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 third quarter ended
September 30, 2023.
Financial Highlights for Third Quarter 2023
(All results reflect comparison to prior-year period; Cash on
hand is compared to prior-year end)
- Net sales totaled $400 million, an increase of 4 percent.
- Net income was $39 million, an increase of 29 percent.
- Adjusted net income* was $39 million, an increase of 16
percent.
- Adjusted EBITDA* was $78 million, an increase of 15
percent.
- Net income per common share attributable to common
shareholders, diluted, was $0.67, an increase of 34 percent.
- Adjusted net income per diluted share* was $0.66, an increase
of 20 percent.
- Total liquidity* at the end of the third quarter was $214
million, including cash of $38 million and revolver availability of
$176 million.
Fourth Quarter 2023 Guidance
- Net sales in the range of $325 million to $350 million.
- Adjusted EBITDA* in the range of $51 million to $57
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 a record third quarter in spite of a
continuing dynamic macro environment. Net sales were $400 million,
four percent above the prior year quarter. The Company is executing
on all cylinders, resulting in an Adjusted EBITDA margin of 19.6
percent,” said Jeff Jackson, President and Chief Executive Officer.
“The Company continues to execute on operational performance
objectives while maintaining strong cost management
discipline.”
“Our organic third quarter net sales increased one percent from
the prior year quarter, driven by a two percent impact from price
increases, partially offset by a unit volume decline. Our unit
volume growth rate increased from the second quarter, driven by our
southeast segment in both repair and remodel and new construction
channels,” added Jackson. “We continue to see lower growth rates in
the west, as the business is more heavily weighted to new
construction.”
“In the third quarter, we delivered record operating cash flow
of $80 million, which enabled a reduction in our revolver
borrowings of $39 million,” said Craig Henderson, Interim Chief
Financial Officer. "Additionally, we returned nearly $30 million of
capital to our shareholders through share repurchases, for total
year-to-date repurchases of $75 million."
"We expect fourth quarter 2023 performance for net sales in the
range of $325 million to $350 million, and Adjusted EBITDA in the
range of $51 million to $57 million. Strong operational execution
should continue into the fourth quarter and help us deliver solid
profits in this dynamic market," 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 today, through approximately 12:30 p.m. on November
9, 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 3330517. 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=E5RSqlGu.
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. Through
its brands, 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
Nine Months Ended
Sept. 30,
Oct. 1,
Sept. 30,
Oct. 1,
2023
2022
2023
2022
Net sales
$
399,931
$
385,837
$
1,161,694
$
1,151,020
Cost of sales
238,159
236,035
696,740
701,495
Gross profit
161,772
149,802
464,954
449,525
Selling, general and administrative
expenses
101,872
102,399
297,790
307,786
Restructuring costs and charges, net
(794
)
—
1,722
—
Income from operations
60,694
47,403
165,442
141,739
Interest expense, net
7,772
6,889
23,642
21,124
Income before income taxes
52,922
40,514
141,800
120,615
Income tax expense
13,715
10,100
36,412
29,910
Net income
39,207
30,414
105,388
90,705
Less: Net income attributable to
redeemable non-controlling interest
—
(373
)
(1,101
)
(1,334
)
Net income attributable to the Company
$
39,207
$
30,041
$
104,287
$
89,371
Calculation of net income per common share
attributable to PGT Innovations, Inc. common shareholders:
Net income attributable to the Company
$
39,207
$
30,041
$
104,287
$
89,371
Decrease (increase) in redemption value of
redeemable non-controlling interest
—
271
(1,637
)
(1,514
)
Net income attributable to PGT
Innovations, Inc. common shareholders
$
39,207
$
30,312
$
102,650
$
87,857
Net income per common share attributable
to PGT Innovations, Inc. common shareholders:
Basic
$
0.68
$
0.51
$
1.75
$
1.47
Diluted
$
0.67
$
0.50
$
1.74
$
1.46
Weighted average number of common shares
outstanding:
Basic
58,012
59,964
58,796
59,908
Diluted
58,291
60,402
59,092
60,201
PGT INNOVATIONS, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(unaudited - in
thousands)
September 30,
December 31,
2023
2022
ASSETS
Current assets:
Cash and cash equivalents
$
37,675
$
66,548
Accounts receivable, net
149,288
160,107
Inventories
117,942
112,672
Contract assets, net
53,948
47,919
Prepaid expenses and other current
assets
30,537
28,295
Total current assets
389,390
415,541
Property, plant and equipment, net
216,466
208,354
Operating lease right-of-use asset,
net
103,087
104,121
Intangible assets, net
427,250
447,052
Goodwill
462,630
460,415
Other assets, net
9,839
4,766
Total assets
$
1,608,662
$
1,640,249
LIABILITIES, REDEEMABLE NON-CONTROLLING
INTEREST,
AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses
$
150,428
$
168,961
Current portion of operating lease
liability
18,108
16,393
Total current liabilities
168,536
185,354
Long-term debt
631,768
642,134
Operating lease liability, less current
portion
93,414
95,159
Deferred income taxes, net
47,438
47,407
Other liabilities
6,135
7,459
Total liabilities
947,291
977,513
Commitments and contingencies
Redeemable non-controlling interest
—
34,721
Total shareholders' equity
661,371
628,015
Total liabilities, redeemable
non-controlling interest and shareholders' equity
$
1,608,662
$
1,640,249
PGT INNOVATIONS, INC.
