PGTI - Earnings call transcript Q2 2022

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Operator

Good day, and welcome to the PGT Innovations Inc., Second Quarter 2022 Earnings Conference Call. All participants will be in a 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. I would now like to turn the conference over to Brad West, Senior Vice President of Corporate Development and Treasurer. ahead. go Please you. Thank Brad West Good morning, XXXX Innovations quarter the welcome conference call. to investor PGT second and With the John Jackson and me CEO, our and on Chief call today Financial Officer, Kunz. President are Jeff

be our the This On the earnings release recorded webcast posted slide is earlier issued to website, company's the will will as as we find being press well company available today presentation Investors on the you accompany website. for of replay section have today's and discussion.

your risks, direct as discuss please to our remarks, factors that disclaimers prepared our uncertainties including filings statements. begin to contain remarks X could release presentation we statements cause forward-looking statement disclosure the included actual press Slide well XXXX attention on forward-looking our materially. earnings Before outlook. about the performance results the statements, SEC and involve and that financial in of differ the other Today's statements as Those

that results to factors results could actual in on recent filings. most available information company's is Additional SEC cause expected from differ the

Brad, Slide call. of release directly President, included morning, and good note attached performance. additional CEO us financial this time, Jackson and Jeff provide over the today's report joining you presentation. which we investors measures, and measures slide to thank X, GAAP Jackson. appendix in company's you, our I Thank the the that results tables the earnings on believe At the everyone, will non-GAAP to call for now Jeff and hand to most prior reconciliation using and we A help compare in present the comparable is information on to Additionally,

months. the to challenges chain constraints. team's and on to very supply a included number and XX strong capacity ability testament over PGT value innovation's proposition financial These labor, our Our was results execute of past challenges a

However, operations long-term growing investing talent, focused our markets. executing on scaling flow and strategy cash we our adding effectively of our in stayed

quarter second achieve drivers the of million on during the and results surpassed Slide quarter $XXX X. year these today's both Multiple record key quarter to for messages forecasts. discuss prior results. as led Let's We revenues internal our

footprint expanded placed our First, in growing us markets.

strategy of our customer marketing product our offerings. drove Second, awareness continued

Third, our efficiently improved our to has each through growth of I strong am to materials training how volumes. continues well members higher PGT efforts secure team as efficiency, supply operational day. customer first-class innovation increase allowing factories us and forth, process very and provide to our product proud our of chain to through service our operating ongoing automation, improve, every the capacity kept ability as our further team ship deliver and

make to by continue XXXX We operational significant results the our to with the experienced. while to several first gains have pressures. top our majority basis second of grow managing the points sequentially XXX business adjusted have success and we EBITDA offset XXXX. improve the model last points compared improving actions Pricing XXX reflect inflationary versus of of performance quarters quarter margin quarter our of inflationary line in pressures margin, the implemented These basis and the over

of to for the prior continued This lead versus our increases we'll QX escalating price XX% offset Since In year continue average into new addition, we the lead with to our XX% brands times. quarter. the operational have in face. beginning reduced have announced times to improving costs efficiencies gains year, key

and through enhancements. possible We also manufacturing investing focus worked to a control quality process constant on costs whenever

our strong behind allowed a a quarter cash the balance accretive has with balance provides strategic driving acquisitions. look chain will higher an to John and effectively force production we cash our our in the summary, as in necessary to continued within allocate model to shareholder in team our to levels, capital drive well flexibility provide term our continuing business execute over detail, flow to of outstanding disruption, Additionally, sheet factors supply the business by leverage range. past and job contributed to end performance strength targeted quarters. and long improved $XXX us allowing few but us do value million minimize These our reinvestment support to to more our QX through

year half expectations adjusted the well revenue we first As raising results the sales margin our and favourable, our are trends EBITDA. exceeded and and remain for full guidance

a we high our our guidance. the backlog confidence and in performance gives recognize environment, surrounding the manufacturing microeconomic revised level uncertainty While execution margin of us

new Next reflecting markets. sales and up strength for into closer pick sales the prior aluminum portfolio market strength look The us product Southeast south core at quarter, in grew challenging allowing the largest the was of year our led continue in Total their reflecting on lines, support Slide competitors our to will a years. demand our migration one to to the take our XX% and our Florida, quarter market PGT in In market let's demand has region of XX% in the brand brands. X, our Southeast discontinue trends. The organic organic growth share. region, dynamics coming larger versus

