PGT Innovations, Inc.

Good morning and welcome to the PGT Innovations first quarter and full year 2021 earnings conference call. All participants will be in a listen-only mode. I'd now like to turn the conference over to PGT Innovations interim chief financial officer, Brad West. Please go ahead.

Thank you, operator. Good morning, everyone, and welcome to the PGT Innovations first quarter 2021 investor conference call. On the investor section of our company website, you will find the earnings press release issued earlier today, as well as the slide presentation we have posted to accompany today's discussion. This webcast is being recorded and will be available for replay on the company's website. Before we begin our prepared remarks, please direct your attention to the disclosure statement on slide two of the presentation, as well as the disclaimers included in the earnings press release and our SEC filings related to forward-looking statements. Today's remarks contain forward-looking statements, including statements about our 2021 financial performance outlook. Those statements involve risks, uncertainties, and other factors that could cause actual results to differ materially. Additional information on factors that could cause actual results to differ is available in the company's most recent form, 10-K. Additionally, on slide three, you should also note that we report results using non-GAAP financial measures, which we believe provide additional information for investors to help facilitate comparison of prior and present performance. A reconciliation to the most directly comparable GAAP measures is included in the tables attached to the earnings release and in the appendix of the slide presentation. I am joined on this morning's call by Jeff Jackson, PGT Innovation's CEO and President, After our prepared remarks, we will take your questions. I will now hand this call over to Jeff for opening remarks.

Thank you, Brad. Good morning, everyone. And thank you for joining us on today's call. 2020 was a year full of challenges and opportunities. Our core markets continue to show growth in both the repair and remodeling, as well as the new construction markets. This growth has continued and in certain aspects, accelerated in 2021. Our employees and our dealers and distributors have worked hard to service this increase in demand in an environment where, while we are all encouraged by the increased availability of vaccines, we are not yet back to normal. I continue to be extremely proud of our 3,500-plus team members for their dedication in servicing our customers over the past 15 months during these unique circumstances. Turning to slide four, we start off the year by posting record sales for the quarter. with 23% growth versus the first quarter of last year. We saw strong demand in both the southeast and western segments. Our organic growth came in at 15%. Additionally, February 3rd marked one year since completing the acquisition of New South Window Solutions. The sales contribution for the quarter for New South was $34 million. Driven by strong sales growth in the direct-to-consumer Florida residential R&R market, and our expansion efforts outside of Florida. Integration of New South into our operations has added to our record level of production capacity in a tight labor market, and we expect continued growth from New South's existing retail locations and additional store expansions outside the state of Florida in 2021. Since the acquisition, we've increased capacity at New South locations by 125%. and we have opened three new showrooms. We plan to open three more this year, growing the footprint outside of Florida and increasing our investment in lead generation tools. As previously announced on February 1st, we acquired a 75% ownership stake in Echo Enterprises, which contributed $16 million of sales in the quarter. We are excited about Echo as it accomplishes a number of strategic objectives, including providing an additional reliable source of glass, and glass manufacturing capacity, diversifying our product lines into the high-growth commercial market, and creating new relationships with additional residential dealers. As we discussed over the past few earnings calls, we have put substantial efforts behind identifying and implementing operational improvements across the manufacturing processes at our Western Business Unit. We have seen steady improvement in material costs, direct labor, and distribution costs, These improvements generated a 70 basis point increase in consolidated gross margin for the quarter. While we strive for continuous improvement in our manufacturing operations, we are seeing cost pressures on a number of fronts. Increasing consumer demand and the need for restocking across all sectors of the economy has continued to cause labor constraints. These pressures have resulted in wage inflation as employers compete to attract and keep employees. This certainly affects us all, and we will incur higher direct labor and overhead costs as we work to ramp up the production to meet increased sales demand. Additionally, I have seen inflation in material costs, including glass and extrusion, which are major components of our product. Given the impact of all these factors, our adjusted EBITDA margin of 15.6% decreased 230 basis points versus prior year quarter. To offset our increased cost structure, we have enacted a number of price increases throughout the quarter. And as price increases take effect, we expect to see our margins improve throughout the later half of the year. Margins will also improve as capacities increase in our plants, allowing us to deliver higher sales and reduce our backlog. Next, I would like to give an update on what we are seeing in incoming customer orders and how our backlog is developing. Our total backlog at the end of the first quarter, excluding New South and ECHO, has increased to 288 million and has since grown to an all-time high of 343 million as of today. This is driven by longer lead times for most of our products, as our operations teams work to meet rising demand in an environment where labor is tight in all our manufacturing locations, as well as for our key suppliers. Strong order entry in our southeast business unit up 34%, driven by continued strength in the new construction market up 56%, and repair and remodeling market up 25%. And strong order entry at our western business unit as recoveries in Arizona and California pick up steam. Within our two most recent acquisitions, we have seen impressive demand growth. For the first quarter, retail sales orders at New South Window Solutions totaled $35 million, an increase of 42% year-over-year. Echo is off to an incredible start, with order entry up 69%. To meet growing sales demand and improve lead times to better meet customers' needs, we continue to focus on increasing production capacity in our Florida-based operations. while we continue to do everything in our power to promote employee health and safety as our top priority. Some of the actions we've taken include increasing starting wages, adding stay bonuses as well as sign-on bonuses, signing a lease in southeast Florida to increase warehouse capacity, which will begin to favorably impact our operations in Q2, signing a lease for a new facility, expanding our manufacturing capacity, in Fort Myers, Florida, which we are currently staffing and will favorably impact our operations in Q3. We have made capital investments to increase our vinyl window capacity by 20% in Q2, as well as frame capacity for our sliding glass doors by 30% in Q3. Additional steps are being taken to increase vinyl window capacity by another 20% in Q4. These increases in capacity will be reflected in our results as we go through the back half of 2021 and will help us to accommodate the strong organic sales growth we have seen in Florida and return the current robust backlog to normal levels later this year. Turning to slide six, as we look ahead into 2021, there is no change in our framework for profitable growth as we execute our strategic long-term value creation for shareholders while servicing our customers, and communities. Our first pillar is to maintain our focus on consumer-centric innovation. We strive to stay in front of challenging and changing builder and consumer preferences by bringing products to market that offer both performance and value our customers demand. Our marketing strategies have enabled us to gain insight into the demand that is driving ourselves in the R&R market. capturing more leads as consumers are spending more time in their homes. We will continue to evolve our innovative strategies as the overall economy improves further. Our second pillar of attracting and retaining talent has been on the front and center as all businesses face a very tight labor market in the U.S. We have always placed an emphasis on being an employer of choice, but we have had to go even further to build out our team of dedicated employees with the right skill sets. We work hard to maintain a safe workplace and a culture where employees know they are appreciated, and we've recently implemented a long-term incentive program to help retention. Our third pillar is investing in the business to increase manufacturing capacity and capabilities. We strive to continually improve operations to increase output, lower cost, and improve quality, which will help us meet growing demand. I have highlighted our efforts to enhance efficiencies at our Western Windows Systems facility to lower costs while maintaining high-quality standards. Additionally, we are continuing to deploy PGT Innovations best practices and other systems across operations at New South and ECHO. Our fourth pillar is the allocation of free cash flow to achieve profitable growth through investing for growth through new product development and production capacity. paying down debt, or the right strategic acquisitions, all with the end goal of driving shareholder value consistent with our past execution. Now I'd like to turn the call over to Brad to review the results in greater detail. Brad?