ATKR - Earnings call transcript Q3 2020

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Operator

Greetings, and welcome to the Atkore International Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, John Deitzer, Vice President of Investor Relations. Thank you.

begin. may You

John Deitzer

good Bill and David I joined am Chief Thank President morning and by Waltz, Officer. as CEO today Financial you everyone. as Johnson, well

and David. after We company. your call, Such refer of future such we or risk everyone comments events I press that projections may this to from materially actual identify our our statements. would make factors release, today’s statements Please statements or in projections important by that actual filings will involve during uncertainties like which questions the Bill and results forward-looking take may cause or differ SEC remind those results could to contained forward-looking performance materially. differ that and regarding to financial

our to EBITDA. today any In EBITDA turn over in addition, that, With to reference adjusted it Bill. will I means discussion

Bill Waltz

I and believe navigate culture despite delivered helps the we through results good in morning John us times. of with these Thanks, pandemic. pleased associated everyone. Atkore that focus as to and solid strong operational challenges COVID-XX quarter report third safety am uncertain the our I

were come agreement business Steelworkers ratify our and shortly sustainable I location. certainly agreement pleased with a the Harvey, United to building to long-term many As million our than start implemented our of quarter million. delivered EBITDA an performed our to Union Atkore, on of announce we end $XX organization. It balance control increase are that the able quarter, throughout to cash we actions the in ended, the Page new so a adjusted employees third a the we the we after focused agreement am the better At strong given this of to for balance our helps. we we by expectations margins on $XXX $XXX cost as X, measures of were Illinois with through million is quarter and able that

the net down we volatility, and our estimate XXXX year. to uncertainty Given XX% be continued approximately prior EBITDA FY adjusted EPS sales, versus and market adjusted

to me Now, go and let key summarize results detail. more then the quarter my recent take a takeaways events David in will moment into and the regarding

QX use Atkore delivered our team solid of by driven the disciplined Business results the in System. First,

are position in strong we a at Second, the $XXX end financial million third in of cash with the quarter.

us With in as much remain David, conditions, these the committed to through more stronger focused quarter building will over walk turn even we managing an future. the on we detail. Third, that, as call to through Atkore for current I will who the

David Johnson

Bill, Thank morning, good you, and everyone.

we mentioned, As in results Bill are pleased with the the quarter. third

XX% our to approximately Moving the declined Slide the Adjusted was on conditions our EBITDA caused was adjusted sales the and EBITDA due X, primarily margin to XX%, by net pandemic. million, market unfavorable consolidated $XX quarter. results in

$X.XX lower partially was EPS helped lower as interest expense adjusted offset the Our earnings.

execution, our Turning result sales sales to and to raw operational lower and the impact Slide volume. $XXX able team mitigate on Through as selling steel partially declines volumes are million inputs such from commercial from material The the resin. declined selling key the in lower lower a prices decline X, prices. due outstanding in net was profitability to and

the we of EBITDA previously quarter volume Moving the declines million. mentioned impact largest an bridge, adjusted had to the in $XX impact unfavorable with

XX%, the adjusted expectations. better of EBITDA our margin quarter to Atkore did able the lower a were customers team commercial in initial in a approximately market our which in changes the line as This reduction, benefits. year-over-year Business value System the However, significant selling by controlling resulted in excellent prices with drive job our productivity our than in $XX costs. Atkore Despite million in of was to costs, of input following team an our was communicating decremental our

on due results segment Net the we quarter Raceway had lower sales Electrical XX% an pandemic. a volumes XX%. EBITDA Slide as our with experienced margin to declined to solid X, of adjusted the Moving

However, our categories focused low to in product quarter. only the mid-teen the percentages declined in

