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.

Thanks, Bill, and good morning, everyone. I'll take you through our consolidated and segment results. My discussion covers results from continuing ops as we classified the industrial business, which was divested on Tuesday as discontinued operation for 2020. I'll also provide more color on this divestiture shortly. And as a reminder, TerraSmart had no impact on our income statement in 2020, as we acquired the business at the end of the day on December 31st. The acquisition of TerraSmart is reflected in our year-end balance sheet and cash flows. So going to consolidated, consolidated revenue increased 17.3% driven by growth in the residential products and renewable energy and conservation segments, which offset a revenue decline in the infrastructure segment. Organic revenue growth of 3.6% was driven by continued execution and very strong demand and participation gains in the residential product segment, which was partially offset by organic revenue decrease in renewable energy conservation and infrastructure cycles. We generated 13.7% growth from our first quarter 2020 acquisitions of thermal energy and delta separations, and our fourth quarter 2020 acquisition of architectural mailboxes. Total backlog at quarter end, including Terrace March, was approaching 300 million, up 50% from the prior year, by continued end market demand in our renewable energy conservation segment, and to a lesser extent, demand in our infrastructure segment. Consolidated gap operating income was up 12.4%, and adjusted operating income increased 5.8% in the fourth quarter. Consolidated gap in adjusted EPS grew 15.2% and 3.5% respectively. The increase was a result of organic growth, continued margin expansion in the residential product segment, Product and services mix, effective price material cost management, and ongoing benefits from operational excellence initiatives. As a result of the industrial business divestiture included in the fourth quarter 2020 loss from discontinued operations of $26.1 million, there's a $29.6 million non-cash loss related to the disposal of this business. Now, let's review each of the three reporting segments starting with slide five, the renewable energy and conservation segment. Segment revenue increased 11.8% driven by our recent acquisitions. Organic revenue slowed 11% during the quarter, driven by a few market factors. Solar energy customers experienced unanticipated delays for their existing projects related to solar panel supply challenges and building permit delays, pushing projects scheduled for the fourth quarter into 2021. In the growing and processing business, the slow market for greenhouse structures and processing and extraction equipment serving the cannabis and hemp markets that we've seen over the past two quarters persistent. These markets are improving. The renewable energy business's margin performance was impacted in the quarter by the reduction of solar volume as the existing projects moved into 2020. Again, we accept the solar panel supply challenges to subside in the first half. On the conservation side, margins were impacted by COVID-19 related to later integration plan of thermal energy due to mandated visitation and travel restrictions between the U.S. and Canada, where thermal is located. Current market conditions for greenhouse structures and processing equipment for cannabis and hemp also negatively impacted margins in the quarter. Total segment backlog continued to grow, increasing 55%, including the terrace mark, with a core growth of 22%, pretty equally split between the solar and growing and processing, driven by continued strength in both end markets, with TerraSmart accounting for the remaining 33%. In early December 2020, the existing industry federal investment tax credit, which was slated to step down from 26% to 22%, was extended through the end of 2022, which is positive for the business. The pipeline of projects, And these are projects in the sales funnel but not yet signed at the contract stage. For both the solar and growing and processing businesses, heading into 2020 is very strong. Let's move to slide six to review our most recent acquisition. As expected, TerraSmart generated 2020 revenues of $157 million and adjusted EBITDA of $26 million. Again, TerraSmart's results did not impact our Q4 reported results. The inclusion of TerraSmart brings the renewable energy and conservation segment to approximately 51% of Gibraltar's total consolidated 2020 revenues on a pro forma basis. And as we discussed in January, on the left side of this chart, we show the historical pro forma and anticipated progression of our solar energy business, which sits in the renewable energy and conservation segment. On