ATKR - Earnings call transcript Q2 2018

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Operator

Greetings, and welcome to the Atkore International Second Quarter 2018 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Keith Whisenand, Vice President, Investor Relations. Please go ahead.

Keith Whisenand

morning, good and you, everyone. Thank are With Jim Chief President CEO; Williamson, Chief me Operating Financial new today Mallak, our Officer; and Waltz, John and Officer. Bill

performance or discuss quarters, they company. results this Bill and call our and that differ projections would statements. the their our the make financial and that uncertainties As actual to such like release, materially. to could in in address risks future statements quarter involve or prior we factors transition regarding comments. done results press differ Jim and of may Such refer have identify or will today's future that may will forward-looking during X-K in materially summary projections forward-looking important our leadership cause John contained to which second from results everyone events John actual and statements Please those I remind

refer during year, reference I'll we year over when October period. it to Any a a to relating we to With September. through the runs fiscal to turn to fiscal full call, Finally, referring is this John. or corresponding information year which a the that, quarter are

John Williamson

and quarter. Atkore's delivered earnings everyone. per strong our delivered $XX Keith. versus adjusted and $XXX of year, of to XX% million sales Thanks, last the million, second share Good up of We're and proud We net performance morning, respectively. report XX% XX%, over in guidance adjusted $X.XX, EBITDA

of In initiatives. addition, in growth due part to we year-over-year key continued traction volume drove X% organic

inflation freight million quarter, million we commodity $XX to and customers. the through our $XX of During passed from

you solid share to financial want expected highlights through this dollars input through in few saw detail. XXXX But same walk we're track I cost, a inflation for performance. the for contributed the will cost results our quarter's to pass first, will XXXX We the we of be in of to more the range and on blend XXX% key year. Jim as expect increases in that total

primarily First, our the completed in the increases EBITDA, in due to delivered and adjusted months. segment electrical acquisitions XX raceway double-digit net sales last

sales net freight of well, costs and by successful pass-through As the to favorably the raw higher were market. material impacted

Mechanical the in sales an higher volumes. net XX% from also segment increase & delivered Second, Solutions Products

Additionally, and X% quarter. versus versus last increased adjusted than XX% EBITDA more year last

M&A our a Acquisitions toward that our Third, contributed last enhancements -- over story. will positive have margins of organization. continue Atkore portfolio and to and EBITDA as the accretive big and initiatives have part favorably as results. impact have year well synergies been be value to completed creation across Acquisitions continue driven the

Additionally, the enable recent its divestiture be more to of core business businesses is focus in hands, on will than more value. cash. drive $XX proceeds in this think more used our good Flexhead and the contributed million can We divestiture

as adjusted sales, Lastly, transaction favorable Dubilier market double than are flow, we our Rice, completed previously of no credit change shareholder. subsequent retirement our very million and with Atkore with our just and repurchase the over from to XX The Clayton, & stock was announced, and accomplished financing terms and rates largest shares prior year-over-year exceeded and cash EBITDA organic up performance. our strong quarter. delivered and year-to-date the Net Overall, more for revenue outpaced the digits volume growth. double We ratings. operating in EPS guidance

quarter. insights to accretive to have and We provide manner. Jim, shares repurchase that, half. momentum an into quarter going turn I'll our and second will our through us the we and who We deployed detail continued call successfully integrate strong capital With financials over had the walk to continued we in another acquisitions into in the and additional more efficient

James Mallak

good to Thanks, morning everyone. John, and

average foreign X the results X%, $XXX after million, selling of for up were of sales up passing XX% acquisitions up XX% prices by quarter second the and and increasing environment year-over-year. from second consolidated acquisitions, material quarter and mix our a normalizing and and X. freight strengthening delivered excluding and increases organically cost The sales growth volume to on was Moving Slides Net net through impact impacted in volume, was Net X% favorably for double-digit growth. industrial row Volume MP&S organic MP&S initiatives. reflecting exchange. for our

we is the to in year-to-date. the Electrical expected, and As added X% Raceway quarter volume line. X% second moderated top up Acquisitions

up at second X% XXXX, our of XXXX up slightly sequentially. PVC Copper quarter sequentially. costs resin up up X% XXXX on of was quarter in in and steel quarter, our key of material impacts and X% versus X% versus second Looking up the sequentially. P&L the And was and quarter second XX% the the was versus down

