ATKR - Earnings call transcript Q2 2019

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Operator

Greetings, and welcome to the Atkore International Second Quarter Fiscal 2019 Earnings Conference Call. At this time, all participants will be in listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I'd now like to turn the conference over to your host, Keith Whisenand, Vice President Investor Relations for Atkore International. you. Thank

begin. now may You

Keith Whisenand

that release, you, or and Bill differ David which me are company. risks those statements remind everyone. Chief make we projections Such uncertainties or or financial good important differ and such materially. may Please President Bill. I'll and performance that, and results morning, forward-looking XX-Q everyone to refer statements. to Waltz, it involve like forward-looking could statements as future today's contained that Officer. With over this CEO; actual press identifies factors call, results Financial projections may cause events to our today regarding I'd to Thank during future that With turn as Johnson, in the actual well our from materially of

William Waltz

EBITDA pleased Thanks, report guidance the quarter Keith, that to exceeded results that Atkore Adjusted XX%. everyone. good prior for morning, strong financial second up and our I'm delivered with

Looking and as delivered to to and from overall investments remain as at well the sales Despite specifiable our pricing above Solutions in saw lower our Mechanical improved low Volume we as disciplined MP&S the prices the business that delivered in the our benefits electrical We in timing average Electrical this closer selling products offset volumes growth down ratio range. due average we in of segment key year-over-year provide X% improve growth the primarily from was and customers. by are in Xx high project sales goal to our with the effort to continue we rates leverage improvements focused strong organic segment and organic net accelerated on the basis. margins. financially quarter, move due segment, Raceway & Products productivity, mix a in

Construction & momentum XXXX Year winners Maintenance named Electrical its Product Two Magazine. products around category maintained in Atkore the of the Finally, innovation. were recently

Our our BriteRail Conduit and support Raintight conduit Super Kwik-Couple systems.

to With X marketplace the the that, during introduced through six insights industry. into will products who quarter. us also in external year-to-date. We value David, products provide new to recognizing more financials new bringing to total detail we the walk bring I'll turn our the Collectively, the over call the the and quarter, is

David Johnson

Thanks, good Bill, and everyone. morning to

than offset EBITDA input increased $XX We prices $X impact. to we we've last net $XX the the $XXX versus and adjusted made was Moving million, We've the in $X prices volumes was second a Raceway driving was after million. Volume increase million. of including on selling favorable to EBITDA for on cost our impact increases timing and consolidated resulting year-over-year. compensation year. XXX% net initiatives, MP&S was X% X. X% added added results acquisitions top $XX under X. due favorable down million, in approximately as $XX out year-over-year Adjusted EBITDA X.X%, average of variable higher business. organically were sales as the on various incurred Slide volume, our successfully more mix. To to on by effort the accelerated million of for Through Net net up up X% quarter. up exchange. quarter was acquisitions net selling acquisitions foreign adjusted account and items and focused well million primarily normalizing This XX% from Electrical down the just broken Net productivity Slide increases these line that to million Atkore, by was XX% in the bridge decline acquisition budget average quarter total investments These or million for increase volume the partially inflation, MP&S. $XX driven EBITDA in were

by increased income Moving XX%. Slide X. Operating to

Flexhead quarter a our net XXXX million, XXXX second share on year. increase million. versus XX% from adjusted reflecting to sale basis an second year $X.XX, repurchases our count the last the of in favorable earnings EPS up $XX income gain $XX However, the over and the GAAP prior of on due of down quarter the Adjusted was was from

$XX difference annual our EBITDA incentive segment bonuses and after sale of The down for due versus XX% delivered the approximately mix on XXXX. year-to-date Raceway million, to adjusting XX% and & back Moving prior points X and The XXX magnitude drove On coming which additional was and now reported XXXX More than Solutions X. Slide XX% on activities segments our basis Flexhead. with than growth $XX almost another X, of growth operating from MP&S EBITDA pricing in XXXX. XXX paid from Slide growth. Products is XXX% up from net Mechanical million EBITDA and X% to up adjusted basis growth cash margins XXXX Electrical XX%, strong from XXXX. quarter had points volume and improvements, products timing flow in X% focused year or to distributor rebates more QX the QX to relating adjusted

normalize We year-end expect XXXX. this impact by to

ratio, we to as X.X define Finally, net was which EBITDA, the times. debt adjusted months leverage trailing our XX

