PGTI Reports 2021 First Quarter Growth and Raises Fiscal 2021 Guidance

Rhea-AI Summary

PGT Innovations, Inc. (PGTI) reported a 23% increase in net sales for Q1 2021, reaching $271 million. This growth includes $16 million from the consolidation of Eco Enterprises. However, net income per diluted share fell 19% to $0.21, and adjusted net income declined 4% to $0.27. Adjusted EBITDA rose 7% to $42 million. The company raised its full-year guidance, expecting net sales between $1.050 billion and $1.125 billion, despite ongoing margin pressures attributed to inflationary costs. The company also plans to manage operational improvements.

Positive

• Net sales increased 23% to $271 million.
• Adjusted EBITDA rose 7% to $42 million.
• Acquisition of Eco Enterprises contributed $16 million to sales.
• Full-year guidance increased, expecting net sales between $1.050 billion and $1.125 billion.

Negative

• Net income per diluted share decreased 19% to $0.21.
• Adjusted net income per diluted share fell 4% to $0.27.
• Gross margins declined by 220 basis points to 34.7%.

PGT Innovations, Inc. (NYSE: PGTI), a national leader in premium windows and doors, including impact-resistant products and products designed to unify indoor/outdoor living spaces, today announced financial results for its first quarter ended April 3, 2021.

Financial Highlights for First Quarter 2021 compared to First Quarter 2020

• Net sales increased 23 percent, to $271 million, which includes $16 million from consolidation of Eco Enterprises (f/k/a Eco Windows Systems)
• Gross profit increased 16 percent, to $94 million
• Net income per diluted share attributable to common shareholders decreased 19 percent, to $0.21
• Adjusted net income per diluted share decreased 4 percent, to $0.27
• Adjusted EBITDA increased 7 percent, to $42 million

Full-Year 2021 Guidance Increased (includes results for Eco from date of acquisition at 100% of its sales)

• Net sales in the range of $1.050 billion to $1.125 billion
• EBITDA in the range of $175 million to $200 million

“PGT Innovations’ sales increased 23 percent for a record quarter, including 15 percent organic growth, and during the quarter we completed the acquisition of a majority ownership stake in Eco Enterprises, which also contributed $18 million of sales,” said Jeff Jackson, President and Chief Executive Officer. “Reflecting strength in the housing sector across our key markets, our legacy business grew orders 31 percent. This includes orders from NewSouth in the first quarter of $35 million, up 42 percent over the prior-year quarter.”

“We recently announced price increases to help offset inflationary pressures on rising material costs and labor rates in the quarter which contributed a decline in gross margins of 220 basis-points to 34.7 percent,” added Jackson. “Going forward, we expect recently announced price increases will begin to offset these cost impacts beginning in the last month of the second quarter. Additionally, we remain focused on cost controls, strategic markets and operational excellence improvements as evidenced by the enhancements to our Western Phoenix operations, supporting their growing demand as the economy reopens.”

“Our results for the quarter included $4.2 million of costs related to our exit from the commercial business included in the New South acquisition. Adjusting for these charges, our adjusted EBITDA was $42 million, a 7% increase versus the prior-year quarter. Our net debt-to-trailing-twelve-month Adjusted EBITDA ratio ended the quarter at 2.6 times, near the midpoint of our targeted range,” said Brad West, Interim Chief Financial Officer and Senior Vice President of Corporate Development and Treasurer. “As we think about capital allocation, we continue to prioritize acquisitions and investing in internal projects that we expect to drive margin growth or further improve our operational efficiency.”

"Looking to the remainder of 2021, we expect continued sales growth, though margin pressures may continue into the second quarter longer than initially anticipated due to timing of price increases and our significant backlog now totaling $343 million,” added West.

“The health and well-being of our team members, customers and communities continues to be our greatest focus. In support of this commitment, we are making available COVID-19 vaccinations for employees at our Venice, Florida facility,” concluded Jackson.

Updated 2021 Guidance

		Prior Guidance* (as of 02/24/2021)		Updated 2021 Guidance* (as of 05/13/2021)
	Net sales (in billions)	$1.0	$1.075	$1.050	$1.125
	% growth	13%	22%	19%	27%
	EBITDA (in millions)	$175	$194	$175	$200
	% growth	17%	29%	17%	33%
	* 2021 guidance includes Eco at 100% contribution for the post-acquisition period.