San we as builder the serve showroom demand capacity benefit also In allowed Western expansion position markets. reflecting outperformed home on the sector for has was strength to large in and In seeing outlook. our areas the strong. we the recently supply XX% builders years quarter, organic business. custom outdoor Southern which Diego, five market indoor, seeing half addition, long-term home versus first production to has from prior three-year and growth better renovation to during are and our We're will agreements, region, to the near-term the well past This which year upgrade us strengthens our serve demands California's our view of remain signed the two Phoenix, the opened in year, from in us living our further separate growth

San Atlanta, stages for in a opening well We're stores at New South total year. from XX very opening of the end with of stores sales and that various continues of in benefited to perform in growth Worth of the Fort stores three Antonio new XXXX. XX% Dallas,

in busy their training new store Dallas signed team have opening. Our and are Worth and members anticipation Fort leases stores of operators those

is Our its on order of sequential ribbon official of strong X. region, versus Florida XXXX. Atlanta growth saw we cutting QX the celebrating XX% August In store

drove which New Our brands across was South this both balanced and PGT growth, remodelling. and new repairing construction the

Floridians. shared two-year governor hardening recently signed a by As quarter, tax impact we affordable make last exemption to our a windows doors granting bill more and sales for home

in focus continued Our lead times strong demand. improving customer to metrics decrease allowed has on-time to and average service performance improve our us manufacturing on full meet and our and

delivering from end products of start up X profitable team operational million at slightly $XXX strategic for year. the creating of and and best-in-class members. As framework goal QX, $XXX a customers to our our million result, our growth the a or environment backlog was the Slide services drives while our at an that by summarizes

deliver expanding thermal customer-centric drives us to our and improved improving with to demanded sightlines, customers. product spaces. living innovation, is offerings builders indoor-outdoor pillar performance first performance and energy which and value improve improve Our our delivering products by our features, We're and efficiency

second is Our investing talent. pillar in

who with growing been incredibly achieve we high growth last targets. us team our base talent at help year, the have quality our members successful Over

manufacturing our our transforming growth. operations line to is pillar third scale Our in with

orders and to positioned operations. flexibility to and on processes efficient have our warehousing tenacity improving prevent us maintain focus reduce manufacturing well Our back operational or

strong our cash free flow to pillar profitable fourth achieve is Our allocating growth.

deployment our offerings opportunities creation to capital we long-term always and inflationary are generate disciplined accretive to organic product this environment, being above-market improve a priority while to we seek the value inorganic for our results. as we we production capabilities. lookout As top for navigate will delivering as That shareholders, look business opportunities on grow our and said, remain

the quarter in detail. over John to John? Now review I'd like our to turn second greater call results to

John Kunz

Jeff. you, Thank

X, was recent are from pleased to we continued acquisition. XX% our second Slide from to million the quarter. by driven the This South organic in prior very our businesses, today, increase and XX% for Echo $XXX New over increase revenue Anlin quarter, year legacy and growth Turning growth including a report

the we improvements, for and the Organic material were profit proven sales XXXX construction. which costs offsetting second XX% previously and increased of to XX% actions to volatile prior As sales new R&R brands. able a XX% in offset growth new headwinds. cost R&R $XXX.X increased have labor quarter grew volumes pricing legacy quarter, volume and quarter successful this quarter and breakdown in due was sales deliver and by compared construction the was Gross Jeff In organic our environment. strong second implemented quarter, million, year process second the through pricing, mentioned, partially XX% from to reflecting strength operating the increase increased of a again rising our XX%

geopolitical Aluminium efficiency. pricing including improvements improved by availability strong market price operational LME Our minimal, tensions have and and from monitor in growth, between scrap the and as as improved the conditions. results although resulting double-digit Impacts primary unit has improvement market Southeast, and decreased. production labor well QX driven the Ukraine Russia speculation has to we steadily were secondary spot in surrounding continue been

