Attached files
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| 8-K - CURRENT REPORT ON FORM 8-K DATED FEBRUARY 25, 2020 - PGT Innovations, Inc. | form8k_02202020.htm |
| EX-99.1 - PRESS RELEASE DATED FEBRUARY 25, 2020 - PGT Innovations, Inc. | ex991_q42019.htm |
EXHIBIT 99.2
PGT Innovations Q4 and full year 2019 Financial results February 25, 2020
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FORWARD LOOKING STATEMENTS Statements in this presentation regarding our business that are not
historical facts are “forward-looking statements” that involve risks and uncertainties which could cause actual results to differ materially from those contained in the forward-looking statements. Such forward-looking statements generally can
be identified by the use of forward-looking terminology, such as “guidance,” “expect,” “believe,” “anticipate,” “may,” “outlook,” “forecast,” “intend,” “could,” “estimate,” and similar terminology. These risks and uncertainties include factors
such as: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 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 Western Window Systems;our level of
indebtedness, which increased in connection with our acquisition of Western Window Systems, and increased further in connection with our acquisition of NewSouth;increases in bad debt owed to us by our customers in the event of a downturn in the
home repair and remodeling or new home construction channels in our core markets and our inability to collect such debt;sales fluctuations to and changes in our relationships with key customers;the risks that the anticipated cost savings,
synergies, revenue enhancement strategies and other benefits expected from our acquisitions of NewSouth and Western Window Systems 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;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;our dependence on our limited number of geographically concentrated manufacturing
facilities;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 the acquisitions of NewSouth and Western
Window Systems, 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 risks and uncertainties discussed under Part I,
Item 1A, “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 28, 2019.Forward looking statements in this presentation include our expectations regarding: (i) the impact of our strategic pillars on customer and
shareholder value; (ii) market volumes in 2020 and the initiatives we undertake to drive above-market growth; (iii) the results of our strategic growth projects; (iv) the results of our advertising, marketing and promotional activities; (v)
possible strategic acquisitions and the benefits they may provide; (vi) the strength of our balance sheet and our capital structure; (vii) our guidance for 2020 set forth in this presentation; (viii) the possible benefits of investing in talent
and R&D; (ix) operational efficiencies and margin expansion; (x) order entries and demand for our products during 2020; and (xi) our ability to capture profitable growth in the new construction and repair and remodel markets. You are
cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this presentation. Except as required by law, the Company undertakes no obligation to update these forward-looking statements to
reflect subsequent events or circumstances from the date of this presentation. 2
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Use of Non-GAAP Financial Measures This presentation and the financial schedules include financial
measures and terms not calculated in accordance with U.S. generally accepted accounting principles (GAAP). We believe 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. We also believe
these non-GAAP measures provide investors with a better baseline for assessing our future earnings potential. The non-GAAP measures included in this release are provided to give investors access to types of measures that we use in analyzing our
results.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 the 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 our credit agreements. 3
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Executing 4 Strategic Pillars expected to Create Long-Term Customer and Shareholder Value
4 Customer-centric focus to drive brand recognition, loyalty and growth Attracting and retaining talented, dedicated leaders to drive our business Investing in our business and scaling our operations to meet expected increasing demand in
the long-term Strategically allocating capital generated from our free cash flow to support our growth
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Closing Date 2/1/2020 Purchase Price $92M Showroom Locations OrlandoTampaSarasotaW. Palm BeachFt.
LauderdaleJacksonvilleBonita SpringsCharlestonPensacola NewSouth Transaction Update HighlightsNewSouth currently operates 8 showrooms across Florida and plans to open additional locations in strategic, coastal markets (Louisiana, Texas,
Florida Panhandle, Georgia, & North Carolina)The company’s unique go-to-market strategy enables it to carry out all functions of manufacturing, distribution, showroom display, in-house consultation and in-home installationServes both
residential (~70% net sales) and commercial (~30% net sales)2019 net sales estimate of $82-$85 million achieved 5 1. Not included in PGT Innovations' 2019 results
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Fourth Quarter key Messages HighlightsQ4 2019 sales delivered at top-end of guidance rangePositive order
momentum entering 2020 as legacy pipeline ended the quarter up 8% versus the prior year quarterWestern Business Unit sales increased 8% versus the prior-year quarter; continued expansion in core and emerging marketsMargins impacted by
unfavorable product mix 6 1. Refer to reconciliation to GAAP Q4 2019 vs. Q4 2018 $175MNet Sales 7.9% 32.1%Gross Margin 2.5% 13.6%Adjusted EBITDA1 Margin 3.0%
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Market Performance – Southeastern Business Unit 7 1. Q4 2018 invoicing benefitted from increased order
intake from Q3 2018 price increase Comparisons against 2018 are behind usQ4 2019 pipeline up 8% vs. Q4 2018Q4 2019 order entry up 12% vs. Q4 2018Expecting market growth up to 3% in repair & remodel and 3-5% in new construction; have