Slide input increases We've cost $XX X. and inflation During successfully million the bridge on the increases. freight cost and just $X on material adjusted out items million. we approximately incremental broken under year-over-year, We through of million these EBITDA $XX of incurred quarter, of these passed other

costs As margin pass to our net these increase sales goods when cost unfavorably amounts, percentages. we price, the through we impacting in previously, resulting mentioned through equal and sold have of customers in

the business, believe versus also and million. in XX% impact favorably volume productivity adjusted our savings points million driven up was $X profit and million million ongoing was to primarily was inventory profit or noncash was or the the million year. better the XXXX $X XX% $XXX manufacturing. XXXX, and probability mentioned, of by margin a almost Gross just for compared EBITDA mathematical quarter, the $XX impacted is of to second Gross year-over-year. Excluding basis by the adjustment last measure of same up which up lower-of-cost-or-market versus quarter $XX EBITDA, Adjusted in XX period we

account by differences. XX added to adjusted productivity months and the were and within business volume organic acquisitions partially and Our $X increase EBITDA, the million. increases for our million the last These variable in completed $X compensation investments of offset

was Our of net $XX up on quarter $XX the GAAP million a income second million, versus basis XXXX.

on second and this With net the guidance the restating XXXX. change, the $X.XX, adding those was communications, adjusted intangible, the back on from reporting EPS In EPS second a to added to To clear, with and been consistency $X.XX our that impact prior have for $X.XX, XXXX. amortization EPS we adjusted $X.XX better our of calculation. performance. income be guidance our to are and the peers, the second year, intangible back quarter of XXXX numbers, $X.XX adjusted quarter of the second added to was and of range and For XX% with amortization quarter would operational $X.XX new between view prior tax-affected up now give compared and $X.XX based quarter between

million through or The acquisitions completed by and $XXX price mix driving by and margin Slide the of million Raceway, million. segment Electrical of XX% to with segment in to last expectations. Raceway Organic accretive volumes million EBITDA the and sales basis Moving improvement. our When selling account million last or line reported on prices to X% mix increased increased months, are net $XX in combined sales remainder. $XX for million to increases acquisition with our favorable in driven all up $XX passing was X; XX the the increase, Electrical compared quarter. customers year. Reported EBITDA Adjusted favorable softened about with our points with execution, strong million, $X adjusted XX% X% quarter the impact XX a were increased had in in volume or up The volumes net to revenue $XX XX%. by EBITDA Higher driving $XX the or year-to-date pricing and which first acquisitions cost adjusted by X%. of by quarter, margins about average

Adjusted the Moving were the on of the added strengthening revenue EBITDA segment year, last of or by quarter quarter our in on EBITDA pipe in XX% up Solutions well sales volume by XX%, to $XX million as to quarter. to basis metal million. as Products increased $XXX reflecting increased X; strong a X% net $XX million Mechanical net Adjusted margin Volumes and below is market. Price points. to & XXXX by industrial framing driven second Slide in XXX compared mechanical X% productivity.

XXXX. it to first with Although has index-based the commodity This -- the by versus the increases through of OEM due pricing. primarily timing sequentially is latest our points customers however, basis to passing quarter XXX of lagging increased

flow The of and quarter we of equivalents balance Slide cash received $XX cash is at end for sheet Turning cash Flexhead $XX the million balance trailing on this million. in EBITDA proceeds about of our to X; was the the XXx included and or number.

about million for was We operating CapEx have of year-to-date. year $XX six last total at months in double Net spent a this from $XX.X million, the flow cash first time. activities

and Finally, reflects earlier million debt our a million the repurchase quarter. $XXX of net second completed announced $XXX we in refinancing stock

we as net EBITDA which to adjusted define X.Xx. XX-month leverage, the Our trailing was debt

low the is back Xx past, the in move communicated metric we've our goal to this to long-term range. As

turn John guidance comments his perspective. I'll and our final back call Now, to the and for

John Williamson

Jim. Thanks,

confidence full strong activity, market the update to believe on With X. our earnings and year fiscal to our Moving in Slide guidance. a quarter it's we prudent

