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spk01: This conference is being recorded. Thank you. I would now like to turn the conference over to your host, John Deitzer, Vice President of Treasury and Investor Relations. Thank you. You may begin.
spk07: Thank you. And good morning, everyone. I'm joined today by Bill Waltz, President and CEO, as well as David Johnson, Chief Financial Officer. We will take your questions after comments by Bill and David. I would like to remind everyone that during this call, we may make projections or forward-looking statements regarding future events or financial performance of the company. Such statements involve risks and uncertainties such that actual results may differ materially. Please refer to our SEC filings in today's press release, which identify important factors that could cause actual results to differ materially from those contained in our projections or forward-looking statements. In addition, any reference in our discussion today to EBITDA means adjusted EBITDA, and any reference to EPS or adjusted EPS means adjusted diluted earnings per share. Adjusted EBITDA and adjusted diluted earnings per share are non-GAAP measures. Reconciliations of non-GAAP measures and a presentation of the most comparable GAAP measures are available in the appendix to today's presentation. With that, I'll turn it over to Bill.
spk06: Thanks, John, and good morning, everyone. Starting on slide three, Accor is off to a strong start for FY24, and we are demonstrating the structural improvements and transformation that we made to our business over the past several years. I'm proud to share that volumes for the quarter were up 13% driven by contributions across all key product areas. We're focused on executing our capital deployment model as evidenced by the $96 million in shares repurchased in the first quarter and the continued activity in January. In addition, I'm very pleased to announce that we've officially declared our first quarterly dividend a very exciting achievement for our company. I also want to highlight the release of our fiscal year 2023 sustainability report, which was published last month. This report provides an update on the progress against our 2025 targets and covers additional important topics and initiatives. I'd like to take a moment to thank all of our employees for everything they do to support our key stakeholders. Overall, in fiscal 2024, we're off to a great start, and I continue to be excited for what's to come. With that, I'll now turn the call over to David to talk through the results from the first quarter and our outlook for the full year.
spk10: Thank you, Bill, and good morning, everyone. Moving to our consolidated results on slide four, in the first quarter, net sales were $798 million, and adjusted EBITDA was $214 million. We are pleased with our margin performance in the quarter with adjusted EBITDA margins over 26%. Our tax rate in the quarter was favorable due to the vesting of previously granted stock compensation. This outsized benefit was unique and contributed to our strong EPS performance. Moving forward, we expect the rate to be closer to roughly 25% for the remaining quarters in the year. Turning to slide five in our consolidated bridges, I'm pleased by our strong volume performance in the quarter, with organic volumes up over 13%. These gains were offset by the continued pricing normalization, but this impact was within expectations and aligns with the pricing trends we have been discussing for the past several years. Moving to slide six, We're making good progress against the low double-digit volume expectation for the full year, with solid contributions across all key product areas. Our plastic pipe and conduit category was up high single digits, led by solid growth in our PVC products. Across our electrical-related categories, volumes were slightly higher than anticipated in Q1, as several large customers met their calendar year-end rebate levels. Looking ahead, we expect Q2 to be softer than Q1 in terms of year-over-year volume percentage growth due to this timing of purchases at year-end and the recent severe weather conditions that have unfavorably impacted our gain-worth performance. Turning to slide seven, those segments had positive volume growth in the first quarter. Margins compressed in our electrical segment with the previously mentioned pricing normalization that remain very strong at 34%. We also face some year-over-year margin compression on the F&I side due to a tough comparison versus the prior year and the planned startup costs in Indiana to support the volume ramp. Turning to slide eight, we continue to execute our capital deployment model with cash generated from the business, and our balance sheet is in tremendous position with no maturity repayments required until 2028. Next on slide nine, I am pleased to highlight a significant milestone for our company with the upcoming payment of our first regular quarterly dividend. Earlier this week, ACOR's board of directors approved the first quarterly dividend payment of 32 cents per share. This achievement was made possible by our sustained performance over a multi-year period and our confidence in the future. Now for our fiscal year 2024 outlook on page 10. Our expectation of low double-digit percentage volume growth for their year remains on track. Also, with our strong EPS performance in Q1, we are increasing our full year estimate accordingly. As previously mentioned, our performance in January was impacted by several factors, including the adverse weather conditions in many parts of the U.S. This is affecting our estimates for Q2, But overall, we are maintaining our outlook for full year net sales and adjusted EBITDA. Also, as we've discussed before, we've always built in an expectation that the back half of the year will be stronger than the first half for two main reasons. First, as we are ramping up these new facilities, our volume from these sites will steadily increase throughout the year. And second, our overall business is always stronger in the spring and summer construction seasons versus the fall and winter. Therefore, we expect adjusted EBITDA to improve sequentially from Q2 to Q3 and then Q3 to Q4.