the compared increased and basis expenses of believe increased process XXX prior first accounts. our Earlier from prior SG&A to points quarter cost the to and future. price growth. and recent across South We in the second the margins of increase continue than higher in actions higher for our by administrative the margin benefit spend basis operational improvements the investments Second gross and reserve was quarter, for expansion foreseeable manufacturing gross efficiencies than helped XX.X%, unit our points quarter marketing year Selling, distribution, driven those increased by general quarter XXX operations in New increases, an their uncollectable acquisitions, will XXXX, the hiring improved driven year, XX% portfolio.

Leverage administrative EBITDA XXX% increased lower than adjusted and offset prior than and expenses and quarter, pricing marketing points million, improved actions volumes reserve quarter Second transportation inflationary from labor offset manufacturing year accounts. increase general resulting inflation, partially pressures, the basis was an for or increase higher and by Adjusted prior $XX.X to increased their from XX.X% uncollectable sales in performance. spend year an were XX quarter. selling, was higher

our loss a to significantly related productivity in recall prior from to You will drag our that new expansion due quarter expending, a impacted year hires. was by from

the expense in were second XX.X% respectively. share $X.XX XXXX, $X.XX of came reported per at in share, net to in or $XX.X $XX.X income million quarter the increases We at diluted of our XXX% per XXX% and quarter of in with tax adjusted Our line compared million diluted expectations.

quarter unused our of $XXX to liquidity cash total balance X, we on debt capacity our and sheet million turning million, $XX a including balance $XXX net of had of million We Slide ended on Now revolver. the $XXX million. with of

end have we maintaining grown run that Our adjusted EBITDA at net trailing conservative approximately the through leverage profile. EBITDA a of X inorganically, times the rate X.X shows both Slide while to debt was XX-month acquisitions quarter.

allowed us cash flows have policies after leverage financial reduce to use significant Our acquisitions. our conservative historically strong to

of the priorities. us times. our X.X since of the our we've from metric completion times approximately adjusted long-term times, leverage to range leverage acquisition, have Anlin at allocation fact, two lower placing end In capital our covenant we three reduced to XX, our target of Slide On summarized X.X

priority capital in is expect which will that margin growth. first projects reinvest Our to revenue we allocating to business, our in includes drive

and have example, invested reduce in initiatives efficiency continue to to and margins investments to operational metrics These we costs. selling revenue. our For strategic grow allow enhance us our to will to improve

debt is sheet. balance Our and reduction strong to commitment a second priority our maintaining

at that maintain to stay of net the debt EBITDA with range of with profile We leverage three times preference two expect low end a to range. to a a to conservative

We expected will to term. and that growth grow the strategic aligned priorities continue are long value our are over shareholder target with to acquisitions

or We channels regions, into will that us look expand enable for products. will to new opportunities

evaluating turn part as integrate other to possible carefully And strategic acquisition overall I the expect and call over plan. of opportunities to our like to now, back We deliver acquisitions would our Jeff. while

Jeff Jackson

John. Thanks

we to million in thus on very net results of in the ongoing our the for $X.XXX our $XXX range navigate billion Slide half of We operational full year, based sales in environment remainder increased the rates. and Initial on second indications strong our performance the and guidance adjusted to the first for this now improvement, sales the impact strong year, EBITDA we I'll interest for the inflationary review during changes Next of are XXXX year raising showing in million. and $XXX expect the are billion of of of as the With range half profitability the continued July far outlook $X.XX XXXX. XX. of

