Gibraltar Announces First Quarter 2023 Financial Results

Net Sales: GAAP and Adjusted down 8%, EPS: GAAP up 45%, Adjusted up 17%

Strong Cash Generation

Reaffirms 2023 Net Sales, EPS, Cash Flow Growth 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 March 31, 2023.

“First quarter results demonstrate a strong start to the year. We executed well delivering 14% improvement in adjusted operating income on 8% down net sales. Additionally, we delivered free cash flow exceeding 12% of net sales, enabling us to pay down a large portion of our revolver draw and continued to execute our authorized share repurchase program. Current trends in our end markets and positive customer order activity align and support our expectations and 2023 guidance,” stated Chairman and CEO Bill Bosway. 

First Quarter 2023 Consolidated Results

Below are first quarter consolidated results:

The decrease in net sales was mainly driven by end market dynamics in the Renewables segment and customer rescoping and reprioritizing fruit and vegetable growing projects in the Agtech business. Residential end market demand is evolving as expected, and the Infrastructure segment continues to have strong momentum.

GAAP earnings increased to $21.1 million, or $0.68 per share. Adjusted net income increased 10.7% to $21.8 million, or $0.70 per share, and adjusted EPS increased 16.7% driven by solid execution in the Renewables, Agtech and Infrastructure segments. Free cash flow to net sales of 12.3% was driven through stronger margin performance and improved 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.

First Quarter Segment Results

Renewables

For the first quarter, the segment reported:

Net sales were down 24.9% as the U.S. solar industry continued to manage through panel importation challenges resulting from the Uyghur Forced Labor Prevention Act (UFLPA), and project movement associated with adverse winter weather conditions during the lowest seasonal quarter of the year. The pace of business continued to improve during the quarter as bookings nearly doubled sequentially. As a result, backlog increased 34% on a sequential basis and year-over-year backlog comparisons are expected to turn positive over the course of the year.

Adjusted operating margin improved as expected, increasing 920 basis points year-over-year, driven by field operations productivity and improved supply chain management that offset lower volumes.

Residential

For the first quarter, the segment reported:

Net sales were flat; the positive impact of participation gains and the acquisition of Quality Aluminum Products, which contributed 8.0% growth in the quarter, offset headwinds of channel inventory correction, the market’s return to normal seasonal demand, and adverse winter weather in key regions of the U.S.

Adjusted operating income decreased 12.2% as anticipated as price and material cost continued to realign, and the market returned to its normal seasonal demand pattern. Sequentially, margins improved 310 basis points as price and material cost alignment improved during the quarter, and we expect margins to improve as seasonal volume accelerates, price / material cost are better aligned, and Quality Aluminum Products integration benefits are realized.

Agtech

For the first quarter, the segment reported:

Net sales decreased 15.3%, with adjusted net sales down 18.0% as Produce customers rescope and reprioritize the launch of fruit and vegetable growing facilities. The active project pipeline is at its highest level in company history driven by produce and cannabis projects, and bookings and backlog are expected to increase accordingly in the coming quarters.

Adjusted operating margin improved 440 basis points driven by business mix, further improvement in business operating systems, which are now fully unified across the business, and supply chain productivity and efficiency improvement.

Infrastructure

For the first quarter, the segment reported:

Net Sales and backlog increased 8.7% and 38%, respectively, as customer demand continues to be very strong. Management expects continued strength from increased infrastructure spending related to the Infrastructure Investment and Jobs Act and ongoing efforts to increase market participation.

Adjusted operating income more than doubled and adjusted operating margins improved 800 basis points driven by strong 80/20 execution, volume, and supply chain productivity.

Business Outlook

Mr. Bosway concluded, “As we head into the second quarter, customer bookings and demand across the business is shaping up as anticipated, and our businesses are on track for a solid second quarter. As committed coming into the year, we remain laser-focused on driving growth, margin expansion, and strong cash performance.”

Gibraltar is reiterating its guidance for net sales and earnings for the full year 2023. Consolidated net sales is expected to range between $1.36 billion and $1.41 billion, compared to $1.38 billion in 2022. GAAP EPS is expected to range between $3.04 and $3.24, compared to $2.56 in 2022, and adjusted EPS is expected to range between $3.46 and $3.66, compared to $3.40 in 2022.

First 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 first 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 sell assets that Gibraltar has determined to sell, 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 has been classified as held-for-sale. 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 that has been classified as held-for-sale. 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.

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