Products Mechanical large for renewable points only as down strong the margin year a sales on Page Solutions net and basis and comparable. helped to XX% XX% business the prior declined & quarter. segment Turning X, energy equipment to recreational the declined Adjusted XXX during EBITDA versus demand support very projects are

to take to review structure liquidity. a Page me moment our X let Moving debt and

loan debt to This XXXX, prior associated December does total loan maturity. have mature we principal $XXX We with and have term until payments not facility. million scheduled of our no

with or X.Xx quarter ended a EBITDA. of the XX-month adjusted or net cash, mentioned, debt Bill position As trailing $XXX million in million we $XXX

on are confident drawn our We asset-based liquidity not have and loan. position, we in our

highlight Turning turn now we to full X, are want XX I down to the Slide net-debt-to-adjusted-EBITDA ratio our months. in over that a past

$XXX challenging quarter As third the we last million position. our has business these proven discussed in that pleased the conditions, in be quite during our we it to let are And strong we the our back for to to the Bill me flow outlook. expected it earnings positive call, convert increase with cash to cash and turn Even ability now, has cash. solidly

Bill Waltz

Thanks, David.

full is approximately Turning to EBITDA This and be our prior XX% XX, to versus XX% expect improvement to EPS XX% the in we an down with versus year only year. that in net saw sales, May. QX, performance we adjusted estimate Slide solid our now adjusted

to is as certain in XX% margins be to However, to versus net events in sales this other we we the and quarter. assumption range slowly QX in EBITDA decremental our recognize and be onetime XX% our return down the business based estimate for approximately of our to year anticipate prior expenses the on as

fiscal very for compare year approximate half EBITDA margins run-rate first In we have into to XXXX the believe year. addition, continue will decremental in against we of quarters this two next as will strong

we XX help growth. our One next and item continued controls While situation, we improve in implemented make on as drive proud Page unprecedented that expense will $XX the increasing million We to that to to future ‘XX of to year will FY to deliver the is will the additional of our to $XX be that strong are in our now generation. value in capabilities million this are shareholders that future. the cash estimate customers we’ve want face flow due highlight continue cost for investments invest capital we there up headwinds us for and projects expenditures

and well to believe because tagline. it’s the the do. of share like year and I we to Speaking making, a essential our what would new in and are the over to of core who future, logo we to introduce has XX we you to our turn project today This been wanted with it at Slide we

for Building all Our Operator, open belief of of Together, our stakeholders best yet working for Better that by new represents line the that questions. to now tagline come together is our please Atkore. with the

Operator

Thank from you. Kaplowitz [Operator Citigroup. And of Instructions] Andy question our first from the comes line

Your line is open.

Andy Kaplowitz

guys. morning, good Hey,

Bill Waltz

Andy. morning, Good

David Johnson

Good morning, Andy.

Andy Kaplowitz

cadence as just so the quarter. about thinking the went you Bill, through

I what which down you Did Your – you your if cadence? for see volume XX%, in monthly XX% give you in any last so, for What know on part guide saw business? – you QX. what for could of improvement sales QX, you quarter at were about are to did is what in color to guiding July? the but you us more the sales and

you So any in the that improvements though business? seeing are

Bill Waltz

XX%, going Yes, I was seeing were we than the we the that the can last now as improvement call, down think are then And we Andy, where said was great probably XX%, question. into average June quarter, the so little XX% A very figure month-to-month, for that about so. less you a linear May approaching QX, XX%.

David Johnson

And July was with consistent that.

Bill Waltz

consistent was July have we – talking, given the And Yes. yes, we July QX. with are for as direction

Andy Kaplowitz

just and as said, the it’s Okay. And again $XX hard following did XX%, in that quarter. that, had up to Bill, decrementals you in not then to XX% QX. for million you productivity on the But you you guided notice

million I you baked going is, to is a think have the come mentioned on the costs back. us some think do guided from I here, year better about forward? to much the usually. average I question potential into to XX% how than And know conservatism you guidance have temporary But $XX

David Johnson

will David, one. is this that so Andy, take Okay. I

first So costs. that are have seeing now you onetime expenses And reducing P&L, and million, improvements right have half that productivity kind the about that bit COVID-related more what we a than you. imagine $XX in of by very like low just estimated you we little on medical can all, is half, of things