These assumptions beginning the side modeling So unchanged left slide. provided are included on at are from of the year. also what we the the of

continue innovations long-term to our Turning XX, on value delivering an excellent to believe today, is in why closing position PGT we I and to creating Slide our in shareholders. for want model review business

with have national through brands are acquisitions. portfolio we that an recent made been outstanding stronger First, even leader

gain markets to to products in that impact geographies are resistant and Our we in continuing living continue indoor-outdoor service traction, and in growth both population. show

product especially in allows target to which our West Second, in channels, the the Texas is profitable both diversified, and R&R new Coast. construction the us portfolio growth and Southeast,

we and serve. growth rates installers national that seeing While dealers continued we on our see markets level, from we growth slowing a within our are

finally, through increased operational culture. Third, that and expansion their more business We products continue We growing ways an We And in socially to by provides will and help needs. meet you to premium seek responsible consistent capacity us reminding manner. both been environmentally investments changing elevate improvements R&D demand. innovative to invest our business. product our Fourth, conducting meet to our contributes capital margin conclude and and commitment customers innovation talent. to deliver smarter, with development sustainability and to further part a a in long company's of conducting focus environmental effective believe has plan I of

long and communities the We we the serve. for of team of welfare tradition time. this our health caring members and At have

the Let Operator? Q&A. me begin

Operator

of session. We instructions] Our Merrick question [Operator go begin Truist the come from will will first question-and-answer Securities. ahead. now Please Judy

Judy Merrick

were This talk fall Keith you a a at seems last in and talked if for Florida, lot calling XX% Hughes. South of wonder in Thank south? Is you like you. I Florida orders the through little like could sort of or did about some the and about sequentially in bit quarter. is say normalized you pull the on going that there's Judy and

John Kunz

Yeah, Judy. sure

Let that take me one. Yeah.

speaking up growth we quarter. the What our Southeast was in strong mentioned Jeff the we was have five that the builders signed in have region. order home on new As call, we did in seen he

pleased very with that. were we So

with new demand. along We construction continue demand to see that R&R

we pleased sales with along our that So and pricing we've been report very with the other pricing. is the helped that that us factor that's with

that actually is to pricing for are the have and helped So sort influenced half the year. number Those the and drivers the the the growth of well. outlook as back that us comfort in of numbers have

Jeff Jackson

improved as Obviously to it year dramatically. just I'll on at And remained lead our and that. is Yeah. basically was add full end, backlog times our and same yet time the in

XX% times cases. are as in improved as lead Our some much

weeks, weeks, example, depending four lead aluminium and customer Our for to times, is down on the four to order. the seven

anywhere from to is low a seven time lead high a vinyl Our of of XX.

it depends just it and ordering So who's what kind project is. of

sales remains still half, builders interest for strong there's couple adjusts see you back with a hit incremental. obviously the dramatically of it. products we rate growth, was a of when see and same numbers. those economics building back somewhat new So strong period. the tremendous kind the for we'll as a half, of backlog changes that pull don't in these the been the kind John basically had we enter five In half, all the whatnot. going back improved I think hit mentioned on as Like operational But in we we're performance What, these transition All market are and the this demand.

we literally those So before. have agreements didn't

holiday Florida we're with incremental volume State passing of grown stabilized market as had as products us the two share that; market So heartening tax of and holiday kind us. has for to getting gain resistant products. sales And help Florida for the home really year we've well R&R and that impact

the of finish So confident guidance we're we've we've the That's out got pretty tailwinds as a lot good given. year. why we in

Judy Merrick

sales your in seen in that that help have Florida exemption and pricing second well? underway tax actions that And great. as the Okay, you've mostly was quarter

Jeff Jackson

feel started -- we'll and we program. two we started seeing again, it's that benefit, of just to some see start that literally a but It's year

has of the So, the smart the not making we're and incredibly installed. done time, order right to homeowners legislature install get that influx and not orders think overwhelm getting, have goal state infrastructure, to program the across was a was it I don't the the two-year a that the and it big allows product infrastructure so

South, year, I'm at instance, week. we week have we million seen order New last last sorry, a had $X just growth, some So for

considered strong for New So, that's South.

see sales tax the bleed are think next to we we so do some but months. out over that's And starting to of holiday, that going benefits XX

to going a to So it's be good come. tailwind

Operator

from The Jefferies. Phil of comes Ng next question go Please ahead.

