Atkore Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
November 17, 2023

There are 9 speakers on the call.

Operator

Good morning. My name is Christa, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Atkore's 4th Quarter and Full Year 2023 Earnings Conference Call. All lines have been placed in a listen only mode. After the speakers' remarks, there will be a question and answer As a reminder, this conference is being recorded.

Operator

Thank you. I would now like to turn the conference over to your host, John Dutzer, Vice President of Treasury and Investor Relations. Thank you. You may begin.

Speaker 1

Thank you, and good morning, everyone. I'm joined today by Bill Walt, President and CEO as well as David Johnson, Chief Financial Officer. We will take your 2019 guidance 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 financial performance of the company. Such statements involve risks and uncertainties, such that actual results may differ materially.

Speaker 1

Please refer to our SEC filings in 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 adjusted EBITDA and adjusted diluted earnings per share are non GAAP measures. Reconciliations of non GAAP measures The 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.

Speaker 2

Thanks, John, and good morning, everyone. Starting on Slide 3, I'm pleased to report that Atkore again delivered strong operating results this year and we remain confident in the future of our company. During our discussion today, we will discuss quarter financials as we normally do, but we will also like to take this opportunity to review our strategic growth opportunities and provide some exciting updates regarding capital deployment. Let me start with a quick review of some of our highlights from the year. Turning to Slide 4.

Speaker 2

2023 was a great year for Atkore. We delivered financial results well ahead of our expectations and we made great progress on many of our strategic initiatives. We continue to be recognized as an employer of choice And I believe that our talented team is a true hedge of advantage for our company. I'd like to take this moment to recognize them for their great work and everything they do to support our customers.

Speaker 1

Thank you. David and

Speaker 2

I are confident in our business And I'm pleased to report that we repurchased an additional $75,000,000 of stock in the 4th quarter. Over the past 24 months, we have now repurchased over $990,000,000 of our stock. We are proud of our accomplishments and we've worked diligently to evolve Atkore into an industry leader. Now, I'll turn the call over to David to talk through the results from the Q4 and the full year.

Speaker 3

Thank you, Bill, and good morning, everyone. Moving to our consolidated results on Slide 5. In the 4th quarter, Net sales declined 15% year over year to $870,000,000 and our adjusted EPS decreased 24% to $4.21 For the full year, we achieved $3,500,000,000 in revenue and our adjusted EPS was $19.40 Adjusted EBITDA for the full year was over $1,000,000,000 Turning to Slide 6 in our consolidated bridges. Volumes were positive in the quarter and federal profitability was stronger than expected. Looking at the full year, net sales decreased by $395,000,000 due to lower average selling prices.

Speaker 3

As we have been discussing over the past several years, Price normalization, primarily in our PVC business, started at the end of FY 2022 and has continued through FY2023. However, our profitability on both an adjusted EBITDA and EPS basis was much stronger than originally anticipated. We're extremely pleased with our overall financial performance. Moving to Slide 7 and our segment results. Margins compressed in our Electrical segment in the 4th quarter, driven by continued price normalization in our PVC related products.

Speaker 3

Nonetheless, margins were better than expected and we were encouraged to see volumes in our PVC related products were flat on both a year over year and sequential basis. The year over year volume declines in the quarter were in our HDPE and cable products. Shifting over to our S and I segment, volumes increased 18%. Net sales for this part of business declined due to lower average selling prices resulting from the year over year declines in raw material input costs and the impact from solar credit offsetting the strong volume gains. It is important to acknowledge that the declines in adjusted EBITDA margins include the recognition of the solar credit adjustment to cost of sales.

Speaker 3

Under the GTA method, earnings and margins would have been much stronger and closer to 14%. As you may recall from our comments last quarter, we will be using this methodology in FY 2024. Turning now to Page 8, we wanted to review some of the volume trends for FY23 and our outlook for FY 2024. In FY23, we achieved 3% volume growth, which was slightly below our expectations of mid single digit percentage growth for the year. During the Q4, there was a clear slowdown in demand coming from the telecom industry as the market and channel is working through elevated inventory levels and timing related to some of the government stimulus funding.

