Good morning. My name is Paulie, and I will be your conference operator today. At this time, I would like to welcome everyone to Atkore's Second Quarter Fiscal Year 2024 Earnings Conference Call. After the speaker's remarks, there will be a question-and-answer session. As a reminder, this conference is being recorded. Thank you. I would now like to turn the conference over to your host, Matt Kline, 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 such that 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. And any reference to EPS or adjusted EPS means adjusted diluted earnings per share. Adjusted EBITDA and adjusted diluted earnings per share are non-GAAP measures. Reconciliations of non-GAAP measures and a presentation of the most comparable GAAP measures are available in the appendix to today's presentation. With that, I'll turn it over to Bill.

Thanks, Matt, and good morning, everyone. Starting on Slide 3, we are pleased with our second quarter performance. While organic volume was down 1% year-over-year, volume is up 6% year-to-date, closing out a strong first half of the fiscal year. Our net sales were in line with our initial projections and adjusted EBITDA and adjusted diluted EPS both exceeded the top end of our outlook we presented back in February. We continued executing on our capital deployment strategy during the quarter, ending the first half of fiscal 2024 with $150 million in share repurchase and more than $70 million deployed for capital expenditures. I'm also proud to highlight the payment of our first quarterly dividend during the second quarter. As we near the end of our previously approved $1.3 billion share repurchase authorization, I'm pleased to share that our Board of Directors has authorized a new $500 million buyback program, which will be available upon the completion of our existing plan. Additionally, during the quarter, Fitch Ratings moved Atkore into the prestigious investment-grade status. This designation reflects Atkore's operating profile, financial flexibility, and our commitment to a balanced capital deployment strategy. At the halfway point of our fiscal 2024, I'm pleased with the results we've been able to achieve. As we look forward to the second half of the year, we are amending the midpoint of our adjusted EBITDA outlook by $50 million to $875 million. While we remain enthusiastic about our long-term view of our HDPE and solar initiatives, we are reducing our near-term growth expectations. Despite challenges in those two areas, we are within our expectations regarding the pricing normalization topic. Despite the near-term challenges to growth in the overall construction market, we remain confident in our diversified product portfolio, as it is unmatched across the market and positions us well to capitalize on the secular tailwinds of the energy transition and expansion of digital infrastructure over the long term. With that, I'll turn the call over to David to walk through the results from the second quarter.

Thank you, Bill, and good morning, everyone. Moving to our consolidated results on Slide 4. In the second quarter, net sales were $793 million, and adjusted EBITDA was $212 million. We delivered a strong adjusted EBITDA margin of over 26%, which was in line with our performance in the first quarter. Our tax rate in the core was approximately 19%, which benefited from both stock compensation and the impact of the solar tax credits. Turning to Slide 5 and our consolidated bridges. Our volume in the quarter was down 1% compared to the prior year, while net sales were at the midpoint of our guidance. Despite lower volume, EBITDA was up $5 million due to an overall favorable mix. We continue to experience pricing normalization that was discussed in previous quarters. Our second-quarter results were in line with our expectations, both sequentially and from a year-over-year perspective. Within our other portion of the EBITDA bridge, we saw overall improved plant productivity. Moving to Slide 6. Our year-to-date volume increased 6% compared to the prior year with contributions across the portfolio. Turning to Slide 7. Both segments had strong EBITDA margin performance in the second quarter. Our Electrical segment achieved 33% on essentially flat net sales sequentially to the first quarter. Our S&I segment EBITDA margins rebounded from the first quarter to over 12%. This improvement is due in part to better operational performance at our Hobart, Indiana facility. Turning to Slide 8. We continue to execute our capital deployment model, supported by robust cash flow generation. Due to the strength of our balance sheet, we have flexibility to deploy capital in multiple ways in order to deliver value for our shareholders. With that, I'll turn it back to Bill to talk through some updates relating to our FY '24 outlook.

