PGT Innovations, Inc. (NYSE: PGTI), a national leader in premium
windows and doors, including impact-resistant products, garage
doors, and products designed to unify indoor/outdoor living spaces,
today announced financial results for its second quarter ended July
1, 2023.
Financial Highlights for Second Quarter 2023
(All results reflect comparison to prior-year period; Cash on
hand is compared to prior-year end)
- Net sales totaled $385 million, a decrease of 5 percent.
- Net income was $32 million, a decrease of 13 percent.
- Adjusted net income* was $34 million, a decrease of 16
percent.
- Adjusted EBITDA* was $74 million, a decrease of 6 percent.
- Net income per common share attributable to common
shareholders, diluted, was $0.53, a decrease of 13 percent.
- Adjusted net income per diluted share* was $0.58, a decrease of
13 percent.
- Total liquidity* at the end of the second quarter was $177
million, including cash of $39 million and revolver availability of
nearly $138 million.
Third Quarter 2023 Guidance
- Net sales in the range of $385 million to $405 million.
- Adjusted EBITDA* in the range of $71 million to $77
million.
* Adjusted net income, Adjusted net income per diluted share,
Adjusted EBITDA, and Liquidity are non-GAAP measures. Please see
“Use of Non-GAAP Financial Measures” below for more
information.
"PGT Innovations delivered sequential growth in net sales and
profitability for the second quarter in a dynamic macro
environment. The Company continues to execute on operational
performance targets, maintaining good cost controls, and our team
continues to excel in this challenging environment,” said Jeff
Jackson, President and Chief Executive Officer. “The Company
delivered two percent sequential sales growth, with continued
strength in the repair and remodeling channel driving the
increase.”
“Our organic second quarter net sales were down eight percent
from the prior year quarter, driven by a low double-digit unit
volume decline partially offset by the impact of price increases,”
added Jackson. “New construction market activity suggests a solid
recovery in the second half of 2023 based on the recent recovery in
permits and starts trends.”
“During the quarter, we completed the acquisition of the
remaining 25% of ECO Enterprises, invested in capacity and
automation initiatives, and continued to repurchase shares. In the
second quarter, we executed $19.8 million of share repurchases, for
a total year-to-date purchases of $45.4 million,” said Craig
Henderson, Interim Chief Financial Officer and Vice President of
Corporate Finance.
"Our second quarter performance was driven by operational
execution, continued cost containment measures, and the impacts of
pricing actions taken to offset materials and wage inflation. We
expect third quarter 2023 performance for net sales in the range of
$385 million to $405 million, and Adjusted EBITDA in the range of
$71 million to $77 million," concluded Henderson.
Conference Call
PGT Innovations will host a conference call today at 10:30 a.m.
The conference call will be available at the same time through the
Investor Relations section of the PGT Innovations, Inc. website,
http://ir.pgtinnovations.com/events.cfm.
To participate in the teleconference, kindly dial into the call
about 10 minutes before the start time: 833-316-0547 (U.S.
toll-free) and 412-317-5728 (International). A replay of the call
will be available within approximately one hour after the scheduled
end of the call on August 3, 2023, through approximately 12:30 p.m.
on August 10, 2023. To access the replay, dial 877-344-7529 (U.S.
Only toll-free), 855-669-9658 (Canada Only toll-free) and
412-317-0088 (International) and refer to pass code 7409661. Other
international replay dial-in numbers can be obtained at:
https://services.choruscall.com/ccforms/replay.html
You may join the conference online by using the following
link:
https://event.choruscall.com/mediaframe/webcast.html?webcastid=nxTiCxVw
About PGT Innovations, Inc.
PGT Innovations manufactures and supplies premium windows,
doors, and garage doors. Its highly engineered and technically
advanced products can withstand some of the toughest weather
conditions on Earth and are revolutionizing the way people live by
unifying indoor and outdoor living spaces. PGT Innovations creates
value through deep customer relationships, understanding the
unstated needs of the markets it serves, and a drive to develop
category-defining products. PGT Innovations is also the nation’s
largest manufacturer of impact-resistant windows and doors and
holds the leadership position in its primary market.