We industrial high in these updating be range. as mid-single continue consideration up markets expect are in will the full XXXX our our volumes low guidance range markets follows. single-digit into year to to be digit in the now to and construction factors, expect up the in Taking we

still strong our we EBITDA Raceway the to and For mid-single-digit and $XXX half, increasing a range volume low million. million up we to adjusted Electrical expect the are be to range segment, between in first $XXX after

and we total, amortization increasing our a between The will million adjusted of $XXX million. are to for Interest to incorporates $X.XX. million and our our our million. EPS approximately our to shares. back our between million, adjusted volume $XX adding count XX be For and prior range increases share EPS our better be the account to our EBITDA million MP&S $XX range to $X.XX are year restating Flexhead expected fully This we're compared net between adjusted segment, increasing sale and We calculation. operating XXXX amortization will by single-digit adjusted estimate guidance to expense of adjusted $XXX full intangibles the $X.XX income, reflect high $XX we for diluted to be performance. of EBITDA be In to the intangible back add be and

for be XX% the and guidance. is QX turning about And $XX full around be the the CapEx year. entire finally, for XXXX quarter will right to year third to rate million and tax QX. expected XX% Our for

share summary, in for are have and guidance million to per and continued raw earnings we double-digit be our loss see logistics our momentum we In between on we from to productivity delivered We both $XXX in pass-through based I models, your net and market sales, would Atkore efficiencies Again, The $XX future adjusted the between for from EBITDA To million and of costs million employees of the increasing months to remiss second $XXX Flexhead. the well end completed been in last didn't EPS activity, as material successful EBITDA as million customers over million we initiatives. delivering without initiatives increased acquisitions, $XXX organic deals. growth divestiture and have our M&A expect $X.XX the volume, full XX of EBITDA gained for high $X.XX. a and completed We delivered the our of quarter. year. adjusted results. and the our from our value for driving targets for strong such is be would guidance pipeline and I thank activity clear EBITDA if strong consolidated $XX be to

the to on our are drive deliver succession Atkore. recipient an aligned people, value greater is A organizational and key business for focus and this system of future team, building business drive development to the our benefit. associates to to planning used our capabilities disciplined leadership engaged continuous of customers. and our our of system Ultimately improvement, build shareholders element Our

morning, retirement XXXX. seen the already my this have scheduled announced end our you've of As I fiscal for

of Our the which, with Board to I appointed an my and of and to move years, reporting eager future. CEO the the seven announcing transition emotions. plan and to Bill Directors team, attached succession orderly the Waltz to leadership to Atkore I'm extremely life. September. of business Atkore's leading about next Chief I'm proud certainly when has excited to After confident my for on but effective immediately, retire retirement Operating at approved mixes Officer is Atkore stage in my of end me

effectiveness industry-leading with the belief Bill models true. best Our excellent is been has and been team and and culture. years main executive unshakable foundation of but and business in Strong values practices is only leader. the our and over to not Raceway Bill foundation are is now initiative, transition and future. pricing second momentum with committed has in, system, the Bill he to build to words. and an led form through believes to strong closely the Electrical business, and this and one our contributors five forward organization our us Atkore to driven conduit his Raceway the and our our its results kind go-to-market has Waltz initiatives. to PVC joined team led Bill what and working business, the none. I'm a the achieve I'm few to going and Bill he look say in will he has invite

William Waltz

And John. a me. Thanks, yes, Yes. thoughts few from

honored to with lead working I I immerse opportunity have and forward to community my to the am entire I the investment role. First, new with Atkore. as our look myself team

mentorship. entire a thanks, culture, best-in-class what of been part for and I'm me team business your today, great have finally, John, has proud great board and we to a think I our bringing system. and have on team accomplished

John Williamson

over to our and lot all of the myself You'll a transition. weeks and talk to of Bill months have time

I'd outlook forward. Gelly, the lines Q&A QX open focus our session to and going So questions. for on our like please our results

Operator

Mr. Citi. first The Kaplowitz question Instructions] [Operator comes Andrew from with