a pro forma basis for 2020, our solar energy business had a revenue run rate of roughly $400 million, with adjusted operating income margins in excess of 12%. Over the next five years, we expect this business to continue to grow at a significant pace and expand its profitability, driven by the backdrop of expected annual market growth in the range of 10 to 15 percent, developers increasing participation in community and utility solar through the broadest industry offering available, and commercial and operational integration to provide scalability and maximize growth synergies. From a consolidated perspective, we ended 2020 with just over $1 billion in revenue and adjusted operating margin of 11.3%. And on a pro forma basis, we exit 2020 with a revenue run rate of just under $1.2 billion and adjusted operating margins in excess of 11.5%. Let's move to slide seven to review our residential product segment. Segment revenues increased 26.7 from last year with the residential market strengthened by ongoing housing fundamentals and strong demand and participation gains across all channels. Organic revenue grew 21.4% and the acquired architectural mailboxes business contributed 5.3% to the growth. Gap in adjusted operating margins increased 280 basis points with consistent execution, volume leverage, price-cost management, and continued benefits for mid-20 issues. The organizational changes we made in 2019 continue to benefit these businesses, and we continue to improve processes and develop the organization. Let's move to slide eight to review our infrastructure product segment. As mentioned earlier, my comments covering the results from continuing operations and the results of the industrial business are included as discontinued operations. Segment revenue decreased 7.5% as the pandemic continued to impact existing and new project schedules, especially with our airport runway maintenance customers, where customers have delayed spending. Infrastructure backlog improved modestly, and bidding activity is approaching record levels in 2021. Adjusted operating margin was up 60 basis points through strong execution in our fabricated product lines, which offset a decline in our higher margin non-fabricated product lines. Let's move to slide nine to discuss the industrial business divestiture. First, I'd like to thank the team of these businesses for all their efforts over the past 15 years of our ownership and to wish them continued success. This team did a great job embracing 80-20, optimizing their operations, and focusing their efforts on higher margin opportunities. This divestiture is a direct result of the portfolio management pillar of our strategy and committed to a plan to sell these businesses during the fourth quarter and therefore report them as discontinued operations in our 2020 results. We completed the sale on Tuesday, receiving net proceeds of approximately $38 million, approximately $25 million in cash, and a $13 million note secured by real estate. We recorded a non-cash loss of $29.6 million at December 31st to reduce the book value of the net assets to estimated realizable value. And the industrial business for a full year and fourth quarter, prior to reporting the non-cash loss, generated revenues of $129.9 million and $30.8 million and adjusted operating profit of $13.9 and $4.1 million, respectively. Let's move to slide 10 to discuss our liquidity position. Our free cash flow of $76 million in 2020 was negatively impacted by our planned investment in thermal energy working capital of $42.4 million. On the M&A front, as previously reported, in October we paid $27 million for architectural mailboxes, and in December we paid $3.75 million for Sunfig and $228.2 million for TerraSmart. TerraSmart consideration included an $85 million draw on our revolver and the assumption of $0.6 million of debt, with the remainder financed through cash on hand. At December 31st, we had $309 million available on our revolver, cash on hand of $32 million, and our leverage was approximately half a turn. We continue to expect to repay our revolver within a year using cash flow generated from operations and the proceeds of the industrial sale. And with respect to the industrial divestiture, we use net cash received approximately $25 million to reduce outstanding debt. A $13 million note secured by real estate matures in five years. Given our strong operating cash flow and relatively modest capital expenditures, we continue to have ample liquidity to invest in our operational excellence, growth initiatives, the development of our organization, and the repayment of debt. We remain active in M&A discussions and continue to remain focused on managing our working capital. Now, turn the call back over to Bill.