The PGT Innovations’ family of brands include CGI®, PGT® Custom
Windows and Doors, WinDoor®, Western Window Systems, Anlin Windows
& Doors, Eze-Breeze®, Eco Window Systems®, NewSouth Window
Solutions®, and Martin Door®. The company’s brands, in their
respective markets, are a preferred choice of architects, builders,
and homeowners throughout North America and the Caribbean. Their
high-quality products are available in custom and standard sizes
with massive dimensions that allow for unlimited design
possibilities in residential, multi-family, and commercial
projects. For additional information, visit
https://pgtinnovations.com/.
Forward-Looking Statements
This press release contains "forward-looking statements" within
the meaning of the safe harbor provisions of the U.S. Private
Securities Litigation Reform Act of 1995. Forward-looking
statements can be identified by words such as: "assume," "believe,"
"could," "estimate," "expect," "guidance," "intend," "many,"
"positioned," "potential," "project," "think," "should," "target,"
"will," "would" and similar references to future periods. Examples
of forward-looking statements include, among others, statements we
make regarding the recovery of the new construction market and our
net sales and Adjusted EBITDA guidance.
Forward-looking statements are neither historical facts nor
assurances of future performance. Instead, they are based only on
current beliefs, expectations and assumptions regarding the future
of our business, future plans and strategies, projections,
anticipated events and trends, the economy and other future
conditions. Because forward-looking statements relate to the
future, they are subject to inherent uncertainties, risks and
changes in circumstances that are difficult to predict and many of
which are outside of our control. Our actual results and financial
condition may differ materially from those indicated in the
forward-looking statements. Therefore, you should not rely on any
of these forward-looking statements. Important factors that could
cause our actual results and financial condition to differ
materially from those indicated in the forward-looking statements
include, among others, the following:
- unpredictable weather and macroeconomic factors that may
negatively impact the repair and remodel and new construction
markets and the construction industry generally, especially in the
state of Florida and the western United States, where the
substantial portion of our sales are currently generated, and in
the U.S. generally;
- changes in raw material prices, especially for aluminum, glass,
vinyl, and steel, including, price increases due to the
implementation of tariffs and other trade-related restrictions,
Pandemic-related supply chain interruptions, or interruptions from
the conflict in Ukraine;
- our dependence on a limited number of suppliers for certain of
our key materials;
- our dependence on our impact-resistant product lines, which
increased with the acquisition of Eco Enterprises, LLC ("Eco"), and
contemporary indoor/outdoor window and door systems, and on
consumer preferences for those types and styles of products;
- the effects of increased expenses or unanticipated liabilities
incurred as a result of, or due to activities related to, our
recent acquisitions, including our acquisitions of Martin Door
Holdings, Inc. ("Martin") and Anlin Windows & Doors
("Anlin");
- our level of indebtedness, which increased in connection with
our recent acquisitions, including our acquisitions of Martin and
Anlin;
- increases in credit losses from obligations owed to us by our
customers in the event of a downturn in the home repair and remodel
or new home construction channels in our core markets and our
inability to collect such obligations from such customers;
- the risks that the anticipated cost savings, synergies, revenue
enhancement strategies and other benefits expected from our
acquisitions of Martin and Anlin may not be fully realized or may
take longer to realize than expected or that our actual integration
costs may exceed our estimates;
- increases in transportation costs, including increases in fuel
prices;
- our dependence on our limited number of geographically
concentrated manufacturing facilities, which increased further due
to our acquisition of Eco;
- sales fluctuations to and changes in our relationships with key
customers;
- federal, state and local laws and regulations, including
unfavorable changes in local building codes and environmental and
energy code regulations;
- risks associated with our information technology systems,
including cybersecurity-related risks, such as unauthorized
intrusions into our systems by "hackers" and theft of data and
information from our systems, and the risks that our information
technology systems do not function as intended or experience
temporary or long-term failures to perform as intended;
- product liability and warranty claims brought against us;
- in addition to our acquisitions of Martin and Anlin, our
ability to successfully integrate businesses we may acquire in the
future, or that any business we acquire may not perform as we
expected when we acquired it; and
- the other risks and uncertainties discussed under “Risk
Factors” in Part I, Item 1A of our Annual Report on Form 10-K for
the year ended December 31, 2022, and our other filings with the
Securities and Exchange Commission.
Any forward-looking statement made by us in this press release
is based only on information currently available to us and speaks
only as of the date on which it is made. We undertake no obligation
to publicly update any forward-looking statement, whether written
or oral, that may be made from time to time, whether as a result of
new information, future developments or otherwise.
