective, or? about in to from and kind business? it’ll take typical

Jeffrey Jackson

a group we’re We launch limited this this select quarter actually quarter, a in, Jeremy, did of customers. with

we’re speak. we producing So actually as that,

plant We’re actually the this here having in call. Miami

at customers. with this comment we’re our So really at meant of a this year we laminated in on down producing full point. a with quarter is to as say, is, roughly look came expected But unit And let launch it, what all fourth we do actually speak, but this only to Brad it, margins. I’ll the

or we’re – literally maybe homeowner names, was standpoint, targeting point. And that field a a is service our It’s impact customer warranties that it. It’s putting it. at got and going our behind plywood put behind Depot it’s aluminum Home that from price so what the But we’re a and to point a be targeting will our was got reputation quality behind lower it. got itself entry got price

be price target. want I’d say, you it to more for Do one? will comment the on So we incredible point an buy that

Brad West

Yes.

getting very market would So, the is and located not impact that is typical concerns new we going that is, do team, in it necessarily our our feel with and part right right point. the range, it’s to and and product, And R&R, Jeremy, the team actually that impact our line the And consider longest mostly better. like been the be in mindful they margins. we’ll going say, can manufactured current here and have Miami even looked be about the of But, reason it’s in construction this our on The right at when new But decretive. design whether because of And to in it’s we’ve of the right in hopefully, being for did of good our we why of Miami. to the in and wait minimum we work WinGuard product the were based be went marketing expectations, through space to I price product margin. margins time design space about what products, we know thing obviously, kudos we somewhere will construction, see. now, here that servicing a

as So pick some side up we maybe up on even the transportation well.

Jeffrey Jackson

a pressure this Right. other play state. products substitute that provide I whistles isn’t of to And be and want products a quite can bells are or designed a frankly. clear, high no for WinGuard Those

and just be work will this it going market. would the the make – geographic We market ordered still to not don’t going different So homeowner a down custom. design their and the stock. we’re point on pressure It limited it for – our get play cost home, and is in be from ordered to and in – will will be through their different home custom to network be home. dealer for It’s

Jeremy Hamblin

color, closing Thanks the guys. acquisition luck for the the of rest year. the Good in

Jeffrey Jackson

Thank you.

Brad West

Jeremy. Thank you,

Operator

Please Zener The question of next from Ken ahead. comes KeyBanc. go

Ken Zener

Good morning, everybody.

Jeffrey Jackson

Hey, Ken.

Brad West

Ken. Hey,

Ken Zener

quarter like this slice to so you’re so makes kudos and things selling you Wow, best it guys. the in bread, look

Jeffrey Jackson

you Ken, thank for comment. that

Ken Zener

going XX%. good. back the I mean, R&R, earlier know, I question about to it’s

a that first Two this ago have very say million real guys category. years that It’s XX were R&R you a it’s you just million hurricane impressive, $XXX years. truly year. in at had obviously, $XX you So

you in So referenced X. Was numbers market I new looked don’t terms And stuff. have guys a Was know demand what Was about that in for to trying guys really qualitatively Slide have put from here this a at does report talked is. know it impact-resistance? this you head the around? – I this of What have third-party? that or analysis you guys up new

Jeffrey Jackson

got it. Yes, we

yes. checked and of the was offline it the if And third-party that source. a up went validity, it they picked you picked through new team the study marketing and will, up, Our done

Ken Zener

R&R, you’re if the the XX% reaching with much out But how I and for you it’s mean, XX% be how running it of, on demand, do the say, profile driving to awareness, future business in the operational making – mean you six, grow? strong year? think your you let’s handle people Could that remodeling obviously, to I you’re had you not in construction guys that planning growth next kind how I’m have R&R – the And we reason know how aware. growth, in of is, So negative do big do guess, you’re new very could mean, what so smooth your point handle plan terms think, about is challenges risk all your not the – when But a of mean, storm. doing at future. strong asking you just you how I I continue so is? Page I’m will that as I there be is I you being might