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

cash $XX our financials. an Therefore, XXXX excess our paid our we payment to now for normally next disclosed update. guidance quarter, debt principal XXXX. million including of in of scheduled back March payments is you payment Bill, payments we our and the During required

William Waltz

David. Thanks,

guidance XXXX our Slide X. to Moving on

in MP&S volumes, X% up X%. to the project not has to be view volume be to we timing Electrical to we flat now that X% Our construction on the for the and because changed impacted delayed year, MP&S markets expect of still XXXX. And up expect Raceway

year. guidance, However, with performance our strong the our midpoint raising prior to compared full we of our are

EBITDA adjusted million segment, adjusted to and is Our be to our to range million. Interest our follows: expect $XX EBITDA XXXX estimate be and the $XXX guidance million; we between between million $XXX for $X.XX. $XXX $XXX We expect we segment, $XX expect $X.XX Raceway between be $XX EPS Electrical million. approximately to for to be we for XXXX million as total adjusted million; expense adjusted between Atkore, be the and EBITDA MP&S will

Our the about million is for $XX tax rate and $XX million CapEx our fully around between year, shares. for the full million share year. will and to expected XX% XX will be be be diluted count

Turning quarter Atkore. for to third total guidance

to range range EBITDA another continue ahead pipeline QX a and adjusted summary, EPS to $XX strong with between million of strong $XX market see was half points $X.XX optimistic, XXXX nonresidential construction Customer us. quarter, In and strong we adjusted Our second while a is million projects. and of between our $X.XX. is an of also feedback

strategic employees success. day We expect and favorable initiatives Operator, are be our the long-term not driving and without taking for shareholders. drive to better our value results you will open on focused line each Thank and for care could to business our questions. every dedicated please for done who our of customers, Atkore. and continue the long-term to commitment making This your

Operator

you. Instructions] [Operator Thank

Our Please questions. line Andrew comes the your first from Citi. question of Kaplowitz proceed with with

Eitan Buchbinder

morning. is Andy. Good on for Eitan This Buchbinder

William Waltz

Eitan. morning, Good

Eitan Buchbinder

recovered non-res currently year? the inflection calender February your rates back you bit non-res Raceway building longer begin interest has like looks are outlook morning. It volume, year had start of contracted the the What Good an And and markets? Dodge for of construction to a for for in in Electrical in seeing out [now] half the the March. down you into in end lower, anticipation January,

William Waltz

what's thing good at where the billing voice from days not backlogs. San be that which we still still we other the the will yet. it's do We're index. national there predicting called a are Yes. X just the Bill -- but we're as And is distributor it, here, still architectural of X% growth though, I every the just bullish, -- was have just for the quoted have just it they we electrical But of than they in X, Francisco when everything out slightly came record what go you -- as customer beginning there. Dodge, customer. X% event through and because And to were back year to we higher is

that's in X% is range, why for the to we year the So X% think we're guiding reasonable. which

Eitan Buchbinder

last for headwind. million no And to a was you. it price you be Thank longer $XX follow-up, expected favorable as cost a and quarter, a

year. And do year? $XX the price full to cost your did better million fiscal half cost be for expect price and this are expectations What the for in You you the the year? of tailwind a second

William Waltz

just reason Yes. that, for to products do selling a value-added pricing, continue we're well comparables, year-over-year if -- the in doing of but tweeted pricing we're year, Obviously and Trump I and -- year the David and had challenge, amazing tailwind. as we'll again. I'll But that and give were President of last think challenge did the last the proposition, general. comparables, had well add, we was XXX, we And up we not slight with to had just opportunity the when now wants going in with probably the

bit that -- here. little initiatives we're guided with less just guiding second a half, comfortable price to enough our but relative still So up the we

Eitan Buchbinder

you. Thank

Operator

is Deane Dray question your the RBC. next with question. from The line Please of proceed with

Deane Dray

Thank you. Good everyone. morning,

William Waltz

Morning.

Deane Dray

quarter. guys. Hey, Nice

of on what some in And takes any this did in potential a could on what's you If like puts freight? pose terms and going headwind of the update give weather just quarter. in

David Johnson

look impact. PVC, out -- On separate our at be Sure. that I major product impacted the didn't price start. the hitting Yes. you think I'll because We underground. feel one weather, call Deane, that mainly would when do most overall, the we gets is like, didn't lines, a

there's of last for seen really, inflationary freight, about major I still the say, Yes... X or freight On would for some because so have PVC an And weather. item demand fairly in but quarters. positive that we haven't change from either talked year-over-year, we it's around field us. negative, primarily It's been the any heard X or pent-up we've stable

Deane Dray

ahead. Yes. Got And go Bill, it.

