Gibraltar Industries, Inc.

Sipralta Industries Q2 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A 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. I would now like to turn the conference Over to your host, Carolyn Capaccio of LHA Investor Relations. Please go ahead, ma'am.

Thank you, Operator. Good morning, everyone, and thank you for joining us today. With me on the call is Bill Bosway, Gibraltar Industries Chairman, President, and Chief Executive Officer, and Tim Murphy, Gibraltar's Chief Financial Officer. During the 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. As noted in the earnings press release issued today, Gibraltar has classified the processing equipment business in the ag tech segment as held for sale with first quarter 2022 results and has removed the related revenues and expenses from the processing business from its adjusted results. Gibraltar's earnings press release and remarks contain non-GAAP financial measures, Stables of reconciliation of GAAP to adjusted financial measures can be found on 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 event's 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 we'll turn the call over to Bill Bosway. Bill?

Good morning, everyone, and thank you for joining today's call. We'll start with an overview of second quarter results in financial performance, and we'll talk about our outlook for the rest of the year, and then we'll open the call for your questions. So let's turn to slide three, and we'll start with second quarter 2022 results. We generated solid revenue growth and margin expansion in the quarter with adjusted revenue up 7%, adjusted operating income up 20%, adjusted EBIT up 16%, adjusted EPS grew 19% to 96 cents per share. Renewables, ag tech, and infrastructure margins improved sequentially as expected, and our residential business delivered both strong revenue and margin performance. Our order backlog increased 5% to $408 million. Demand drivers remain relatively healthy across our end markets despite ongoing trade challenges impacting our renewables customers. We continue to drive additional participation gains in our residential business, and ag tech and infrastructure bookings are accelerating. Renewables customers continue to wait for clarity on panel availability so they can finalize projects and book additional orders for the second half of the year as well as in 2023. Our performance reflects our continued focus on 80-20 execution. Supply chain optimization, accelerating the digitization of our operations, keeping our organization as healthy and flexible as possible, and continue to conduct business the right, responsible way every day. I'd say at the halfway point of the year, we are tracking to our full year performance objectives. Let's turn to slide four for an update on commodity price and supply. Just as a reminder, there are really three main core commodities we use across the company, steel, aluminum, and resin. We focused on three drivers relative to each commodity. First, the absolute price of the commodity. Second, the price variability of the commodity. And then third, obviously, the availability of the commodity. In general, availability of each core commodity is better than last year, but pricing continues to be dynamic due to the macro environment and the geopolitical situation. Hot-rolled coil steel price fell from its high of $2,000 a ton in Q4 2021 to 13.29 at quarter end, and it continued to fall as we entered the current quarter. Structural and plate steel used in our renewables and infrastructure businesses increased during the first half of the year, but recently structural steel prices have come down between 3% and 4%. According to the June report from IHS Market, steel prices is forecast to come down further over the next 12 to 18 months, and we'll see how that happens, and we'll remain agile as steel prices move. Aluminum rose to peak level in Q1 2022 and then came down slightly during the second quarter. There are a number of variables impacting aluminum price, including the ongoing energy crisis in Europe, which actually started in 2021, the rolling COVID lockdowns in China and the additional energy supply pressure in Europe stemming from the Russia-Ukraine conflict. We do expect aluminum prices to remain elevated and probably through 2023. Given the current price-cost environment, we're just going to continue to execute across our three core initiatives. Number one, just trying to keep our price and input cost balanced, and then implement changes in a timely and efficient manner. Secondly, just continue to execute and accelerate more A20 initiatives to drive productivity and cost reduction. And finally, third, continue to optimize our contract terms and conditions with our customers to try to balance and share potential risk in the current environment. Let's move to slide five for an update on panel supply to the solar industry. The two trade issues that withhold release order, the WRO, which has been succeeded now by the UFLPA, which stands for the Uyghur Force Labor Prevention Act, and the Department of Commerce's anti-dumping and countervailing tariffs investigation, referred to as the ADCVD, both remain active and continue to limit visibility and clarity for panel supply. First, let's start with the UFLPA, which was signed into law last December, was implemented here just recently in late June, and is enforced by the U.S. Customs and Border Protection. Effectively, the law requires importers of record to prove via traceability processes and documentation that quartzite material mined in Shenzhen province is not contained in panels deployed in the U.S. I'd say the industry is working with the U.S. Customs and Border Protection to understand importing traceability requirements for both successful and efficient importation, and there's a learning curve associated with that. Second, the Department of Commerce is expected to issue its preliminary ruling in late August, so later this month, with its final ruling in January 2023. If the Department of Commerce finds in favor of the complainant, future penalty imports can be assessed duties, and it is possible the DOC will make these duties retroactive to when the petition was accepted or earlier. That being said, while the administration instructed the DOC to implement a two-year waiver on tariffs, the DOC has not yet executed an order to do so. And we believe this will be done in conjunction with or around the time of the DOC's preliminary ruling on the ADCBD case. As a result, the industry has effectively continued its pause in executing and finalizing many existing and future projects as we had expected. We do expect a two-year tariff waiver to be implemented and provide much needed clarity on tariffs for the industry going forward. Also, in our view, the DOC's preliminary ruling will provide solid direction to the industry on what to expect in its final ruling, again, due in January. We also believe the administration will continue to support the solar industry given the importance of renewable energy production in creating a balanced energy plan for the U.S. For our renewables business, the scenarios we plan coming into 2022 really do remain consistent given our experience in Q2, the first half, and our current outlook for the second half. I would say the industry really looks forward to the DOC's preliminary decision in getting through the UFLPA learning curve so the industry and our customers can finalize project plans for 2023 and 2024. With that, I'll turn it over to Tim for a review of our results.