Use of Non-GAAP Financial Measures
This press release and the financial schedules include financial
measures and terms not calculated in accordance with U.S. generally
accepted accounting principles (GAAP). Management believes that
presentation of non-GAAP measures such as Adjusted net income,
Adjusted net income per share, and Adjusted EBITDA provides
investors and analysts with an alternative method for assessing our
operating results in a manner that enables investors and analysts
to more thoroughly evaluate our current performance compared to
past performance. However, these measures do not provide a complete
picture of our operations. Management also believes these non-GAAP
measures provide investors with a better baseline for assessing our
future earnings potential. The non-GAAP measures included in this
press release are provided to give investors access to types of
measures that we use in analyzing our results, and for internal
planning and forecasting purposes.
Adjusted net income consists of GAAP net income adjusted for the
items included in the accompanying reconciliation. Adjusted net
income per share consists of GAAP net income per share adjusted for
the items included in the accompanying reconciliation.
Adjusted EBITDA consists of net income, adjusted for the items
included in the accompanying reconciliation. We believe that
Adjusted EBITDA provides useful information to investors and
analysts about the Company's performance because they eliminate the
effects of period-to-period changes in taxes, costs associated with
capital investments and interest expense. Adjusted EBITDA does not
give effect to the cash the Company must use to service its debt or
pay its income taxes and thus does not reflect the actual funds
generated from operations or available for capital investments.
Liquidity consists of net revolver capacity plus cash and cash
equivalents. Net revolver capacity is calculated as total revolver
capacity, less revolver borrowings and off-balance-sheet
outstanding letter-of-credit commitments.
Our calculations of Adjusted net income and Adjusted net income
per share, Adjusted EBITDA and Liquidity are not necessarily
comparable to calculations performed by other companies and
reported as similarly titled measures. These non-GAAP measures
should be considered in addition to results prepared in accordance
with GAAP but should not be considered a substitute for or superior
to GAAP measures. Schedules that reconcile Adjusted net income,
Adjusted net income per share, Adjusted EBITDA and Liquidity to
GAAP net income are included in the financial schedules
accompanying this release.
We are not able to provide a reconciliation of projected
Adjusted EBITDA to the most directly comparable expected GAAP
results due to the unknown effect, timing and potential
significance of the effects of legal matters, tax considerations,
and income and expense from changes in fair value of contingent
consideration from acquisitions. Expenses associated with legal
matters, tax consequences, and income and expense from changes in
fair value of contingent consideration from acquisitions have in
the past, and may in the future, significantly affect GAAP results
in a particular period.
PGT INNOVATIONS, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(unaudited - in thousands,
except per share amounts)
Three Months Ended
Six Months Ended
July 1,
July 2,
July 1,
July 2,
2023
2022
2023
2022
Net sales
$
384,934
$
406,521
$
761,763
$
765,183
Cost of sales
230,983
241,391
458,581
465,460
Gross profit
153,951
165,130
303,182
299,723
Selling, general and administrative
expenses
100,005
109,505
195,918
205,387
Restructuring costs and charges
2,516
—
2,516
—
Income from operations
51,430
55,625
104,748
94,336
Interest expense, net
8,214
7,155
15,870
14,235
Income before income taxes
43,216
48,470
88,878
80,101
Income tax expense
11,462
12,005
22,697
19,810
Net income
31,754
36,465
66,181
60,291
Less: Net income attributable to
redeemable non-controlling interest