CONDENSED CONSOLIDATED
STATEMENT OF CASH FLOWS
(unaudited - in
thousands)
Nine Months Ended
Sept. 30,
Oct. 1,
2023
2022
(unaudited)
Cash flows from operating
activities:
Net income
$
105,388
$
90,705
Adjustments to reconcile net income to net
cash
provided by operating activities:
Depreciation
26,607
25,359
Amortization
19,802
19,725
Provision for credit losses
2,213
7,395
Stock-based compensation
9,054
7,638
Amortization of deferred financing
costs
986
921
Asset impairment charges
—
2,131
Non-cash portion of restructuring costs
and charges, net
1,679
—
Loss (gain) on sales of assets
84
(166
)
Change in operating assets and
liabilities:
Accounts receivable
1,005
(35,166
)
Inventories
(5,635
)
(21,145
)
Contract assets, net, prepaid expenses,
other current and other assets
6,970
6,213
Accounts payable, accrued and other
liabilities
(28,322
)
48,531
Net cash provided by operating
activities
139,831
152,141
Cash flows from investing
activities:
Purchases of property, plant and
equipment
(38,205
)
(24,741
)
Business combinations
(744
)
(787
)
Proceeds from sales of assets
1,171
41
Net cash used in investing activities
(37,778
)
(25,487
)
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
(61,352
)
—
Purchases of treasury stock under
repurchase program
(75,131
)
—
Income taxes paid from stock withheld
relating to vesting of equity awards
(3,362
)
(1,888
)
Proceeds from issuance of common stock
under ESPP
726
291
Net cash used in financing activities
(130,926
)
(3,959
)
Net (decrease) increase in cash and cash
equivalents
(28,873
)
122,695
Cash and cash equivalents at beginning of
period
66,548
96,146
Cash and cash equivalents at end of
period
$
37,675
$
218,841
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
Nine Months Ended
Sept. 30,
Oct. 1,
Sept. 30,
Oct. 1,
2023
2022
2023
2022
Reconciliation to Adjusted Net Income
and
Adjusted Net Income per share -
diluted:
Net income
$
39,207
$
30,414
$
105,388
$
90,705
Reconciling items:
Insurance recovery of business wind-down
costs (1)
-
-
(2,897
)
-
Restructuring costs and charges, net
(2)
(794
)
-
1,722
-
Acquisition-related costs (3)
-
1,250
1,051
1,250
Executive severance costs (4)
-
-
942
-
Cyberattack recovery costs (5)
-
-
206
-
Asset impairment charges (6)
-
-
-
2,131
Adjustments to contingent consideration
(7)
-
297
-
5,051
Hurricane Ian-related costs (8)
-
1,848
-
1,848
Tax gross-up payment (9)
-
427
-
427
CGI Commercial relocation costs (10)
-
-
-
277
Tax effect of reconciling items
209
(1,012
)
(270
)
(2,855
)
Adjusted net income
$
38,622
$
33,224
$
106,142
$
98,834
Weighted-average diluted shares
58,291
60,402
59,092
60,201
Adjusted net income per share -
diluted
$
0.66
$
0.55
$
1.80
$
1.64
Reconciliation to Adjusted
EBITDA:
Depreciation and amortization expense
$
15,369
$
14,096
$
46,409
$
45,084
Interest expense, net
7,772
6,889
23,642
21,124
Income tax expense
13,715
10,100
36,412
29,910
Reversal of tax effect of reconciling
items for adjusted net income above
(209
)
1,012
270
2,855
Stock-based compensation expense
3,085
2,729
9,054
7,638
Adjusted EBITDA
$
78,354
$
68,050
$
221,929
$
205,445
Adjusted EBITDA as percentage of net
sales
19.6%
17.6%
19.1%
17.8%
(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
nine months ended September 30, 2023.
(2) Represents net 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 net restructuring costs and
charges, net, totaling $1.7 million, including $2.5 million in the
second quarter of 2023, partially offset by a gain of $0.8 million
in the third quarter of 2023 relating to the forgiveness of a
portion of the operating lease liability by the landlord of the
Charlotte, NC location, which we satisfied in the third quarter of
2023. Of the $2.5 million in restructuring costs and charges in the
second quarter of 2023, $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) In 2023, represents
acquisition-related costs, including transfer taxes assessed to the
Company in 2023 relating to the Anlin acquisition in the first
quarter of 2023, and costs relating to the redemption 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 nine months ended
September 30, 2023. In 2022, represents costs relating to the
Martin acquisition.
(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 nine months ended September 30, 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 nine months ended
September 30, 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 nine months ended October 1, 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
nine months ended October 1, 2022.
(8) Represents disruption and recovery
costs caused by Hurricane Ian in late-September 2022, of which $1.1
million is classified within cost of sales, and $747 thousand is
classified within selling, general and administrative expenses in
the three and nine months ended October 1, 2022.
(9) Represents tax gross-up payment
required to be made to the non-controlling interest relating to our
acquisition of Eco, which we initially estimated to be $1.5
million, but which was ultimately determined to be $1.9 million, a
difference of $427 thousand, which is classified within selling,
general and administrative expenses in the three and nine months
ended October 1, 2022.
(10) 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 nine months ended
October 1, 2022.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231101454255/en/
PGT Innovations Contacts: Investor Relations:
Craig Henderson, 941-480-1600 Interim CFO
CHenderson@PGTInnovations.com
Media Relations: Stephanie Cz, 941-480-1600 Corporate
Communications Manager
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