David Johnson

nothing add, no, - really was Oh Deane. I to

So sir. second question, yes, the

Deane Dray

markets visibility? means comments could you expand some you cycle. that we comments about end Bill, hearing kind the activity and the there the the on of and where maybe what about construction, markets, construction I'd end about non-res about to the projects most in be are individual the interested of in in size Yes.

William Waltz

Yes.

center the hotels. projects. continue seeing So lot around well. of to seeing we're probably education offices a Obviously, like two in most data markets our things go then that And and we're the offices, of deemed opportunities within growth

high through the think a admit a is go that's So our out. to if do talking visibility I sell there's will somebody selling also we're where be obviously that's it probably seeing may were strong we that with where you not though so and as remember [ph] or as I specificity. tractor Wesco distributors, Dodge reporting correlation do something. there

Deane Dray

at this kind about from point Any there? the in Just factors color the on distributors. picture point? on And sell-through me last update question sell-in, destocking, rebate any of

William Waltz

but I -- bounces we No, material things. so. last commodities don't couple going been The slightly enough the up, big the months, can anyone following and to don't steel think has had make track, like a it's therefore, move all I of people over buy if tougher last down comparables. steel copper that, shooting year to were we around, trying were was where, prices ahead, not hey,

it's earlier to your were enough think weather of at this I and answered some. the David think optimism point, there's there I because And but out we volume that steady question didn't in impacts call on PVC, state weather, markets.

here that hey, season, things see destock busy quite exactly, backlog, of are to going versus, going with the not as plant. into distributors part at frankly, think I looking we are the Atkore So we're

Deane Dray

you. Thank helpful. very That’s

William Waltz

you. Thank

Operator

The next Please question Walsh from proceed of Suisse. with the your is with question. line John Crédit

John Walsh

morning. good Hi,

William Waltz

Good John. morning,

John Walsh

of know product in drive highlighted the to prepared that I introduction, you your remarks. So initiatives been it really new has one of kind

either of what where the Just would on average, wondering faster kind have been you us vitality some of much rate there kind or helpful. of some relative index of newer new product how growth products to stands growing. color introduced if is be are around they these the today color can give Any that fleet the

William Waltz

there, go there, Yes. I'll low that and both for as forward. kind lots two for to But magazine single that out low still articles, thing growing introduced of of digits, this see Then called the quite We're year, the is really not on we've are interesting almost XX%. while customer's plus up vitality, products send you a new sides. digit still there. fun you the from year thing to we're or in question. we product give single those number We'll check alone. won of we're later products Rough we XX products, opportunity

help are pull are seeing investing Actually, our to voice it's this the those to ahead in clicking people along from distribution exactly. So we're objectives. we said customers who investment that to therefore, traction. year the contractors, in objectives and And we focus will on sales stretched of our salespeople of our extra everything products customer additional stretched through and engineering

So...

David Johnson

David. is something with our the our else also gives more about we have reps It also critically and the this it John, our gives important to product get because Atkore It's events basket. salespeople talk to distribution.

critically And are so products forward. important moving for these us

John Walsh

then half? And is think the about the one the thinking just here any seasonally quarters, QX flow about of cadence Great. just as obviously cash in here half, we free us your way to help generation the back with back kind of weaker

David Johnson

the half is last part the and half year. quarter the look the imagine, fantastic first this When if you we built significant quarter of some second versus rebate last our what all is and first of had know, a year. reserves year slightly incentive can weakest -- for you we by last things in up As a of of year, year. because happened down of at are always we you end The that year, the reason those sort reserves of had at pretty far main

in on half second a year. get the this XXX% target to because we anticipate where capital X we as and first do around half of to we given working that year net of the good here points the this year. And set those expect having year, plus feel that's year therefore, of what still the are or are on paid have to over of reserves again that strongly the Some minus We you, be. those we up there pay and here build of really normalize income, out commodities,

John Walsh

color. the Appreciate Great. Thank you.

David Johnson

Thanks, John.

Operator

of the Please with Wells Instructions] Raghavan with [Operator questions. your The line Fargo. is from question next Deepa proceed

Deepa Raghavan

Good morning.