(264
)
(304
)
(1,101
)
(961
)
Net income attributable to the Company
$
31,490
$
36,161
$
65,080
$
59,330
Calculation of net income per common share
attributable to PGT Innovations, Inc. common shareholders:
Net income attributable to the Company
$
31,490
$
36,161
$
65,080
$
59,330
Change in redemption value of redeemable
non-controlling interest
(460
)
351
(1,637
)
(1,785
)
Net income attributable to PGT
Innovations, Inc. common shareholders
$
31,030
$
36,512
$
63,443
$
57,545
Net income per common share attributable
to PGT Innovations, Inc. common shareholders:
Basic
$
0.53
$
0.61
$
1.07
$
0.96
Diluted
$
0.53
$
0.61
$
1.07
$
0.96
Weighted average number of common shares
outstanding:
Basic
58,559
59,928
59,188
59,880
Diluted
58,867
60,257
59,528
60,241
PGT INNOVATIONS, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(unaudited - in
thousands)
July 1,
December 31,
2023
2022
ASSETS
Current assets:
Cash and cash equivalents
$
39,397
$
66,548
Accounts receivable, net
150,530
160,107
Inventories
117,155
112,672
Contract assets, net
50,910
47,919
Prepaid expenses and other current
assets
34,857
28,295
Total current assets
392,849
415,541
Property, plant and equipment, net
213,165
208,354
Operating lease right-of-use asset,
net
102,864
104,121
Intangible assets, net
433,754
447,052
Goodwill
461,927
460,415
Other assets, net
6,854
4,766
Total assets
$
1,611,413
$
1,640,249
LIABILITIES, REDEEMABLE NON-CONTROLLING
INTEREST,
AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses
$
126,560
$
168,961
Current portion of operating lease
liability
17,615
16,393
Total current liabilities
144,175
185,354
Long-term debt
670,436
642,134
Operating lease liability, less current
portion
94,928
95,159
Deferred income taxes, net
47,134
47,407
Other liabilities
6,933
7,459
Total liabilities
963,606
977,513
Commitments and contingencies
Redeemable non-controlling interest
—
34,721
Total shareholders' equity
647,807
628,015
Total liabilities, redeemable
non-controlling interest and shareholders' equity
$
1,611,413
$
1,640,249
PGT INNOVATIONS, INC.
CONDENSED CONSOLIDATED
STATEMENT OF CASH FLOWS
(unaudited - in
thousands)
Six Months Ended
July 1,
July 2,
2023
2022
(unaudited)
Cash flows from operating
activities:
Net income
$
66,181
$
60,291
Adjustments to reconcile net income to net
cash
provided by operating activities:
Depreciation
17,742
17,064
Amortization
13,298
13,924
Provision for credit losses
1,463
6,048
Stock-based compensation
5,969
4,909
Amortization of deferred financing
costs
654
611
Asset impairment charges
—
2,131
Non-cash portion of restructuring costs
and charges
2,473
—
Gain on sales of assets
(193
)
(39
)
Change in operating assets and
liabilities:
Accounts receivable
5,782
(44,148
)
Inventories
(4,847
)
(18,539
)
Contract assets, net, prepaid expenses,
other current and other assets
472
5,713
Accounts payable, accrued and other
liabilities
(48,698
)
36,958
Net cash provided by operating
activities
60,296
84,923
Cash flows from investing
activities:
Purchases of property, plant and
equipment
(24,866
)
(17,328
)
Business combinations
(744
)
(787
)
Proceeds from sales of assets
698
41
Net cash used in investing activities
(24,912
)
(18,074
)
Cash flows from financing
activities:
Payment of fair value of contingent
consideration in Anlin Acquisition
(4,348
)
(2,362
)
Redemption of redeemable non-controlling
interest
(37,459
)
—
Proceeds of amounts drawn from revolving
credit facility
50,000
—
Payments of borrowing under revolving
credit facility
(22,352
)
—
Purchases of treasury stock under
repurchase program
(45,431
)
—
Income taxes paid from stock withheld
relating to vesting of equity awards
(3,350
)
(1,663
)
Proceeds from issuance of common stock
under ESPP
405
291
Net cash used in financing activities
(62,535
)
(3,734
)
Net (decrease) increase in cash and cash
equivalents
(27,151
)
63,115
Cash and cash equivalents at beginning of
period
66,548
96,146
Cash and cash equivalents at end of
period
$
39,397
$
159,261
PGT INNOVATIONS, INC.