Andrew Kaplowitz

did X% that John, organic in Is declined quarter, the X% the maybe would market a that And did recovery are more us you quarterly a little your in in bit X% efforts. half X% you year, you've the residential markets that in the more mentioned the the quarter Raceway? on with mention growth than of line and line construction growth was core more markets. and non-res little in first supportive you you volume give second with and slow hurricane raceway the it But expectations. anything the say of underlying Is thought growth. of that QX there up Electrical in in recorded Raceway big color on was the obviously

John Williamson

order, Yes, important that question question. activity supports answer -- an right great the fundamental to is we and in in to X% the well, think thing is your question, One strong keep growth. mind

X% first market our seeing are a beef When then rebate us are somewhat quarter as were in Keep our the fourth pace of first the buy good better is and quarter volume will be a non-residential mind, distributors have the unusual up is at that quarter. is the we combined, to bit we and on what We happens second quarter regularly, exposure little quarter about real of weighted some excess not rate. in that that giving and it's look in our in really bit the little activity driving year, of what kind and than calendar fourth a about proceeding volumes initiatives quarter and to distributors you our into first just heavier sometimes programs, the good second drive third we feel feel growth have distributors quarter as they change as and sell-through. there of is we

X% that, expected X% the to range it activity I we we last that feel that very and think now. So good we and expected, time take mentioned there acted we is, away about as right

Andrew Kaplowitz

raised a I give centers to mentioned has weaker, weak forecast bit for industrial that in is improvement been is is MP&S more there. environment getting here long large business better little solar? us been there you the what's little you across strengthening your obviously a too? data given then have growth and you color say within would little know Maybe happening your industrial for board And the on pretty more the a And including that then runway a time? business,

John Williamson

really little we would back And bounce past. construct bit but there the that wouldn't in seeing different I are solar point with it's it's broad. I that's think than a in I Yes, is particular, say the across-the-board, a

much a three are and past solar large the less Collectively very customers, was in customers centered actually way. more or we on the business coming two is Our solar serving with business individually solar in volume. nice though, back

as single-digit served broad rebounce right So forward. level, our is it's on some number the that you a we a said, defines to what focus growth low it's high exactly recovery, rate basically going from think pretty and market it

small solar, a keep really rates, good on Just in ended being pretty mind, what on but base. up growth strong

Andrew Kaplowitz

on just the John, data improvement And follow-up centers. you there? Are seeing large

John Williamson

data slowdown combination kind of what underway. saw centers think a projects just mostly on in I already Yes, delays of a up finishing was we of and

wouldn't say it's a but that would feel -- we improvement I marked not in I So there's centers, say data deteriorating.

Operator

The Kwas next question from comes Rich Mr. Fargo. with Wells

Unidentified Analyst

This is forward look Rich Kwas. working and your [ph] you well. wish with I for John, you. on both Bill, Deepa congratulations retirement. Rich to

John Williamson

Deepa. Thanks,

Unidentified Analyst

you certain could there how has good realize trending others? -- to it environment been price? better Are your been has you Or verticals much you realization better demand have -- the able over comment than Question Could get on on is versus price price; you're you overall to price realization just on that would generally comment expectations? able realization price, expected. are better better

John Williamson

Yes, great question.

Now to than been better that went way performance prices what the it we is pass before commodity regards ability our we think extremely with public with to investors would say since to through consistent really expectations. We we've customer. wasn't

Now because we thing. almost immediately. way to affect broader by have don't of it affecting think be need misunderstood base, on the get that's don't commodity and it's us don't same passing commodity increases well. as that that us on or they And act investor there's downside this for going if do other the to we decreases it We the a anything to upside affect do are industrial I -- companies through

initiative Bill an years for Waltz question, keep spirit time what we people this to hard that say spent ago. mind, like your of of would thing, of a a the leading number us, first on, unexpected worked say that lot including initiative, I'd the on So very in is isn't that couple is of I but to

how system things. into do built and we have our We business

pricing line, We our a sets on be our more the sensitive, through of to line less have which quick sure to here market. understanding to bundle price make there we differences Raceway tools get it's in value sensitive Electrical are slight our about it's discipline, to and product very together ones us total delivered. product and pricing that based ability a skill about our moving the to premium our allow and And in

should've it's It's job expected. to the we I so would our actually makes mind, -- to bit in we a really than keep going it else think say, than publicly a expected. different prices. different about higher little And quarter it anybody up, So steel when not a is customers talk not quarter need for easier

the changes, So XXX summarizing really it's going other is it answer. important. publicity on like in the the really affect would doesn't this I to tariff, it just to us Section affect industrials. The way reiterate

