Manufacturers

Atkore Delivers Record 2022 Results

Atkore Inc. announced earnings for its fiscal 2022 full year and fourth quarter ended September 30, 2022 (“fourth quarter”).

“Atkore delivered record results for fiscal 2022, as we continue to successfully execute on our strategic initiatives to expand our portfolio and deliver differentiated value to our customers,” said Bill Waltz, Atkore President and Chief Executive Officer. “Our performance was driven by the resilience of our business model, and our ability to drive value from our acquisitions. During fiscal 2022, we deployed over $950 million in capital towards investments in our operations, six acquisitions and $500 million in share repurchases. Our fiscal 2022 performance builds on the journey we’ve taken over the years to transform our business and create a stronger platform for long-term success.”

Waltz continued, “Looking forward, we are confident that we can continue to leverage our diversified approach and broad portfolio of leading solutions to win in the marketplace. As anticipated, the strong pricing environment experienced in recent years is expected to normalize in fiscal 2023, which will impact our top- and bottom-line performance through the year. However, we expect to continue to generate strong cash flow, and our capital allocation strategy remains focused on investing in both organic and inorganic opportunities while still returning capital to shareholders. We have significant financial flexibility, a proven strategy and the discipline to capitalize on favorable megatrends, in order to capture the opportunities ahead and deliver value for all of our stakeholders over the long-term.”

2022 Fourth Quarter Results

Three Months Ended

(in thousands)

September 30, 2022

September 30, 2021

Change

Change %

Net sales

Electrical

$

795,220

$

697,492

$

97,728

14.0

%

Safety & Infrastructure

233,884

227,361

6,523

2.9

%

Eliminations

(118

)

(1,122

)

1,004

(89.5

) %

Consolidated operations

$

1,028,986

$

923,731

$

105,255

11.4

%

Net income

$

220,802

$

202,561

$

18,241

9.0

%

Adjusted EBITDA

Electrical

$

308,783

$

283,945

$

24,838

8.7

%

Safety & Infrastructure

36,371

29,015

7,356

25.4

%

Unallocated

(20,067

)

(20,029

)

(38

)

0.2

%

Consolidated operations

$

325,085

$

292,931

$

32,154

11.0

%

Net sales for the fourth quarter of 2022 increased to $1,029.0 million, an increase of 11.4% compared to $923.7 million for the prior-year period, primarily due to higher average selling prices of $45.4 million and higher sales volume of $8.4 million within both the Electrical and Safety & Infrastructure segments. Additionally, entities acquired during fiscal 2021 and 2022, contributed to the increase in net sales by $57.3 million.

Gross profit increased by $57.2 million to $414.5 million for the fourth quarter of 2022, as compared to $357.3 million for the prior-year period. Gross margins increased from 38.7% in the prior year period to 40.3% in the fourth quarter fiscal 2022 due to higher average selling prices of $45.4 million and lower input costs of steel, copper and resin of $9.2 million.

Selling, general and administrative expenses increased $24.3 million or 29.3%, to $107.0 million for the fourth quarter of 2022, as compared to $82.8 million for the prior-year period. The increase was primarily driven by increased general spending on business improvement initiatives of $11.6 million, recent acquisitions in fiscal 2021 and 2022 of $4.8 million, and higher sales commission and variable compensation expense of $2.6 million. The remaining increase of $5.3 million is spread across a variety of other spend categories.

Net income increased $18.2 million to $220.8 million for the fourth quarter of 2022, as compared to $202.6 million for the prior-year period, due to higher operating income of $30.9 million. Adjusted net income increased $26.5 million to $231.6 million compared to $205.1 million for the prior-year period.

Adjusted EBITDA increased $32.2 million, or 11.0%, to $325.1 million for the fourth quarter of 2022, as compared to $292.9 million for the prior-year period. Net income margin decreased from 21.9% in the prior-year period to 21.5% and Adjusted EBITDA Margin decreased 10 basis points from 31.7% to 31.6%.

Net income per diluted share was $5.18 for the fourth quarter of 2022, an increase of $0.92 from the prior-year period. Adjusted net income per diluted share was $5.52 per share for the fourth quarter of 2022 compared to $4.39 for the prior-year period.

Segment Results

Electrical

Electrical net sales increased $97.7 million, or 14.0%, to $795.2 million for the fourth quarter of 2022, as compared to $697.5 million for the prior-year period. The increase in net sales is primarily attributed to increased average selling prices of $59.3 million which were mostly driven by the plastic pipe and conduit category, increased sales from companies acquired in fiscal 2021 and 2022 of $51.3 million, partially offset by decreased volume of $3.5 million. Pricing for PVC products, as well as other products, has begun to decline from historic highs.

Adjusted EBITDA increased $24.8 million, or 8.7%, to $308.8 million for the fourth quarter of 2022, as compared to $283.9 million for the prior-year period, and Adjusted EBITDA Margin decreased from 40.7% to 38.8%. The increase in Adjusted EBITDA was largely due to increased average selling prices and Adjusted EBITDA margins decreased primarily as a result of volume declines in the fourth quarter.

Safety & Infrastructure

Safety & Infrastructure net sales increased $6.5 million, or 2.9%, to $233.9 million for the fourth quarter of 2022, as compared to $227.4 million for the prior-year period. The increase is attributed to higher volumes of $11.8 million and increases from companies acquired in fiscal 2022 of $6.0 million partially offset by decreases in average selling prices of $13.9 million.

