Atkore Inc. (NYSE:ATKR) Q1 2024 Earnings Call Transcript February 1, 2024
Atkore Inc. beats earnings expectations. Reported EPS is $4.12, expectations were $3.62. Atkore Inc. isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good morning. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to Atkore's First Quarter Fiscal Year 2024 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. Thank you. I would now like to turn the conference over to your host, John Deitzer, Vice President of Treasury and Investor Relations. Thank you. You may begin.
John Deitzer: Thank you, and good morning, everyone. I'm joined today by Bill Waltz, President and CEO; as well as David Johnson, Chief Financial Officer. We will take your questions after comments by Bill and David. I would like to remind everyone that during this call, we may make projections or forward-looking statements regarding future events or financial performance of the company. Such statements involve risks and uncertainties such that actual results may differ materially. Please refer to our SEC filings and today's press release, which identify important factors that could cause actual results to differ materially from those contained in our projections or forward-looking statements. In addition, any reference in our discussion today to EBITDA means adjusted EBITDA.
And any reference to EPS or adjusted EPS means adjusted diluted earnings per share. Adjusted EBITDA and adjusted diluted earnings per share are non-GAAP measures. Reconciliations of non-GAAP measures in the presentation of the most comparable GAAP measures are available in the appendix to today's presentation. With that, I'll turn it over to Bill.
Bill Waltz: Thanks, John, and good morning, everyone. Starting on Slide 3, Atkore is off to a strong start for FY '24, and we are demonstrating the structural improvements and transformation that we made to our business over the past several years. I'm proud to share that volumes for the quarter were up 13%, driven by contributions across all key product areas. We're focused on executing our capital deployment model as evidenced by the $96 million in shares repurchased in the first quarter and the continued activity in January. In addition, I'm very pleased to announce that we've officially declared our first quarterly dividend, a very exciting achievement for our company. I also want to highlight the release of our fiscal year 2023 Sustainability Report, which was published last month.
This report provides an update on the progress against our 2025 targets and covers additional important topics and initiatives. I'd like to take a moment to thank all of our employees for everything they do to support our key stakeholders. Overall, in fiscal 2024, we're off to a great start, and I continue to be excited for what's to come. With that, I'll now turn the call over to David to talk through the results from the first quarter and our outlook for the full year.
David Johnson: Thank you, Bill, and good morning, everyone. Moving to our consolidated results on Slide 4. In the first quarter, net sales were $798 million and adjusted EBITDA was $214 million. We are pleased with our margin performance in the quarter with adjusted EBITDA margins over 26%. Our tax rate in the quarter was favorable due to the vesting of previously granted stock compensation. This outsized benefit was unique and contributed to our strong EPS performance. Moving forward, we expect the rate to be closer to roughly 25% for the remaining quarters in the year. Turning to Slide 5 in our consolidated bridges. I'm pleased by our strong volume performance in the quarter with organic volumes up over 13%. These gains were offset by the continued pricing normalization, but this impact was within expectations and aligns with the pricing trends we have been discussing for the past several years.
Moving to Slide 6. We're making good progress against the low double-digit volume expectation for the full year, with solid contributions across all key product areas. Our plastic pipe and conduit category was up high-single digits, led by solid growth in our PVC products. Across our electrical-related categories, volumes were slightly higher than anticipated in Q1 and several large customers met their calendar year-end rebate levels. Looking ahead, we expect Q2 to be softer than Q1 in terms of year-over-year volume percentage growth due to this timing of purchases at year-end and the recent severe weather conditions that have unfavorably impacted our January performance. Turning to Slide 7. Both segments had positive volume growth in the first quarter.
Margins compressed in our Electrical segment with the previously mentioned pricing normalization that remained very strong at 34%. We also faced some year-over-year margin compression on the S&I side due to a cost comparison versus the prior year and the planned start-up costs in Indiana to support the volume ramp. Turning to Slide 8. We continue to execute our capital deployment model with cash generated from the business, and our balance sheet is in tremendous position with no maturity repayments required until 2028. Next on Slide 9, I am pleased to highlight a significant milestone for our company with the upcoming payment of our first regular quarterly dividend. Earlier this week, Atkore's Board of Directors approved the first quarterly dividend payment of $0.32 per share.
This achievement was made possible by our sustained performance over a multiyear period and our confidence in the future. Now for our fiscal year 2024 outlook on Page 10. Our expectation of low double-digit percentage volume growth for the year remains on track. Also, with our strong EPS performance in Q1, we are increasing our full year estimate accordingly. As previously mentioned, our performance in January was impacted by several factors, including the adverse weather conditions in many parts of the U.S. This is affecting our estimates for Q2, but overall, we are maintaining our outlook for full year net sales and adjusted EBITDA. Also, as we've discussed before, we've always built in an expectation that the back half of the year will be stronger than the first half for two main reasons.
First, as we are ramping up these new facilities, our volume from these sites will steadily increase throughout the year. And second, our overall business is always stronger in the spring and summer construction seasons versus the fall and winter. Therefore, we expect adjusted EBITDA to improve sequentially from Q2 to Q3 and then Q3 to Q4. With that, I'll turn it back to Bill.
Bill Waltz: Thanks, David. We are very pleased with what we've accomplished this quarter and our outlook for this fiscal year, but we're even more excited about all the opportunities ahead. Moving to Slide 11. As we've said before, the electrical industry is a great place to be. It's difficult to find a building or infrastructure project that does not require Atkore's products. With over 90% of Atkore's product portfolio supporting electrical infrastructure, we are well-positioned to benefit from the strong electrical trends projected across numerous end market categories. On Slide 12, we've analyzed product volume data to determine estimated density across key end markets. With anticipated growth in data centers, manufacturing, lodging, health care, education and multifamily over the next five years and Atkore's ability to deliver a wide range of products that each of these buildings need.
I am again reminded that Atkore in electrical industry overall is a great place to be. Better yet, consensus agrees. Experts and peers across the industry also have a positive outlook on 2024 and beyond. In addition, with several other major public electrical contractors and electrical peers reporting record backlogs and project positive growth, it reinforces our confidence in the future for this industry. With that, we'll turn it back to the operator to open the line for questions.
