Atkore Inc. Announces Fourth Quarter 2021 Results

Fourth-Quarter Highlights

• Record quarterly net income in the fourth quarter 2021
• Net income per diluted share increased to $4.26 from $1.11; Adjusted net income per diluted share increased to $4.39 from $1.18
• Net income increased by $148.3 million to $202.6 million; Adjusted EBITDA increased by $194.7 million to $292.9 million

Fiscal 2021 Highlights

• Record full year net income
• Net income per diluted share increased to $12.19 from $3.10; Adjusted net income per diluted share increased to $12.98 from $3.78
• Net income increased by $435.6 million to $587.9 million; Adjusted EBITDA increased to $897.5 million from $326.6 million
• Ending cash balance of $576.3 million; net cash provided by operating activities of $572.9 million; Free Cash Flow of $508.4 million

Additional Highlights

• Awarded U.S. Patent #11,101,056 for new MC Glide^TM armored cable product
• The Board of Directors approved a new share repurchase authorization of $400 million over the next two years

Atkore Inc. (the “Company” or “Atkore”) (NYSE: ATKR) announced earnings for its fiscal 2021 full year and fourth quarter ended September 30, 2021 (“fourth quarter”).

“Atkore delivered outstanding earnings in the fourth quarter and for the full Fiscal Year 2021, driven by our leading position in PVC electrical conduit and solid volume recovery,” remarked Bill Waltz, Atkore President and Chief Executive Officer. “Our MC Glide^TM product, which received a U.S. patent in the fourth quarter, continues to be well-received by customers due to its ability to speed up construction times and reduce overall costs – two clear advantages in today’s environment. We remained focused in our execution of the Atkore Business System, which enabled us to generate approximately $573 million in cash from operations this year, strengthen our balance sheet, return $135 million in cash to stockholders via share repurchases and acquire three companies that will enhance and improve our position in the market for years to come.”

Waltz continued, “As we enter fiscal 2022, we continue to invest in our business to drive value with a focus across our three key conduits of growth: advancing new product innovations, such as MC Glide, improving cross-selling opportunities in our focused product categories and strategically engaging our M&A pipeline to strengthen our portfolio. Through these efforts and supported by the megatrends of electrification and digitization, we expect to generate solid cash flow from operating activities, and deploy over $1 billion in cash to drive value creation over the next couple of years. We are increasing our projections for capital expenditures in fiscal 2022 up to approximately $80 to $90 million, and we are pleased to announce a new share repurchase program of $400 million over the next two years. Across Atkore, we are working to create an even stronger business for the future for the benefit of our employees, customers, shareholders and communities.”

The Company reported triple digit percentage year-over-year improvements in net income, adjusted EBITDA, diluted EPS and adjusted EPS for its fourth quarter and full year fiscal 2021.

2021 Fourth Quarter Results

Net sales for the fourth quarter of 2021 increased to $923.7 million, an increase of 93.5% compared to $477.4 million for the prior-year period, primarily due to higher average selling prices of $391.3 million and higher sales volume of $24.8 million within both the Electrical and Safety & Infrastructure segments. Additionally, entities acquired during fiscal 2021, to include Queen City Plastics and FRE Composites Group, contributed to the increase in net sales by $27.8 million.

Gross profit increased by $210.2 million to $357.3 million for the fourth quarter of 2021, as compared to $147.1 million for the prior-year period. Gross margins increased from 30.8% in the prior year period to 38.7% in the fourth quarter fiscal 2021 due to higher average selling prices of $391.3 million, partially offset by higher input costs of steel, copper and PVC resin of $183.5 million.

Selling, general and administrative expenses increased $28.0 million or 51.1%, to $82.8 million for the fourth quarter of 2021, as compared to $54.8 million for the prior-year period. The increase was primarily driven by commissions of $9.7 million, variable compensation of $8.4 million, increased general spending on business improvement initiatives of $8.7 million, and the acquisition of Queen City Plastics and FRE Composites Group of $2.4 million partially offset by a gain on sale of assets of $3.8 million.

Net income increased $148.3 million to $202.6 million for the fourth quarter of 2021, as compared to $54.2 million for the prior-year period, due to higher operating income of $181.7 million. Adjusted net income increased $148.5 million to $205.1 million compared to $56.5 million for the prior-year period.

Adjusted EBITDA increased $194.7 million, or 198.3%, to $292.9 million for the fourth quarter of 2021, as compared to $98.2 million for the prior-year period. Net income margin increased from 11.4% in the prior-year period to 21.9% and Adjusted EBITDA Margin increased 1,110 basis points from 20.6% to 31.7%.

Net income per diluted share was $4.26 for the fourth quarter of 2021, an increase of $3.15 from the prior-year period. Adjusted net income per diluted share was $4.39 per share for the fourth quarter of 2021 compared to $1.18 for the prior-year period.

