Gibraltar Announces Second Quarter 2024 Financial Results

Net Sales: GAAP -3.3%, Adjusted -2.0%; EPS: GAAP +5.0%, Adjusted +2.6%

Strong Operating Cash Flow Generation, $36 Million

2024 Outlook: Moderating Revenue Growth, EPS Unchanged

Gibraltar Industries, Inc. (NASDAQ:ROCK), a leading manufacturer and provider of products and services for the residential, renewable energy, agtech and infrastructure markets, today reported its financial results for the three- and six-month period ended June 30, 2024.

"We delivered solid execution and strong operating cash flow performance across Gibraltar, generating $36 million, while overcoming two market headwinds that impacted growth in our Residential and Renewables businesses in the quarter. The residential market experienced unexpected channel destocking which started in late May / early June. We offset some of this impact through participation gains, which will support our residential growth plan in the second half. Although net sales for Renewables were up versus prior year, it was less than expected as some customers continued to have project delays related to ongoing trade and regulatory issues. Agtech bookings surpassed $90 million in the quarter, a record for the business, and support strong revenue growth in the second half. We continue to work toward achieving growth in all four segments in 2024 while expanding margin and driving cash flow, and we feel positive about our full year outlook," stated Chairman and CEO Bill Bosway.

Second Quarter 2024 Consolidated Results

GAAP net sales were down 3.3% while adjusted net sales were down 2.0% driven by a slowing market in Residential. Agtech bookings are up significantly and support strong revenue growth in the second half, and Infrastructure performance is expected to remain positive going forward.

GAAP net income increased 4.9% to $32.2 million, or $1.05 per share, and adjusted net income increased 2.8% to $36.4 million, or $1.18 per share.

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

Second Quarter Segment Results

Residential

Net sales decreased 6.1% driven by a slowing market and unexpected channel destocking in the second half of the quarter, partially offset by participation gains with new and existing customers, growth in ventilation product lines, and expansion initiatives in the Rocky Mountain region.

Operating margins expanded through solid execution, 80/20 initiatives, and effective price/cost management.

Renewables

GAAP net sales increased 2.5% and adjusted net sales increased 8.2%, which excludes the Japan renewables business divested in 2023. Net sales were driven by strong demand from new and existing customers for the new 1P tracker product. Despite a growing pipeline of new projects across all product lines, order backlog decreased 10% during the quarter as some customers paused signing new contracts as they work through trade and/or regulatory items specific to their projects.

Both GAAP and adjusted operating margins were impacted by product mix as the 1P tracker product moves through its launch process learning curve to permanently tooled production for suppliers and an efficient field installation process. GAAP margins were further impacted by restructuring activities and prior year portfolio management actions.

Agtech

GAAP net sales decreased 1.4% and adjusted net sales increased 0.6%, which excludes the Processing business liquidated in 2023. Revenue was impacted by new projects starting later in the quarter, with June revenue up significantly over May. New bookings reached $90 million in the quarter increasing nearly 400% over Q1 resulting in backlog up 32% over prior year.

Both GAAP and adjusted operating margins were impacted by project timing and mix, while GAAP was more than offset by the liquidation of the processing business in 2023.

Infrastructure

Net sales increased 2.5%, driven by continued strong execution and market participation gains. Backlog decreased 12% as expected due to a large project booked in 2023 reaching its final stages; bookings increased 3% on a sequential basis reflecting consistent customer activity. Demand and quoting remain strong, and management expects order flow to increase in the second half of the year.

Operating margins increased 100 basis points driven by price / cost alignment, ongoing strong execution, 80/20 productivity, and improving product mix.

Business Outlook

Mr. Bosway continued, "We are making a slight adjustment to our net sales outlook for the year to reflect recent slower market conditions in both Residential and Renewables end markets offset by strength in both Agtech and Infrastructure. We remain focused on driving participation gains as we work toward achieving growth in all four segments, with operational improvements to support solid second half and full year margin expansion and cash flow growth."

Consolidated net sales are now expected to range between $1.38 billion and $1.42 billion, compared to $1.38 billion in 2023, or $1.36 billion on an adjusted basis. The outlook for both GAAP and adjusted EPS is unchanged, with GAAP EPS continuing to range between $4.04 and $4.29, compared to $3.59 in 2023, and adjusted EPS continuing to range between $4.57 and $4.82, compared to $4.09 in 2023.

Second Quarter 2024 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 2024. 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 residential, renewable energy, 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 generate order flow and sales and increase backlog; our ability to translate our backlog into net sales, other general economic conditions and conditions in the particular markets in which we operate, changes 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 IT systems, the impact of trade and regulation (including the latest Department of Commerce's solar panel anti-circumvention investigation, the bifacial exemption revocation, the Auxin Solar challenge to the Presidential waiver of tariffs, deadline to install certain modules under the waiver, 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 has been liquidated and our Japan renewables business which was sold on December 1, 2023. Adjusted net income, operating income and margin exclude special charges consisting of restructuring costs (primarily comprised of exit activities costs and impairment of both tangible and intangible assets associated with 80/20 simplification, lean initiatives and / or discontinued products), senior leadership transition costs (associated with new and / or terminated senior executive roles), acquisition related costs (legal and consulting fees for recent business acquisitions), and portfolio management (which represents the operating results generated by our processing business which was liquidated in 2023 and our Japan renewables business which was sold in 2023). 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 interest, taxes, depreciation, amortization and stock compensation expense. 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 flow 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 2024 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.