Greetings, and welcome to the Atkore Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, John Deitzer, Vice President of Treasury and Investor Relations. Thank you. You may begin.

Thank you, and good morning, everyone. I'm joined today by Bill Waltz, President and CEO; as well as David Johnson, Chief Financial Officer. We will take your questions after comments by Bill and David. I would like to remind everyone that during this call, we may make projections or forward-looking statements regarding future events or financial performance of the Company. Such statements involve risks and uncertainties, and actual results may differ materially. Please refer to our SEC filings and today's press release, which identify important factors that could cause actual results to differ materially from those contained in our projections or forward-looking statements. In addition, any reference in our discussion today to EBITDA means adjusted EBITDA. With that, I'll turn it over to Bill.

Thanks, John, and good morning, everyone. Starting on Slide 3. In the third quarter, Atkore again delivered outstanding performance across our businesses, shaping up to be another record quarter. Revenue was $854 million, and adjusted EBITDA was $274 million. This significant increase in earnings is driven primarily by the exceptional performance in our PVC and metal conduit businesses. In the third quarter, we had very strong results across multiple product categories, and our volumes were up 24% versus the prior year. We generated strong cash flow, and we continued our balanced approach to capital deployment by repurchasing $75 million of stock. We are also pleased that we completed our debt refinancing process and extended our asset-based loan credit facility. Looking forward, we are increasing our FY '21 outlook and now expect to achieve adjusted EBITDA in the range of $855 million to $875 million, and we raised our perspective on FY '22, up to a range of $500 million to $550 million. I'll provide more detail on the outlook after David walks us through this quarter's financials. But before I pass it off, I want to congratulate and recognize all of our employees for their tremendous effort and support of our customers. With that, I'll turn the call over to David to discuss the quarter.

Thank you, Bill, and good morning, everyone. Moving to our consolidated results on Slide 4, net sales increased 122% year-over-year, primarily due to higher average selling prices across many parts of our business. Adjusted EBITDA increased to $274 million, which drove our adjusted EBITDA margin to 32% in the quarter, both up significantly versus the prior year. Our adjusted EPS increased to $3.96. As you look at our year-over-year comparisons, please recall that we had a negative impact from temporary shutdowns related to the pandemic in Q3 last year. Turning to Slide 5 and our consolidated bridges. Net sales increased by $469 million due to higher selling prices and increased volume of 24%. Through outstanding operational and commercial execution, our team was able to fully overcome the impact from higher input cost inflation, and we grew adjusted EBITDA by $211 million. This profit growth was driven by our ability to service our customers despite the challenges associated with raw material supply, as well as a very tight labor market. Shifting to our segment results on Slide 6. The Electrical segment led our profit and margin improvement year-over-year, with adjusted EBITDA up $212 million and adjusted EBITDA margins above 40% due to the strong performance we had across the segment. We experienced strong volume growth in both North America and international, which increased our sales by $64 million in the quarter. In our Safety & Infrastructure segment, net sales increased by 71% from the prior year as the business was able to fully pass through higher input costs associated with raw materials, freight, labor, and other items. Volume growth of 24% or $27 million also drove part of the top line growth as we saw solid demand across multiple end markets. Adjusted EBITDA increased 58% to $22 million, and on a constant input cost basis, margins would have been up over 200 basis points versus the prior year. Now, moving to our consolidated cash flow review on Slide 7. We ended the third quarter with $397 million in cash, and we generated $284 million of free cash flow this year. Our priorities are organic investments in our business, strategic M&A, and returning capital to shareholders, primarily through share repurchases while also maintaining a strong balance sheet. During the third quarter, we invested approximately $14 million in organic investments, bringing our year-to-date total for CapEx to $34 million. In addition, as Bill mentioned, we repurchased $75 million of stock in the quarter, bringing our total repurchases this year to $110 million. Our healthy cash flow, strong balance sheet, and overall financial strength provide us with the flexibility to execute on multiple fronts in driving value creation for our shareholders. Turning to Slide 8, I'd like to discuss the details of our recent debt refinancing. In late May, we completed the refinancing of our senior secured term loan expiring in 2023 with two new instruments. As a result of this transaction, we lowered our overall effective interest expense. We separated and increased our maturity profile, and we moved to a 50-50 split between fixed versus variable interest rate exposure. In conjunction with these two transactions, we received favorable updates from several of the rating agencies, and we were able to extend our asset-based loan facility into 2026. With that, I'd like to turn it over to Bill to discuss our updated outlook.