Speaker 3

This slowdown caused an unanticipated impact of volumes for HCPE related products. In addition, the ramp in production of our new facility in Indiana was behind our expectations, which led to slightly lower levels of shipments than we had anticipated. This being said, we are working through this production challenges and we expect sales for solar related price to double in FY 2024. This projected growth in our solar related price is a key driver in our low double digit growth expectation for the total enterprise in FY 2024. This will be a large step up and we expect the capital investments that we've been making in Indiana and other parts of our organization to deliver for our business in FY 2024.

Speaker 3

In addition, our metal framing, cable management and construction services businesses are very well positioned to support the continued growth of global mega projects. This part of our business grew double digits in FY2023 and we expect continued high single digit growth this year. This team has done a tremendous job growing Atkore's presence with some of the most recognized companies in the world. Turning now to our outlook on Page 9. We anticipate net Sales to grow in FY 2024 led by the low double digit volume gains, partially offsetting this growth will be continued pricing normalization,

Speaker 2

which will

Speaker 3

lead to lower levels of adjusted EBITDA and adjusted EPS. In FY 2024, we will use the DDAM method of accounting related to the solar credit, which will bring our tax rate back toward our historical range in the mid-20s. We continue to see upside potential in our company and we're committed to returning at least $200,000,000 in cash to shareholders through repurchases. Moving to Slide 10, we recognize there are a lot of moving parts between our performance in FY2023 and our outlook for FY2024. Therefore, we've outlined some of the critical components and impacts of both net sales and adjusted EBITDA.

Speaker 3

For example, We expect price versus cost to be a headwind of approximately $225,000,000 to $275,000,000 on an adjusted EBITDA basis. Of that amount, we would estimate that nearly $175,000,000 has already occurred when you look at lower margin levels exiting FY23 versus the start of the year. At the midpoint, this would be approximately $500,000,000 of the $585,000,000 that we 2019 results by last year as total price outperformance. Turning to Slide 11, Despite these anticipated declines in FY 2024, we're extremely pleased with the structural transformation and improvements that we've achieved in the business since our IPO. Last year at this time, we shared a historical bridge which broke down the different components in our sales and earnings since 2017.

Speaker 3

1 year later, the sustainable pricing improvements that we discussed are still holding and our estimates regarding pricing outperformance are in line with our expectations. The diversity and strength of our product portfolio is a true competitive advantage, and we expect our long term adjusted EBITDA margins will land in the range of 25 success. Even at these lower levels versus our performance in the past 3 years, these margins would be equal or slightly better than best in class companies in the electrical industry. With that, I'll turn it back to Bill to give an

Speaker 2

update on our growth opportunity. Thanks, David. Starting on Slide 13, Atkore is a differentiated company and a great investment opportunity. The financial and portfolio related achievements we've made since IPO as well as the strong secular tailwinds and growth opportunities we have ahead of us have positioned Atkore well for continued success. Earnings.

Speaker 2

Turning to Slide 14, we have provided a view of our strong financial profile. Our balance sheet and cash flow give us a rock solid foundation from which to grow. In addition, on Slide 15, our products are genuinely all around you And these are truly essential items for the electrical infrastructure needed in all types of construction. In fact, when you look at our segment sales on Slide 16, we estimate that over 90% of our sales are related to electrical infrastructure. 3 quarters of our sales are in our electrical segment, but a significant portion of our safety and infrastructure Turning to Slide 17, there are strong secular trends related to electrical infrastructure that we trust will support our market for years to come.

Speaker 2

Underlying many of these trends are also a large government stimulus program and with some of them have a spending profile through the end

Speaker 3

of the

Speaker 2

decade. David has said this many times before and even to several of you and I could not agree more with them. The electrical industry is a great place to be. Moving to Slide 18, we remain focused on executing the conduits of growth that we've discussed at this time last year, which emphasized M and A, category expansion initiatives and product innovation. Today, we wanted to provide an update on our key category expansion initiatives, which are an important aspect of executing our conduits of growth for years to come.

Speaker 2

In FY 'twenty four, we anticipate the investments that we made in Indiana will start to demonstrate considerable financial benefits. We expect growth and benefits from our investments in our retail service centers and HPPE will start to materialize in FY 2025 and beyond. On Slide 19, we wanted to highlight our new facility in Hobart, Indiana. This is really a great achievement for all of us And we are now planning to add in additional service capabilities outside of the Greater Atlanta region. Moving to Slide 21, we're pleased with the integration and investments we've made in our HPPE related acquisitions.