So in do of we QX, a couple have some have the XX% quarter. decremental, the in there. on we things One, costs onetime going

came So contract, with some onetime our Harvey as which that costs. we we announced, concluded union

some We have of costs, the you. what medical, that also as such believe

will start in of we facilities some quarter. to see up, those expenses As the more open

tough cost, we QX comp we for did were was as is, The had was initial talking and we to MP&S, begin be guide going price the a especially $XX did versus third and year. mentioned first with, point there, that the negative about know guidance, we way back to when somewhere around million for

now the unfavorable, are year. last positive to probably of little QX mainly We is slightly bit likely comp again, from but a very year, that be favorable for because

Andy Kaplowitz

changes. one had some watch your a sort obviously, Very helpful, have for of few fundamental business, just And you on me, guys. more follow-up months the as impact pandemic’s

we retail. data going focus more on focus centers warehouses, forward about maybe talked on and quarter think less a last little I office and

are be? So what how Can about ‘XX? to ultimately you your than into business that as go think all better do you starts trend nonresidential going

Bill Waltz

questions so. just I front Andy, I Yes. going in of two one. to answer think am

focus As as anyone. We to you more markets. value, than how huge that data for into year obviously, co-loads, for going November, in continue should the able mid-single to next faster all in you on do be value but... prop, look itself we grow And mentioned we we we market market will depth the do and different to is to down for And the the think better there. could than the in get product guide add a low probably there’s more put it centers, us at be forecasts I new our market, that effort development, But with digits. just from

Andy Kaplowitz

Thanks. it. Appreciate

Bill Waltz

Andy. Thanks,

Operator

line Dray from RBC question comes next from of Our Deane Capital. the

now is line Your open.

Deane Dray

morning, Good you. Thank everyone.

Bill Waltz

Good morning, Deane.

David Johnson

morning, Good Deane.

Deane Dray

we question. with last Andy’s can just pick Maybe where we up off left

Just low you is digit, you said non-res – can to just that overall that, mid-single for place? to in What clarify, please? value clarify when

Bill Waltz

that a most low Yes, everywhere indicators very .com? to site, Dodge a from do forecast I are would think down most and this for low There’s digits. forecast record unprecedented X.X% That of talking the I year some we having put-in-place around but again, that’s other Deane, have question, different would try to to whether organizations. the same then of numbers overly are variance Moody’s there yet, will hope contractors, think – again, the they XXXX to stage, the last down is and headwind for have digits. AII would And low to to be there. to here specific at to we in it’s time for this that But in guiding next not precise getting months, least XXXX couple am great next we gives fiscal seeing, XXXX past. to mid-single here, And Andy’s I a outperform be as forecast, year. is we lot we ABI. distributors, thing talking, – with are And at With have the single

Deane Dray

it. Appreciate

David Johnson

against it’s Okay. little next to because us fiscal two of be we give for comping And mention, outlook when we quarters. a Deane, kind will be a for other look interesting bit one that and going calendar non-COVID quarter of year, a – just course, is our thing our to

be to going it’s tale different bit FY two of of ‘XX. us, for for little a a halves more So

Deane Dray

green And that That’s project at as way helpful. continue. the are had been is to people some looking construction the then light market the started reopened, states real got qualitatively, any non-res

hit are pocket? funnel, this the depends worry got completed? after – the these What the look here going what you confidence And projects And but to seeing CEO of does the pipeline, we there. is you – the current air the the so your completed? current kind after in have the are or to ground Are of projects ear so on issue, pipeline is terms these what concern like are an

Bill Waltz

with the more give specific. end will some I answer Yes. you then

project years Deane, the push will books There earlier been as X low I bit there that starts have that specific an or do. complex, any that haven’t are our cases. The long There would is therefore, or X just months year, Orlando, airport question have put-in-place started postponed am think that’s say, average the to not an jobs ones, statistical ties, of to example, pocket? imagine I concerned that just X significance and a been can if go next whether single months. ABI say, that from I without and next naming hiccup should that to in only down but on is they I There’s schedule really the some in has they shovel, is I like entertainment into projects been it’s take of out hey, me think that low not was year. where things now X a other go To back ground oh, digits. There digits you stopped. there go the dug your about I low a you months single little but down the to has answer, – is somebody’s point, for am be to slower. is for be aware

do to continue – we Just will but well.