Thanks, Tim. Let's turn to slide 11, and I'll give you an update on the recent actions supporting our three strategic pillars. First, let's discuss our business system. Our focus on executing our pandemic playbook continues and will remain throughout 2021. We obviously must maintain the best and safest work environment for our team so we can execute consistently and continue to support our customers. In 2020, we invested more in digital IT systems, including ERP projects, CRM implementations, remote management capability, and cybersecurity to protect how we do business, and we will continue to invest in 2021. The raw material inflation and availability environment will continue to be dynamic throughout 2021. Our businesses have been implementing actions to minimize and offset this headwind through supply chain planning, price management, productivity initiatives, and 80-20 projects. Our second pillar, portfolio management. In 2020, we built stronger positions in our solar energy, growing in processing and residential products. businesses with five acquisitions. We made significant progress integrating our new companies, even with pandemic-related restrictions, and our progress will continue in 2021. We also divested. As we mentioned, our industrial business enabled us to allocate more time, talent, and energy to our faster-growing and more profitable businesses. And third, organization development. In 2020, we added significant talent to the team, upgrading and filling gaps in sales, marketing, human resources, engineering, and digital IT and cybersecurity. We execute our digital education initiative covering ethics, compliance, and diversity, equality and inclusion, and cybersecurity with approximately 20,000 hours of employee training, and we expect to complete another 25,000 hours of training in 2021. We are really building a diversity of thought mentality into our organization, building a team, and creating an environment for our people to grow and have success. And in 2020, 50% of our management new hires were classified as diverse. Let's now walk through our 2021 priorities. I want to start with a quick summary for each business, and we'll start with our renewables and conservation segment. So let's turn to slide 12 and talk about our solar energy priorities. The U.S. solar market is expected to remain robust and has several positive drivers supporting its long-term growth. Since 2015, our solar business has grown 17% to 18% per year. With the acquisition of TerraSmart and Sunfig, as Tim presented earlier, We really expect to drive significant performance improvement in this business over the next two to three years. Obviously, it starts in 2021 with successfully integrating TerraSmart and SunFig and scaling our processes and systems and the organization to support increasing demand. We are also excited to have a strong portfolio with electrical property, including tracker and canopy solutions, and I expect us to remain very active in further broadening our platform with additional investments in technology, software, and services. Let's turn to slide 13 and review our growing and processing key priorities. The market for growing food, cannabis, and flowers in an environmentally friendly way without the use of pesticides 12 months a year in any region of the country continues to gain momentum. I'd say demand for commercial growing structure square footage is increasing 6% to 7% per year, and we see additional investment supporting this market going forward as well. Consumer demand for healthy food and cannabis-based products to drive health and well-being, both physical and mental, is growing at an impressive rate. Like our solar business, our key priorities are to complete the integration of our recent acquisitions, thermal energy, delta separations, and APEX Supercritical, and scale the business and deliver growth and margin expansion. In 2020, we added strong leadership to the team, implemented a scalable organization structure, and started implementation of ERP and CRM systems. In 2021, we'll continue these efforts and further build out our project field management capability to deliver the best customer experience in the industry. Let's move to slide 14 to discuss our priorities for the residential business. We expect the residential market to remain relatively strong in 2021, both in new construction and repair and model segments, and we participate well in both. The fundamental market drivers, supply, demand, interest rates, other incentives continue to be favorable and are expected to offset I believe potential price inflation headwinds during the year. Our key priorities reflect continuation of our focus that we had in 2020. We're going to expand our participation gains in different channels and geographies, deploy our digital systems for better customer experience, connectivity, and reducing channel costs, and closely managing pricing, material cost inflation, and driving additional 80-20 productivity initiatives. Let's move to slide 15. We'll discuss priorities for the infrastructure business. We do expect infrastructure market to benefit from a federal infrastructure spending bill anticipated from the Biden administration, as it should provide more clarity around funding and support for state department transportation groups on existing and new projects. As well, a federal bill will accelerate private-public partnership initiatives as it has in the past. Our priorities with or without a spending bill are to support our existing and new high-speed rail projects with our new IP bearing technology, continue our operations and supply chain improvement, effort to drive growth and margin and expand our high margin sealant and coating business at airport runways, parking garages, and other infrastructure markets as they start to recover in the second half of 2021. So let's turn to slide 16 just for a quick recap of our 2021 priorities. First, scaling and improving our renewables and conservation business. It's about integrating our acquisitions for our plan. executing our record-level backlog flawlessly, continuing to build organization capabilities at tools and processes and systems, and strengthening the portfolio further with technology, IP, software, and services. Secondly, just improving overall execution across Gibraltar around health and safety, 80-20, productivity, quality, and new product development. Third, really proactively managing and optimizing our supply chain around today's material inflation environment, and supply challenges. Then fourth, continue to conduct business in the right and responsible way by driving our environmentally sound solutions, investing in our communities where our people live and work, and obviously trying to create the best environment for our people to have success. So with that, let's move to slide 17 and discuss our outlook for 2021. So, you know, although we are dealing with some short-term market challenges, we enter 2021 with good momentum across our businesses. We have confidence in our end markets. and a strong backlog that supports and correlates with real demand. We will continue to execute our operating playbook. We're going to maintain a safe environment for our people, obviously work closely with our suppliers and support our customers. As a result, I am confident we will deliver our full year growth and margin expansion in 2021, and our full year guidance is summarized as follows. Consolidated revenue is expected to range between $1.3 billion and $1.35 billion. GAP EPS is expected to range between $278 and $295 compared to $253 in 2020. And adjusted EPS is expected to range between $330 and $347 compared to $273 in 2020. So while we are returning to providing full-year guidance, at this time we are not providing outlook for the first quarter as we have done in the past. As I discussed, we expect the overall environment and some of our specific supply challenges remain somewhat unpredictable in the first half of the year, but clarity increasing as we move through the year. Regardless of the quarter-to-quarter cadence, we have confidence in overall 2021 outlook, and we will remain focused on executing our plans and delivering our full-year plan. So with that, let's open the call for questions.

Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Thank you. Our first question comes from the line of Daniel Moore with CJS Securities. Please proceed with your question.

Bill, Tim, good morning. Thanks for taking the questions. Good morning, Dan. I want to start with renewables on the solar side. Is it possible to estimate the revenue and margin impact of the customer supply chain shortages in Q4? How much lingering impact is likely in Q1?

Yeah, what I'll say, Dan, is it was significant. That's why I wanted to call it out today and talk through it. It's over a few projects. We don't have complete clarity on the exact amount outside of it being significant, and the reason I say that is each of the projects were in different stages. In terms of when they flow into 2021, we're monitoring that. It may be Q1. It may be Q2. It varies project by project, and it's case by case. Each project's a little different scenario. In some cases where a customer has had a panel availability issue, they may switch to a different panel module. When they do that, it causes redesign with racking systems, all the things that we do, and that causes a certain type of delay. In other cases, if a customer just says, hey, I don't have my panel and I'm going to delay, they'll work their supply chains to try to get those panels in, and that will be a different type of delay. In terms of when it actually flows through, those projects are existing, they're out there, they're in process, but it's going to be a combination of flowing into Q1 and some into Q2.

That's helpful. And maybe if you could just elaborate on the permitting challenges that you mentioned and where are those and what is the likelihood that those challenges linger beyond a quarter or two?

I think the supply of solar panels is a temporary situation, but it's driven by some specific things that are being rectified. We didn't really see much of that. We have a thousand different projects in flight and 350 going on at one time. What we're really dealing with is 350 different supply chains managed by individual developers and customers. Same with permitting. We deal with permitting issues all the time. And so it wasn't – I wouldn't say it was a big surprise that we would experience it. I think it's where it happened and what projects it happened on that was impactful to us in the quarter. And they came late. And they happened to be on some relatively larger projects. And, Dan, you know from our history, you know, we've always been in that more of a community solar space, which is kind of 5 megawatt or 3 megawatt and smaller. Our strategy the last couple of years is to move up into some of the bigger projects. And so the makeup of our 350 projects in the quarter, still very heavily weighted towards smaller size, but we do have more larger projects. And some of those were part of that 50 to 70 megawatt group that got moved. And when you move two or three of those, it's pretty impactful. We've got a list of each project that moved, and it's a different story for each of the delays. Those permits will come through, and they'll get back on track. It's just a story for each one is the way it actually works.

Helpful. More from maybe a longer-term question. On the longer-term outlook for renewables, I think you stated pro forma margins in 2020 above 12%. and would improve as volume grows. What adjusted operating margin range is associated with the $700 million revenue target for 2025, and do we think of that as sort of straight line improvement, step function, just any thoughts there?

Well, I will say in general, I'll let Tim comment here too, but I would say this. There's a combination of things that will drive our margin enhancement. Obviously, volume helps, but When you think about how we integrate and scale the business, there will be some step function improvement based on processes and systems, both in our facilities with our supply chain and in the field. So it's going to be a combination of things that are going to drive our margin enhancement. Go ahead, Tim.

Yeah, and Dan, the 2025, we said we'd be 15% plus is our expectation.

Got it. That is still the case. Okay. Thank you. I'll jump back with any follow-ups.

Our next question comes from the line of Ken Ziener with KeyBank Capital Markets. Please proceed with your question.