Speaker 2

This business is now operating cohesively as one unit and we continue to drive the adoption of the Atkore business system throughout the network. Yes, there are challenges as you've heard about the industry and inventory, timing of stimulus funding and so on. However, I'm confident in our team and the long term value this business will drive for our company. We estimate that we're number 2 in the power and telecom part of the market, which is probably less than 20% of the overall HDPE market we think about other applications like oil and gas and water. Atkore is an outstanding company and a compelling investment opportunity With our exceptionally strong balance sheet and diverse product portfolio, we are well positioned to deliver long term value for all of our stakeholders.

Speaker 2

With that, I'll turn it over to David to give some exciting updates about our capital deployment plan.

Speaker 3

Thanks, Bill. Yes, I'm excited to announce on Slide 23 that our Board has added plans for a regular early dividend and our capital deployment model. The introduction of this dividend is supported by our strong performance over the past several years and our confidence in the future. Turning to Slide 24, our updated capital deployment plans reflect our intention to invest and grow our business while consistently returning cash to shareholders. We're being quite selective in our approach to M and A as we continue to have a high level of confidence in our curve business as demonstrated through the nearly $1,000,000,000 we've deployed to share repurchases over the past 24 months.

Speaker 3

Moving to Slide 25, we anticipate elevated levels of capital expenses in FY 2024 similar to FY 2023 as we build out our RSP network that Bill mentioned and continue to invest in our digital tools and capabilities. Next on Slide 26, looking back on the version of the slide we presented a year ago, something has changed from the positive to negative. Despite these changes, we believe our growth investments and our capital deployment model will support our ability to deliver greater than $18 per share of adjusted EPS FY 2025. With that, I'll turn it back to Bill for Slide 27.

Speaker 2

Thanks, David. And we are very pleased with what we've achieved over the past several years and we're even more excited about the opportunities ahead With our outstanding financial profile and differentiated product portfolios supported by strong secular trends, We are a compelling investment opportunity for anyone looking for a company with strong growth initiatives and a commitment to returning cash to shareholders. I'm confident in the team, the strategy and processes we put in place to continue Atkore's strong trajectory. With that, we'll turn it over to the operator to open the line for questions.

Operator

Your first question comes from the line of Alex at Wriggle from B. Riley. Please go ahead. Your line is open.

Speaker 4

Thank you. Good morning, gentlemen, and Very nice quarter and lots of really helpful slides here. So thank you very much for that.

Speaker 2

Thanks, Alex. Yes. Good morning.

Speaker 4

First question here is, kind of your visibility as it relates to both the solar market and the HDP market or the telecom market. How confident are you that you feel like you've got pretty good visibility as it relates to either existing inventory and how that's getting worked through the channel and then customer demand over the next call it 12 to 18 months.

Speaker 3

Alex, this is David. I'll take the Solon question and I just wanted to remind you that as part of the Inflation Reduction Act with the incentives made for domestic manufacturing of torque tubes. That market essentially beginning last year Double domestically, even if the amount of solar being deployed was the same. So I think for that one, we're very comfortable. We We have really good relationships with some of the large tracker OEMs that that volume is going to is there and continues to be there.

Speaker 3

No, our challenge is probably more on just production on that side of the business.

Speaker 2

Yes. So just one other thought on David's, Because of the IRA, just moving volume from China to U. S. Doubled the size of the market. So market is exceptionally healthy.

Speaker 2

It's all about us and just getting factories out. And then, for HDPE, That's a little bit more triangulation, but I think everybody from fiber optic public corporations, I won't Call out individuals that are out there that have already announced their earnings and their estimates on when The funding will get deployed to our competitors that are public that have announced to things like the Fiber Optic Beat Association and so forth have all estimated second half of next year. So from that to talking to customers, We're pretty optimistic. Again, it's $65,000,000,000 of what's called being part of the IIJA. So it's a huge amount of funding.

Speaker 2

It's just a question of getting that shovel ready taking longer than expected. But We're ready and it's really what's going to help carry us full year 2025 and beyond.

Speaker 4

Very helpful. And as some of maybe your smaller competitors figure out ways to digest The weaker pricing environment that you've worked through very, very well. Do you see even more attractive M and A targets developing from a pricing standpoint and whatnot from those private entities that are having trouble accessing capital.