spk02: With that, I'll turn it back to Bill.
spk06: Thanks, David. We are very pleased with what we've accomplished this quarter and our outlook for this fiscal year, but we're even more excited about all the opportunities ahead. Moving to slide 11, as we said before, the electrical industry is a great place to be. It's difficult to find a building or infrastructure project that does not require Accor's products. With over 90% of Accor's product portfolio supporting electrical infrastructure, we are well positioned to benefit from the strong electrical trends projected across numerous end market categories. On slide 12, we've analyzed product volume data to determine estimated density across key and markets, with anticipated growth in data centers, manufacturing, lodging, healthcare, education, and multifamily over the next five years, and Accor's ability to deliver a wide range of products that each of these buildings need. I am again reminded that ATCOR and the electrical industry overall is a great place to be. Better yet, consensus agrees. Experts and peers across the industry also have a positive outlook on 2024 and beyond. In addition, with several other major public electrical contractors and electrical peers reporting record backlogs, and project positive growth, it reinforces our confidence in the future for this industry. With that, we'll turn it back to the operator to open the line for questions.
spk01: At this time, I would like to remind everyone in order to ask a question, press star, then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Andy Kaplowitz from Citigroup. Your line is open.
spk00: Hey, good morning, guys. Good morning, Andy.
spk01: Good morning.
spk00: Bill or David, I know you've guided to relatively strong volume growth for the year, but you did have a nice positive bump in electrical volumes in Q1. I know you mentioned some of the bigger customers pulling forward their volume, but maybe you can quantify how much was that pull forward? Did you at all see a turn in your HDP markets? And could you quantify the weather impact in Q2? how much that could impact Q2 results.
spk06: Yeah, I'll start, Andy, and then turn it over to David, always with what level of specificity here. But first, HDPE, very much on track for what we expected. But as David said in the past, it's more of a fiscal 25. And you can see that with, I won't call it other public corporations, but even large fiber optic companies have announced earnings recently it's almost their slide could have been interchanged with ours or what we've communicated there um and again we can follow up with why we think that home here in a moment what we saw and this is common for every year is we said in the industry sets not just us rebate levels go if you hit x number volume dollars we'll give you you know whatever two percent whatever the number rebate is back And we try to stay firm to that. So some of our customers literally just said, okay, we understand. And I'm assuming when we saw a spike in December was to get to their goals. So a little soft there. And then not a surprise, I think, for anybody in January here that with the weather, you know, across the country, for example, us talking to our customers, for example, one large customer, I won't be overly specific here, but had over 50 of their locations down for at least two days or more dealing with the weather. So with those two things, January was light. But again, if you add up the strong organic growth in Q1 with what we're kind of forecasting per se without a precise number in Q2, it basically averages out and bridges exactly to what we have for the year. Again, to me, it's a good comfort thing that we're still on track and actually raised DPS. So hopefully somewhere in that level, I answered your questions.
spk00: You did, Bill. But let me sort of step back. I think you talked about contractor backlogs. You know, when you step back, obviously, you know, the lead indicators are kind of all over the place, still, you know, maybe stabilizing at lower levels. Are you seeing sort of any changes in primary markets? You know, we already talked about HDP, but, you know, clearly things like data centers are ramping up. You've been working on undergrounding. So like, are things sort of better than they were a few months ago as rates have come down? Worse? Like, how do you sort of frame the market at this point?