Thanks, David. Turning to our outlook on Slide 9. We are raising our outlook for net sales, adjusted EBITDA, and adjusted EPS for the fiscal year 2021. The guidance reflects a number of factors: our stronger-than-expected results year-to-date, the unprecedented and continued strength in PVC conduit, and favorable macro trends. This is supported by a stronger-than-expected performance in our other businesses, such as metal conduit. Our fourth quarter 2021 outlook contemplates net sales up approximately 70% and adjusted EBITDA to be in the range of $250 million to $270 million. For fiscal 2021, we now expect our net sales to be up approximately 60% and adjusted EBITDA to be in the range of $855 million to $875 million. Just as we did in the first half of the year, our entire team continues to effectively navigate what remains a very dynamic operating landscape through the third quarter. We expect a combination of these dynamics and the macro trends to sustain the pricing tailwinds through Q4 and into early fiscal 2022. In connection with our increased fiscal '21 guidance and our clear understanding of the near-term market, we are raising our perspective for fiscal '22. We now expect adjusted EBITDA to be in the range between $500 million and $550 million. This considers the continued PVC conduit demands and our ability to meet them, while also factoring in macro uncertainties such as labor, supply constraints, pricing and customer behavior, particularly in the back half of fiscal '22. Before we turn to Q&A, I just wanted to reinforce how pleased we are with the team's execution and how excited we are for what the future holds for this tremendous company. With that, we'll turn it over to the operator to open up the line for questions.

Your first question comes from Deane Dray from RBC Capital Markets. Your line is open.

We experienced a significant operating performance here, and I appreciate the framework you've provided for fiscal 2022, which shows some normalization while still indicating very strong levels. My first question, Bill, relates to the sustainability of the current supply and demand dynamic you've mentioned, particularly the high demand and supply constraints within the industry. Could you elaborate on your views regarding the sustainability on the supply side? I understand that competition is challenging, and establishing new plants takes time. Additionally, it's intriguing to note the increase in metal conduit, which suggests growth in non-residential sectors. There are several interconnected questions here, but I would like to start with those points.

Great question, Deane. There's a lot to discuss. Starting with demand, we expect it to be in low single digits moving forward. It's not particularly strong, but I can generalize and say this applies to almost any product line or competitor. The real challenge right now isn't whether demand is in low single digits, high single digits, or even flat; it's about whether we can supply the product. That's what's causing most of the constraints in filling the market by a couple of single digits. If we had more product available, I believe we could sell it easily at a good price. These constraints are widespread for Atkore. Labor is likely the top constraint right now, while in the last quarter, we may have identified materials as the main issue. For instance, lead times for steel have increased from three weeks to twelve weeks. These are rough estimates from suppliers and materials, complicating forecasting and transitions. Additionally, some PVC resin suppliers have just come off force majeure, with three out of four suppliers affected for most of the fiscal year. We're still facing challenges with sourcing additives and related materials. However, we anticipate that these aspects will start to normalize over time. Therefore, we want to be transparent with both the sell side and buy side regarding our expectations. Do not assume that the revenue range of $850 million to $875 million this year will occur linearly next year; there will be some normalization, similar to how lumber prices soared to $1,800 and then fell back to $600. Looking ahead, I believe that Atkore's value proposition will remain strong into fiscal 2022, and the supply-demand dynamics we discussed will continue with variability and challenges in predictability, as is the case with any market.

Deane, I'll just add. The demand in the market is very hard to determine what it would be if labor wasn't a constraint; not only for the manufacturers but also the construction companies, which, as you recall, we had a labor shortage going into the pandemic. Obviously, right now, it's even more of a constraint. I think the business is out there. Things are being designed and what have you, if you look at any of the future indicators. I think that's a good indication for the future, but it is hard to really determine with this labor shortage exactly what volumes could be.

Got it. I have two follow-up questions. Can you provide insights on the mix between PVC and metal conduit, especially since you've mentioned increased demand for metal? Is the non-residential sector performing better in this regard? Additionally, is there any price elasticity? We've discussed this previously, but it seems that the market is ready to accept whatever is available right now, and pricing does not seem to be an issue. I would appreciate your thoughts on this.

