Gibraltar Announces Fourth Quarter and Full Year 2022 Financial Results

2022 Revenue: GAAP up 3.7%; Adjusted up 4.7%

2022 EPS: GAAP up 13.8% with Charge; Adjusted up 18.9%

2023 Outlook Calls for Further Margin Expansion and Cash Flow Growth

Gibraltar Industries, Inc. (Nasdaq: ROCK), a leading manufacturer and provider of products and services for the renewable energy, residential, agtech and infrastructure markets, today reported its financial results for the three- and twelve- month periods ended December 31, 2022.

“We executed well in the fourth quarter and remained focused on our key initiatives while adapting to the ongoing fluid external environment. Our adjusted net income improved 20.4% and adjusted EPS improved 28.6% on a sales reduction of 5.2%. We also generated free cash flow of 19% of revenue as we improved margin and working capital performance during the quarter. For the full year, we delivered revenue growth, adjusted EPS and free cash flow within our stated outlook, and GAAP EPS within our recently announced outlook,” stated Chairman and CEO Bill Bosway.

Fourth Quarter 2022 Consolidated Results from Continuing Operations

Below are fourth quarter 2022 consolidated results from continuing operations:

Revenue decreased 6.1% to $313.9 million and adjusted revenue decreased 5.2% to $312.9 million. Adjusted revenue was down 9.8% organically, with reductions in the Residential, Renewables, and Agtech businesses. In Residential, volume was impacted as the market returned to historically lower seasonal demand patterns as supply chain reliability improved. Also, market prices began to align with changes in commodity indexes. The acquisition of Quality Aluminum Products (“QAP”) partially offset the impact of Residential market dynamics. Project rescoping and rescheduling impacted the Renewables and Agtech segments. Demand in the Infrastructure segment remained solid.

GAAP earnings decreased to $3.3 million, or $.0.11 per share, which included a previously disclosed one-time non-cash charge for the write-down of $14.0 million, or $0.35 per share, for the held-for-sale processing equipment business in the Agtech segment. Adjusted net income increased 20.4% to $22.4 million, or $0.72 per share, and adjusted EPS increased 28.6%. Performance was driven by profitability improvement in the Renewables and Infrastructure segments through material cost alignment, field operations efficiency, price management, business mix, 80/20 initiatives and the share repurchase program.

Adjusted measures exclude charges for restructuring initiatives, acquisition-related items and the results of the processing business which included a write down in the fourth quarter of 2022, as further described in the appended reconciliation of adjusted financial measures.

Fourth Quarter Segment Results

Renewables

For the fourth quarter, the Renewables segment reported:

Customer demand remained strong for products and services but both Segment revenue and backlog were down 20.8% and 17% respectively as the U.S. solar industry continued to contend with panel importation guidelines governed by the Uyghur Forced Labor Prevention Act (UFLPA), which has impacted scoping and scheduling of projects.

Despite importation issues impacting revenue, adjusted operating margin improved as expected, increasing 1,390 basis points year-over-year and 230 basis points sequentially, driven by field operations productivity, 80/20 project management, business mix, and materials productivity.

Residential

For the fourth quarter, the Residential segment reported:

Revenue increased 7.8%; the acquisition of QAP contributed 9.4% of growth for the segment. Organic revenue was impacted as the market returned to its typical lower seasonal demand patterns in the quarter as supply chain reliability improved and market prices began to align with changes in commodity indexes. QAP results, included for a full quarter, were as expected.

Adjusted operating income decreased 13.2% and adjusted operating margin decreased 320 basis points. The alignment of price and material cost, and the timing of changes in commodity indexes, impacted organic margin in the quarter. The acquisition of QAP, finalized in the third quarter, contributed 110 basis points of the decrease. Margins are expected to recover as price/cost alignment improves and QAP integration benefits are realized.

Agtech

For the fourth quarter, the Agtech segment reported:

GAAP revenue decreased 22.7%, with adjusted revenue down 17.4% due to project rescoping and rescheduling of produce growing projects into 2023. While quote activity remains robust, backlog decreased 13%.

Adjusted operating margin decreased 420 basis points as project rescheduling delayed project revenue recognition, partially offset by better project execution.

As previously disclosed, Gibraltar recorded a fourth quarter 2022 charge to write down the value of its processing equipment business.

Infrastructure

For the fourth quarter, the Infrastructure segment reported:

Revenue increased 4.8% and backlog increased 23% as bidding activity remained very strong. Management expects continued positive impact in 2023 from increased infrastructure spending related to the Infrastructure Investment and Jobs Act.

Adjusted operating income more than doubled and adjusted operating margins improved 720 basis points driven by improved price material cost alignment, improved operating execution, product mix, and volume leverage.

Business Outlook

“We enter 2023 with good operating momentum and a plan to deliver full year growth, margin expansion, and strong cash performance for the year. We are well prepared for what will continue to be a fluid external environment and we expect that the Residential market will return to normal demand seasonality, panel supply for the solar industry will improve in the second half of the year, and Agtech projects for produce growing will get finalized.” Mr. Bosway concluded, “The long-term fundamentals of our end markets remain strong, and given the progress we made the last 12 months in our market positioning, systems, processes, and organization, we expect to drive solid performance in 2023 as we continue to execute toward our 2025 objectives.”