So few a I have questions.

sustainable obviously to can strategy is margin are and maybe are of lower list is your up higher the exit half you up. rate businesses now, there talk how margin much once year? but second by Margins prices one, how First run this is staying about caught more

William Waltz

Yes. start. I'll

here. are, back comparable, little bit less in still people were margins the maybe bit where we think think we a the a now. a our and the more again, on I you quarter Obviously, side, internally, range MP&S on phenomenal Raceway -- in area. are we're the pushing. I I but mean little the think from I had, forecast, There we're overall, a look

So...

David Johnson

margin Raceway, of you we a they then for When the of that up percentages, do comfortable go nature of there. we Deepa, if commodities pretty then it those trend XX% if MP&S could look at pass-through. and the slightly. EBITDA know, little bump feel And XX% down because XX%, up, could bit as with And commodities down this business, just

range. feel where a right that So we I it's are pretty good now,

Deepa Raghavan

it. Got

Okay.

more question impacted specific Second overall be moderation, seems on it's mean to I demand MP&S. product volume delays. to by

question pricing, too, into quarter, quarter seeing, as light. going impacts my is you fiscal price you mentioned we for have how price, exit And volume more is I volumes should handle mean I little second you these last but you're were all about later. that exiting or visibility volume your model and given a year? there talk this now have And visibility But we half? how this You've how can 'XX, one a on much obviously,

William Waltz

has everybody the be of other to don't I start. I'll Deepa, along. with lot that words, seems the transparency, in rate and economy, on data think a Yes. same going

or backlog think, was itself, some not of visibility. indicators than with don't But deep different Again, business to well. out Our overall, and more recently, the of a months shortage good, was doing economy the and here, we're be the of I do we to seem that, have labor X MP&S X for it I I It's but has with shortage customers -- the contractor. speak just literally, it's backlog.

One like finishing and architecture winging, the are haven't of fully estimating that the is design. then delays kind taking they costs even because designed, orders project the of

getting last then of architect a prepared couple were specificity kind There the we call thing didn't in out projects look earnings. at this for what from literally business MP&S. the a in just the are didn't team gives like year but we to So out, results, specifically us be actually delayed. at profit, the confidence projects repeat, at our looks security raising is of that's and on remarks lot that again, during our one And time, large overall of our

David Johnson

We did questions Remember, XX%. think of to Yes. that in around QX, XX%, answered - around Deepa, a last they're at could and XX%. when above get now was we we lot MP&S XX% that,

we the had of projects, we has So MP&S with given the QX. mix products a solid and think volume, where are where very

Deepa Raghavan

Okay.

So that higher on by driven was moderation right Am it I demand this? looks prices. you're not implying

David Johnson

No.

William Waltz

No.

I We're things we of think focus complement to have we're doing picking where do teams. a to doing on, a we great the job job. want solid what very I grow.

think, our cable products. name customers, our prepared a not specialty we've what specifically higher-margin These others we're of I that products, X%, things our focused in lower with and are example, we're margin in on call to been a estimated and cable, we're picking, products, products Raceway. tray, couple like specifically commodity -- as focused growing products. for said very to One specifiable These we prefab we're of, with number, But we're I grow remarks with our for basket our and some and we're are X% double-digit targeting wire our how of the in employees. in was that's and agents, solid up can where

where Yes. we we are go? So selecting

And are shareholders, customers value-add results. bringing we're the seeing quite those that frankly, the our are seeing You, also.

David Johnson

Raceway, steel regular on ways categories of basis. our our Electrical thing. cable, we X just what of one share Remember verifying PVC and Deepa, third-party a our market is conduit, big in have And additional product

have sure verification there third-party closely make monitor that are. So our where We prices shares right. we're are because that to not just of very we're telling we to know say you off sitting able volume that

Deepa Raghavan

Got But out the appreciate it. my Can on That's this or very helpful it. rightsized at a if little you comment inventory I of in channel. final question color. is balance that's time?

David Johnson

yes, budget question, great Deepa. This --

much say tell, I I would think I as balance. it's as can

there's definitely stretch in that by construction there think And the to imagination. don't if being anything seasonality of I an we are, some believe I don't any industry is -- So seasons. overstock

probably it's think appropriate. I

Deepa Raghavan

on. it pass Thanks. I’ll

David Johnson

Thanks, Deepa.

William Waltz

Thanks, Deepa.

Operator

Peter line Next question from your of proceed is question. the with Please with Lennox-King UBS.

Peter Lennox-King

everyone. morning, Good

William Waltz

Good morning.

David Johnson

Good morning.