Thank you, David. Turning to Slide 9. I want to provide an update on two of our category expansion initiatives. Our investment in HDPE is one of several growth initiatives that have long-term positive impacts for Atkore. During the first quarter, we discussed the demand for HDPE telecom-related products being challenged as the industry works through the excess inventory and awaits the rollout of government stimulus funding related to broadband investments. Despite these current headwinds, we are optimistic about the fundamentals and long-term positive prospects for this business. We continue to make progress on our production output of solar torque tubes from our Hobart, Indiana facility. Although our current and projected output levels are trailing our previous expectations, we continue to grow this product offering and remain confident that our capital investments position us well to participate in solar-related secular tailwinds. Turning to Slide 10. Our updated fiscal year 2024 outlook reflects the impacts from both HDPE and solar. Overall, net sales are down slightly from our previous guidance due to the continued HDPE market challenges and the delayed ramp-up of our solar torque tube facility. Overall, adjusted EBITDA is down $50 million from our previous guidance. We have reduced our expectations by HDPE and solar by $80 million, which is partially offset by strong performance in other electrical product lines and a reduction in overall corporate spending. Improvements in our interest expense, tax rate, and reduced share count have resulted in an EPS midpoint of $16.50, which is the same as our original FY 2024 projection. We continue to expect the electrical portfolio to have a stronger back half of the year compared to the first half of the year due to seasonal impact from the spring and summer construction season and have included this assumption in the updated outlook. If activity does not pick up as anticipated, the pricing environment could be challenged in the second half of 2024. As we discussed during our first quarter call, we expect adjusted EBITDA to improve sequentially from Q2 to Q3 and then from Q3 to Q4. Taking a step back, while we have some items to address as we progress through the year, our solid performance in the first half of our fiscal year reinforces our confidence in our ability to build on the momentum in the second half of the year and beyond. On Slide 11, we've updated each of our key bridging assumptions when compared to fiscal year 2023 and our expected 2024 results. We expect a higher incremental margin on our volume as we have a very strong first half of the year fiscal '24. We've updated the price cost assumption to a midpoint of $275 million unfavorable impact versus our original projection of $250 million. This shift is entirely due to HDPE. We have not adjusted our FY '24 assumptions versus the overall expectation we presented in November 2022 that approximately $585 million of elevated earnings would continue to normalize over a multiyear period. Given the challenges to HDPE and solar in FY 2024 are primarily timing-related, we remain confident in our ability to deliver $18 EPS in our fiscal 2025. I'm incredibly proud of the team, strategy, and processes we have in place and believe we are well positioned to achieve our long-term goals. With that, we'll turn it to the operator to open the line for questions.

Thank you. And your first question comes from the line of Chris Moore from CJS Securities.

I was wondering if you could bridge or even just roughly bridge the $18 adjusted EPS in '25 to the $16.50 in '24, just price or volume? Is it really just HDPE and solar torque are going to be the big drivers? Just any thoughts there.

Yes, Chris, we haven't given a specific bridge, but I think it's pretty logical when you sit and look at where we are with HDPE and solar. And we said that this year negatively impacted $80 million; you can assume that it would turn in the other direction and then even grow beyond that. So there, you have a pretty nice positive impact, we believe. We also believe we're going to have a nice impact due to the continuation of our large project business, which we're quoting quite a few opportunities this year that we think will manifest itself next year. And then we would expect some help from the overall market. We offset some of that with continued reduction of our price cost kind of the last year, we think of that year-over-year impact. And then probably a little bit of favorability on the productivity. And if you add all that up, you're talking the $16.50 to $18 plus.

Got you. I appreciate it. Very helpful. Maybe just on the solar torque manufacturing. Can you separate kind of your manufacturing challenges from what you're seeing in the overall market, what the lead times look like? Is domestic capacity meeting demand?