Segment Results

Electrical

Electrical net sales increased $346.9 million, or 98.9%, to $697.5 million for the fourth quarter of 2021, as compared to $350.6 million for the prior-year period. The increase in net sales is primarily attributed to increased average selling prices of $304.1 million which were mostly driven by the plastic pipe and conduit category, the metal electrical conduit and fittings product categories and increased net sales of $27.6 million from the acquisitions of Queen City Plastics and FRE Composites Group. Pricing for PVC products, as well as other parts of the business, are expected to return to more normal historical levels over time, but that time is uncertain. Additionally, sales volume increased $11.3 million driven by increased volumes across all product categories.

Adjusted EBITDA increased $192.0 million, or 208.9%, to $283.9 million for the fourth quarter of 2021, as compared to $91.9 million for the prior-year period, and Adjusted EBITDA Margin increased from 26.2% to 40.7%. The increase in Adjusted EBITDA and Adjusted EBITDA margins was largely due to higher average selling prices in relation to changes in input costs, operational efficiencies and contributions from the acquisitions of Queen City Plastics and FRE Composites Group.

Safety & Infrastructure

Safety & Infrastructure net sales increased $99.9 million, or 78.3%, to $227.4 million for the fourth quarter of 2021, as compared to $127.5 million for the prior-year period. The increase is attributed to increased average selling prices of $87.1 million driven by higher input costs of steel, and by higher volumes of $13.5 million primarily driven by increases across all product categories.

Adjusted EBITDA increased $12.0 million, or 70.1%, to $29.0 million for the fourth quarter 2021, as compared to $17.1 million for the prior-year period. Adjusted EBITDA Margin decreased to 12.8% from 13.4%. The Adjusted EBITDA increase was primarily driven by the increase in average selling prices, while lag in pricing created downward pressure on EBITDA margins.

Fiscal 2021 Full-Year Results

Net sales for fiscal 2021 increased $1,162.6 million to $2,928.0 million, an increase of 65.9%, compared to $1,765.4 million for fiscal 2020. The increase in net sales is primarily attributed to increased average selling prices of $977.9 million which were mostly driven by the plastic pipe and conduit category within the Electrical segment and increased net sales of $79.1 million due to the acquisitions of Queen City Plastics and FRE Composites Group. Pricing for PVC products, as well as other parts of the business, are expected to return to more normal historical levels over time, but that time is uncertain. The increase in net sales was also driven by an increase in sales volume of $88.4 million across the majority of product categories within both the Electrical and the Safety & Infrastructure segments.

Gross profit for fiscal 2021 increased $634.3 million to $1,125.6 million, an increase of 129.1%, compared to $491.3 million for fiscal 2020. Gross margin increased to 38.4% in fiscal 2021 compared to 27.8% in fiscal 2020 due to higher average selling prices of $977.9 million, partially offset by higher input costs of steel, copper and PVC resin of $386.5 million.

Selling, general and administrative expenses increased $73.5 million, or 33.5%, to $293.0 million for fiscal 2021 compared to $219.5 million for fiscal 2020. The increase was primarily due to higher variable compensation of $24.1 million, higher sales commission expense of $22.4 million, increased general spending on business improvement initiatives of $10.8 million, the acquisitions of Queen City Plastics and the FRE Composites Group of $5.4 million, and higher stock compensation expense of $3.5 million partially offset by productivity efficiencies of $4.1 million.

Net income increased $435.6 million to $587.9 million for fiscal 2021, as compared to $152.3 million for fiscal 2020. Adjusted net income increased $432.6 million to $614.0 million for fiscal 2021 compared to $181.5 million for fiscal 2020. The increase in both net income and adjusted net income was primarily driven by higher operating income of $559.4 million.

Adjusted EBITDA increased $570.9 million or 174.8%, to $897.5 million for fiscal 2021, as compared to $326.6 million for fiscal 2020. The increase was primarily due higher operating income.

Net income per diluted share on a GAAP basis was $12.19 for fiscal 2021, an increase of $9.09 from fiscal 2020. Adjusted net income per diluted share was $12.98 for fiscal 2021 compared to $3.78 for fiscal 2020.

Liquidity & Capital Resources

During fiscal 2021, operating activities provided $572.9 million of cash, compared to $248.8 million during fiscal year 2020. Free cash flow increased to $508.4 million for fiscal 2021 from $215.0 million in fiscal year 2020. The increase in cash provided by operating activities and free cash flow was primarily due to operating income.

During the year ended September 30, 2021, the Company refinanced its previous debt under the First Lien Term Loan Facility with new debt under the $400 million Senior Notes and $400 million New Senior Secured Term Loan Facility. In the fourth quarter of fiscal 2021, the Company made a voluntary prepayment of $26 million on the New Senior Secured Term Loan Facility. The principal repayment in the fourth quarter, combined with the lower balances after the refinancing transactions and the increases in cash on hand and Adjusted EBITDA resulted in a reduction in the net debt leverage ratio to 0.2 as of September 30, 2021 from 1.6 as of September 30, 2020.

Fiscal 2022 First Quarter Outlook¹

The Company expects the first quarter of fiscal 2022 Adjusted EBITDA to be in the range of $230 - $250 million and Adjusted net income per diluted share to be in the range of $3.30 - $3.60.