Speaker 2

Yes. So two things, Alex. I'm going to answer your specific question and then go a little bit broader on M and A. Absolutely, yes. And we just At our Board meeting and they had the same exact thought as you classically this is a perfect time to potentially acquire and so forth.

Speaker 2

So we are out, we are where we're spending $200,000,000 plus on capital that even without M and A, we're comfortable with the $18 EPS for next year. And our management is so focused on that, that we're not going to opportunistically just grab acquisitions for the sake of acquisitions. I think we've always been disciplined and will continue to be disciplined as we quite frankly absorb all the stuff of startup of factories, deploying capital for technology, the regional service centers and so forth.

Speaker 4

Thank you very much. Nice quarter and nice year.

Speaker 2

Thank you, Alex. Thanks, Alex.

Operator

Your next question comes from the line Deane Dray from RBC. Please go ahead. Your line is open.

Speaker 1

Thank you. Good morning, everyone.

Speaker 2

Hey, good morning, Dean. Good morning, Dean.

Speaker 5

Hey, can we go through pricing dynamics in the quarter and then the implications on the path that you talked about in the prepared remarks. So, for the quarter, pricing ended up being Not down as much as we thought it would be, so better on pricing. And just that how does that factor in lead times, What you're seeing in terms of competition, input costs and so forth?

Speaker 2

Yes. So, Dean, I think Q4 was slightly better as we expected and the whole year was slightly better. If you go back and David wrapped correctly or you Dean on, we started the year With around $850,000,000 EBITDA. So again, this was a strong year that beat our expectations and guide, analysts' expectations and guide this quarter's Yes, we just wrapped up Analyst Guide for EPS and EBITDA and so forth. And pricing still remains Good, better than what we forecasted, but I also want as David walked through in the prepared remarks, we continue to see PBC slowly go down.

Speaker 2

So that's the part of the estimate as we go forward. But really the stuff that we presented in November a year ago is playing out other than slightly better than exactly Hey, over a 2 year period, here's what we think we're going to keep because of our service, our regional service centers, the ability for one order, one delivery, one invoice. Yes, we're going to keep some of the price, but we're also going to get back some. And again, PVC we talk about because that's the biggest product From the price up, well, you have those dynamics across all the other products with by the way, some products I won't call off specifically, Yes, we see given up some price, other ones probably the strongest price either ever or at least in the last year or 2. And we just put price increases out on, I guess, I can share on metal conduit yesterday here.

Speaker 2

As steel costs go up, we're raising our metal conduit prices. So I don't want to say business as usual because it's a headwind, but it's very much playing out like we estimate at this time.

Speaker 3

And Dean, remember, we always said that the volume in the PVC business obviously has the component of what drives some pricing element. And in Q4, our PVC volumes were flat year over year, which was certainly better. We were trending better throughout the year, but we Started pretty significantly down year over year. So I think that's a positive. Going into Q1, we have seasonality.

Speaker 3

That business It has more seasonality than anybody given that it does go into the ground, so on and so forth. So I think as Bill mentioned, Pretty much in line, maybe slightly better than what we expected. Yes.

Speaker 2

And the other thing being that part of your question, but what I'm excited about that shareholders should The chart that we walked through where we're forecasting double digit organic growth, which to me was that and the dividend There are 2 things that should be very positively received by our shareholders and as we go forward. And that's the 2 things. In fairness, Destocking happened last year, so we don't have that happening again in the market. And then the fact We are the self help of all these different initiatives are starting to pay off here. So that's really when we make the statement about we're excited about the future of Atkore.

Speaker 2

These are

Speaker 5

That's all good to hear and that's great color. And just a quick clarification on Alex's Question regarding volume, if we were looking for mid single digit volume this quarter, you came in low single. How much of that, if you were to size the shortfall there, was the timing of the government stimulus and the telecom choppiness there. Is that does that account for all of it?

Speaker 2

Do you want to go?

Speaker 3

Yes, I can. I would say maybe Half to maybe a little bit more than half was due to the HDPE environment and then the other portion came with the slower than anticipated start up for our solar plant.

Speaker 2

Good. Okay.

Speaker 3

So one of the 2 Within our control and the other one, as we mentioned, is probably an overall market that's going to take a little bit to get back to where we expect it to be.

Speaker 5

All right. That clarification is helpful. And then just last question for me is on cash flow was seasonally for your fiscal Q4 a bit light. Just kind of take us through the dynamics there. And I also just want to give a shout out, great to see you initiate the dividend.

