Gibraltar Industries, Inc.

Greetings and welcome to the Q2 2021 Gibraltar 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. Thank you, Carolyn. You may begin.

Thanks, Paul. Good morning, everyone, and thank you for joining us today. With me on the call are 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 section of the company's website, GibraltarOne.com. Please note that Gibraltar has classified the industrial business which was divested on February 23rd, 2021, as a discontinued operation with fourth quarter 2020 results. Results of TerraSmart, which was acquired at the end of December 2020, are included in first half 2021 results. Gibraltar's earnings press release and remarks contain non-GAAP financial measures. Tables of reconciliation of GAAP to adjusted financial measures can be found in the earnings press release that was issued today. Also, 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 guaranteed the 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'll return the call over to Bill Botway. Bill?

Hey, good morning, everybody, and thank you for joining today's call. Let's start this morning with an overview of the second quarter results, and then we'll discuss the ongoing market environment we continue to manage in. Tim will then provide a detailed financial review of the quarter, and then I'll give you an update on our 2021 strategic priorities and our guidance for the year. Then we'll open up the call for your questions. So let's start. Let's turn to slide three. You know, we delivered a solid quarter. with revenue up 36.5%, 14% of which was organic, and 22.5% came from acquisitions. We got off to a good start in the first quarter with 34% growth, and the momentum accelerated into the second quarter. Growth was driven by healthy end market demand, further participation gains, and the realization of multiple price actions implemented in the first and second quarters. In total, our order backlog, which reflects signed contracts, grew 54% to over $400 million last a record level really for Gibraltar. And on a pro forma basis, order backlog grew 32%, again reflecting accelerating order momentum as we exited a strong first half of 2021. The integration of TerraSmart is on track. We continue to evolve into one organization. We're six months into the process and have combined sales, marketing, supply chain, finance, HR, and have a strong leadership team in place. TerraSmart's operating margin nearly doubled versus the first quarter, and demand remains robust as we enter the second half of the year. Historically, the strongest quarters for this business and for the solar market. In our residential business, Architectural Mailbox has completed its third full quarter of integration activity and is delivering to plan as well. Adjusted operating income increased 8.2%, and adjusted EPS expanded 6.7%. to 80 cents per share. Although our margin contracted during the quarter, our success in implementing various price actions and productivity initiatives helped offset a large portion of the macro headwinds that accelerated during the quarter and drive positive growth in operating income. Our macro headwinds included ongoing inflation of materials, labor, and freight, and the supply and availability of materials, labor, and transportation. As it relates to the reemergence of COVID, we maintained our operating protocols through the quarter and were able to minimize disruption accordingly. So let's turn to slide four so I can share with you a little bit about inflation and supply chain dynamics. So let me provide some context concerning the macro headwinds and the environment we continue to operate in. And I realize there is plenty of debate and opinion regarding the inflation going forward. But regardless, June was the ninth month in a row with a significant market increase for core input cost. And inflation continued to accelerate in July as well. The magnitude of the increase combined with the speed in which it has occurred is really unprecedented. And I think it's been surprising for many industries. For example, in January 2020, if you think about it, in a good economy and prior to the pandemic, the CRU price for hot rolled steel was $570 per ton. And really over the next nine months, by September 30th, 2020, the price had increased 5.1% to $599 per ton. Now, in contrast, between September 30, 2020, and June 30, 2021, another nine-month period, the CRU price for hot-rolled steel increased 188% to $1,723 per ton, and during July, it increased another 4.8%, surpassing $1,800 per ton. The net result, hot-rolled steel pricing is more than three times higher in a market where demand levels today are actually less than they were prior to the pandemic. You know, pricing for their input costs and materials has risen as well with aluminum at 50%, resins up 97%, transportation rates up 29% over the same timeframe. Now there are a number of reasons for causing today's situation. You know, we have capacity reductions during the pandemic, labor shortages, tariffs, import duties, supply capacity management strategies, and other macroeconomic questions. But our expectations are these issues will continue in 2021. So yeah, it has been a tough and fast moving environment and we expect it will continue and we will remain proactive in attacking our inflation and supply chain challenges. As discussed in our first quarter earnings call, we started engaging customers and suppliers in the fourth quarter of 2020 and also started implementing our first round of price increases with subsequent price actions as inflation accelerated. Our supplier agreements with our customers, specifically within our residential customers, include commodity indexing clauses that support price changes and also a well-defined process and timing for approval implementation of changes this does create a natural lag for price realization relative to commodity increases and in the second quarter resulting in margin contraction force especially given the sharp and substantial cost increases in steel aluminum resins Historically, though, the price realization lag has been anywhere between one to two quarters once inflation turns down. Now, until this happens, we will continue to implement necessary price actions and really focus on maximizing operating profit dollars. And when input costs do start to fall, we'll manage price accordingly to facilitate margin recovery. Now, we've also continued to work to execute our 80-20 initiatives that we had planned going into the year. We're staying very close to our suppliers and trying to stay in sync with our customers at the same time. I think all of these efforts have helped us manage relatively well in the current environment and deliver this quarter's results. With that, let me turn it back over to Tim, and we'll give you a little more detailed review of our results. Tim?