Yes. I think, Chris, the markets are still strong. They are out there. It's really us fine-tuning equipment. Let me just give a sound bite, probably deep diving, but if anyone thinks, 'Oh, you just buy a set of equipment,' just imagine one component like the saw that cuts the tubes. This pipe is flying down torque tubes with high precision at several hundred feet a minute; the saw has to go with it. It has to cut within 1/10 inch of tolerance. So obviously, with no burrs. Make that happen, and also at different speeds, different diameters. And then just God forbid that over time, the tolerance uses because of the rattling and you have to take the machinery down for 3, 4 days to redesign, so it maintains its tolerance. It's just working through those things. But the end markets are there; the customers are there; our relationships are there. So just as we fine-tune things like that, we don't expect to repeat in future quarters. One example is what gives us confidence in the future in that area.

And Chris, I probably should mention one other element, obviously, in the bridge, would be our capital deployment, which we've been pretty robust about. And you can see what we're implementing this year, and we would expect similar levels next year.

Got it. I appreciate that. I will leave it there.

Thanks, Chris.

Your next question comes from the line of Andy Kaplowitz from Citigroup.

David, can you give more color into your visibility into the recovery in HDPE? First of all, how big is HDPE right now as a percentage of Atkore sales? When do you think the channel will normalize? And while I think we understand the volume component of the pressure on your guidance, is the price versus cost pressure that you have solely because of HDPE? I think you kind of suggested that, but anything else you're seeing across the portfolio?

Yes. So I'll defer to David on if we get that specific on the size. But the markets, Andy, if I hit all your questions here, definitely. So I think you know that. You can see it whether it's people that make the fiber optics, whether it's other manufacturers that are public, whether it's distributors after us that have commented. The markets are slower, like everybody walked in saying it would start to come up at the end of this year. People are still thinking that and saying that, but the markets this year are actually slower than last year, and that we did not assume in our guide or original estimates and so forth. And then with it, Andy, yes, we're seeing pricing go down, which is not a new phenomenon for Atkore or any of our competitors. When volumes are slower, people are more apt to drop price to try to fill up their factory and so forth. So hopefully, as we go into next fiscal year, both the volume should pick up and therefore the pricing and spreads should pick up.

Yes. And the only thing I would add, Andy, is when we went into this year, we said we did not count on much on HDPE in our original guide. And we said that was mainly an FY '25 story. And we still believe that. But what we didn't anticipate was that the business would actually be worse year-over-year. So we had kind of penciled in a similar level of performance in FY '24 versus '23. And it's just not the case right now. And here we are over halfway through our fiscal year. I know others might have had a different opinion; they say later in their year, but they typically mean their calendar year, not our fiscal year. So I think it's just getting to the point where we think the performance, although perhaps maybe getting a little bit better going into the summer and so on and so forth, is just not going to be enough to make up for where we are in the year.

Could you provide more details on what you're observing in your core PVC products markets? In your presentation, you mentioned strength in non-electrical PVC products. Can you clarify what that means? Also, could you help us understand the potential impact of data centers on Atkore and the size of that market for the company going forward?

Yes, Andy. The overall markets currently appear to be somewhat subdued, which aligns with what we're hearing from distributors and others in the commercial industrial sector. It's not surprising that we are outpacing market growth, currently at a 6% year-to-date increase. Much of this can be attributed to our internal initiatives. For instance, in PVC, we have highlighted products beyond just the electrical sector. Our previous presentations have showcased growth strategies, like the global mega projects mentioned by David, and our expansion in PVC outside of traditional markets, which are contributing to our faster growth. Regarding large projects, as David mentioned, there's significant activity occurring. It's no surprise that there are numerous developments for artificial intelligence and chip manufacturing, particularly concerning data centers. It’s a thriving market, and we have a solid backlog of projects. This contributes to our confidence in moving from a projected range of $16.50 to $18, as it is one of several factors we see positively influencing our performance.

And then, Bill, just a final quick follow-up. I just want to go back to your comment that if you talked about spring and summer activity in the electrical space. If it doesn't pan out, pricing could be impacted. I guess why did you say that? Are you seeing something on the volume or pricing side that concerns you at this point?