Good morning, gentlemen. Hey, Ken.

How are you?

I'm well, thank you. What a year 2020 was for your company. So many moving parts. First, I think you guys did a very good job opening up your portfolio and how you're thinking about it because there is a lot that's happened at your company to say the least. I guess let me start with the legacy piece because that's going to be the easiest here. Residential. Doing quite well. I don't know, Tim, if you want to kind of just talk about end market demand there and perhaps a first versus second half, you know, sense of where the market is. You know, Home Depot earlier this week just said no guidance. So, I mean, I get it. It's a tough end market to figure. But if you could shed some color in terms of, you know, revenue, mix, margin, trajectory, anything like that,

I would say generally we think, you know, housing remains pretty strong. You know, the repair remodel, which is, you know, going to be the driver of the bulk of our business, you know, no indication that that's going to change. So we expect, you know, we got participation gains last year and we didn't have them all year, so we expect revenue growth from that. You know, kind of like It's not going to expand like it did 19 to 20. I wouldn't expect us to repeat 20 to 21 on growth or margin expansion, but our goal is to grow our businesses and make more money every year.

Do you think the back half, not to put you guys on the spot, but a large supplier like Stanley Works talked about, high growth in the front half of 21, but actually being negative in the back half of 20, 21. Is that a possibility given the 20%? Cause I know we talked about your real share gains that you had because you guys didn't shut down operations like other people. So you gained share. Could you maybe qualify how much of that, you know, 12% gain, you know, growth you had this year might've come from share gains or just some way to think about how you improved your position because your operations are better. for Spears as opposed to just a macro tailwind?

It's a combination of all three. We started working on the businesses back in 2019 and started going after some additional customer opportunities once we sort of fixed some of the things in the background. So it's hard to say how much is specifically you know, incremental stores versus same store volumes. It's a mix of that, and then the operations are better structured for higher returns. So, you know, Ken, is it, you know, without giving guidance other than for the full year, not by segment, you know, I don't want to go too far, but, you know, we think it's a good market. We're not seeing, you know, we're not predicting a slowdown in what's there today.

Yeah.

Hey, Ken. Yes? Hey, Ken, just, you know, the one thing that we hear, and you may hear this from other folks as well, the second half of the year kind of may correlate a little bit with how the pandemic starts to subside over the next arguably six months or whatever time frame it's actually going to happen, but the access to having people labor to drive the residential construction market last year was plentiful because you had so many people coming out of the service industry when it was really hampered by the pandemic and moving into the residential construction industry where there's a ton of less skilled jobs available in the residential construction market. And so there was a huge labor supply going into that, which I think is what also helped keep the pace of residential going. And I think that's true going into the first half because of where we are on a global, you know, on a economic or broad economy basis in the U.S. As those restaurants and some of those service industries start to pick back up, you know, we have heard and people are concerned a little bit, well, we still have labor availability to continue to support the growth that's expected in the inherent demand for residential. So Yeah, there's some nuances like that to consider in the second half that may be what people are pointing a little bit to or concerned with. But from our perspective, you know, we see decent momentum starting out the year, and, you know, we're going to continue to do the things we talked about. So, you know, we'll see how that evolves in the second half.

Now, focusing on renewable, I mean – It's just amazing how far that business has come from where RBI was originally. I'm just thinking about communications. I think you guys are doing a very good job trying to illuminate your end markets that might not be so obvious to people. I understand FY21 guidance. I understand uncertainty around 1Q, clearly solar. vegetable, you know, cannabis, all the, all these markets seem to be, you know, in secular growth mode. Is there a way, do you think the inability to, or to give guidance, is there something structural about those businesses that we should really just think about, you know, your ability to offer quarterly guidance is not so much a function of, concern or business uncertainty as it is the nature of those businesses because I think investors are going to have to grapple with the fact like we always want quarterly guidance or you know we want you to know what's happening to the penny and is that is that something we should just accept because those markets move on such different you know cadences you know from backlog to I don't know I'm just interested in your thoughts because I think that's going to be one of the things that I certainly would struggle with relative to your older businesses is clarity, lumpiness, not the growth rates, not the structure, but just how we think about that. I appreciate it. Sorry about that broad question.