Jeffrey Jackson

pillars Ken. definitely is, also out, footprint growth. four a our the concentrate as plan on with. we capacity our of ahead lot stuff, expansion, our geographic footprint to you to I up Right. We to Well, of point that of but keep we one on like expanding have pointed back of I’d And our

things and capital couple is enable had technology. capacity people. doing, last spend over help technology the We’ve for going we’re plants of increase to more One be years this the to our without to instance, in better

we couple folks of X,XXX recall, years. here about you for had If a

have, Cardinal, footprint, for can keeping to I essence and which locations. expanded we down we grown. that up but And while We our of glass door roughly actual added brands land We’ve our utilization equipment we operations that amount at technology those that. square in Cardinal here and manufacture been better door we across the and the here as will or continue the huge made the the deal But all in same lines, is it’s we to the do and in. through sales sold and then feet, with, think, have what of we’ve Miami went to us. mentioned we rearranging people Now we leadership people the where assets, that XXX,XXX done sell I there, XX building

I capacity. also think, and that increased footprint

We a It not is. So is necessarily add. incredibly because labor is much actually can capacity. we’ve just market more – it with unemployment lot remember, here tight people-dependent, got the what

wanted other can of to it. to working but And had our and we’ve ahead far, I ought to alternatives to and so So our investment it’s turn sure trying we And you, that’s we’ve tell four why stay been them what and I we game things community and make one the of on. concentrate we able we the is to do that with capital ahead on investors stay definitely allocation so to that. far of in do focus

Ken Zener

was in know it’s that I no mean, I negative. way – Yes.

Miami think year about much getting growth think, before thank million Window’s X% growth I’m best and that, the sequential sure also the into like X% you didn’t seem to to the kind over you. way year. this Western contribution, guys $XXX demand year? and are or business or it. growth Just company there Thank about exactly run how amazing to apply reasonable it’s a about way maybe can or use realizing? But how I’m that comment million being $XXX I just is I talked of that from, guess, growth. is a on I think Switching about mean, next Western goodness, trying Windows, the not it over sequential talk really to last you to you the

Jeffrey Jackson

hesitant I potential we as comment deal. I funding, we also and the you you, jointly terms the means well more close But can’t as issue impact third all we’ll as expect this on for as do the of and I Ken, the about than other to which encourage would Once that stuff, close, said on and quarter, XXXX we a we Western press else on I in until talking about on I’m everybody impacts our the guidance run good here acquisition, companies again, Yes, will the in close new announcing And well. release call. what learn the together, occur can’t XXXX. what that I’ve

Ken Zener

Thank you.

Jeffrey Jackson

welcome. You’re

Operator

ahead. comes from Alvaro Gabelli Lacayo Please Co. of question go & next The

Alvaro Lacayo

Good morning, guys.

Jeffrey Jackson

Good morning, Alvaro.

Alvaro Lacayo

on gross in have sort guess, how the just just highlight could you walk each through So just year-on- year? maybe and on like, price, past much us I focus to and volume margin, maybe if you expansion the mix, of contributed

Brad West

Sure.

about then mix XXX. that and the had biggest we XXX was bps a pretty about that in XX And like get XXX be I price in from another bps. the volume then bps that efficiencies labor is about would inflation the at XX, at scrap then you and XXX another and I And about and mentioned, So close. was impact have aluminum, came should offset that improvement about

Alvaro Lacayo

months. portion Great, just bit. the that the Windows, little which business thank construction, Western the a growth And of has shown just about then isolation. in on looking five talk slowing a Maybe could high new if the And you. California. slide is trends I on some you last over business it’s signs noticed at the the deck, end big of

whole? Just seeing been impact as Western the or if wondering could what of a a in if that’s you’ve business last trends? six comment on as you months And Windows five had terms maybe, any

Jeffrey Jackson

we the about Yes, away much again, to closed I’m until going shy from Western acquisition. discussing

it’s do call. the a to current people I about a expand it that chance tell trends week’s growth a want last step up indoor/outdoor buy that housing. listen they home necessarily offer up living call, into some unique product in to not can had to on growth talked to we related you trends, and you, If It’s niche and as space.

I as as mass vinyl company, what to start we’ve gotten. as not they’re number housing a So window not that’s what vinyl much rate, tied mass window, builder consider would

of hesitancy on determine trends point. actually Western to So any discussion at of limit at to kind want close look this to stories transaction. Western would housing But I the we again, kind I any caution growth until

Alvaro Lacayo

Got it.

thanks Okay, very much, guys.