UnidentifiedAnalyst

you XXXX you have Were Jeff, Hey [ph] first incremental to anything guys, Maggie announced are quarter. demand price through? to mentioned really Or guess gross see starting that strong cost this increase is a to relief? on And those Phil. or coming then for new late margins price any I primarily increase. referring you that? areas you of were this Was increases

Jeff Jackson

Yeah, pleased have operating across team us the job want. and our want margins, regards the supply complement chain our team. that produce products board, a materials to with we in supply They've the good that customers to need so our we team, chain done to putting really position a were our to really very of

So that with it to control the supply us was realize the chain margins. those allowed to respect has

has with Our our a good and team processes job labor. manufacturing done operating

we your is from So kept have. part that very demand increases price future. sorry. foreseeable that the we And with only Demand have in that obviously increases, pricing overall. seen was we the price the the what don't one scheduled question? have I has were that then we pleased Oh, one second of then And perspective. increase know perspective our up that another from

point we that's think in where this I for are So time.

John Kunz

Yeah. about the improved performance little of margin with a And to our I'll strong there. that attributed literally operations, It's pricing. and a comment bit realization just couple

over twice pay months. member's the team our raised we've mind, in last keep to got XX You

brand or a the And recognizing P&L, gives in improvement; we used low took, we're run say in but margin I'd full. because bumping huge fully but cost, gross They're time now XX% lot full realizing essence in the me XX% obviously our in full PGT months time actions heading driving factor on don't we with increased to pricing this, PGT, now, from huge. So to are but I the XX%, last main over we to the over XX% emphasize thirties nine we've so. into in half has of and in going been what and on that's at confidence a in on had back time the

XX plus gross metric. we've good continue PGT brand. as perform in the got So a drive original that improvement here flagship we margin points to still will continued basis And that improvement well at

UnidentifiedAnalyst

Okay. That's off in really we strength was pretty similar, some guide I be are XQ, and there there maybe should just of drop-off margins one-time helpful and the the going of? guess be I tailwind mindful XQ any but asked because could in XQ. implies generally XQ kind

So just to want flush that out.

Jeff Jackson

look thing that QX guidance. address to respect it, only at really The you guidance, with I'll see I when the our

Our right? what QX some should degree, you And look to could look so QX sort like QX squeeze will of like.

half we of hedging our QX have going had have in to release will a you'll and in is liability benefiting in from back week see next we positions year. a benefit to the months, We're actually that things will that that flip. us did the One amortize first have our of the six the

cost. a bit that balancing little we'll what is So headwind as pricing perspective. and a well Also of have from we're

dynamic right, right. will that So continue;

margin expect don't So in XX.X% the we QX.

in those guidance the our we that's, sort dynamics in are the thinking of and that the what's those ranges things, So that resulted through provided. are we're

Operator

from next KeyBanc Please go Kenneth Markets. of comes question Capital ahead. The Zener

Christian Zyla

Ken Zener. questions. Zyla This actually everyone. for Thanks on morning, Good my Christian taking for is

Jeff Jackson

morning. Good

Christian Zyla

the know and contribution you That'd price, just helpful Go that I have I was sure. secondly, quarter? you it don't available. be price the if XX% last First quarter know oh, X% breakdown then units. question. unit Could quantify ahead. about in

Jeff Jackson

about that. Sorry

in in and is So double pricing high we're for area. for digit volume, what we the teens range the unit that said volume in increases is, range low that volume, then

between So price. and volume that's breakdown the

Christian Zyla

aluminium, anticipate And said know especially increases. you. then commodities, given elevated, some but price Thank etcetera, don't any Great. costs remain costs future other you come have you understand that down, I

the that for and or looking In unit do like that rest see do growth, Do terms just see of I of, you kind you the that I going stabilizing? the year? you of see first quarter guess guess, more demand how

John Kunz

is was look react would the change things I question foresee that If inflation to as what inflation dynamics when saying well, we increase. of going I saying reserve don't year, that I part should forward. this I labor nature, we at and was again? change the at respect to should change. will with if is then one have but, right that And full our guess we to -- point, implement obviously prices your another the the Sorry… Yeah, we continue clarified that the price second of there, don't Jeff way

Christian Zyla

unit This the volumes rest year.