Speaker 3

All right. Thank you very much. Overall, for the full year, our operating cash flow is actually above last year, even though we were $300,000,000 EBITDA below last year. So I think that was very positive. The timing in Q4 this year, again, relates to the startup of In Indiana, where it's a little bit slower than we expected.

Speaker 3

So we have the steel ready to go. So we had a little bit higher elevated inventory levels, probably in solar. And I would argue the same price is the same in HDPE.

Speaker 1

Yes, that clarifies. Thank you.

Speaker 2

You're welcome. Thanks, Dean.

Operator

Your next question comes from the line of Andy Kaplowitz from Citigroup. Please go ahead. Your line is open.

Speaker 6

Hey, good morning, everyone.

Speaker 3

Hey, good morning, Andy.

Speaker 6

Bill, maybe just a little more color into your markets. Inventory of your products, I mean, I think you've talked about it being reasonably low in PVC and metal conduit, is it still the case? Are you seeing any impact on larger projects, either non res or res from the higher rates? I know you talked about stimulus and HDPE, but Anything sort of more macro that you could talk about? And I think last quarter you mentioned you were having a strong July.

Speaker 6

Did you see any change in the cadence of your businesses as you went through Q4 and now here into Q1.

Speaker 2

Yes. So I'll start and then David may have to help me. It feels like years ago for the last quarter already. But Dean, they go a different direction. The large projects overall are really strong.

Speaker 2

I would even say, If you look at any macro indicator, ABI, Dodge and so forth, the amount of large projects that are starting With some of it the stimulus to go, whether it's new factories going up, other chips, data centers Being driven by artificial intelligence and that's just in the United States, so let alone again we do have a global presence here, Really drive some of the optimism that we had with the forecast for double digit growth. So Overall, we're optimistic on the markets going forward, especially with these large projects that we're involved in. And then I don't recall anything specifically say July versus August.

Speaker 3

No, I don't think it's pretty consistent. But I would also say Andy, the other thing that Really encouraged about other players in our industry have announced quite a bit of capital investment, not for our products, but for other products that we would argue is slowing down just the volumes in the whole industry. So the fact that they're investing 100 of 1,000,000 of dollars in capacity in the U. S. To help Expand the electrical capacity.

Speaker 3

I think that's a very big positive for us. Maybe not in the Q1, right? Year, this past this next year or so.

Speaker 6

Got it. But just to be clear, David, you're not calling for some sort of big inflection In PVC conduit volume, it's more easy comps or is there more of an inflection that you're calling for when you get the change in growth here 24.

Speaker 3

No, I think it is more just one. We don't have the destocking year over year. And so we see some positive sequential volumes there. I think You are starting to see continued investment in grid hardening, which I think is another positive. I mean, if we happen to have any Slight increase in single family housing or anything like that, that would be helpful, but we're certainly not counting on that.

Speaker 3

And then we do have some new products, which we think our customers Like and so I think there's a little bit of opportunity there.

Speaker 2

Yes. Andy, I'll also take the same question from the like call it the negative, but it's a positive to go. The markets are there. In other words, the amount of construction backlog is within 0.2 months, plus or minus as high as it's ever been. Architectural billing index was slightly down, but the amount if you actually look and go how many months of backlog does an architect have is still as strong as it's ever been.

Speaker 2

So all the volume is there, let alone when we started getting more of the infrastructure from the IRA and so forth, the IIJA. So it's really becomes what are the limiting factors and it's been labor. So in some ways, one could argue a little bit softer labor market that we can get more people working construction will help and then it's other people's products like switchgear and so forth. So the more that they To David's earlier point, get out of their backlog, the quicker our products will flow. And then as David mentioned, yes, I'd say we do have easier comps Because we don't have the destock going on.

Speaker 2

So we get the factory up, we get some of these projects moving ahead, we get our growth initiatives, we're optimistic As we go forward, obviously.

Speaker 6

Great. And then I just wanted to focus on your guide for the 24% of 25% to 6% EBITDA margin, it's obviously up significantly as you showed us from mid to high teens pre pandemic. Maybe a little more color on It seems like you're saying, okay, that's basically the trough. I want to sort of clarify that or at least that sort of new run rate going forward. And then if I look at that chart that you have, you did say there's a down arrow for regarding potential future pricing normalization Now versus what you gave us last year around that bridge to $18 plus So is pricing normalization still you're going to retain $400,000,000 Or did something change there?