this, to down basically spreads, have ago, was we as the to tough to year mean I high and spreads. year second point, because well. David’s quarter as of a this half done neutral have in much and last Think of historically plug we this going are year. this the we of had We said back be

co-loads for optimist, the going end sudden a come to at that of anybody there’s but of We product ground including through to of will a am in. not manage vaccination for also to other an a digitization. and in development be am like year, unrealistic things, factor I customer-focusing V-shaped to non-res, the I setting lot work continue on all new recovery would is a – it’s the and going be here

Deane Dray

Alright. helpful. That’s really all

there that here and gears happen, your been talk still quarter switch de-stocking distributors. there to actually How out? did additional that had play thought And about was an last some Let’s maybe week. that

Bill Waltz

things. out – following it Yes, played the

you inventory almost are be doing line. manufacturers are down. inventory, sites X I and to doing de-stocking into they maybe earnings and mid-March, Probably, thinking to the in so and time June, are of that new gave And are weeks. July, have in people think they up most stocked were think a back to By up. over were blow-by-blow, to I normal back actually would manufacturers were our If have new obviously said, we had weeks I much I have as we case, X They distributors have they distributors the is because COVID shut call, most they and their job down. think they like even are as well. noticed can And a months of May X then X this we well.

David Johnson

out plays little geographic bit obviously that Deane, a And, differently by location.

area back. Boston now the like So starting come heavily really impacted, to it’s and was

overall, So there’s should inventory think and it’s then as where forth. up opening But different wasn’t parts so now of on in impacted, the it they I is so and line. – country

Bill Waltz

Yes.

Deane Dray

hear. to Good

the CapEx, Just last one from on me increase.

with can What that the actually a us be you maybe you described And create of You that either generically of see? can kind are you to just kind but of return share getting? then you returns type as David ranges to project? are rates of more project looking value, specific or any internal

Bill Waltz

with they who him are across Yes. smiling, and because questions, forth, one. than gets on It’s to I Deane, the I won answer, investment. all we fighting on pass good and I are questions, pointing am this to these board. Other return on for that, will it back

X. XXXX, fiscal a but optimistic. new talking our funded Shark And next came literally different with just I decade. ideas, for am for challenge product XX did We employees events We development up like the are event, not for submissions Tank

a see So that. you are to bit little of starting

working some for things our environmental larger so facilities. There projects on. capital we working bit on some that. funding are efforts, digitization little a more There are are is of We there’s for

organization my are capital guys, moving what board cash X,XXX does all as going, working as across So flow, to with and employees driving ahead. X,XXX the it’s where, the in And we mind, for we COVID. complement are anybody dealing we that are much with know they

making because is are we our lots and projects So good society. real for there our customers shareholders, returns with including of investments, CapEx,

excited level, they So I not because is invest And good Deane, returns I for... but just the one project. am to to that’s high going be are know there

David Johnson

we returns range when this and beginning remember, this type probably are the are if of we these outlook of between And to – beginning we at are capital X you X-year first gave And Deane. in year, our with. returns,

So not we had prudent reduced it quarter, last just regarding really being capital. –

Going markets into go. COVID, really going to understanding not the exactly how were

We more bit of feel investment in comfortable million $XXX we feel cash We that can comfortable. we a QX. Now increase. go release little and generated this

Bill Waltz

think statement I you Andy I if around too, where CEO a – Deane, made very add, comment hey, on question, And some Yes. first it with your confidence. was can like, or

Next the how the But down. about what Page like markets future, the for predicts we on the last just and invest. wrapped Atkore, Atkore how from everybody page we on year employees, and bullish I are It’s again, re-brand we slightly leadership is up XX.

there yes, Do on some facet that’s ahead customers? And focused the every company moving phenomenal we value our have So are team Absolutely. the to Yes. will bringing of we market? a in in headwinds be in our initiatives. therefore,

Deane Dray

That’s that job. event talk Great. really I Tank but the concept. all will and Thank Shark helpful you. more like great about offline, am I

Bill Waltz

Sounds great. you. Thank

David Johnson

you. Thank

Operator

of Fargo. Our Wells the Raghavan Deepa next comes question from from line

is line open. Your

Deepa Raghavan

Hi. Good everyone. morning,

Bill Waltz

Deepa. Good morning,

David Johnson

morning, Good Deepa.

