Gibraltar Announces Second Quarter 2023 Financial Results

EPS: GAAP up 11%, Adjusted up 23% on Flat Sales

Backlog at $412 Million, up 15% Sequentially, up 1% vs. Prior Year

Continued Strong Cash Flow Generation

Increasing 2023 EPS Outlook; Reaffirming 2023 Net Sales Outlook

Gibraltar Industries, Inc. (NASDAQ:ROCK), a leading manufacturer and provider of products and services for the renewable energy, residential, agtech and infrastructure markets, today reported its financial results for the three-month period ended June 30, 2023.

"We executed well in the quarter, building on our momentum from the beginning of the year. Our end market fundamentals remain solid with our order backlog up 15% sequentially and 1% versus prior year. On an adjusted basis, operating income improved 18%, EPS improved 23%, and we generated 20% free cash flow. Given our first half performance and current outlook for the second half of the year, we are raising our adjusted EPS guidance range 12% - 13% and reaffirming our net sales outlook and expect continued strong cash flow generation," stated Chairman and CEO Bill Bosway.

Second Quarter 2023 Consolidated Results

Net sales were flat, driven by the acquisition of Quality Aluminum Products, completed in the third quarter of 2022, along with organic growth in the Residential and Infrastructure segments. Offsetting growth were market price adjustments in the Residential segment, continued channel inventory right-sizing, and project delays in the Renewables and Agtech segments related to solar module availability, project permitting, and project rescoping.

GAAP earnings increased to $30.7 million, or $1.00 per share. Adjusted net income increased 15.2% to $36.3 million, or $1.18 per share, and adjusted EPS increased 22.9% driven by solid execution in all segments. Free cash flow to net sales of 20.0% was driven by improved margin performance and working capital management.

Adjusted measures exclude charges for restructuring initiatives, acquisition-related items, senior leadership transition costs and the results of the processing business, as further described in the appended reconciliation of adjusted financial measures.

Second Quarter Segment Results

Renewables

Net sales were down 23.6% as module supply and local permitting delays impacted project timing of contracted and active projects. New order bookings continued to accelerate from the beginning of the year with order backlog up 16.7% sequentially and 6.3% versus prior year. Solar module supply remains a challenge but continues to improve as additional module importers come up the Uyghur Forced Labor Prevention Act (UFLPA) importation learning curve.

Adjusted operating margin increased 470 basis points versus prior year as the team continued to execute well across the business. Management expects to deliver improved sales and margin performance in the second half of the year as module supply improves further.

Residential

Net sales increased 14.0%, with organic sales contributing 1.3% and the acquisition of Quality Aluminum Products adding 12.7%. Organic growth was driven by participation gains across the business, which helped offset the year-over-year impact of market price adjustments made in prior quarters in response to lower commodity prices and some remaining channel inventory right-sizing.

Adjusted operating income improved 18.9% with increased volume, improved alignment of price/cost, implementation of additional 80/20 initiatives, and favorable product line mix. Operating margin expanded 80 basis points and management expects solid performance to continue in the second half of the year.

Agtech

Net sales on an adjusted basis were down 16.1% as the commercial business experienced customer delays in project starts. New orders in the produce business helped increase backlog 16.2% sequentially, which is expected to drive improved sales in the second half of 2023.

Adjusted operating margin improved 280 basis points driven by 80/20 initiatives, supply chain optimization initiatives, and improvement in project management systems. Margin performance is expected to be solid for the rest of the year.

During the quarter, Gibraltar elected to exit the processing equipment business, resulting in a GAAP operating loss in the segment. This liquidation is underway and expected to be substantially completed during the third quarter of 2023.

Infrastructure

Net sales and order backlog increased 12.6% and 46.1% respectively driven by strong end market demand and market participation gains. The Infrastructure Investment and Jobs Act continues to provide a strong tailwind for the market and management expects positive momentum to continue in the second half of the year.

Adjusted operating income doubled and adjusted operating margins improved 1,070 basis points driven by strong execution, 80/20 productivity, supply chain efficiency, and product line mix.

Business Outlook

Mr. Bosway concluded, "We delivered solid results in the first half, and we expect this momentum to continue as we enter the second half. As a result, we are raising our EPS guide and are reaffirming our 2023 net sales outlook, and expect to deliver growth, improved profitability, and better cash flow versus last year."

Gibraltar is raising its guidance for earnings for the full year 2023. GAAP EPS is now expected to range between $3.46 and $3.66, compared to $2.56 in 2022, and adjusted EPS is now expected to range between $3.90 and $4.10, compared to $3.40 in 2022. The outlook for consolidated net sales is unchanged, between $1.36 billion and $1.41 billion, compared to $1.38 billion in 2022.