spk06: Yeah, I think either consistent, but definitely not worse. Let's put it that way. So giving Andy to your point, there's so many metrics out there and which metrics are relevant or even over time. how metrics evolve on the importance. And one of the ones that, at least I'll say I, but of course Gravitt's hating too, that we don't talk about on the earnings deck, I don't think, but was association of building contractors. They're still high eight plus months. I forgot the exact 8.6, 8.8, but I do recall two things, for example, one, In December, they actually increased a tenth of a month. So their backlog is going up. And then here in the last two days, the Association of Building Contractors said about they have even higher number of open jobs as they put jobs. Literally, we could have written their script on the biggest constraint to ACOR. And it's a good thing. Isn't the market? So whether you read ABI or something like that, it's literally there is around nine months of backlog right now with contractors, ABI or ABC. would talk to that and to the point of as other skilled trades, whether it's a maintenance manager someplace else, may have slowing hiring, it's actually the Economist for Association of Building Contractors said how that's good for the industry so they can hire more people. So, Andy, at the end of the day, I'm pretty confident, you know, we can talk about Q2 versus Q3 and, you know, when things ramp up in our own self-growth initiatives, But the backlogs are out there for us and everybody else.
spk10: Yeah, Andy, if you look, the construction employment continues to go up, although the estimate from this week from the Contractors Association said that they estimate they need around 500,000 more new folks entering construction. And that's over above the net normal. So there is a lot of work out there. I mean, when we talk about the contractor backlog of Iran, that's about as high as it's going to be because people aren't going to take jobs two years from now. So I think that's just a really healthy rate. This is around, again, getting folks who can actually execute some of these projects.
spk00: And one more for me. I know you said safety and infrastructure include $7 million of startup costs, but did you contemplate those costs when you were thinking about when you guided us to Q1? How are you factoring in any incremental startup costs going forward? And, you know, was there anything else holding down safety and infrastructure margin?
spk06: Yeah, I think, Andy, we're on track. So, both the fact that, like, one simple way to do this is we did our guide for, you know, Q1 actually exceeded the guide in the range slightly. Some of that now, again, is just the volume pull ahead. I don't want to, you know, again, our transparency, but It was a good quarter, and we're on for the full year for EBITDA, and I'll make the plug again on EPS. And one other thing, I know David wants to jump in here, too. Realize with a large complex factory, I think once a while shareholders forget, it's like, oh, you're just making a torque to every size different it's an octagon it's a circle you can't do those things until you're actually up and running you don't have the air permit so literally getting all the machinery tuned for every new size determining things like whether you're using mig or tig welding there's just so many different complexities there that we knew it's going to take all year to ramp up. But as David said in the prepared remarks, that's why also as we look for our guide for the year, you'll see a ramp up as we continue to hit our volume numbers and so forth. So both confidence in our, as much as you can be, confidence in our year and outlook for EBITDA, confidence in our volume numbers as things pick up through the year.
spk02: Got it. Thanks, Seth. Yeah. Thanks, Andy. Thank you.
spk01: Your next question comes from a line of Dean Dre from RBC. Your line is open.
spk08: Thank you. Good morning, everyone. Hey, good morning, Dean. It was great to see that volume come through this quarter, especially like slide six that shows you that balance across the portfolio. So good to see that.
spk06: Oh, yeah, Dean, thank you for that. I mean, purely from the standpoint, it wasn't once in a while we get focused on one product line versus it wasn't a one-trick pony. Every product line was up there. And also, I think what that chart shows is, well, for example, PVC and HD is important. It's 31% of our sales. So there's a lot of other great products, some of which we're doing really well in pricing with and so forth. So it's a good environment for AgCorp.
spk08: Tad Piper- Great and that takes me to the heart of the question here is take us through the pricing dynamics this quarter, and I know the recovery and the normalization is not going to be linear but. Tad Piper- You know what were the specific dynamics this quarter, you know input costs competitive positioning.
spk06: know where the demand was um i know geographically that's a factor as well but just take us through those dynamics if you could i'll start and then again if david would like that specificity to this with the charts i'd say it's overall on track again without getting into each product line there's some are a little bit lower but there's absolutely some going hey general manager sales team keep doing what you're doing here and I can think of, and again, if you go back to that page six reference without me calling out specific of these products, and at least two of those categories, maybe then maybe more, others have led price increases. So, you know, I think we're a price leader because we have that one order, one delivery, one invoice, and we have the ability to bring more value than many of our competitors to the industry. But we're not the only one out there thinking about how you give good returns to their shareholders. So. right on track overall.
