JELD-WEN Holding, Inc.

Ladies and gentlemen, thank you for standing by and welcome to GELDWIN Holdings Inc. Fourth Quarter 2020 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star and the number one on your telephone keypad. If you require any other further assistance, please press star zero. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Chris Teachout, Director of Investor Relations. Please go ahead.

Thank you. Good morning, everyone. We issued our earnings press release this morning and posted a slide presentation to the Investor Relations portion of our website, which we will be referencing during this call. I'm joined today by Gary Michel, our CEO, and John Linker, our CFO. Before we begin... I would like to remind everyone that during this call, we will make certain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to a variety of risks and uncertainties, including those set forth in our earnings release and provided in our Forms 10-K and 10-Q filed with the SEC. Jeltham does not undertake any duty to update forward-looking statements, including the guidance we are providing with respect to certain expectations for future results or statements regarding the expected outcome pending litigation. Additionally, during today's call, we will discuss non-GAAP measures which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. A reconciliation of these non-GAAP measures for the most directly comparable financial measure calculated under GAAP can be found on our earnings release and in the appendix to this presentation. I would now like to turn the call over to Gary.

Thanks, Chris. Good morning, everyone, and thank you for joining us today. Over the past few years, we have deployed the strategic foundation to propel Gelwind to premier performance. We are executing a disciplined plan to accelerate organic growth, expand margin, and improve cash flow while effectively allocating capital to optimize shareholder returns. And we're making good progress in each of these areas. The underpinning of our strategy deployment is our business operating system, GEM, the Gelwyn Excellence Model. GEM is the systematic way that our people work within the company to deliver our strategy globally. This holistic approach is anchored in the very essence of a lean problem-solving culture, the practice of continuous improvement, development, and respect for people, and the identification and elimination of waste. While still in the early stages, we are seeing consistent outperformance in the areas where GEM has been deployed, and we are seeing progress in the strategic growth drivers. In previous calls, we've highlighted our commercial work focused on customer and channel segmentation, innovation, and unleashing the vast opportunities to expand distribution of GELWIN products and services across geographies and channels. This combination of commercial strategies and disciplined price realization is delivering market share gains and margin expansion. The disciplined approach of using price to offset inflation has now led to nine consecutive quarters of favorable price costs. Likewise, we've made significant progress in our footprint rationalization and modernization initiatives, having completed projects that represented the first third of our $100 million targeted annual savings. Execution is now underway on the next phase of the program and associated savings. You'll recall that the rationalization and modernization programs reduce rooftops and costs while adding manufacturing capacity and enhancing the ability to serve customers. Across the rest of our sites, GEM is driving productivity savings through more efficient labor utilization, material consumption, and sourcing savings. In 2020, we made great progress on these strategic levers while also navigating the unprecedented challenges of the year, including the effects of the pandemic and other unanticipated events, including severe weather and natural disasters. The impact of these events was felt throughout the year, including in the fourth quarter. These effects included increased absenteeism, supply chain disruptions, and unforeseen government lockdowns. Nonetheless, with safety always at the forefront, our associates found a way to deliver for our customers, our communities, and our shareholders. I want to extend a sincere thank you to all our associates who for helping us achieve these results through such uncertain times. In the fourth quarter, we delivered both core growth and margin expansion. Total revenue increased 7.7% versus prior year, and adjusted EBITDA grew 29.4%. Core revenue grew 5% versus last year, contributing to 190 basis points of core margin expansion. This was the best quarter of year-over-year core revenue growth since 2017, led by North America and Europe, and the first quarter of core revenue growth for Australasia since the second quarter of 2018. All three segments delivered sequential improvements in volume growth and significant margin expansion versus prior year. We continue to benefit from favorable price and, while still ahead winning Q4, signs of improving product and channel NIPs. In addition to these positive revenue impacts on margin, each segment delivered positive net productivity, further expanding our adjusted EBITDA improvement. Specifically, we saw a 300 basis point margin expansion in North America, 330 basis point margin expansion in Europe, and 150 basis point margin expansion in Australasia. The execution of our commercial strategies and the benefits of GEM are showing through. For the full year, revenue declined 1.3%, clearly below our expectations as we entered the year. That being said, the deliberate actions taken by our teams, coupled with productivity benefits from footprint actions and the deployment of GEM, were able to offset the impact of the pandemic to deliver 100 basis points of core margin expansion. In addition to implementing cost savings, preserving cash, and managing working capital, we also overcame the cost to ensure safe working environments for all of our associates, increased absenteeism in certain operations, the effects of mandated governmental closures, and temporary changes in product and channel myths. This strong earnings performance, continued focus on working capital improvements, and prudent capital allocation delivered free cash flow of $258.8 million, a 55% increase, and a record for Gelwood. Further demonstrating our quality of earnings and the strength of our balance sheet, we reduced net debt leverage to 2.3 times, the lowest since the IPO four years ago. And with record liquidity of approximately $1.1 billion, we have flexibility as we evaluate strategic alternatives to further enhance shareholder value. John will provide additional commentary on our financial performance, and I will provide some thoughts on 2021 in a few minutes. First, I will share some thoughts on our markets and key drivers for each segment. For North America, housing fundamentals remain supportive. We expect the recent robust increase in housing starts to continue and perhaps accelerate as strong new home orders from previous quarters turn to starts. Completion activity of these starts may lag due to builder supply constraints, including labor and other building product availability. We expect overall demand for R&R activity to grow by low single digits, favoring larger pro-driven projects over DIY. The pricing actions we implemented in late 2020 are holding, and we expect solid realization to more than offset increasing inflation and tariff headwinds expected during the first half of the year. For Europe, we expect markets to be somewhat flat for the full year. For the first half of 2021, our end markets in Europe are open and healthy across new construction, project, and R&R. However, we see potential for demand to moderate later in the year. Market share gains and continued momentum, including sequential improvements in price and mix, will extend performance in the segment. For Australasia, particularly Australia, residential new construction markets continue to be challenging and have yet to recover. We saw signs of stabilization during the fourth quarter with accelerating single-family new construction permits. We expect some ongoing improvement from the benefit of government stimulus programs directed at both new home construction and remodel activity. However, a significant portion of Australia's new housing demand comes from immigration, which has been halted due to COVID-19. The government has yet to set a date for this to resume. Repair and remodel demand is also expected to be challenged. However, we expect to offset some of this weakness through additional market share gains. I'm optimistic about the outlook in each of our markets for 2021, particularly housing fundamentals in North America, European market dynamics and stabilization, and some improvements in Australia. However, the foundation for our performance has been and will be based on continuing to deliver significant margin expansion and growth through our disciplined deployment of GEM, the execution of the rationalization and modernization programs, and the benefits of commercial excellence, including innovation, segmentation, and price. John will now provide a detailed review of our financial performance for the fourth quarter and full year 2020.