PGT Innovations, Inc.

Good morning and welcome to PGT Innovations Third Quarter 2022 Earnings Conference Call. All participants are in listen only mode. Please note today's conference is being recorded. I'd now like to turn the conference over to PGT Innovations Senior Vice President of Corporate Development and Treasurer, Brad West. Please go ahead.

Thank you. Good morning and welcome to the PGT Innovations Third Quarter 2022 Investor Conference Call. With me on the call today are our President and CEO, Jeff Jackson, and our Chief Financial Officer, John Koons. On the Investor Relations 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 that discuss forward-looking statements. Today's remarks contain forward-looking statements, including statements about our 2022 financial performance outlook. These 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 from expected results is available in the company's most recent SEC filings. Additionally, on slide three, note that we report results using non-GAAP financial measures, which we believe provide additional information to help investors compare performance between periods. A reconciliation to the most directly comparable GAAP measures is included in the tables in the earnings release and in the slide presentation appendix. At this time, I will now hand over the call to our company CEO and President, Jeff Jackson.

Thank you, Brad. Good morning, everyone, and thanks for joining us today. Our third quarter was a unique quarter for PGT Innovations. It was a quarter filled with courage, remarkable strength, and solid results. As most of you are aware, Hurricane Ian, a dangerous high-end Category 4 storm, hit the coast of southwest Florida on September 28th. With 125 mile per hour wind speeds and a 16 foot storm surge, Ian plowed a path of destruction through our state and was among the most powerful storms ever to hit the coast of Florida. What we witnessed in the days after the storm has been amazing. First, courage. The storm made landfall in the heart of where a majority of our Venice and Fort Myers team members live. The devastating winds and rainfall and flooding impacted approximately 2,000 of our team members from Fort Myers, Punta Gorda, and Northport. Some team members lost homes. Many were without power and water for weeks. Second, remarkable strength and commitment. Immediately after the hurricane, PGT Innovations mobilized to check on our team members' welfare and safety. We distributed generators, tarps, chainsaws, flashlights, water, and other essentials to our affected team members. We also had many of our partners, suppliers, and customers provide an outpouring of support as a result of the damage caused by Hurricane Ian, and we also would like to express gratitude for them as well. Third, results. We closed our West Florida facility on Tuesday, the 27th of September, and did not reopen until Monday, October 3rd. While our facilities did not sustain any meaningful physical damage from the hurricane, we experienced limited ability to produce at our facilities as our team members could not safely travel to work due to the flooding and road closures from downed power lines and trees, as well as focusing on repairing their own homes. We made the decision to continue to pay our team members during those days even though our facilities were closed. When we reopened our facilities on October 3rd, we realized that we would not be able to return to normal production schedules as many of our employees still could not make it to work safely. During the first week, we only operated one shift with team members that were able to travel safely to work. Productivity was less than what we would otherwise expect. as we had makeshift teams manning our various production lines. As the affected communities gradually started to recover, many of our team members were able to begin to return to work. During the month of October, we were able to increase the number of shifts and gradually improve on our production from the first week of the month. And last, but very important, codes work. In the aftermath of this extremely dangerous storm, we had no reported impact failures. Homes built to Florida building codes survived, and many homes built prior to Florida building codes were unfortunately destroyed. We have various footage and testimony of the devastation. In review, it is apparent that PGT Innovations products help homes survive this devastating storm with very little or no damage. Moving on to our third quarter results, I'm very pleased to announce we delivered another strong quarter. despite the challenges we faced. Looking at our key messages for the quarter on slide four. Net sales for the quarter grew 28% as we continued to see strength across our key markets. We achieved organic growth of 17% while handling contributed 35 million. While I'm pleased with our third quarter results, it is important to note that Hurricane Ian caused us to close our West Florida facilities. limiting our ability to manufacture and ship product from those locations during the last week of the quarter. We estimate the facility closures impacted production and shipments by approximately $12 million during the quarter. Also during the quarter, we continued to gain in profitability. Adjusted EBITDA margins improved 320 basis points compared to a year ago quarter. Prior to the hurricane, we were able to reduce our average lead times for key brands by 50% versus the prior year quarter. Additionally, over the last several quarters, we successfully implemented price increases to offset inflationary pressures. We will continue to pursue pricing actions where we face escalating costs. Our supply chain team has continued to do an outstanding job to minimize disruptions and support production levels. which has helped us drive improved performance over the past few quarters. Strong sales and margin continue to produce solid cash flow, ending the quarter with $219 million in cash, which enables us to make investments to improve our operations and pursue strategic acquisitions such as Martin Door, which we completed in October. While we continue to address the challenges presented by the hurricane, we have not lost sight of the macroeconomic environment, Rising interest rates, a slowdown in new home sales, and the uncertainty facing the U.S. economy are all things that are impacting our customers and partners. We have not lost sight of these indicators and decided to proactively