No, it's a really good question and I appreciate you asking it. Clearly, the makeup of the business is evolving to where we've got half our business now focused in these markets and they're project-based businesses and there's potential movement from one quarter to the next and we see that every now and then and It's a little less predictable. You know, you think over time as you grow in this space and you become more mature, you get a pattern. And so, you know, the one-time events or some disruptions here and there eventually start to wash themselves out. They do during the course of the year, but as you get a little bit bigger, which we obviously intend to do, I think you'll see less and less concern about that quarter to quarter. But, you know, the next couple of years, yeah, I think there's – there's going to be some of that challenge. The reason, uh, but that's not the reason we're not guiding right now by quarter. Uh, we're actually continuing to deal with just like everybody else. Uh, you know, infection rates still pretty high. There's still a lot of supply chain, uh, challenges out there and not related to, uh, those two markets. Uh, this, you know, huge weather system that just disrupted the, the U S is, uh, you know, been a challenge for a lot of different companies where, you know, people were mandated to be shut down for eight or 10 days if you operate anywhere near Texas or Kansas and all that good stuff. So, you know, we just have a number of things that I think are kind of unique, you know, things that are still out there. That's more of our guidance concern by quarter right now is just we need some of that stuff to settle. But inherently we think it will. And if you think about it this way, You know, last year, at this time last year, we started to see and hear a lot more about the pandemic. So going into, you know, at the beginning of the year, going into the year, you're thinking, oh, my gosh, what's going to happen? We feel like we're coming in the opposite direction now, where we're coming out of that and things are getting a little better. They're still challenging, but you have to, you know, we have to believe and we do believe that things are going to get a little more clear as we go forward. The economy should get stronger. you know, the vaccinations are coming, rolling out, the infection rates come down and that's going to have, I think, a big impact on just cadence and consistency around being able to predict some things that for the last 12 months, it's been a bit of a challenge. So it's a combination of things, but I do appreciate the question. I think as we build out our solar and growing and processing business, yeah, we'll have a little less predictability quarter to quarter. Um, And eventually that will have a cadence that's more consistent. But we will experience that in the interim, I'm sure.

Thank you.

As a reminder, if you would like to ask a question, press star 1 on your telephone keypad. Our next question comes from the line of Walter Liptack with Seaport Global. Please proceed with your question.

Thanks. Good morning, guys. Hey, Walt. Hey, Walt. And I wanted to ask an industrial question and make sure that I'm understanding the numbers of the business that you sold. So it looks like it was a profitable business that you sold. Is that right? Yes. What was the EBITDA level on it?

Well... So we gave you adjusted operating profit. It's probably a million and a half to two million in depreciation in there on top of that.

So 16 million. And then the sale price, I want to make sure I understand this, that was 38 million with some ties to a real estate transaction?

Yes.

Okay. Okay. Okay. So the multiple looks fairly low. Was this done under auction, or how was that decision made to defest it?

Yeah, so what's not reflected in those numbers that you just looked at was the way we've been really managing that business for the last few years, which was using it to generate cash and not necessarily reinvesting. So it's capital-intensive. And there is, you know, some deferred capital expenditures that need to be made. So, you know, when you look at the EBITDA that we generated, you have to sort of recognize that there's, you know, deferred CapEx. So it was an auction wide, and we went through that and really picked the best buyer.

Okay. Okay. And which businesses are you keeping?

Well, what's left is the infrastructure business that does expansion joints, bearings, and sealants for the, you know, highway and airport parking type market. Okay, right.

That's Diaz-Brown. That's Diaz-Brown. Well, yeah, that's what's left.

Okay. Okay. So this was the perimeter fencing business. uh and the architectural metals that was sold okay okay all right thanks for that and uh i want to go back to an earlier question about uh the renewables and i i wasn't sure i heard the answer about the um uh the project delays um you know what you know i think you said it was significant i don't know if you gave a dollar amount or a ballpark of how much revenue and profit shifted from fourth quarter into next year?