We when down pass to have have it it and prices prices commodity commodity through go to go through pass up. we when

reiterated of given frames think doing we and OEM quicker over, little Raceway, pass-through commodity kind because that So slower for for bit we and it little the fluctuation and have bit over pricing, customers time Mechanical years. for we've the been Electrical index of

Unidentified Analyst

the you sale? free by for now on looking flow and Flexhead that also debt Could your the comment a to have we year be some year cash proceeds to given should end from you net of outlooks is targeted number EBITDA there forward

James Mallak

million the flow flow cash there, taxes have in free a -- million our a When We've look path $XXX clear we we cash we take the leverage be range. cash interest to we When our to to -- that a shown get can free going and low get like and year, generate to that have Xx we'd take the look will this target number. $XXX is there. we given at

Unidentified Analyst

you pass on intra-commercial, non-residential My etcetera? could institutional verticals? that's market I'll John, last What across are it one; it. on. comment seeing And you

John Williamson

fiscal do the numbers about Yes, we're year and strong We Deepa. square we little the The kind the through part and non-res this. recently. Yes, on I'll macro. that, What see for important a our XXXX that's footage is horizon. of being bit thanks seeing strong our that non-res, underpinnings calendar it -- effective business. see think our say of We down edge through answer we and of have

Although, look little distinction increasing has you're adding Raceway that's amount new in foot Electrical maintenance of been some pretty has Raceway And it based buildings is with regularly, call lighting, up. on when The along spend important an bit a we repair you're per verticals convergence, doing data more, think to at. I in where spend renovation. and LED and/or square

data. see We So we talked We a things we look channel about see lot. we've numbers with see the of guys you the NEMA think that in in pretty strong. fundamentals the that it data, cranes, in

our So strong. ball about going continuing through crystal through we think little we the but buildings to goes The really solid in new feel of forward a fiscal XXXX. expanding be there, very bit think We still content fuzzy XXXX. and electrical that good

So I on next we question. the can to think move

Operator

[Operator question RBC Instructions] next comes Mr. Markets. with Capital from The Dray Deane

Deane Dray

And John well Bill, know have that and like hands. myself, congrats, pretty for years, and folks will Bill many for be good covered in that Atkore and the Pentair know

add to wanted just So that.

And -- Just are line discussion And hit? been we least our able being want reset the that circle is, very has price Atkore to dollar. to you of question, just at this ability Is there dollar pass-through costs, where our to recover ever able time for holding to have more expectations? margin sight is the on perspective to show Or it you're offset begs on the do almost bottom raw if should well, here on to back up you and pricing a -- from material realistic? it. needed the line,

James Mallak

we might I is I If to more think, it. think, the, pass we earnings to, that our marketplace a a on seller, way the able through pass-through Deane, realistic one-for-one be the -- to current pricing the is and key have, think cost. on at volumes the one-for-one given a look maintaining right I favorable and be now, increase then for but becomes most economic

John Williamson

of the XX Deane, we're mentioned up margin. mathematical and basis commodity earlier, Yes, points mind, you keep Jim the when impact, as exclude in pass-through, just in

Deane Dray

to companies part year question, this? like side, cash consideration industrial to you timing on second some EPS. middle to did the of surprising. maybe in is then perspective of Did move fact give the new. the get it seeing across little not many it But And that clearly is the a on We're so any bit the the you just so that

John Williamson

we -- -- a, We've go consistently course been We other We is of -- think, couple for to our do doing way is did. doing are do it, decide you when something, we with it. to didn't of very it. consistent the a companies This about thought I asked about years. why very,

just we I and investors all. did trends at provides or around the think so it's it's ability It business raise the either the performance. on treatment not of no and the the new significant a acquisitions -- with be It comparison. impact but new and essentially our why management Strong the trend number, impact meaningfully guidance. same change improvement, to has different trend about guidance We're is does comparison it? to strong metric really the presentation, greater under transparency with basically transparent and improving operating of

it honesty. nonevent a all in So I think was

Deane Dray

Yes, we have to agree.

