Gibraltar Industries, Inc.

Greetings, and welcome to the Gibraltar Industry's fourth quarter 2020 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Carolyn Capaccio of LHA Investor Relations. Thank you. You may begin.

Thanks, Christine. Good morning, everyone, and thank you for joining us today. With me on the call is Bill Bosway, Gibraltar Industries President and Chief Executive Officer, and Tim Murphy, Gibraltar's Chief Financial Officer. The earnings press release that was issued this morning, as well as the slide presentation that management will use during the call, are both available in the investor info section of the company's website, GibraltarOne.com. Please note that Gibraltar has classified the industrial business which was divested on February 23, 2021, as a discontinued operation with fourth quarter 2020 results. Excuse me. Additionally, Gibraltar's earnings press release and remarks contain non-GAAP financial measures. Tables of reconciliation, including GAAP to adjusted financial measures, as well as continuing and discontinued operations, can be found in the earnings press release that was issued today. Further, results of TerraSmart, which was acquired at 11.59 p.m. on December 31, 2020, had no impact on operations in 2020 reported results. As noted on slide two of the presentation, the earnings press release and slide presentation contain forward-looking statements with respect to future financial results. These statements are not guarantees of future performance, and the company's actual results may differ materially from the anticipated events performance, or results expressed or implied by these forward-looking statements. Gibraltar advises you to read the risk factors detailed in its SEC filings, which can also be accessed through the company's website. Now, I will turn the call over to Bill Bosway. Bill?

Thanks, Carolyn. Good morning, everybody, and thanks for joining the call this morning. I hope everyone is remaining safe and healthy and navigating through some of the recent winter weather that we've all experienced. Let's start with an overview of our 2020 full-year and fourth quarter results. And then Tim's going to provide more detail regarding our Q4 financials. And then I'll circle back with you and review our strategic priorities and full year guidance for 2021. And then we'll open the call for your questions. So let's turn to slide three, 2020 results. You know, excuse me, overall, we delivered record results in 2020 while remaining very focused on the health and well-being of our of our people, of our operations, our customers, and obviously the communities we operate in. For the full year, revenue increased 15%, GAAP EPS increased 38%, and adjusted EPS increased 18%. And GAAP operating margin improved 140 basis points, and adjusted operating margin improved 40 basis points to 11.3%. And our return on invested capital improved to 17.6%. up over 180 basis points versus 2019. So, you know, despite a challenging and I'd say relatively dynamic environment in 2020, you know, we executed well on our key initiatives. We generated strong cash flow, and we continued to improve our operations. We also invested in our organization, adding talent and accelerated our education initiative. We deployed additional digital and IT systems and tools, and we made five acquisitions to strengthen our leadership position in and relevance in our key markets. We acquired Thermal Energy Solutions, a leader in the commercial growing infrastructure market, Delta Separations, a leader in process and extraction equipment for mailboxes, a leader in high-end mailboxes, and TerraSmart and Sunfig, respective leaders in the solar energy space. And as mentioned at the start of the call, we also announced the sale of our industrial business earlier this week and classified the business as a discontinued operation. with our fourth quarter results. So a lot of important initiatives completed during the year really focused on supporting our objective of increasing participation in higher growth, higher margin markets. Now let's talk about the fourth quarter. We delivered solid results while operating what I would say was probably the most dynamic period of the year for us. The pandemic was starting to peak with record level infection rates across the country. Key commodity prices began to inflate. It started to see some solar panel supply challenges surfacing and a few customers experiencing some permitting delays. And then all this was wrapped up around a pretty abnormal and anxious holiday season for many folks. Now, that all being said, as we emphasized with the team throughout the year, we stayed focused on what we can control and do it the best we can. And for the quarter, revenue increased 17.3%. really driven by good growth in our residential products and also from acquisitions made in both mail and package and the growing and processing business. Our residential products business really continued its execution momentum, delivering solid margin results consistent with the performance we have seen throughout the year. Gap EPS increased 15.2%. Adjusted EPS, 3.5%. But our GAAP operating margin declined 40 basis points, and our adjusted operating margin declined 100 basis points to 9.6%. So let's talk about our margin performance in the quarter, which is really driven or impacted by a couple of market dynamics, one in our solar energy business and the other in our growing and processing business. So let me start with the solar businesses. For some context, in 2020, we shipped and deployed approximately 1.5 gigawatts of solar infrastructure to over 1,000 different projects across the U.S., mainly supporting the community and commercial and industrial segments, the smaller midsize projects. During the fourth quarter, we had a portion of our then active 325 projects representing between 50 megawatt and 70 megawatt due to some solar panel availability and a few local permitting issues. As a result, we had some projects and therefore revenue margin move into 2021. Now the panel supply issue, which has been driven by some shortages of key components, particularly polysilicon, but also glass and some silver paste, as well as really robust growth and demand across the global solar energy market, should improve. should continue to improve, I would say, in the first half of 2021 as some of this capacity comes back online. The second factor, which we have been dealing with over the last three quarters, is related to our hemp and cannabis markets where, as you know, we provide greenhouse growing structures and processing equipment for oil extraction. Demand was less than expected in the fourth quarter, but we saw an uptick in customer activity in early December, a similar pace to actually pre-pandemic levels as we enter 2021. And as I mentioned in our Q3 earnings call, we expect this market to recover throughout 2021 and our business to resume growth and deliver better results as well. Despite these two challenges in the quarter, we do have strong momentum entering 2021. Our demand profile is very positive. with our overall backlog approximately $300 million, up 50% versus Q4 2019, which includes the acquisition of TerraSmart, but also up 26% without including TerraSmart. And there are two important things I want to make sure that I note regarding our backlog. First, our backlog has always been highly correlated with actual demand across our business. And second, to actually be included in our backlog, we have to have an executed valid commercial contract. that's been reviewed internally, approved, and signed by both a customer and Gibraltar, and a down payment of up to 50% of the contract value must be received or be in hand. Any other customer activity and or potential projects that are in our funnel are scoped and they're tracked, but they're not permitted to be included in our backlog without meeting the above criteria. So let me finish this slide with a couple comments regarding our recent acquisitions of Terrismart and Sunfig. We are obviously very excited about adding these businesses and our integration process with both teams is in full swing. As I discussed during our January call announcing the deals of TerraSmart and Sunfig, these businesses really help us accelerate four key initiatives in our solar business. First, it does strengthen and help us scale our position in a relatively large market, $4.7 billion domestic solar market, which we see growing at 10% to 15% per year. It really broadens and creates the best portfolio, we believe, of racking system and foundation technology infrastructure, but also electrical balance of systems and design software solutions. It supports our vision and mission to accelerate making solar energy readily available everywhere, and it enhances our revenue growth and margin profile as we build our leadership in faster-growing, more profitable markets. So before I turn it over to Tim, I do want to – Say a big thank you to everyone across Gibraltar for what the team does each and every day and its support and dedication for each other, their families and their communities we operate in, and for the journey we're on. You know, 2020 was a challenging year on so many fronts, and our team responded in a way that honestly makes me incredibly proud to be part of the organization. You know, I'm fairly confident all our stakeholders feel the same way. So now let's... Let's turn to slide four, and Sam, take it away.