Operator

Alex The ahead. from [Operator next question Instructions] B. comes FBR. Riley of go Rygiel Please

Alex Rygiel

quarter. Thanks, gentlemen. Nice

Jeffrey Jackson

Thank you.

Alex Rygiel

some little conservative regards with XXX on all your to to confused little sales with and chalk a But backlog net higher. in it second-half to to hurricanes. you having XXX a up guidance want the of being I’m uncertainty I about is guidance

You’ve got new a product that’s launching.

You’ve the got comp easy third pretty when hurricane year more capacity, year-over-year quarter a hit. and got versus of last you’ve the

the the and second-half slow frame kind me the sales from XXXX of could better growth So guidance year-over-year first-half? why tell

Jeffrey Jackson

that all tell any us of did time you hit we around, our framed. the I it last in third that $XX I think, hurricane We you quarter points a Brad, have them. impact are did I those Alex, year season. though, quarter million? argue discussed hurricane and line really middle have of can’t an top growth well in we on were can that that said the call

Brad West

Well, $XX million.

Jeffrey Jackson

impact. million $XX

quarters some get like So, sure, a on deliver several you to we We what and hear in continue last done ahead I of just guess, the we not want hesitancy. said make we’ve to in ourselves. row

plan that, you close I’ll and do out guidance our at So remind very the we Western I comfortable again, I updating think, our in feel point. we’ve laid acquisition. this entire all Window guidance company on the we for once Systems And annual

total. won’t Western of of it the So PGT be in for guidance an impact Innovations annual just be it’ll more Windows,

Alex Rygiel

helpful. That’s

running Where And and recently. added that amount I your change between how this. sorry, of might capacity utilization you’ve if now? fair a right missed year-end? But is rate capacity at now And

Jeffrey Jackson

capacity have to to Miami Again still of for saw. the meet the demand legacy move we go in the PGT was Innovations, exactly plenty we

have in capacity add company’s for I can We have, to we plant. highest as and production second was as third still of full still a really of well had ever quarter at we we shift, As that Miami mentioned in looking a shift, staffing we’re plenty the new third. it my in shift our if up a to running history, in remarks, a while we’re

there’s because our with of think So to capacity here launch it. – in designed especially going think, still new Miami that way, we’re line, the we that was growth. Sparta It market, and we the need

the here with which especially very, capacity. scenario in. are similar in concerned labor is not Hialeah market, Orlando, actually of In I’m in force and then strong we terms very capacity Miami, in So

a PGT a product, so high-end custom not of is. more what As it’s mass

running production I so it XX% where that And We capacity can production in we our definitely focus product be could you, more overflow been from the if two there. wise to PGT we’re ever scale we’ve there, is vinyl honest has shift. only to on we needed plant that’s changed other probably of that with lines, one And really had have if to to now Venice, necessary. vinyl. plan percentage than if push a

over the earlier. capacity not I glass. of had and windows We XXX-ish, to So glass the Cardinal were go. that deal dedicated to Those plant, to let with doors. last think you call to I make we’ve the over we We did years to assembly had expanded what couple door individuals people transferred mentioned make we were XXX [GPX] that

we that So plant, glass plant And labor assembly we had and like it that now. and into an force. tapped that we’ve we on earlier, mentioned built done turned I that took

that. just in deal We’re We that quarter. first doing process the of out the closed still Cardinal in really

well. as So actively that’s ongoing

So we’re expanding that capacity.

forward good invest shape in move a We’ll wisely. think, continue I to So the we’re meet and demand. to

Alex Rygiel

much. Thank you very

Jeffrey Jackson

welcome. you. You’re Thank

Brad West

Thank you.

Operator

the closing conference I would for back Brad turn any This our concludes to to West like over session. question-and-answer remarks.

Brad West

Well, care, you concluded. conference getting we on this call. to then as Operator’ look more information presentation. attending you back earnings morning quarter everybody. forward acquisition the and next with now thank today’s after for joining Take The close has Thank well. you for We today’s with

disconnect. now may You

PGT Innovations (PGTI) 30 Jul 182018 Q2 Earnings call transcript