Yes. Again, great set of questions, Deane. Both residential and non-residential are performing strongly. As we've always explained, since we sell to electrical distributors and then they sell to contractors, there is a little bit of difficulty in being overly precise, quite frankly; an electrical distributor, at times, could be, hey, a contractor walked up to will call, picked up product; I didn't ask them where it was going. Both seem to be moving along well. I am sure somebody will follow up and say data centers are really strong. There are a lot of great vertical markets in the non-res and commercial construction realm that are carrying forward. We called out metal conduit, and I think if we didn't say in the prepared remarks, and in other products, just to make sure you and other investors that PVC is going really well, but it's not a one-trick pony. We kind of laid out and said, okay, what's the next product on Nexwell, but our metal conduit business and metal framing, all our businesses right now are doing well because, as I mentioned at the very beginning, if you have the material, and you have a good say-do ratio, you're honest with your customers. They are, to your last part of the question, willing to pay more. Now, Deane, there's always some price elasticity on how much you can charge, but as you see in the results, I think we're paying more. Some of it, depending on the competitor, the market, the week is kind of an average thing for a competitor. It feels like, say, whatever Atkore is charging will charge 3% or 4% less. But for a distributor that trusts and needs that material, as you see in our results, they are willing to pay that slight premium. We are, in many cases, pulling the industry forward with price increases.

And Deane, that 24% volume increase year-over-year, broadly speaking, was across all the product lines. I think we did see strength across the entire portfolio.

Your next question comes from John Walsh from Credit Suisse. Your line is open.

This is Jing Peng on for John. It looks like you added automation when you reopened your Pendleton facility. How much longer do you think you can continue to get productivity in the $10 million to $15 million range?

I believe that there will be continuous opportunities in this area. Many investors are curious about our capacity to maintain productivity enhancements. I take pride in our Atkore business system and the solid fundamentals it supports, and there are numerous avenues for improvement in safety, quality, delivery, and productivity. Therefore, it would be reasonable to expect this trend to extend for several years at least.

Got you, that's helpful. If I could follow up, any color around your M&A funnel, and if you can please help us understand your aspirations in the safety market?

Yes. So again, great questions here. The funnel remains robust. We are actively working it, again, with this great financial year, and I'm sure questions to come at some point during the day with investors on our capital deployment and buying back stock as we're generating a lot of cash. So, we're doubling down on even our resources to make sure we're connected to all deals. Without having deal fever, I mean, Atkore's prided itself on is it strategic, is it synergistic? Is it debt responsible? And do we have the management bandwidth? That's kind of in the four roles in Atkore's formation, and we continue to drive those filters. There are enough deals out there to keep moving forward with. Yes, we are expanding into safety and infrastructure, very much like the four rules. We have to ensure it's our strategy. I do think in the safety and infrastructure, there are some vertical markets that are going to grow much faster than GDP. I also think that there can be good synergies. Now it's just about finding the appropriate deal for us with management bandwidth and the right vertical channels and so forth, but we're actively working deals in both segments.

Your next question comes from Chris Moore from CJS Securities. Your line is open.

Obviously, pricing has been the biggest driver of 2021 results at this point. Recognizing that your fiscal '22 estimated EBITDA range at this point, like to clarity in detail of your '21 guide. Can you maybe just talk a little bit more about what's in there, for example, how do you look at volume growth in fiscal '22 versus '21 or '20?

Yes, we haven't given a lot of details, which we will, obviously, Chris, in one quarter's time when we give our official guidance for next year. But broadly speaking, I would say that kind of mid-single-digit volume number and then a normalization of pricing and then some continuation of M&A from the deals that we already have in this year that we've already announced will lap a little bit into next year, and then our typical productivity improvements. I would say that, in general, those would be the buckets that would be built into that outlook.

Got it. Obviously, much of the focus is on the areas where you're generating exceptional results, PVC on the metal side, trying to predict when some of that will normalize. What about the flip side, end markets that have been soft throughout COVID, such as the non-res like office and retail hotels? Do you see those as being potential tailwinds in '22?

Yes, I think so, Chris. But there are tailwinds to go; if you look at some of these segments, they're 3% of our sales, 6%. I'm not being prescriptive to say which ones which, there are enough other things that are going well. Obviously, data centers, I think I just mentioned a couple of minutes ago when I was addressing Deane's question, warehousing continues to be strong. I'm saying strong with some of these things like Dodge is looking at double digits. Also, as we get into the latter half of 2022 and into 2023, Dodge even predicts things like hotels and stores and restaurants have bounced back. Now, it's off of this year's low, but that's the reason relative to how we're performing this year. I think David answered it well when he said low to mid-single-digit growth for next year. So if anyone travels, you will realize that airports are totally packed again, and airlines are investing. So, while things are probably low right now, they'll probably remain low for a bit longer, but those things will bounce back. With all the infrastructure build hitting and other things, we're pretty optimistic for the future here with growth.

Your next question comes from Andy Kaplowitz from Citigroup. Your line is open.