capacity to serve incremental demand while maintaining competitive lead timesSelling initiatives in place to drive above-market growth Orders, Invoicing and Order Pipeline ($) Source: Internal PGT Innovations data 1
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Q4 2019 vs. Q4 2018 $175MNet Sales 7.9% 32.1%Gross Margin 250bps $23.8MAdjusted EBITDA1 24.6%
$0.10Adjusted Diluted EPS1 52% Q4 2019 RESULTS HighlightsDecline in legacy R&R as expected; continued growth in core and emerging markets for Western Window SystemsGross margins impacted by unfavorable product mix and promotional
investments in our legacy businessSG&A reduction driven by reduced incentive compensation versus prior year quarterAdjusted EBITDA impacted by reduced sales versus prior year quarter along with unfavorable product mix in both business
units 8 1. Refer to reconciliation to GAAP
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Full-Year 2019 vs. Full-Year 2018 $745MNet Sales 6.7% 35.0%Gross Margin 0.1% $128MAdjusted
EBITDA1 0.8% $0.82Adjusted Diluted EPS1 31% HighlightsSales of $745M includes sales contribution of $138M from Western Window SystemsAdjusted EBITDA impacted by unfavorable product mix in both business units versus prior
yearAdjusted diluted EPS for 2019 was $0.82 versus $1.18 in the prior year; weighted average diluted shares increased by 9.3%, primarily as a result of 7M shares issued in September 2018 9 FULL-YEAR 2019 RESULTS 1. Refer to reconciliation to
GAAP
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Strong balance sheet 10 Net debt is total consolidated funded indebtedness as of 12/28/19 and
calculated in accordance with our credit agreement except on an all cash netted basis. Adjusted EBITDA is calculated in accordance with our credit agreement. Refer to reconciliation to GAAP.Leverage ratio defined as net debt divided by
trailing-twelve-month adjusted EBITDA; refer to reconciliation to GAAP. Net Debt1 and Leverage Ratio2 HighlightsEnded 2019 with net debt of $282 million, down from $297 million in Q3 2019. Net debt to trailing-twelve month adjusted EBITDA of
2.2 times.Proven track record of deleveraging following acquisitions. Acquisition of Acquisition of Acquisition of
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Capital Allocation priorities 11 Internal Investment StrategicAcquisitions Debt
Reduction Share Repurchase Strategic growth projects expected to drive margin improvementAdvertising and marketing investments expected to drive sales Strategic acquisitions are expected to grow shareholder valueExpansion into new
geographies or customer markets or other window and door products with different market positioning Expect to maintain a strong balance sheet and conservative capital structureCompleted private offering of $50M principal amount of additional
6.75% senior notes due 2026 No shares repurchased in Q4 2019 1 2 3 4
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Full-Year 2020 Guidance 12 Full-Year 2019 Results 2020 Guidance as of 2/25/20 2020 Guidance vs.
Full-Year 2019 Net Sales$745M Net Sales$850M-$880M 14% – 18% Adjusted EBITDA1$128M Adjusted EBITDA$145M – $155M 13% – 21% Adj. Net Income / Diluted Share1$0.82 Net Income / Diluted Share$0.86 – $0.99 2020 Guidance
Assumptions Depreciation and Amortization2$10M / Quarter Interest Expense3$29M Non-cash Stock Compensation4$7M Capex as % of Net Sales3% – 4% Tax Rate26% 1. Refer to reconciliation to GAAP; 2. Includes estimate for NewSouth non-cash
amortization; 3. Includes yield related to $50M of senior notes issued; 4. Includes $1.2M for non-cash incentive compensation from New South earn-out; $4.0M non-cash incentive compensation to be recognized over 3 years; Additional $4.0M to be
included in SG&A over 3 years as cash incentive compensation for a total of $8.0M.
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Why Invest in PGT Innovations 13 National leader in growing premium impact-resistant and
indoor/outdoor window and door category Expect to continue investing in talent and R&D to remain an industry leader in innovation and product development Continued focus on operational efficiencies expected to drive additional margin
expansion Execution of our strategy expected to create long-term customer and shareholder value Well positioned with diversified product portfolio to capture profitable growth in new construction and repair and remodel channels
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Q&A 14
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Appendix 15 Reconciliation to Adjusted Net Income, Adjusted Net Income per Share-diluted, Adjusted
EBITDA, and Adjusted EBITDA per our bank covenants
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Reconciliation of GAAP to NON-gaap MEASURES(unaudited - in thousands, except per share amounts)THREE
MONTHS AND YEAR ENDED DECEMBER 28, 2019 AND DECEMBER 29, 2018 16
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17 Reconciliation of GAAP to NON-gaap MEASURES(unaudited - in thousands, except per share
amounts)THREE MONTHS ENDED DECEMBER 28, 2019 AND DECEMBER 29, 2018
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Reconciliation of GAAP to NON-gaap MEASURES(in MILLIONS) 18
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19 Reconciliation of GAAP to NON-gaap MEASURES Represents the total of the adjustments consistent
with previously published and publicly available earnings releases as issued by the Company relating to the period for which the total adjustments is presented.Beginning in 2018, the Company updated its reporting of adjusted EBITDA for its
publicly issued earnings to exclude non-cash stock-based compensation expense. As such, the total of the adjustments per previously published earnings as presented herein will not agree to the total adjustments as previously issued for periods
prior to 2018, as they have been revised as a result of this change in presentation.Calculated in accordance with the covenants pursuant to the Company’s then existing credit agreement, which includes adjustments for expected cost savings,
operating expense reductions and synergies related to acquisitions, as well as the earnings of the acquired entity on a pro forma basis for any pre-acquisition period within the trailing twelve-months relating to the period of the calculation.
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