Yes, I'll start. Right now, things are playing out as we expected, so there's no indication of what might happen next. One challenge we face is that I would prefer to be in a position with a year of backlog and just manage shipping, while we currently have a backlog of two weeks or less. This makes it difficult to forecast how things will be in five months. However, everything is proceeding as we anticipated, both for HDPE and as we ramp up Hobart. Additionally, if it weren't for the $80 million of HDPE and solar, we would meet or exceed our estimates, including price spreads. We have products that are experiencing price increases year-over-year. Overall, developments are aligning with what we projected two years ago when we first provided estimates.

Yes, Andy, I would just add to those comments regarding the two weeks of visibility. Typically by now, we would observe more construction activity. I believe that it's progressing a bit slower than we anticipated. However, when you take a step back and examine the fact that construction employment in non-residential sectors is still up over 3% year-over-year, that's a positive sign. Additionally, contractors continue to have a backlog of over 8 months. Again, these typical indicators we use are encouraging. We just need to start seeing the actual activity increase as we move into the building season.

Your next question comes from the line of Deane Dray, RBC Capital Markets.

Thank you. Good morning, everyone. Can we revisit the situation regarding Hobart? Bill, you provided some valuable details about the challenges we faced during the ramp-up. Could you share an overview of the plant's volume or output for the quarter compared to what you expected? I'm not sure if you measure it in linear feet or pounds, but I'd appreciate it if you could indicate how much we anticipated ramping up versus our actual output. Just help us understand that better.

No, I prefer not to provide specific production figures because it leads to constant inquiries about quarterly output by factory and comparisons with our competitors. What I can say is that Hobart is a very large facility, and we have visual materials that show how it can significantly boost our metal production across Atkore. Although it hasn't yet reached our production targets, if we refer to a previous page, mechanical tube production is still up double digits year-over-year. While this is a significant factor, there are variables to consider, such as the impact of adding an evening shift or unplanned maintenance that requires taking machines offline for four days to maintain quality standards. Even those four days matter significantly when considering an average of slightly more than 60 working days in a quarter. However, as I mentioned before, we have improved the process and are expecting to see increased output. The question remains whether we'll see more of that play out in fiscal year '25 than we originally anticipated for fiscal year '24.

Okay. That's helpful. And if we just think a bigger picture regarding pricing being better than we had expected or not down as much versus expectation, but a volume shortfall, was there any bias this quarter to hold on price at the expense of volume? I know it's hard to aggregate across the products, but was there any bias there?

I’m not sure about that, but I believe we are always mindful, as a market leader, of whether we can engage any customer that might prefer us for various reasons and increase our volume. However, we don’t want to go down that path. On the other hand, I think we performed well for the specific quarter. In our prepared remarks, we noted that, if you look back to the January call, we mentioned that our fiscal first quarter was strong due to two customers pulling in orders at rebates we allowed. In January, which I hope to never mention again, sales were light. Therefore, with us at 6% year-to-date, I would bet that our market segments, such as commercial and industrial, are likely growing quicker or at a higher rate than the overall market. The business plans are effective, and we are still focused on achieving an $18 EPS. We're making progress, and we faced just these two short-term challenges that, to be honest, are temporary. I feel positive about our current position.

All right. That's good to hear. Just last one from me, since we get this question a lot recently. Can you comment on the significance of any imports of conduit? We know that just the product physical dynamics do not lend itself to economical cargo shipments. But there still seems to be a very small presence of imports. Can you just comment on that, where and how it plays out?

Yes, that's a great question. The variations differ by product. For instance, the range goes from 0% for some products to 3%. If we're excluding Canada and focusing on the U.S., it can reach up to around 20% for the highest. It ultimately comes down to preferences. We can command a price premium due to our reputation, quality, and shipping capabilities. Additionally, we're noticing that some products entering the market aren't meeting all specifications, which has become less common. So, Deane, it's a good question, but we are adhering to our earnings forecast and executing our strategy successfully.

Good. And just to clarify on that import question, is it the same that it's been for the past couple of years? Has it gotten bigger?