spk10: Yeah, and Dean, when you look at the, you know, in slide five, if you net on the EBITDA bridge, the price versus cost changes, you're around $90 million, and we had guided, I believe, a midpoint of around $250 for the year. That was always going to be more front-end loaded year over year, if you look at that, because pricing went down, you know, all last year sequentially. So I would say to, you know, go to what Bill said, We're definitely on track for our expectations for the year.
spk08: Got it. And that kind of takes me to the next question on the assumptions, first half, second half. And I get the seasonality piece. It's clearly that's the construction season that drives that second half. But just there's such a disparity here in first half EBITDA, if I have the numbers right. Year-over-year down 22%. And then second half coming to almost even to last year. So is that the expected ramp between the two? And how much of that? And I get the volume part because we're seeing that come through and we're believers in the end market demand. So is pricing the key component there?
spk10: So a couple of things. I would look at it more sequentially in the year of FY24, because when you compare it versus FY23 of last year, we still had some really strong quarters at the beginning of the year as pricing went down through the year. So said another way, our comps will get easier at the back half of the year. So when you look at what we have in the second half of our fiscal year this year versus the first half, you will see a number that you'll need like in the 240, 250 kind of EBITDA range versus, you know, the 210, 15 or whatever average for, you know, Q1, maybe a little bit lower than for the first half. That is definitely, again, increases in COBART, normal seasonality where you see the construction season picking up, and then pricing firming versus last year where pricing was still going down. So I think you add that all together, I would say the seasonality is fairly atypical, just a little bit more back and loaded because of our growth initiatives hitting in the back half of the year.
spk08: All right. That was really helpful, David. I appreciate the precision, especially the reminder about the dynamics second half of last year in the comp. So that was really helpful. And just last one from me, you referenced the Indiana plant. Can you give us an update? the startup, where does it stand in terms of productivity, efficiencies, and so forth?
spk06: Yeah, so my first thing, but Dean, to your question a little bit, how I answered with Andy, it's on track. So now on track means that as David called out and we had the $7 million, it's not generating the profits that we expect long term. But that's to be expected. If you just, again, the complexity of every product SKU, it's not like starting up a light bulb factory or a ketchup manufacturer that you just have one SKU and you run it, you know, it starts or it doesn't start. Here is each customer, each product, running it, taking the machines down for a couple of days, bringing up a second ship, bringing up a third ship. But we're still, I mean, we have a phenomenal leadership team there and it's progressing basically as way we expected is they're, profits short-term as you get a plan up and running, yes. But again, to me, the reaffirmation is we have the forecast for the rest of the year. We're still on it. Everything's moving as expected at this time. All good to hear. Thank you.
spk02: Thanks, Dean. Thanks, Dean.
spk01: Your next question comes from a line of Chris Moore from CJS Securities. Your line is open.
spk04: Hey, good morning, guys. Thanks for taking a couple questions. Yeah, maybe just on PVC pricing for January, was there much change? No.
spk06: I mean, with respect to volume, you know, Chris, like a lot of products, you can imagine, especially the products that go underground, which is PVC and HDPE and so forth there, and probably fiberglass conduit. Again, these are smaller lines. Fiberglass is actually under bridges, so misspoke. But those type are definitely being impacted. by the weather across the country, but pricing basically on track. And we've, you know, put in one or two price increases. It's harder when the demand isn't there to get them to realize, but we're still optimistic going forward on these attempting to push the prices in the industry up.
spk10: Yeah, Chris, as you recall, you know, our backlog is less than a couple weeks. So we do kind of every week look at where volumes are and what have you. And like Bill mentioned, we mentioned our prepared remarks January. was light due to several factors. The first start of this week has been much stronger. So we'll see versus our expectations here in Q2 how it lays out for the rest of the quarter.