RECONCILIATION OF NON-GAAP
FINANCIAL MEASURES TO THEIR
MOST DIRECTLY COMPARABLE GAAP
EQUIVALENTS
(unaudited - in thousands,
except per share amounts and percentages)
Three Months Ended
Six Months Ended
July 1,
July 2,
July 1,
July 2,
2023
2022
2023
2022
Reconciliation to Adjusted Net Income
and
Adjusted Net Income per share -
diluted:
Net income
$
31,754
$
36,465
$
66,181
$
60,291
Reconciling items:
Insurance recovery of business wind-down
costs (1)
-
-
(2,897
)
-
Restructuring costs and charges (2)
2,516
-
2,516
-
Acquisition-related costs (3)
339
-
1,051
-
Executive severance costs (4)
-
-
942
-
Cyberattack recovery costs (5)
206
-
206
-
Asset impairment charges (6)
-
1,408
-
2,131
Adjustments to contingent consideration
(7)
-
3,793
-
4,754
CGI Commercial relocation costs (8)
-
277
-
277
Tax effect of reconciling items
(804
)
(1,411
)
(479
)
(1,843
)
Adjusted net income
$
34,011
$
40,532
$
67,520
$
65,610
Weighted-average diluted shares
58,867
60,257
59,528
60,241
Adjusted net income per share -
diluted
$
0.58
$
0.67
$
1.13
$
1.09
Reconciliation to Adjusted
EBITDA:
Depreciation and amortization expense
$
15,357
$
14,475
$
31,040
$
30,988
Interest expense, net
8,214
7,155
15,870
14,235
Income tax expense
11,462
12,005
22,697
19,810
Reversal of tax effect of reconciling
items for adjusted net income above
804
1,411
479
1,843
Stock-based compensation expense
3,762
2,704
5,969
4,909
Adjusted EBITDA
$
73,610
$
78,282
$
143,575
$
137,395
Adjusted EBITDA as percentage of net
sales
19.1
%
19.3
%
18.8
%
18.0
%
(1) Represents an insurance recovery gain
relating to the wind-down of the commercial portion of our New
South acquisition. Proceeds from the insurance recovery totaled
$5.0 million. We previously recorded an other receivable of $2.1
million, representing the low end of our range of estimated
recovery amounts, resulting in a gain of $2.9 million, classified
within selling, general and administrative expenses in the
accompanying condensed consolidated statement of operations for the
six months ended July 1, 2023.
(2) Represents costs and charges relating
to our management-approved plan to exit the North Carolina market
relating to our NewSouth brand. As a result, we determined to close
our NewSouth showrooms in Raleigh-Durham and Charlotte, North
Carolina, which resulted in restructuring costs and charges
totaling $2.5 million in the second quarter of 2023. Of the $2.5
million in restructuring costs and charges, $2.0 million represents
the total impairments of the right-of-use assets of the leases of
the Raleigh-Durham and Charlotte, North Carolina showroom
facilities, and $0.4 relates to write-offs of the related leasehold
improvements. The remainder represents personnel-related costs,
which were paid by the end of the 2023 second quarter.
(3) Represents acquisition-related costs,
including transfer taxes assessed to the Company in the first
quarter of 2023 relating to the Anlin acquisition, and costs
relating to the redemption in the second quarter of 2023 of the 25%
non-controlling interest in Eco, classified within selling, general
and administrative expenses in the accompanying condensed
consolidated statement of operations for the three and six months
ended July 1, 2023.
(4) Represents severance costs relating to
the termination of the employment of our former Chief Financial
Officer, which was effective close of business February 27, 2023.
These costs were paid in and are classified as selling, general and
administrative expenses in the condensed consolidated statement of
operations for the three months ended April 1, 2023.
(5) Represents additional cyberattack
recovery costs incurred in the second quarter of 2023, classified
as selling, general and administrative expense in the accompanying
condensed statement of operations for the three and six months
ended July 1, 2023. We previously disclosed this event by Current
Report on Form 8-K, filed with the SEC on November 7, 2022.
(6) Represents write-offs of property and
equipment, classified as selling, general and administrative
expense in the accompanying condensed statement of operations for
the three and six months ended July 2, 2022.
(7) Represents fair value adjustment to
contingent consideration associated with our Anlin Acquisition,
classified as selling, general and administrative expenses in the
accompanying consolidated statement of operations for the three and
six months ended July 1, 2022.
(8) Represents additional costs relating
to the relocation of our CGI Commercial business to a new location
in the Miami, FL area, being shared with our Eco Enterprises
entity, classified as cost of sales in the accompanying
consolidated statement of operations for the three and six months
ended July 2, 2022.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230801975763/en/
PGT Innovations Contacts: Investor Relations:
Craig Henderson, 941-480-1600 Interim CFO and V.P. Corporate
Finance CHenderson@PGTInnovations.com
Media Relations: Stephanie Cz, 941-480-1600 Corporate
Communications Manager
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