I think it varies. This year may be slightly up, but 2023 was down compared to our fiscal year '22. It really depends on the last three months and the year-over-year perspective. However, if I'm being totally honest about the trend over the last five years, Atkore is making more profits, which allows those without a better cost position to take advantage of the situation. This has led to a trend where, with us and our competitors raising market prices, opportunities have arisen. But again, it's more about the things we've discussed. We need to focus on getting Hobart running smoothly, pushing the DEEDS Act forward, and continuing to work on our global mega projects, delivery, and productivity. We should also use our excess cash to keep buying back shares, and I'm comfortable with the direction we're taking the company.

Your next question is from the line of Chris Dankert from Loop Capital Markets.

I guess, to focus in on the HDPE, I guess, just to be clear, as far as the guide goes, are we assuming a stabilization at current order rates and activity levels? Or does the guide assume some incremental fall-off in the back half of the fiscal year improvement, just to kind of level set what is baked into the guide? And then just what's giving you confidence from an order rate or customer activity perspective on an HDPE hitting that expectation?

Yes, Chris. So I would say that the back half of the year would be slightly better than the first half of the year would be what's in the guide. And I'd say that's supported by some uptick in current order rates.

But not sizable. This is not

It's modest.

Got you. Okay. That's helpful. I'm glad to hear that. And then, again, I know you mentioned in the past, destocking is pretty well behind us. Is that still the view? Are we still seeing incremental destocking? Was there anything to call out in the quarter or kind of looking forward here?

No, I think that’s a great question, Chris. The only thing I would mention is that year-to-date, HDPE has been destocked, which was unexpected a year ago. Otherwise, we are always engaging with customers, conducting channel checks. Many companies are reducing their inventories due to the weaker economy; we spoke with a customer last week who mentioned they might reduce their inventory by 2 days. Overall, I believe it's fairly stable across the market.

Got it. Well, I'll leave it there and thank you so much for the detail.

Your next question is from the line of Alex Rygiel from B. Riley.

A couple of quick questions here. When you look at your sales bridge, when might we anticipate price to be more neutral on a year-over-year basis?

I would say there are a couple of things to consider. If you look at our guidance for this year, the implied midpoint for Q4 would be relatively flat compared to Q4 of last year. This would likely be the quarter where EBITDA remains unchanged. You might see some pricing decrease year-over-year and some volume increase. I would suggest that overall sales, which include the impact of commodities on our top line, will probably be more significant in Q1 and Q2 of next year.

That is helpful. And then as it relates to large project opportunities, can you talk about how you see that sort of sequentially progressing over the next couple of quarters? And maybe not so much identify specific projects but identify specific sort of end markets that you see as being the biggest catalyst. Clearly, there's a lot of talk about AI data centers. But if you could expand upon that.

Yes. I think great question, Alex. It will expand into mostly an FY '25 and beyond story. So again, the orders are coming in now. We do have orders now, and we're shipping orders now. So this isn't a totally new thing, but we're dramatically increasing our team. We're doing things called off-site manufacturing. So partnering with some of the very largest names, you can imagine, like in the Magnificent 7 right now, where we're going to assembly offline and then providing them the products. And as you mentioned, I think if I had to pick two areas, it's both chip manufacturers and then it's also data centers themselves. And it's across the world, mostly U.S. story, but we do have operations where customers have taken us and said, 'Hey, you did such a great job in this specific city and said, would you work with us in different areas in Europe?' for example?

This concludes the question-and-answer session. I would now like to turn the call back over to Bill Waltz for closing remarks.

Thank you. Let me take a moment to summarize my three key takeaways from today's discussion. First, volume is up 6% year-to-date, and we expect mid- to high single-digit volume growth for FY 2024. Second, we continue to execute our balanced capital deployment model with over $150 million in share repurchase year-to-date. Third, with a great team, market-leading product portfolio, and strategy supported by strong secular tailwinds, we are excited about what the future holds for Atkore. With that, thank you, as always, for your support and interest in our company. 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 for joining us. You may now disconnect.