Second Quarter 2023 Conference Call Details

Gibraltar will host a conference call today starting at 9:00 a.m. ET to review its results for the second quarter of 2023. Interested parties may access the webcast through the Investors section of the Company's website at www.gibraltar1.com, where related presentation materials will also be posted prior to the conference call. The call also may be accessed by dialing (877) 407-3088 or (201) 389-0927. For interested individuals unable to join the live conference call, a webcast replay will be available on the Company's website for one year.

About Gibraltar

Gibraltar is a leading manufacturer and provider of products and services for the renewable energy, residential, agtech, and infrastructure markets. Gibraltar's mission, to make life better for people and the planet, is fueled by advancing the disciplines of engineering, science, and technology. Gibraltar is innovating to reshape critical markets in comfortable living, sustainable power, and productive growing throughout North America. For more please visit www.gibraltar1.com.

Forward-Looking Statements

Certain information set forth in this news release, other than historical statements, contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 that are based, in whole or in part, on current expectations, estimates, forecasts, and projections about the Company's business, and management's beliefs about future operations, results, and financial position. These statements are not guarantees of future performance and are subject to a number of risk factors, uncertainties, and assumptions. Actual events, performance, or results could differ materially from the anticipated events, performance, or results expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially from current expectations include, among other things, the availability and pricing of our principal raw materials and component parts, supply chain challenges causing project delays and field operations inefficiencies and disruptions, the loss of any key customers, adverse effects of inflation, our ability to continue to improve operating margins, our ability to translate our backlog into net sales, other general economic conditions and conditions in the particular markets in which we operate, increases in spending due to laws and government incentives, such as the Infrastructure Investment and Jobs Act, changes in customer demand and capital spending, competitive factors and pricing pressures, our ability to develop and launch new products in a cost-effective manner, our ability to realize synergies from newly acquired businesses, disruptions to our IT systems, the impact of regulation (including the Department of Commerce's solar panel anti-circumvention investigation and the Uyghur Forced Labor Prevention Act (UFLPA)), rebates, credits and incentives and variations in government spending and our ability to derive expected benefits from restructuring, productivity initiatives, liquidity enhancing actions, and other cost reduction actions. Before making any investment decisions regarding our company, we strongly advise you to read the section entitled "Risk Factors" in our most recent annual report on Form 10-K which can be accessed under the "SEC Filings" link of the "Investor Info" page of our website at www.Gibraltar1.com. The Company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable law or regulation.

Adjusted Financial Measures

To supplement Gibraltar's consolidated financial statements presented on a GAAP basis, Gibraltar also presented certain adjusted financial measures in this news release and its quarterly conference call, including adjusted net sales, adjusted operating income and margin, adjusted net income, adjusted earnings per share (EPS), free cash flow and adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) each a non-GAAP financial measure. Adjusted net sales reflects the removal of net sales associated with our Processing business, which is in the process of being liquidated. Adjusted net income, operating income and margin excludes special charges consisting of restructuring costs primarily associated with 80/20 simplification or lean initiatives, senior leadership transition costs, acquisition related costs and the operating losses generated by our processing business which is in the process of being liquidated. These special charges are excluded since they may not be considered directly related to the Company's ongoing business operations. The aforementioned exclusions along with other adjustments to other income below operating profit are excluded from adjusted EPS. Adjusted EBITDA further excludes depreciation, amortization and stock compensation. In evaluating its business, the Company considers and uses these non-GAAP financial measures as supplemental measures of its operating performance. Free cash flow is operating cash flow less capital expenditures and the related margin is free cash flow divided by net sales. The Company believes that the presentation of adjusted measures and free cash flows provides meaningful supplemental data to investors that are indicative of the Company's core operating results and facilitates comparison of operating results across reporting periods as well as comparison with other companies. Adjusted EBITDA and free cash flow are also useful measures of the Company's ability to service debt and adjusted EBITDA is one of the measures used for determining the Company's debt covenant compliance.

Adjustments to the most directly comparable financial measures presented on a GAAP basis are quantified in the reconciliation of adjusted financial measures provided in the supplemental financial schedules that accompany this news release. These adjusted measures should not be viewed as a substitute for the Company's GAAP results and may be different than adjusted measures used by other companies and the Company's presentation of non-GAAP financial measures should not be construed as an inference that the Company's future results will be unaffected by unusual or non-recurring items.

Reconciliations of non-GAAP measures related to full-year 2023 guidance have not been provided due to the unreasonable efforts it would take to provide such reconciliations due to the high variability, complexity and uncertainty with respect to forecasting and quantifying certain amounts that are necessary for such reconciliations.