Speaker 3

That's a very good question. Those arrows going from where we are to the 2018. It wasn't necessarily vis a vis versus what we said last time. It's more or less what we think the actual bridge will be. So, but with that, I mean, I think the only thing that that arrow recognizes is we did say $585,000,000 in total.

Speaker 3

And if you midpoint our Current guide plus last year's actuals, it'd be around $500,000,000 So we're giving ourselves a little bit of an area saying there could be some continuation in that Last year, FY 2025 to get that $85,000,000 or so. Obviously, Andy, we'll see as the year progresses.

Speaker 6

Got it. And then I just want to ask you about conduits of growth in the context of you mentioned the solar Facility doubling, are you past the sort of startup issues that you had there? And is it possible to size when you look at 2024, how much The conduits of growth are helping you sort of make your forecast on revenue or EBITDA.

Speaker 2

Yes. So we're still working through some of the startups, but we have that in our forecast for this quarter and expect as we go into the next calendar year To be having these things behind us. By the way, we're seeing we give weekly our leadership, our President, so forth daily metrics, David and I weekly metrics and we're seeing the pickup and we're seeing the, hey, here's the next part being run and the turnover time and bringing on another shift employees. So everything basically going as expected. We are probably just way too optimistic in July of the time it takes Start up a whole factory of the whole other workforce, but we're on schedule for that now.

Speaker 2

And then for the conduit to growth, Andy, I'm going to wing something, but I know David wants to probably Speak to it is, the way I look at it is absolutely driving because we're forecasting double digit growth organic next year And pick whatever number 2%, 3% for just what the markets naturally drive. So that extra growth, whether it is solar torque tubes, whether it is new product development, whether it is the service centers and be able to drive that one order, one delivery, one invoice with comprehensive pricing and products. That's what's driving Atkore and our optimism in the future to grow more than the markets. Exactly. And I would add to the

Speaker 3

global mega projects are also part of that. And on Slide 10, Andy, you can go through. I think We did a couple of other things here I just want to mention is we did outline kind of FY2023 solar credit so that we can isolate that. And then we gave you what we think the solar credit will add to our bottom line for FY 2024. So we would look at that as more of like A normal year over year as the solar credits are around.

Speaker 3

So you can model that in FY 2025 or so on. But we do still have quite a bit of investment This year. And again, that's highlighted in digital and there are additional 2 regional service centers, so on and so forth.

Speaker 6

Appreciate all the color, guys.

Speaker 2

Thank you, Andy.

Operator

Your next question comes from the line of Chris Dankirk from Loop Capital. Please go ahead. Your line is open.

Speaker 2

Hey, good morning guys. Thanks for taking the questions. Good morning, Chris. I guess

Speaker 7

just to pull the thread on pricing a little bit more perhaps, thanks for the color. And again, just on what the expectation is On 2024 and kind of some of that lingering impact on 2025. Just when we're thinking about the actions taken to kind of fully reset price cost to that, The $585,000,000 you've talked about in the past, should we assume that those actions are fully complete this year and just kind of the rollover impact that ripples into 20 25?

Speaker 3

Probably I would say that so of our midpoint of our guide for price cost this year, we said $250,000 essentially. And We did the calculation that about $175,000,000 of that was already baked in whenever you Figured that you exited the year lower than we began FY 2023. So that would suggest there's still a little bit more normalization. There's really No, action. This is the amount of the way that the market over time goes between volume and price and opportunities and what have you and we've seen a General decline down.

Speaker 3

Probably a lot slower than we probably would have said 3 years ago, but yes, which is

Speaker 2

a good thing from Sure, capital will be deployed or stock buyback. And then also, Chris, if your question was more 25 versus 2024, our Current thought process is this would mostly normalize in 2024. Now if you think about it, we gave Slightly more price, let's say in April of 'twenty four. From a comp perspective at the beginning of 'twenty five, you're still going to have some discussion about it. And that's where I would just go back and say, we've been My personal opinion, amazing, we'll be able to look out 3 years, plug in AT and T EPS, explain pricing going down, explain what we're driving And basically been on every forecast and or exceed most things.

Speaker 2

So right now everything looks to be playing out as we expect it to be. But there will be a little bit of price discussion even in next fiscal year.