Jeff Jackson

the rest unit Yeah. of volume. the Oh, year,

pricing, volume half unit what were. in lower the was than be it we first of So will where with the year

sort that's the So breakdown of will be in what year. the of half back the revenue

Christian Zyla

Thank you. Great.

John Kunz

quarter. R&R. the closely to it remind almost, least I'll you, now the And XX% call by close, typically both quarter XX% Fourth and Christmas followed when, And always quarter quarter Thanksgiving right we quarter growth because in third we're our running I'd strongest there. have second holidays our close is our is very

that quarter. the quarter growth for an fourth it it makes the in in So R&R tough makes comps R&R just it terms -- business heavy concentration, sales with of fourth

Christian Zyla

bit talk priorities Echo you Thank you well. how squeeze been And could little terms that performing more you. the for talk you in, and you color. looking? the And M&A, how looks. that know pipeline, your for I just future Thank through I Lynn any have relatively pipeline but could about in if discussed just just can a pipeline, one is if Great. M&A of

Jeff Jackson

right. impacting the and right us an mainly thing glass been the still PGT. has plant Real glass is the from incredible now chain coming you're for benefit supply frankly, echo, that's operationally Quite quick Yeah. That only side.

acquisition glass. some is is shot that, acquisition key. But that continued us, the So well performed was up chain very from ordering definitely above again operational Anlin incredibly door other had for an the back except standpoint, models, for supply we planned. than nicely

As there's of potential in door handful the looking right we category are Florida, to that that window to look out process on talking be and different in to at, in and which markets of our the California, are of still they core or now concentrating probably are we're this kind West by a we future, in Lake, Texas those our states, of Salt we point. Arizona, at surrounded want destination markets those are efforts that targets kind

Operator

Michael of next comes JPMorgan. The question from Rehaut Please go ahead.

Doug Wardlaw

Hi, good morning of Mike. was between bit guys. it wondering and little give a color for the and break maybe Doug markets Wardlaw different just regions. end some, possible, further on on can July I out you the if month if

Jeff Jackson

it end is out Well, we us especially, July, for given break say don't strong, but July it's confidence. this. typically regions, I markets will or between

already So feeling guidance one June digits. quarter, grew into month we when raised July double the that sequential our we're third very confident. to

break out off based again third not July result, quarter because business the coming point it are we but we're can we about at July, literally still we good between feel our it. closing where that So for units

Doug Wardlaw

duration improvement is And a in further the you you'll terms current some this supply at little of chain, you. on bit Awesome. unknown give or of do kind there this year, of of of of state moving sizable still you forward Thank the rest it point? the can insight see think the

Jeff Jackson

that I mentioned and Again, has I for supply my company in comment. think our opening the chain improved

plant. and a our can constrain our the as some team but team the ahead chain the incredible an issues glass mentioned issues disruption curve on have, of within we cause glass major door supply still and purchasing has earlier I of supply issue that Our supplier at staying done supply times with demand job,

that, and goal with the on top layer inter we fluctuations priority And We're speak our addition can constraints, challenge great simply to it company with and impact time Float again, a But of there relationship to we, concern supplier but us supply. see, a be are We the great with float for a we XX% they up Other the have of allocated these on to in their be an have in at mitigate glass player we try incredible times. full. there. last largest offset that glass is glass incredibly of have back PGT the top there are supply Echo. put actively with and year popped glass we capacity float since areas have plant limited, the us quite doing side. plus we as steps the obviously relationships list to increasing

we're But to wise other has than and float get really us is able chain here well. to improve think us for I allowed supply as So out stabilized and, performance glass. that,

Doug Wardlaw

Awesome. Thank guys. you

Operator

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

John Kunz

Andrea, our We at you may today earnings you time in your third earnings disconnect. call. call on Thank quarter on participation our our interest look November. for us this joining second appreciate in company and forward quarter your to

Operator

attending you has disconnect. and conference Thank now today's you The concluded. now may for presentation

PGT Innovations (PGTI) 26 Jul 222022 Q2 Earnings call transcript