Yeah, I didn't give a dollar amount. It was significant. You know, for us, 50 to 70 megawatts is a pretty significant number. But I didn't give a dollar amount because I'm not sure exactly where it's going to land. It's going to be the Q1, Q2. But it was, I would say, significant relative to the results on Q4 for the solar business. And... uh it really comes down to four or five projects that were of decent sized projects bigger than what we traditionally have done uh or would have been able to support which has been you know part of our strategy to get into some of those mid-sized projects and a couple of those uh were delayed because of panels it just didn't show up and then we had uh two of them that were delayed just on a permitting issue um so you know that that'll all be worked out it's not a demand We definitely don't have a demand issue. It's just the time element. We're quite, quite busy right now.

Okay, great. As you do ship these, whatever, in the first or second quarter, it sounds like there might be the delays may cause some cost-related issues, some reengineering. I wonder what you're thinking about with these fortified big projects being pushed out. Is there an impact on the margins?

No, not really. Actually, oftentimes it can help us. We hope our customers don't have to go through that and incur extra costs, but it's not a burden on us. If it's a redesign, it's almost like a new project, and that's just a decision they make, and they look at that relative to the returns they can get on taking that path. Either I redesign around a different panel, or I wait for my panel that I currently have designed. And, you know, that's a big decision for them to make. And I think it's, again, it's developer by developer and size of project. It's where you are and their set of economics they've put into their, you know, investment thesis in the first place. So for us, it's not a cost burden or incremental cost. It's like getting another project.

Okay. Okay, great. All right. Thank you very much. Yeah.

Our next question comes from the line of Julio Romero with Sidoti. Please proceed with your question.

Hey, good morning, everyone. Hi, Julio. How are you? Hey, so apologies as I joined your call a little bit late here, but just wanted to ask about your exposure to Texas. You know, would you see any short-term negative effects or, on the other hand, you know, has that kind of super storm increased the appetite for increased capital investment in in solar and kind of grid reliability more broadly?

Well, first of all, we have some operations in Texas really supporting our residential business. And so we experienced some delays over the last week and a half, like a lot of others. And, you know, any suppliers over in that area, we were mandated to be shut down. We couldn't use natural gas, you know, to run the – didn't have electricity. So we're all up and running now, but – So we've got some catch-up work to do, but I think there's going to be a bit of a lag in some of the supply chains that catch back up as it relates to at least the first three months of the year. But again, the demand is robust, so we'll keep working that. As it relates to solar, et cetera, I don't see any impact there. We haven't seen an immediate impact there one way or the other. We'll see what happens as Texas comes out of this and maybe reassesses our infrastructure and things of that nature and what they may want to do, but it's probably too early to say on that front. But from an existing workload perspective, it was not hugely impactful to our solar business at least, if that's what you're asking.

Okay. Just turning to your residential side, can you maybe speak to the integration of your recent mailbox acquisition?

Yeah, I would say it's going pretty well. We've got a full-time team on it and making progress as we had expected. It's not a huge business and it's not a large organization and If you recall, most of what they do is outsourced, so there's not a lot of manufacturing back in, but there's some supply chain things that we've been working pretty hard. There's some insourcing opportunities, a lot of 80-20 initiatives around PLS and CLS, and we're in the midst of all that, and I think that's resonating pretty well internally, but also making it a lot simpler for some of our key customers because we had a bit of a product overlap in some areas. Yeah, I would say overall it's on schedule and going as planned.

Got it. And then just last one for me is I guess, you know, would a tax rate in line with what you did in 2020 be kind of appropriate for 21 and beyond?

Yeah.

Julio, if you look at our guide and the press release, we've got about 28% in our gap and about 27% in our adjusted. And the variance year-to-year is really discrete items that are pretty hard to really estimate as far as the beginning of the year. There are a lot of variables that impact those.

Okay. Thanks for taking the questions, and best of luck in 21. Thanks, Julio. Thanks.

Mr. Bosway, we have no further questions at this time. I would now like to turn the floor back over to you for closing comments.

Great. Well, listen, we want to thank everybody again for joining us today. Looking forward to connecting back with everybody, talk about the first quarter in early May, I think May 5th, May 6th timeframe. And one other point, I think we are going to try to have an investor day later in the year, you know, if everything is safe and And we have the ability to do that. We'd like to do that in person. So we'll circle back with everybody on when that gets scheduled. And I hope everyone stays safe and healthy and have a good rest of the week. Thank you.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.