Speaker 7

Thanks for the color. And again, thank you for just the level of candidness you've kind of approached that whole price cost conversation with. And when I think about growth into 2024 here, how do we think about the impact of the large mega projects and kind of What's assumed in the guide? Should we be kind of assuming a stronger than seasonal back half just given the timing of some of these projects?

Speaker 2

Yes. I'll jump right into that. Yes, there's a lot of projects without getting too specific on what customer, but we have I mean to compliment our team here Just an amazing job on relationship, seeing the value that we bring to them, brand names that are global. And in this case, they want global providers. So whether it's Europe, United States, Middle East, wherever it is, We're hooked in.

Speaker 2

But at this stage, it's really with some of these large projects that we're real close on is getting the PO. Not that we don't have, pick a number, don't lock in on this number, but $100,000,000 of ongoing global mega projects. To earlier question, the data centers and Chip manufacturers are, in my opinion, exploding or at least for us they are. But you will see a much larger impact in the second half of This upcoming fiscal year from a year over year perspective. Got it.

Speaker 2

Makes sense. Well, thanks

Speaker 7

so much for the color and best of luck on 24 here,

Speaker 1

Thanks Chris.

Speaker 2

Thanks Chris.

Operator

Your next question comes from the line of Chris Moore from CJS Securities. Please go ahead. Your line is open.

Speaker 8

Hey, good morning, guys. Thanks for taking a couple of questions.

Speaker 6

Maybe we

Speaker 8

just get a little deeper good morning into CapEx is going to be elevated again in fiscal 2024, talking about in the $200,000,000 range. Can you maybe talk a little bit further in terms of where Will you be focusing there?

Speaker 2

Yes, David. Yes, go ahead.

Speaker 3

I mean, essentially, we still have some digital investments we're making. I think that they're adding and you can see some of our customers are pretty excited for some of our new capabilities. Our 2 new Warehouses, our regional service centers will be another piece of the CapEx. And then there is a little bit Obviously, the support to growth of mega projects and what have you, you do need to add some capacity in those areas. So I think generally speaking, Chris, it would be the 3.

Speaker 8

Got it. Appreciate that. And on the HDPE side, obviously, lots of talk About the telecom softness from multiple avenues. Beyond that, in terms of the end markets you're seeing, kind of some thoughts there perhaps?

Speaker 2

I think they're good. I mean, it was good with the following things. I would say low single digit growth in general, Not now us as a manufacturer, in fact that's the end market like what is being installed. From there, We won't have some of the destocking that occurred earlier in our fiscal year. So therefore, that will So, Atkore, you kind of almost did my own CEO bridge, so to speak, to go how do you go from low single digit to double digit low double digit growth.

Speaker 2

You have that headwind of last year going away, so that's going to help. And then as David and I mentioned that you Every investor should understand, but you won't see if you just looked at square feet or some other metric, is I think every one of our peers, no matter where you are in the electrical industry, this is going to be the best decade ever with just everything from PG and E, I think just yesterday in the Wall Street Journal, we announced a 1,000 miles or some number around there of The grid hardening in general, the beads act when it comes. There's just so many different things to go. The intensity of a data center For the Marrow Electrical products that we will put into that would be more than what a hotel would cost to put up period. I mean, so like when you win one of these jobs, It's intense.

Speaker 2

So I think it's our conduit to grow self help on a really good just secular trends tailwind that we have that kind of bridges us from the markets up low single digit to Atkore we're aspiring to be low double digit growth this year.

Speaker 8

Got it. Very helpful. I'll leave it there. Thanks guys.

Speaker 2

Thank you, Chris. Thank you, Chris.

Operator

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

Speaker 2

Before we conclude, let me summarize my 3 key takeaways from today's discussion. First, fiscal 2023 was a very good year for Atkore. 2nd, we are well positioned to build on our positive business momentum and have a strong outlook for fiscal year 2024. 3rd, our strategy will drive further value creation into the future as we continue to execute on our growth opportunities and deliver on our updated capital deployment model. With that, thank you for your support and interest in our company and we look forward to speaking with you during our next quarterly call.

Speaker 2

This concludes the call for today.

Operator

This concludes today's conference call. Thank you for your participation and you may now disconnect.

Remove Ads
Powered by Quartr
Earnings Conference Call
Atkore Q4 2023
00:00 / 00:00
Remove Ads