take actions to reduce our indirect and overhead costs during the fourth quarter. We believe these actions will allow us to further streamline our operations and protect our margins while seamlessly continuing to serve our customers. After Hurricane Irma in 2017, we did see an increase in demand for our products and would expect the effects of Ian to favorably impact awareness when it comes to purchasing our products. While it is still too early to quantify the impacts of Hurricane Ian, any increase in demand will certainly help offset softening that we would expect to see from the slowdown in the economy. For example, in October, We are seeing strong demand at our New South markets in the path of the storm. We are optimistic that this trend in our direct-to-consumer channel will translate into momentum for our dealer channels over the coming quarters as well. Next, slide five provides details about our Martin acquisition, which supports our framework for profitable growth by expanding our geographic footprint in the western U.S. and entering an adjacent building product category. Martin has an 85-year history as a well-known, high-quality, fully customizable premium overhead garage doors, serving both the commercial and residential end markets. This transaction was our first move to an adjacent building products category to complement our existing portfolio of windows and door brands. Martin creates cross-selling opportunities for existing brands within our western division and helps us to capitalize on opportunities within the dealer, distributor, builder, and direct-to-consumer channels across the country. The expansion of this product category supports PGT Innovation's strategic criteria by expanding into building product categories adjacent to the window and door market, adding premium overhead garage doors to our product portfolio, broadening our geographic footprint and presence in the high growth western region, adding another strong brand name to the PGT Innovations portfolio, and creating cross-selling opportunities and a strong cultural fit across both companies. The garage door entry market aligns extremely well with our product portfolio. Additionally, Martin's focus on exceptional quality, safety, and innovation is very much in line with the priorities found across all our PGT Innovation brands. making it a great fit for both organizations. Market demand for Martin's garage doors and its efficiency in producing custom products has allowed it to generate EBITDA margins in excess of 30% and strong cash flow conversion. Martin will operate under PGT Innovations Western Business Unit. The integration process is already underway and is going smoothly. Next, on slide six, let's take a closer look at sales trends that are guiding our outlook. Total organic growth was 17%, reflecting the strength of our brand portfolio and demand in our markets. In the southeast region, organic sales grew 13% from the prior year quarter. We are seeing a dip in demand related to the hurricane as production builders across southwest Florida are challenged with repairs to their ready-for-sale and in-process homes. This dip is consistent with prior storms, as communities are focused on repairing damages to infrastructure and builders are focused on repair and recovery. Long term, these storms impact awareness, which we expect to drive demand for our premium storm-resistant windows and doors. Especially in the Fort Myers area, the destruction caused by the flooding will promote the replacement of older homes with new homes, that will be required to meet new building codes, resulting in higher levels of storm protection. During the quarter, we secured exclusive agreements with eight new communities, which will continue to help offset any macroeconomic weakness. In our western region, organic growth was 38% versus the prior year quarter, reflecting strength in our production builder business. This sector outperformed our expectations for the past two years due to an ongoing strong demand to upgrade indoor-outdoor living areas. We're also seeing the benefit from our capacity expansion in our Phoenix facility, which has allowed us to better serve the custom market. We recently opened a showroom in San Diego, which positions us well to serve the growing Southern California home and renovation markets. And lastly, Andlin continues to outperform our acquisition targets. Our backlog was 282 million at the end of the third quarter, down from 356 million at the start of the year. The reduction in backlog is primarily due to the strong operational performance of our core PGT business, as we are fully recognizing the impacts of our 2021 investments. Ending backlog is also impacted by approximately 12 million of deferred sales at the end of the third quarter related to Hurricane Ian. Slide 7 summarizes the strategic and operational framework that drives our profitable growth. Our first pillar is customer-centric innovation, which drives us to deliver products with features, performance, and value demanded by our builders and customers. We're expanding our product offering to improve thermal performance, architectural sightlines, energy efficiency, and indoor-outdoor living spaces. Our second pillar is investing in talent. Over the last year, we have been incredibly pleased with the caliber of both our new hires and experienced talent and their success in helping our company achieve our growth targets. We recently welcomed the 173 talented Martin team members to PGT Innovations. Our third pillar is transforming our manufacturing operations to scale in line with our growth. Our operational flexibility improving our manufacturing processes to reduce or prevent back orders and maintaining efficient warehouse operations. Our 78,000 square foot expansion at our western window facility is producing new windows and offers improved lead times for our western customers as a prime example. The fourth pillar is allocating strong free cash flow to achieve profitable growth. We are always on the lookout for unique opportunities to improve our product offerings and production capabilities. The Martin acquisition is just one example. Recognizing that we continue to face an uncertain economic environment, we will remain extremely disciplined as we consider opportunities to deploy capital to profitably grow our business. Now I'd like to turn the call over to John Kuntz to review our third quarter results in greater detail. John?