spk04: Got it. I appreciate that. Maybe just one more on Indiana. So obviously you've talked quite a bit about the driver from the Inflation Reduction Act you guys are getting up and getting going. How would you characterize, you know, kind of demand for torque tubes overall, you know, and how would you view that kind of against the current domestic capacity to meet that demand? Is it enough, you know, beyond where you guys are at? What are you seeing overall? Oh, there's,
spk06: yeah chris the best i can tell and again it's it's estimates and so forth is there's more demand out there than capacity in the industries to go forward and again i think as we've given prepared remarks or answered questions over the years and again others including public customers could probably comment on this but um with the inflation reduction act it should move all the volume into the States, which is a great thing for the US and its economy. But that literally, even if the solar market did not grow, which we'll come back to in a second, doubles the amount of solar torque tubes. And right now, I don't think that capacity exists by anybody out there. So, you know, again, as we add the capacity of fine tuning, getting multiple shifts up, I have to believe some of our competitors are doing the same thing and so forth. But you add doubling the size of the domestic torque tube market plus whatever double digit plus growth of the solar market. I don't think anyone would dispute that. It's a really healthy and exciting market for both Accor and I think just the country as we become more carbon free.
spk05: Got it. I appreciate that.
spk04: Maybe just one last one here. Obviously, you guys sell the majority of products through distributors, but you You've talked about marketing efforts that go kind of way beyond this distribution channel, developing relationships with the big players in markets like array makers, fab owners, et cetera, with the goal of becoming a partner. Just wondering if you can provide kind of any update there and thoughts on – I know that's a longer-term process, but kind of how you're viewing that.
spk06: Oh, it's really say it's almost Chris, I'm teasing because we did not do this. But if you're giving me a softball question here, to your point, it's a multi year process. But what I'm proud, I think we did a press release here in the last month or two, was Nika, which is the National Electrical Contractors Association. So represents all the construction contractors in electrical space that are union that are so equivalent, non union organization, named us as one of like the premier partners and to give you a feel. There's around 13, give or take, premier partners, and that's everything from a freight carrier to electrical, you know, like energy generator company for their plants, you know, tools. So in our space, across PVC products, across steel conduit products, across metal framing products, you just go through. We are the only premier partner, basically, for all of our set of products there. There's some other product manufacturers in certain spaces. But it just shows the relationships that ATCOR is building out there. It's a real complement to our organization, our products, our value, and the partnership we're doing. So it's exciting, Chris.
spk05: Got it. I appreciate that. I will leave it there. Thanks, Chris.
spk01: Thank you. Your next question comes from a line of Alex Reisel from B. Reilly. Your line is open.
spk09: Thank you. Good morning, gentlemen. A very nice quarter.
spk02: Thank you, Alex.
spk09: A couple quick questions here. First, as we think about the second quarter guidance versus the first quarter, directionally, what does your guidance imply for price and volume? And I guess what I'm getting at here is, have we seen the correction in raw materials sort of fully reflected in either this first quarter or the second quarter guidance?
spk10: I would say, you know, in the second quarter guide, you know, we get from our comments that our volume year over year, we expect it to be lower than it was in Q1 as a growth year over year, but still a growth, you know, modest growth year over year. I would say pricing, you know, when you look at commodities and there's been, you know, steel's been on its way up now, maybe on its way down, what have you. I think that, you know, that gets reflected fairly quickly in our numbers, you know, we are able to price on a daily basis. We might not see an increase or decrease for weeks as we work through our inventory. So I would say it's pretty dynamic. So there isn't really a situation where it lags in any meaningful way, except for the S&I segment, where that tends to be more quarterly based. And so a little bit behind when steel's on its way up, a little bit ahead when steel's on its way down. Again, tends to normalize over a couple quarters.
spk06: And then, Alex, if I can bridge off your question a little bit. Again, David's better at giving you the bridge. But just for you or other shareholders out there, the way we think about our profit and pricing, first thing is just general industry volume. Obviously, if there's tight capacity... Like any product, you can sell for more because you have multiple options and multiple customers that want it. So volume. Second thing where I think we are absolutely the industry leader is our capability, and we're really doubling down on this, of the one order, one delivery, one invoice, that just is a competitive, sustainable advantage that I don't think anyone else can match, period, in the next decade, my own personal opinion. Then it gets to where your question was to go, okay, steel up, steel down. And I think David answered there. We do a phenomenal, you know, real-time pricing that it's not a large driver of our EBITDA, for example.
spk09: And then secondly, can you give us an update on the expansion in distribution centers?