You're predicting slightly down Q4 versus Q3 in terms of EBITDA; there doesn't appear to be that much historical seasonality between the two quarters. So could you give us more color on what in your businesses is sequentially declining? You've talked about PVC a lot. Has that tailwind peaked at this point? Or are you predicting a decline in commodity prices, or is volume expected to be slightly off? Any color would be helpful.

Yes. So we're arguing, Andy, because both of us want to answer here. To your point, we delivered $274 million last quarter, and we're predicting $250 million to $270 million. The top end of the range at $270 million is almost the same as the $274 million, and if we strive and hit everything, I think we could get there. There's nothing dramatic. Pricing probably spreads profit margins have probably peaked across different things. The only thing I would put in perspective is with this $274 million; I make the analogy that literally, you drove through a major city and got every green light. It literally is Dave and I; we called out metal conduit. We called out PVC. I in these unprepared remarks mentioned cable, metal framing; every product line contributed very well, and that even in the best of times just doesn't occur. So, I don't think there's anything systemic as much as just being prudent on the range versus we're going to hit it out of the park exactly like we did in Q3 of this year. By the way, as David will remind our teams, and I would like to remind investors, in the best of years, Atkore would have $100 million in a quarter. Here, it's a really great question to go, hey, why are you only predicting $250 million to $270 million? These are pretty impressive numbers here.

You've definitely come pretty far. So Bill, maybe I could follow up. Could you update us on where you think PVC inventories are and how far the industry is at this point behind demand? And are you assuming that inventories can catch up over the winter?

Yes. I think it's great questions that I will give you on, but that's why the variance and even the words we used on projections for next year; anybody's forecast and most companies can't predict two weeks let alone a year out. Right now, Andy, I would say that lead times within PVC conduit, which is what we sell most of is probably four to eight weeks out, where it's typically, let's say, two to three weeks. There's a little bit of offset with that where distributors understanding that are now placing orders for eight weeks out just because they need to get their product on time. I think some of the other markets, while we don't serve them, their competitors don't come in to serve us like miscible and plumbing are even out further. I read a report from an industry person on Friday that was, quite frankly, predicting some of the plumbing and municipal stuff would not get delivered until January if you place an order now. So, even much longer lead times in some product lines. I think over time, getting into the winter months, it does normalize because there is seasonality in the business. Therefore, some of the reasons why I think we have the appropriate numbers, the $500 million to $550 million. We will continue to much better than our old historical trends, which were two years ago, $325 million and $327 million. That's a massive step up. On the same hand, as inventories come back in and things normalize, we won't be able to keep quite the price premium. So, as much as we can look into our crystal ball and balance all those type of things where you thought the very appropriate and raised by $100 million forecast for next year of $500 million to $550 million seemed to hit all those factors.

Very helpful, and then maybe I just want to understand what you're saying about volume, though, in the sense that it was up 24%; obviously, you're talking about labor shortages and low single-digit volumes, I guess, in non-res expected over time. But if you look at underlying volume growth, and you've talked in the past about having a good probability of above that, given your own new product cycle, there's obviously increased electrification out there. We kind of alluded to it a little bit in this conversation. But then also, the infrastructure bill is out there now. I'm sure you've seen some of the details. So like, when you put that all together, what's the probability that Atkore's growth rate is decently higher than that low single digit?

I am optimistic about our growth prospects. The infrastructure bill is in draft form, and we'll see what becomes ready for implementation. We haven't factored any increase into our numbers yet. David addressed the earlier question about size, and while we have general guidelines, there could be a variation of around $50 million. Regarding our growth, the 24% increase is impressive but it's compared to last year when many factors were shut down. Moving forward from a solid year, we could see mid-single digit growth as we don't have new acquisitions or the infrastructure bill factored in. Historically, we aim to maintain pricing and achieve growth above the market average. In the upcoming quarters, we will discuss investments in new products and some upcoming initiatives that we're not ready to disclose yet. Growth in Canada could range from 100 to 200 basis points. If everything aligns, mid-single digit growth is possible. However, at this point, I would still anticipate low to mid-single digits in the coming year, but your reasoning is valid.

There is no further question at this time. I would now like to turn the call over back to Bill.

Before we conclude, let me summarize my three key takeaways from today's discussion. First, the outstanding results we delivered in the third quarter are a credit to the great efforts by everyone in our organization. Second, we believe in the long-term strength of our company, and we will continue to deploy capital effectively to drive value for our stockholders, as evidenced by the $75 million in stock we repurchased during the quarter. Third, and in closing, we are very excited about the opportunities ahead of us for our business. With that, thank you for your support and interest in Atkore, and we look forward to speaking with you during our next quarterly call. This concludes the call for today.

This concludes today's conference call. Thank you all for joining. You may now disconnect.