Peter Lennox-King

we on the should talking increase. was I else we margins, just a wondering come higher about maybe mentioned was to behind year? And more expect automation what that? it you'd the I'm would start of of drove -- could there a penetration productivity the something or was And hoping in that, that rest

William Waltz

you up beginning. broke Yes. increase, question. I very the in the word the of price got Peter, sorry, I at missed sir. the just I'm though for beginning premise one

Peter Lennox-King

and productivity should about asking we was what I on productivity drove more. see the the apologize. quarter, I when and gains

William Waltz

Yes. firing and The of as and second half the both productivity, into delivering in we XXXX. course, go more to forward keep

not X ago, close always year Just to at facility. We we automation. facility we are specific closures, there's looking closures. did there's call one thing, A but focus, rooftop so one not typically out don't

Atkore lot Danaher, consolidate Pentair us automotive companies, with of I from, kind we production, whether that's lean of our drive A of background the companies. what the consider, As DNA come and it's have business companies world-class system. organization

best maps. and go even where the Kaizens of was making practice had every up making stream day-to-day, call the game saying a are Coast for I just driving more. on sustainable driving sales convention to continue Operations then call this do with suite value our to how there there, before the left sure improvements. step you we it's out person literally I want West the From on President right the So we Vice operations [ph], in what

capital the have on turnaround back and it's it's a -- So they quickest have we're probably of deployment, that times investments. lot David step-by-step larger returns, But I encouraged also sustainable results. is to [ph] organization good projects our if

both. doing we're So David?

David Johnson

automated give not So of of Peter. you're does X/X our products PVC towards million we're productivity, an to when that your manual you a idea, use in efficiency cost it projects, more, labor, not invest of in lot can certainly you spending, increases that that, only able $XX is versus improved. of CapEx like input mixing mixing, business if and but that we to And target the reduce

can our you these on mills, things is for the productivity uptime what's all that gain. of sort basis So imagine

Peter Lennox-King

present down Thank great. since And how ways That's With here? about capacity Are towards, you. back X you times here? segment are deals you target, leaning or X are touched capital some and that And pipeline from thinking about on thinking still deployment. you when your above other? the themselves? then more maybe How leverage do but from towards moving M&A you the

William Waltz

All right.

publicly first. that other of question answer will our our look focus not be core I'll we be So with opportunities, don't mainly Raceway, business We focus opportunity channel to Electrical doesn't on but the second said at mean our our in that Electrical Raceway. will kind our leverage

Our still solid. is pipeline

being our want synergies, hardcore targets so to proceed we I comes whether somewhat are we even very before a think we where just pricing, to of it in have whichever sales there. it's synergies are more sure think, lot we times synergies, smaller the value. we when have discount, we've what also you, that like or make disciplined can want of which disciplined solid you we're add we privately probably companies. way where And mid-cycle held now cycle, but And are not kind to talked

So I that It doubles. say, tends now think, is to would I more, right rather pipeline, singles still speaking, solid. generally be than

to half want cash at talked of to that from to to And expected say point. generator about move One opportunities. kind where is lower of say focus I the going we us. But much second would reducing we're more general, basket. pretty to towards would X.X we add have is smaller or on in we will the times that, debt And thing where our like X for we I a are that couple we down of usually like unless those be targets we our So really that year before, X.X this range. to balanced

in will this have the to half operating flow we more cash second deploy. So of year

Peter Lennox-King

That’s helpful. Thanks much, guys. very

Operator

you. to back for this Instructions] I'll remarks. time, Thank his Mr. [Operator Thank floor you. closing turn Waltz At the

William Waltz

Okay. Thank you.

Before let summarize the we conclude, takeaways. key me X

organic by growth on product driven mix. the right revenue strategic good delivered focus we First,

Second, adjusted double-digit the and up guidance EBITDA for adjusted are and EPS year-over-year again exceeded quarter. our

strategic Third, to our culture key innovation and great to enable including results. Collectively, deliver objectives to full and initiatives continued team, our fourth, increased Atkore maintain our on commitments focus our our guidance. us on deliver year shareholders, has And upon the our Atkore business support system customers, and the our achieve interest during that, to you. of Thank call the set next quarterly And Atkore. for remainder speaking goals for today. concludes that I With you the have you to out I forward look want in with call. we thank for the XXXX. this and focus

Operator

you. Thank

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

Atkore (ATKR) 12 May 192019 Q2 Earnings call transcript