Adjusted EBITDA increased $7.4 million, or 25.4%, to $36.4 million for the fourth quarter 2022, as compared to $29.0 million for the prior-year period. Adjusted EBITDA Margin increased to 15.6% from 12.8%. The Adjusted EBITDA increase was primarily driven by the increase higher volume, while lag in pricing created an upward benefit on EBITDA margins.

Fiscal 2022 Full-Year Results

Net sales for fiscal 2022 increased $985.9 million to $3,913.9 million, an increase of 33.7%, compared to $2,928.0 million for fiscal 2021. The increase in net sales is primarily attributed to increased average selling prices of $996.2 million which were mostly driven by the plastic pipe and conduit category within the Electrical segment and increased net sales of $96.4 million from companies acquired during fiscal 2021 and 2022. These increases are offset by decreased sales volume of $94.8 million across varying product categories within both the Electrical and the Safety & Infrastructure segments. Pricing for PVC products, as well as other products, has begun to decline from historic highs.

Gross profit for fiscal 2022 increased $514.4 million to $1,640.0 million, an increase of 45.7%, compared to $1,125.6 million for fiscal 2021. Gross margin increased to 41.9% in fiscal 2022 compared to 38.4% in fiscal 2021 due to higher average selling prices of $996.2 million, partially offset by higher input costs of steel, copper and PVC resin of $405.5 million.

Selling, general and administrative expenses increased $77.0 million, or 26.3%, to $370.0 million for fiscal 2022 compared to $293.0 million for fiscal 2021. The increase was primarily due to higher sales commission expense of $21.1 million, increased general spending on business improvement initiatives of $29.8 million, higher variable compensation of $6.5 million, transaction costs of $2.6 million, and recent acquisitions in fiscal 2021 and 2022 of $7.4 million. The remaining increase of $9.6 is spread across a variety of other spend categories.

Net income increased $325.6 million to $913.4 million for fiscal 2022, as compared to $587.9 million for fiscal 2021. Adjusted net income increased $340.1 million to $954.1 million for fiscal 2022 compared to $614.0 million for fiscal 2021. The increase in both net income and adjusted net income was primarily driven by higher operating income of $434.9 million.

Adjusted EBITDA increased $444.3 million or 49.5%, to $1,341.8 million for fiscal 2022, as compared to $897.5 million for fiscal 2021. The increase was primarily due higher operating income.

Net income per diluted share on a GAAP basis was $20.30 for fiscal 2022, an increase of $8.11 from fiscal 2021. Adjusted net income per diluted share was $21.55 for fiscal 2022 compared to $12.98 for fiscal 2021.

Liquidity & Capital Resources

During fiscal 2022, operating activities provided $786.8 million of cash, compared to $572.9 million during fiscal year 2021. Free cash flow increased to $651.1 million for fiscal 2022 from $508.4 million in fiscal year 2021. The increase in cash provided by operating activities and free cash flow was primarily due to operating income.

During the year ended September 30, 2022, the Company deployed $307.8 million on the acquisition of six companies with an additional $12.6 million to be paid in the future, repurchased $500.2 million in outstanding shares and had capital expenditures of $135.8 million. The total debt leverage ratio decreased to 0.6 as of September 30, 2022 from 0.8 as of September 30, 2021.

Outlook and Targets1

Fiscal 2023 First Quarter – The Company expects the first quarter of fiscal 2023 Adjusted EBITDA to be in the range of $240 – $260 million and Adjusted net income per diluted share to be in the range of $3.85 – $4.20.

Fiscal 2023 Full Year – The Company expects fiscal year 2023 Adjusted EBITDA to be in the range of $850-$950 million and Adjusted net income per diluted share to be in the range of $13.10 – $14.90.

Fiscal 2025 Full Year Goal –The Company is providing a long-term fiscal 2025 Adjusted net income per diluted share target of greater than $18.00.

The Company notes that the outlook and target information provided may vary due to changes in assumptions or market conditions and other factors described under “Forward-Looking Statements.”

Fourth-Quarter Highlights

  • Net income per diluted share increased to $5.18 from $4.26 in prior year period; Adjusted net income per diluted share increased to $5.52 from $4.39 in prior year period
  • Net income increased by $18.2 million versus prior year period to $220.8 million; Adjusted EBITDA increased by $32.2 million versus prior year period to $325.1 million

Fiscal 2022 Highlights

  • Record full year net sales and net income
  • Net income per diluted share increased to $20.30 from $12.19 in prior year; Adjusted net income per diluted share increased to $21.55 from $12.98 in prior year
  • Net income increased by $325.6 million versus prior year to $913.4 million; Adjusted EBITDA increased to $1,341.8 million from $897.5 million in prior year
  • Net cash provided by operating activities of $786.8 million; Free Cash Flow of $651.1 million

Additional Highlights

  • The Board of Directors increased the size of the current share repurchase authorization from $800 million to $1,300 million, and extended the duration through November 30, 2025.
  • Full-year 2023 Net sales expected to be flat to down approximately 10 percent compared to fiscal year 2022
  • Full-year 2023 Adjusted EBITDA outlook of $850 – $950 million; Full-year Adjusted net income per diluted share outlook of $13.10 – $14.90
  • Introduced long-term Full-Year Adjusted net income per diluted share goal of greater than $18.00 in fiscal year 2025

___

1 Reconciliations of the forward-looking full-year and fiscal first quarter outlook and target for Adjusted EBITDA and Adjusted net income per diluted share are not being provided as the Company does not currently have sufficient data to accurately estimate the variables and individual adjustments for such reconciliations.
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