Gibraltar Announces Third Quarter 2023 Financial Results

EPS: GAAP up 19%, Adjusted up 23% on Flat Net Sales

Strong Cash Generation on Higher Margins, Working Capital Management

Backlog up 5%, End Market Demand Remains Strong

Raising 2023 EPS; Narrowing 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 September 30, 2023.

"Our focus in 2023 has been to drive quality of earnings through profitability expansion and cash flow improvement, and this has paid off. In the third quarter, on an adjusted basis, operating income increased 19%, EPS increased over 23%, and we generated 23% free cash flow on flat net sales. Our results year to date allow us to increase our earnings and free cash flow guidance and narrow our revenue guide. With order backlog up over 5% versus last year, our fundamentals are solid, and we are positioned for a strong end to the year," stated Chairman and CEO Bill Bosway.

Third Quarter 2023 Consolidated Results

Net sales were flat, driven by the timing of active projects shifting from the third quarter in project-based businesses, and price management initiatives in the Residential business. These headwinds were positively offset by revenue from recent acquisitions and market participation gains across the business.

GAAP earnings increased to $39.3 million, or $1.28 per share. Adjusted net income increased 19.0% to $42.5 million, or $1.38 per share, and adjusted EPS increased 23.2% driven by solid execution. Free cash flow to net sales of 23.0% compared to 8.6% in the prior year 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 portfolio management actions, as further described in the appended reconciliation of adjusted financial measures.

Third Quarter Segment Results

Renewables

Net sales were down 4.2% as module supply, local permitting delays, and further delay of the final Inflation Reduction Act tax credit guidelines impacted customer start dates of contracted and active projects in the quarter. New order bookings remained robust with order backlog up 13.3% versus prior year.

Adjusted operating margin increased 380 basis points versus the prior year as the team continued to execute well across the business. Assuming no change in industry dynamics, management expects relatively flat net sales in the fourth quarter, with net sales in the second half accelerating from the first half.

Residential

Net sales increased 5.6% with recent acquisitions adding 8.8%. Organic sales decreased 3.2% driven by price adjustments in response to the downward movement in commodity prices, and 80/20 initiatives targeting less attractive product lines. The company continues to grow participation with new and existing customers in its core products, and through expansion into new regions.

Adjusted operating income improved 17.9% with increased volume, improved alignment of price/cost, implementation of additional 80/20 initiatives, and favorable product line mix. Adjusted operating margin expanded 200 basis points and management expects continued strong performance through year-end.

Agtech

Net sales on an adjusted basis were down 26.3% as the start of new project construction was delayed within the quarter. New orders continued to accelerate, increasing backlog 9.4% sequentially; the company expects these orders, combined with projects now underway, to drive revenue acceleration in the fourth quarter.

Adjusted operating margin decreased 510 basis points as net sales shifted from the third to the fourth quarter.

Infrastructure

Net sales and order backlog increased 22.5% and 6.2% respectively driven by solid end market demand and market participation gains, and management expects positive momentum to continue for the remainder of the year.

Operating income increased 146.2% and operating margins improved 1,300 basis points driven by strong execution, 80/20 productivity, supply chain efficiency, and product line mix.

Business Outlook

Mr. Bosway concluded, "Given our results for the first nine months and the momentum we carry into the fourth quarter, we are adjusting our outlook for EPS upward, and narrowing our 2023 net sales outlook. We expect to deliver improved profitability and cash flow."

Gibraltar is raising its guidance for earnings for the full year 2023. GAAP EPS is now expected to range between $3.51 and $3.71, compared to $2.56 in 2022, and adjusted EPS is now expected to range between $4.05 and $4.15, compared to $3.40 in 2022. The outlook for consolidated net sales narrows to between $1.37 billion and $1.40 billion, compared to $1.38 billion in 2022.

Third 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 third 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, 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 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 exclude 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 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 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.