Gibraltar is providing guidance for revenue and earnings for the full year 2023. Consolidated revenue is expected to range between $1.36 billion and $1.41 billion, compared to $1.38 billion in 2022. GAAP EPS is expected to range between $3.04 and $3.24, compared to $2.56 in 2022, and adjusted EPS is expected to range between $3.46 and $3.66, compared to $3.40 in 2022.

Fourth Quarter 2022 Conference Call Details

Gibraltar will host a conference call today starting at 9:00 a.m. ET to review its results for the fourth quarter of 2022. Interested parties may access the webcast through the Investors section of the Company’s website at www.gibraltar1.com, where related presentation materials will also be posted prior to the conference call. The call also may be accessed by dialing (877) 407-3088 or (201) 389-0927. For interested individuals unable to join the live conference call, a webcast replay will be available on the Company’s website for one year.

About Gibraltar

Gibraltar is a leading manufacturer and provider of products and services for the renewable energy, residential, agtech, and infrastructure markets. Gibraltar’s mission, to make life better for people and the planet, is fueled by advancing the disciplines of engineering, science, and technology. Gibraltar is innovating to reshape critical markets in comfortable living, sustainable power, and productive growing throughout North America. For more please visit www.gibraltar1.com.

Forward-Looking Statements

Certain information set forth in this news release, other than historical statements, contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 that are based, in whole or in part, on current expectations, estimates, forecasts, and projections about the Company’s business, and management’s beliefs about future operations, results, and financial position. These statements are not guarantees of future performance and are subject to a number of risk factors, uncertainties, and assumptions. Actual events, performance, or results could differ materially from the anticipated events, performance, or results expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially from current expectations include, among other things, the availability and pricing of our principal raw materials and component parts, supply chain challenges causing project delays and field operations inefficiencies and disruptions, availability of labor at our manufacturing and distribution facilities or on our project sites, the loss of any key customers, adverse effects of inflation, our ability to sell assets that Gibraltar has determined to sell, other general economic conditions and conditions in the particular markets in which we operate, increases in spending due to laws and government incentives, such as the Infrastructure Investment and Jobs Act, changes in customer demand and capital spending, competitive factors and pricing pressures, our ability to develop and launch new products in a cost-effective manner, our ability to realize synergies from newly acquired businesses, disruptions to our IT systems, the impact of regulation (including the Department of Commerce’s solar panel anti-circumvention investigation and the Uyghur Forced Labor Prevention Act (UFLPA)), rebates, credits and incentives and variations in government spending and our ability to derive expected benefits from restructuring, productivity initiatives, liquidity enhancing actions, and other cost reduction actions. Before making any investment decisions regarding our company, we strongly advise you to read the section entitled “Risk Factors” in our most recent annual report on Form 10-K and Quarterly Report on Form 10-Q which can be accessed under the “SEC Filings” link of the “Investor Info” page of our website at www.Gibraltar1.com. The Company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable law or regulation.

Adjusted Financial Measures

To supplement Gibraltar’s consolidated financial statements presented on a GAAP basis, Gibraltar also presented certain adjusted financial measures in this news release and its quarterly conference call, including adjusted revenues, adjusted operating income and margin, adjusted net income, adjusted earnings per share (EPS), free cash flow and adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) each a non-GAAP financial measure. Adjusted revenue reflects the removal of revenue associated with our Processing business, which has been classified as held-for-sale. Adjusted net income, operating income and margin excludes special charges consisting of restructuring costs primarily associated with 80/20 simplification or lean initiatives, senior leadership transition costs, acquisition related costs and the operating losses generated by our processing business that has been classified as held-for-sale. These special charges are excluded since they may not be considered directly related to the Company’s ongoing business operations. The adjusted measures now exclude the results of the Processing business since it was classified as held for sale as of March 31, 2022. Our adjusted financial measures as of and for the three-month and twelve-month periods ending December 31, 2021 have been recast to reflect this additional adjustment as detailed in the appended reconciliation of adjusted financial measures. The results of the Processing business are considered non-recurring due to the Company’s commitment during the first quarter of 2022 to a plan to sell the Processing business. The aforementioned exclusions along with other adjustments to other income below operating profit are excluded from adjusted EPS. Adjusted EBITDA further excludes depreciation, amortization and stock compensation. In evaluating its business, the Company considers and uses these non-GAAP financial measures as supplemental measures of its operating performance. Free cash flow is operating cash flow less capital expenditures and the related margin is free cash flow divided by revenues. The Company believes that the presentation of results excluding these items provides meaningful supplemental data to investors that are indicative of the Company’s core operating results and facilitates comparison of operating results across reporting periods as well as comparison with other companies. Adjusted EBITDA and free cash flow are also useful measures of the Company’s ability to service debt and adjusted EBITDA is one of the measures used for determining the Company’s debt covenant compliance.

Adjustments to the most directly comparable financial measures presented on a GAAP basis are quantified in the reconciliation of adjusted financial measures excluding special charges provided in the supplemental financial schedules that accompany this news release. These adjusted measures should not be viewed as a substitute for the Company’s GAAP results and may be different than adjusted measures used by other companies and our presentation of non-GAAP financial measures should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.

Reconciliations of non-GAAP measures related to full-year 2023 guidance have not been provided due to the unreasonable efforts it would take to provide such reconciliations due to the high variability, complexity and uncertainty with respect to forecasting and quantifying certain amounts that are necessary for such reconciliations.