Deepa Raghavan

the price talk slightly the still about are of couple commodity XXXX? given next quarters My is hello. should pass-throughs. about commodity now also tracking and the the we versus think price deflation on how Hi, Can in you deflation question price or first deflation Are commodity entering positive? and XXX% pass-through you pass-through you

Bill Waltz

David, answer? you to want do Yes.

David Johnson

can start. we Yes,

that, the the line EBITDA see around can impact Slide $XX million bridges was that back on Deepa, going million. line was you commodities on So $X sales to Atkore our and on X, on

to through say our commodity that prices accordingly passed would able adjust or cost. were So we with we our I

Although, couple positive it And actually a years be some record are And X. year-to-date positive. plus of will of remember, X, are we increases quarters, minus year-to-date, versus we year-over-year.

So going XX. that the said year into we year, a would negative the have full be

QX Now the to situation. it but bit of even unfavorable, that. lot will than And sequential favorable COVID, be to of a any kind is year that’s be little with we comparable last with will more a do

Deepa Raghavan

Atkore place Okay, renovation you term? near you construction the us, side is for Can the cycles remind crunch new working renovation Atkore, also, got about fair. to versus down it. And can specifically? Bill, towards mix in how is what of That’s itself favorably talk

Bill Waltz

a broke you up bit. little Deepa, Okay.

David Johnson

Renovation versus...

Bill Waltz

Oh, renovation, market, apologize. obviously, you XX% David. to a if a and that be headwind– walls tailwind going don’t think be open Thanks, in I it of think Renovation from as whole or will of office wrong, probably workspaces standpoint so and office I the buildings, Purely sorry. the about the people that XX% renovation, I for buildings, forth. said us, building offices, many are think and structured to but I

with So tougher will it’s that have through is numbers just or I growing, how markets. always think initiatives, little be work for on precise much again, of should more to think pickup. we products the or it how pool just then selling do I with but a good. some us get products It’s distributors distributors our any better the growth than and we And and will we labor contractors our through savings these

David Johnson

kind period. last, Yes. technical are in the come a time of you ahead say, this distributor of And when sales of Deepa, ground more remember, about on think, Those I the folks the even talked managers lot investing we up. projects if year in

our those of at of So share will us capture resources help there having opportunities. I certainly those those least any opportunities, think out

Deepa Raghavan

it. Got

How to environment? thinking Just current the final are my switching M&A Thanks. you And capital that’s deployment. in about gears question. continuity

Bill Waltz

Yes.

but moving obviously the months hard we again. of are starting back we we to to look. a in locations. even mean are couple here a stopped, I paused. with But of last couple to never It’s COVID really little So fly we ahead

leverage talked System things: is still responsible? the think in Atkore key Is the I’ll with it ratio – continue we I and that discipline be answer words, absolutely. the four we plug for be management do bandwidth? So does Will it make about synergies? have again to have will have the past. the we other is debt And Business a In strategic? always the and keep to X.X it

process. next money I or think, spend There’s continue So million said, $XX will is throughout the spend in deployment, And million. maybe the well, around and we XXX acquisitions $XX today, pipeline. and will ones least take, we so will with that we’re and shareholder our generically forth. we at there in be It the give if there depends working is year internal million, prudent for capital we $XXX CapEx as on deal buyback right to the

Deepa Raghavan

Okay.

