Encore Wire Corporation

Hello, my name is Chris and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Encore Wire Corporation second quarter 2023 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star, then the number one on your telephone keypad, and to withdraw your question, please press star one again. Thank you. Brett Eckert, Executive Vice President and Chief Financial Officer. You may begin.

Thank you, Chris. Good morning, and welcome to the Encore Wire Corporation quarterly conference call. I'm Brett Eckert, Executive Vice President and Chief Financial Officer of Encore Wire. With me this morning is Daniel Jones, President, CEO, and Chairman of the Board. In a minute, we will review Encore's financial results for the second quarter ended June 30, 2023. After the financial review, we will take any questions you may have. Before we review the financials, let me indicate that throughout this conference call, we may be making certain statements that might be considered to be forward-looking. In order to comply with certain securities legislation, and instead of attempting to identify each particular statement as forward-looking, we advise you that all such statements involve certain risks and uncertainties that could cause actual results to differ materially from those discussed today. I refer each of you to the company's SEC reports and news releases for a more detailed discussion of these risks and uncertainties. Also, reconciliations of non-GAAP financial measures discussed during this conference call to the most directly comparable financial measures presented in accordance with GAAP, including EBITDA, which we believe to be useful supplemental information for investors, are posted on our website. I'll now turn the call over to Daniel for some opening remarks. Daniel?

Good morning, everyone, and thank you, Brett and Chris. Thank you for joining us on the call and for your interest in Encore Wire. We appreciate your continued investment, confidence, and support. This quarter marked our ninth consecutive quarter of elevated margins, despite our continued belief that we are in the midst of a period of gradual margin abatement. As we have discussed at length on prior earnings calls, copper margins began to gradually abate in mid-2021, and aluminum margins peaked in the fourth quarter of 2022. Since then, we've invested heavily and continue to invest in improving our service model and efficiency levels to reduce costs, increase capacity, and deepen vertical integration, which we believe should contribute to achieving sustained higher gross margin levels when compared to pre-COVID baselines. With respect to volume, we're pleased to have shipped a near record number of copper and aluminum pounds in the second quarter. These results demonstrate a dynamic shift in volume shift when compared to a pre-COVID baseline. Copper and aluminum pounds shift in second quarter of 2023, increased by 13 and 78% respectively when compared to the second quarter of 2019. We captured this incremental market share by leveraging our single site, vertically integrated campus, deep supplier relationships, and strong employee base to quickly manufacture and ship finished goods to our customers despite the broader macro challenges facing the sector. The strong performance is also a reflection of our steadfast commitment to outstanding customer service and our intense focus on shipping complete orders quickly, combined with our expanded reinvestment initiatives, such as the XLPE compounding facility, set to come online late in the third quarter of this year. Since our inception, we've grown organically under the same value proposition that we were founded on, manufacturing innovative products while providing exceptional customer service focused on quickly shipping complete orders coast to coast. We believe our industry-leading fill rates continue to give us a strategic competitive advantage in the marketplace. Our one location business model also affords us a higher level of agility in adapting to changing market conditions structuring our operations to quickly service areas of new and growing demand, such as data centers and renewable energy. Demand for our products has remained strong, and our build-to-ship model, combined with the throughput of our modern service center, positions us well to satisfy increases in future demand. We believe that we have made and or are making the appropriate sustainable investments to take advantage of future incremental demand for current and new product offerings that will help to facilitate the broad electrification of our economy. We expect that the current legislation in place to help fund the infrastructure needed for broad electrification will bolster long-term demand for many of our product categories. We also expect that this demand will raise the floor for the price of many raw material inputs for years to come. We firmly believe that our historical, recent, and future success is a direct reflection of our unique culture and strength of our experienced team. We also believe that our one campus location, increasing verticals, deep vendor and customer relationships, and our ability to quickly ship complete orders will remain vital differentiators in our future success. We continue to believe that our stock is undervalued at current market prices and what we believe are historically low forward valuation multiples. as evidenced by our continued share repurchases in Q2 of 2023, an increased repurchase authorization. Since Q1 of 2020, our share repurchase program has returned $565.4 million in capital to shareholders, and our continued purchasing demonstrates our confidence in long-term value creation potential of our company. With that, I'll now turn the call over to Brett to cover some financial performance, indicating the second quarter, Brett.