spk06: Yeah, so great. Wow, great question there. Not that every other question hasn't been good. We're right on track with the following things. We have several of them up and running well. Now we're working on one in the Dallas area and one on the Atlanta area. We have the facilities purchase, lease. We're putting in racking, starting to bring products up. It's really also something, as David talked earlier to other questions, we talk about this fiscal year and go, hey, to Dean Dre's question, like bridge me the average 210 to the 250 the second half of the year. I think the RSEs are more of a thing that's going to help us in fiscal year 26. just to go until we fully get them up and fully get the value. We're getting it now, but the leverage of that as we go forward is what, again, gives us confidence in the $18 plus EPS that we put out there a couple years ago now.
spk02: Very helpful. Thank you very much. Yeah, thanks, Alex. Thanks, Alex.
spk01: Your final question comes from a line of Chris Dankert from Loop Capital. Your line is open.
spk03: Hey, morning, guys. Thanks for taking the question. I guess first off, you've mentioned there was probably a little bit of rebate buying to hit those breakpoints at the end of the year here. Do you feel like distribution inventories are still in a good place as we kind of move into the second quarter here? Is there maybe any kind of comment on how you see the inventory landscape at the distribution level?
spk06: I think we're back in God's know bless here to normal pre-covered in other words there's inventory out there but the appropriate amount for this at this time of year and then you know as we get like it's hard to predict to david's earlier point you know with one or two weeks of backlog are we talking march or april but at some time you know customers will even put more in because they know that you know the spring season and summer season will be you know stronger and therefore will start to stock up more but at this stage right on track. I wouldn't say they're low, but they're definitely not high. And there's no reason to be. In other words, back to earlier questions, you know, commodity prices are pretty stable. We could talk about steel going down a little bit, PVC maybe going up a little bit, you know, those type of things. And even our pricing, while we always aspire to increase our pricing some, there's no dramatic swings or supplier shortages. So business is back to normal.
spk03: Got it. Glad to hear that. And then maybe just to zoom out to the 30,000 feet for a second. Obviously, competitive dynamics don't swing too much quarter to quarter, but certainly we're getting a lot of questions on just, are there any changes in the competitive landscape? I mean, pricing would suggest there's nothing dramatic going on at the moment, but maybe just a quick comment on how you see the competitive landscape and what's going on or what might be changing a little bit incrementally here.
spk06: I have nothing of significance. There's always, you know, minor players that try to enter and You know, noise level things as somebody importing a product because of things, but literally there's as much opportunity without me getting specific on. Things the US government may do, or he saw flashes this morning. If Trump was elected, he would stop imports and, you know, all the different things that the end of the day. It's the earlier questions of there's the demand out there, almost nine months of contractor backlog. It's our self-help things of growing with the solar industry, growing with HDP and so forth, that those are really the drivers of the business.
spk10: Yeah, and Chris, just remember, I mean, I think we've talked about this many times. You know, you still have to have agents. You have to have distribution. You have to have a brand that people know. I mean, so there are a lot of reasons why, you know, like, we do well and that the competitive landscape is fairly stable year over year.
spk02: Makes sense.
spk03: Well, thanks so much, guys, and congrats on a nice start to the year here.
spk02: Thank you, Chris.
spk01: This concludes the question and answer session. I would now like to turn the call back over to Bill Waltz for closing remarks.
spk06: Thank you. Let me take a moment to summarize my key three takeaways from today's discussion. First, Q1 was a solid start to the year with organic volumes up 13%. Second, the declaration of our first quarterly dividend is another recognition of our structural improvements and transformation over the past several years. Third, with a great team, product portfolio, and strategy supported by strong secular tailwinds, We believe the best is yet to come at Accor. Before we conclude today's call, I'd like to mention a planned rotation of key talent that demonstrates the Accor business system at work. John Deitzer will be transitioning into the role of VP of Electrical Finance. And Matt Klein, who is currently our VP of Electrical Finance, as well as the General Manager of our Fiberglass Conduit Business Unit, will be moving into the Treasury and IR role. We wish them both continued success in their new positions. With that, thank you for your support and interest in our company. We look forward to speaking with you during our next quarterly call. This concludes the call for today.
spk01: This concludes today's conference call.
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