I pushed continue this or the of to your hasn’t up to right like and are materialized So guess, some looking, will still – message. be anything you the pipeline full that’s that? the really targets Nothing COVID

Bill Waltz

including both wouldn’t that. not Like, ways. say employees know a No, I’ve questions from don’t had I buying really. if and I’d No, say. – I spree? is this hey,

of On had a months, the in back process. don’t the couple things we’re same for we hand, I but off. pushed think We

a routine, System, for of the the we specific initiatives I’m Atkore Other leaders have the of Atkore to one really, looking call. way challenge there, all really execute that have challenge, than finance – is the a our of employees, I a of of System, changed. our regular met we’re our – just investors with and out couple it, I yesterday it. the We drumbeat our continuing Business COVID. status there Business at with It’s have not details. on monthly

like centers. drumbeat M&A, facet data moving to forward organization the of to be focus branding are every going extra that with to new to on are the We by things internally, on investments growing, from talent drumbeat

it’s we be to continue will Atkore. So and Atkore

Deepa Raghavan

pass much. on. very will you I it Thank

Bill Waltz

Deepa. Thanks,

Operator

comes of Walsh Our Suisse. John next the from question Credit line from

open. is line Your

John Walsh

good Hi morning.

Bill Waltz

John. Good morning,

John Walsh

we look already of lot But one market, questions data the heard consistently to center, tough call. a warehouse. thing on forward of the So have is

your products? Can leadership even a office change changes seen and you how discernible versus verticals big that last if different your year probably leading what be or to we hotel it’s mix talk is for before. impacts warehouse in any if going in there’s year have a versus mix next there So about versus an

Bill Waltz

answer to going The mentioned, into for great things year, Yes. for And should data neutral. us. about also think you you the electrical other that Health is words, that care, next following just think In centers, slightly if up of great positive the just things. be all us.

it’s the going very model other the a much it. footage, And this positive but of confident I’m of to And not to mix share a just teams, up we phenomenon. discussion, which it’s vertical some then is of not data helpful, but and so lot how to So there, lot new a hand, our be markets. our of overall, very on lot warehouses, as center square again, of electrics, I in, in those that’s growing because wouldn’t get increase any effort also, of a is massive John, unfair

we So effort. go more for we’ve And I now. on see a think you’ll as couple forward, been it years of focused

John Walsh

about next year? that kind way there volume, And us for truly then as that’s a Is we think the a Great. there think And cost a on, to the control items, where into of a parts so we as about year, couple whether use is as think avoidance, to are just such of a then going variable to some the variable maintain T&E, these very help around like about that’s tight stuff you next structural etcetera? bucket, of compensation potentially questions with construct far put to moving way employees?

David Johnson

Yes.

you’re quarter, give around others us such of – productivity, the the by that’s investment goes There’s don’t P&L when still we more back normal outlook next and that T&E. fact think to come want there’s provide that we be medical And with going our to color will definitely for which productivity be we right, to items. going whatever. next those that our IV. in to individual there’s sight lose into part have capital, projects, like controllable year as then And I going are we

monetize quarter, we minuses give will we and pluses our next So all when outlook year-over-year. those

see going we guidance now, digits it appropriate give As year, felt around in at we of so talking year. and been to of were you lot we we the about have we next the for were what right some a get market into that what of that’s around the low that what questions what mid-single least about going and thinking market knowing next was have to

John Walsh

Great.

look forward the that to next color. will discussion Appreciate quarter. We

David Johnson

John. Thanks,

Bill Waltz

Thank you.

Operator

further back have the to I’ll call We questions remarks. in Waltz queue for today. no closing turn Bill

Bill Waltz

Great. Thank you.

Before we me summarize discussion. let takeaways conclude, key today’s from three

System. the in First, delivered the we focus the strong of Atkore commitment are the result results solid and to teams from our third quarter operational our the Business

financial we with Second, quarterly conditions support cash call growing third, the concludes you to $XXX our we we necessary for the managing are the want are in call. in for This through the thank employees we speaking great to you for next future while that, steps and and forward to current interest a position with position of and million. make also our look it With Atkore even stronger. today. taking your And keep business safe during truly the

Operator

Ladies today’s Thank conference call. participating. and for you gentlemen, this concludes

You may disconnect. now

Atkore (ATKR) 8 Aug 202020 Q3 Earnings call transcript