Conference Call

PGT Innovations will host a conference call today at 10:30 a.m. The conference call will be available at the same time through the Investor Relations section of the PGT Innovations, Inc. website, http://ir.pgtinnovations.com/events.cfm.

To participate in the teleconference, kindly dial into the call about 10 minutes before the start time: 833-316-0547 (U.S. toll-free) and 412-317-5728 (International). A replay of the call will be available within approximately one hour after the scheduled end of the call on May 13, 2021, through approximately 12:30 p.m. on May 20, 2021. 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 10155679. 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://services.choruscall.com/links/pgti210513FDso7Ns5.html

The webcast will also be available through the Investors section of the PGT Innovations, Inc. website:
http://ir.pgtinnovations.com/events.cfm.

About PGT Innovations, Inc.

PGT Innovations manufactures and supplies premium windows and doors. Its highly-engineered and technically-advanced products can withstand some of the toughest weather conditions on earth and unify indoor/outdoor living spaces. PGT Innovations creates value through deep customer relationships, understanding the unstated needs of the markets it serves and a drive to develop category-defining products. PGT Innovations is also the nation’s largest manufacturer of impact-resistant windows and doors, holds the leadership position in its primary markets, and is part of the S&P SmallCap 400 Index.

The PGT Innovations’ family of brands include CGI®, PGT® Custom Windows & Doors, WinDoor®, Western Window Systems®, CGI Commercial®, Eze-Breeze®, NewSouth Window Solutions®, and Eco Enterprises®. The Company’s brands, in their respective markets, are a preferred choice of architects, builders, and homeowners throughout North America and the Caribbean. The Company’s high-quality products are available in custom and standard sizes with multiple dimensions that allow for greater design possibilities in residential, multi-family, and commercial projects. For additional information, visit www.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 demand in our Western business recovering; price increases offsetting cost impacts; our prioritization of capital; and our Sales and EBITDA guidance.

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are used 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:

• the impact of the COVID-19 pandemic and related measures taken by governmental or regulatory authorities to combat the pandemic, including the impact of the pandemic and these measures on the economies and demand for our products in the states where we sell them, and on our customers, suppliers, labor force, business, operations and financial performance;
• 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 and vinyl, including, price increases due to the implementation of tariffs and other trade-related restrictions;
• 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 our acquisition of a 75% ownership stake in Eco Enterprises and its related companies (collectively, the “Eco Acquisition”), 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 acquisitions of NewSouth, and our investment in Eco;
• our level of indebtedness, which increased in connection with our acquisition of NewSouth, and increased further in connection with our investment in Eco;
• increases in bad debt 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 debt;
• the risks that the anticipated cost savings, synergies, revenue enhancement strategies and other benefits expected from our acquisition of NewSouth, and from our investment in Eco, 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 Eco Acquisition;
• 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 NewSouth, and our investment in Eco, our ability to successfully integrate businesses we may acquire in the future, or that any business we acquire may not perform as we expected at the time 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 January 1, 2021 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. 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. We believe these measures enable investors and analysts to more thoroughly evaluate our current performance as compared to past performance and provide a better baseline for assessing the Company's future earnings potential. However, these measures do not provide a complete picture of our operations.

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.

Our calculations of Adjusted net income and Adjusted net income per share, and Adjusted EBITDA 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, and Adjusted EBITDA to GAAP net income are included in the financial schedules accompanying this release.

Adjusted EBITDA as used in the calculation of the net debt-to-Adjusted EBITDA ratio, consists of our Adjusted EBITDA as described above, but for the trailing twelve-month period, adjusted pursuant to the covenants contained in the 2016 Credit Agreement due 2022.

PGT INNOVATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited - in thousands, except per share amounts)
		Three Months Ended
		April 3,				April 4,
		2021				2020
Net sales		$	271,092			$	220,204
Cost of sales			177,130				139,077
Gross profit			93,962				81,127
Selling, general and administrative expenses			69,766				54,220
Income from operations			24,196				26,907
Interest expense, net			7,457				7,169
Income before income taxes			16,739				19,738
Income tax expense			3,944				4,138
Net income			12,795				15,600
Less: Net income attributable to redeemable non-controlling interest			411				—
Net income attributable to the Company			12,384				15,600
Change in redemption value of redeemable non-controlling interest			—				—
Net income attributable to common shareholders		$	12,384			$	15,600
Net income per common share attributable to common shareholders:
Basic		$	0.21			$	0.27
Diluted		$	0.21			$	0.26
Weighted average number of common shares outstanding:
Basic			59,286				58,668
Diluted			59,894				59,121