then So answer question -- to non-res. And just your question regarding in your Andy's for -- and last John, me.

was would of that that were three said Just those other growth. some volume there higher. have company that drove with of driven sure to some company other points get what you to it correctly, I hoping initiatives then percentage growth, respect contributed understood make it volume clarification non-res the higher you about the to and I were said X% initiatives

John Williamson

Yes, on worth finer putting a it's that. point

then I it is is that of we're talking all, way X%, talking the initiatives. of add full year. and Right? of if think market we're about the First up X.X% you And rest is that about growth the that

Deane Dray

what that... you something would is and that And as initiatives the characterize

John Williamson

Yes, that's a great question.

products So put we've decision Raceway package and our customers is, premiums. delivered the initiatives about what the really to in and slight portfolio consistent the as to us we we together, the same been pricing to to gains same sold is best ability makers same are sites freight same get of logistics feel, part going to trucks, the the of share construction, savings by be and allows on Electrical

So that's one of the initiatives.

have products products seeing innovative save selling content, we're been new electrical the be on time to biggest new ones. that success on site some and diligently two contractors. working and on very That labor would our We contractors

Operator

from The Mr. with Tusa Steve comes next question JPMorgan.

Stephen Tusa

both changes all of guys. you on again, Congrats, the to management

is So now? just is compression like something I exactly $XX guidance all, the of EBITDA spread it embedded the in what think that? prior, first was million

John Williamson

through so had $X second and million very $X and close I able to pass-through freight And about To good we're talked think million. year. whole I a for we'll feeling Yes, that million the XXX% gap we raw it's date, believe $X the inflation. half, that be of to material

Stephen Tusa

positive? should be it So

John Williamson

it be positive. think I Yes, will slightly

Stephen Tusa

free cash that per 'XX, it would imply $XXX And XXX% of the I flow say to just flow? to guide for share? Is right million right number Sorry is clarify, for did million. you the XXX% $X -- $XXX around cash to free that cash the a as free guess,

James Mallak

million to of free $XXX million $XXX flow. cash

Stephen Tusa

a $X share? Yes, that's about

James Mallak

the On right. upper end,

Stephen Tusa

in CapEx, is or anything like So the else that and guide basically there cash like that? working capital the anything difference EPS between and just

James Mallak

Correct.

Stephen Tusa

working $XXX So from million is capital $X is to or some what's the what there walk -- million? the

James Mallak

on It's going in to come capital what be more working a capital. is than of inflation price anything. working we're bit little Because through seeing

year-over-year. are about three days actual down days Our

Stephen Tusa

it. Got

is execution the kind pricing it's impacting So the that? of good, that's

James Mallak

capital Exactly, and very strong. exactly. still working Execution

Stephen Tusa

your then where capacity leverage this And the on one what's is? just given one, at just M&A, stage, last

James Mallak

but comes and can with million below or this million want EBITDA we with to manage in the Xx, even M&A $XXX still the that our If that do at We year to down. we still comfortable we're keep $XXX the bring targets. more, our leverage. Yes, we'll also sure think leverage we make

Operator

reached the Instructions] end turn the Ladies Williamson, President and any the question-and-answer And for call CEO, gentlemen, John to we and I [Operator back remarks. closing would of Mr. like to have session.

John Williamson

All right, thanks.

somebody First I've Waltz former Mike joint you have experience also want with as recently mention dealt past we thank the make of and Bill in in with I in all, Atkore. the that sure well. for venture a Schrock, Pentair, COO just fact your has added to of I interest

of pretty about grow so So second quarter. feel what inflation continue said and our is passing market board, very line our performance in strong Mike Schrock delivered a commodity pass-through that. we to a with above the In joining on with quarters We've of and about the summary, we heavy is we're had to We to number excited great environment. ability costs. do would even and this we through

great for forward for in thanks the your quarter to the end on months That's three of to looking again, and we're So third interest, updating call. thanks a Atkore the you our team quarter.

Operator

conference. today's concludes This

disconnect your time. participation. may you lines at your for this You Thank

Atkore (ATKR) 12 May 182018 Q2 Earnings call transcript