PGT INNOVATIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited - in thousands)
	April 3,				January 2,
	2021				2021
ASSETS
Current assets:
Cash and cash equivalents	$	58,979			$	100,320
Accounts receivable, net		117,239				92,844
Inventories		72,352				60,317
Contract assets, net		49,225				28,723
Prepaid expenses and other current assets		28,543				19,468
Total current assets		326,338				301,672
Property, plant and equipment, net		160,129				135,155
Operating lease right-of-use asset, net		65,763				38,567
Intangible assets, net		324,458				256,507
Goodwill		359,746				329,695
Other assets, net		3,224				925
Total assets	$	1,239,658			$	1,062,521
LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST AND EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	111,892			$	84,344
Current portion of operating lease liability		8,682				6,132
Total current liabilities		120,574				90,476
Long-term debt, less current portion		474,265				412,098
Operating lease liability, less current portion		60,140				35,130
Deferred income taxes, net		29,947				28,329
Other liabilities		10,971				11,354
Total liabilities		695,897				577,387
Redeemable non-controlling interest		34,495				—
Total shareholders' equity		509,266				485,134
Total liabilities, redeemable non-controlling interest and shareholders' equity	$	1,239,658			$	1,062,521

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
		April 3,				April 4,
		2021				2020
Reconciliation to Adjusted Net Income and Adjusted Net Income
per share - diluted - attributable to common shareholders:
Net income attributable to common shareholders		$	12,384			$	15,600
Add: Net income of redeemable non-controlling interest			411				-
Net income			12,795				15,600
Reconciling items:
Acquisition-related costs (1)			672				543
Business wind-down costs (2)			4,197				-
Product line transition costs (3)			-				382
Pandemic-related costs (4)			-				85
Tax effect of reconciling items			(1,205	)			(253	)
Adjusted net income		$	16,459			$	16,357
Weighted-average diluted shares			59,894				59,121
Adjusted net income per share - diluted		$	0.27			$	0.28
Reconciliation to Adjusted EBITDA:
Depreciation and amortization expense		$	11,446			$	9,928
Interest expense, net			7,457				7,169
Income tax expense			3,944				4,138
Reversal of tax effect of reconciling items for
adjusted net income above			1,205				253
Stock-based compensation expense			1,750				1,530
Adjusted EBITDA		$	42,261			$	39,375
Adjusted EBITDA as percentage of net sales			15.6	%			17.9
Net debt-to-Adjusted EBITDA ratio (5)			2.6	x

(1) In 2021, represents costs relating to our investment in Eco. In 2020, relates to the acquisition of NewSouth Window Solutions.

(2) Represents incremental costs related to the wind-down of our commercial business acquired in the New South acquisition. Of the $4.2 million of these costs, $2.7 million are classified as cost of sales, and $1.5 million are classified as selling, general and administrative expenses in the accompanying condensed consolidated statement of operations for the three months ended April 3, 2021. A portion of these costs may be recoverable through insurance. We completed this wind-down during the first quarter of 2021.

(3) Represents costs relating to product line transitions, classified within cost of sales for the three months ended April 4, 2020.

(4) Represents incremental costs incurred relating to the coronavirus pandemic, including cleaning and sanitizing costs for the protection of the health of our employees and safety of our facilities, classified within selling, general and administrative expenses for the three months ended April 4, 2020.

(5) Calculated using an adjusted EBITDA amount pursuant to the covenants included in our 2016 Credit Agreement due 2022 which includes the EBITDA of our investment in Eco on a proforma trailing twelve-month basis.

 

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FAQ

What were PGTI's earnings results for Q1 2021?

PGTI reported a net income of $0.21 per diluted share for Q1 2021, a 19% decrease from the prior year.

How did PGT Innovations perform financially in Q1 2021?

PGTI experienced a 23% increase in net sales to $271 million, while adjusted EBITDA grew 7% to $42 million.

What is PGTI's updated guidance for 2021 after the Q1 report?

PGTI increased its full-year guidance, anticipating net sales between $1.050 billion and $1.125 billion.

What impact did Eco Enterprises have on PGTI's sales?

The acquisition of Eco Enterprises contributed $16 million to PGTI's sales in Q1 2021.

What challenges is PGT Innovations facing in 2021?

PGTI is facing margin pressures due to rising material costs and labor rates.