Full Year 2022 Outlook¹

The Company expects fiscal year 2022 Adjusted EBITDA to be in the range of $650-$700 million and Adjusted net income per diluted share to be in the range of $9.20 - $10.00.

The Company notes that the outlook provided may vary due to changes in assumptions or market conditions and other factors described under “Forward-Looking Statements.”

Conference Call Information

Atkore management will host a conference call today, November 18, 2021, at 8 a.m. Eastern time, to discuss the Company’s financial results. The conference call may be accessed by dialing (833) 968-2233 (domestic) or (825) 312-2056 (international). The call will be available for replay until December 9, 2021. The replay can be accessed by dialing (800) 585-8367, or for international callers, (416) 621-4642. The passcode for the live call and the replay is 6898317.

Interested investors and other parties can also listen to a webcast of the live conference call by logging onto the Investor Relations section of the Company's website at http://investors.atkore.com. The online replay will be available on the same website immediately following the call.

To learn more about the Company please visit the company's website at http://investors.atkore.com.

About Atkore Inc.

Atkore is forging a future where our employees, customers, suppliers, shareholders and communities are building better together – a future focused on serving the customer and powering and protecting the world. With a network of manufacturing and distribution facilities worldwide, Atkore is a leading provider of electrical, safety and infrastructure solutions. To learn more, please visit www.atkore.com.

Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of the Federal Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but are not limited to, statements relating to financial outlook. Some of the forward-looking statements can be identified by the use of forward-looking terms such as “believes,” “expects,” “may,” “will,” “shall,” “should,” “would,” “could,” “seeks,” “aims,” “projects,” “is optimistic,” “intends,” “plans,” “estimates,” “anticipates” or other comparable terms. Forward-looking statements include, without limitation, all matters that are not historical facts. Forward-looking statements are subject to known and unknown risks and uncertainties, many of which may be beyond our control. We caution you that forward-looking statements are not guarantees of future performance or outcomes and that actual performance and outcomes, including, without limitation, our actual results of operations, financial condition and liquidity, and the development of the market in which we operate, may differ materially from those made in or suggested by the forward-looking statements contained in this press release. In addition, even if our results of operations, financial condition and cash flows, and the development of the market in which we operate, are consistent with the forward-looking statements contained in this press release, those results or developments may not be indicative of results or developments in subsequent periods.

A number of important factors, including, without limitation, the risks and uncertainties discussed or referenced under the caption “Risk Factors” in our Annual Report on Form 10-K, filed with the U.S. Securities and Exchange Commission (“SEC”) on November 18, 2021 could cause actual results and outcomes to differ materially from those reflected in the forward-looking statements. Additional factors that could cause actual results and outcomes to differ from those reflected in forward-looking statements include, without limitation: declines in, and uncertainty regarding, the general business and economic conditions in the United States and international markets in which we operate; weakness or another downturn in the United States non-residential construction industry; widespread outbreak of diseases, such as the novel coronavirus (COVID-19) pandemic; changes in prices of raw materials; pricing pressure, reduced profitability, or loss of market share due to intense competition; availability and cost of third-party freight carriers and energy; high levels of imports of products similar to those manufactured by us; changes in federal, state, local and international governmental regulations and trade policies; adverse weather conditions; increased costs relating to future capital and operating expenditures to maintain compliance with environmental, health and safety laws; reduced spending by, deterioration in the financial condition of, or other adverse developments, including inability or unwillingness to pay our invoices on time, with respect to one or more of our top customers; increases in our working capital needs, which are substantial and fluctuate based on economic activity and the market prices for our main raw materials, including as a result of failure to collect, or delays in the collection of, cash from the sale of manufactured products; work stoppage or other interruptions of production at our facilities as a result of disputes under existing collective bargaining agreements with labor unions or in connection with negotiations of new collective bargaining agreements, as a result of supplier financial distress, or for other reasons; changes in our financial obligations relating to pension plans that we maintain in the United States; reduced production or distribution capacity due to interruptions in the operations of our facilities or those of our key suppliers; loss of a substantial number of our third-party agents or distributors or a dramatic deviation from the amount of sales they generate; security threats, attacks, or other disruptions to our information systems, or failure to comply with complex network security, data privacy and other legal obligations or the failure to protect sensitive information; possible impairment of goodwill or other long-lived assets as a result of future triggering events, such as declines in our cash flow projections or customer demand and changes in our business and valuation assumptions; safety and labor risks associated with the manufacture and in the testing of our products; product liability, construction defect and warranty claims and litigation relating to our various products, as well as government inquiries and investigations, and consumer, employment, tort and other legal proceedings; our ability to protect our intellectual property and other material proprietary rights; risks inherent in doing business internationally; changes in foreign laws and legal systems, including as a result of Brexit; our inability to introduce new products effectively or implement our innovation strategies; our inability to continue importing raw materials, component parts and/or finished goods; the incurrence of liabilities and the issuance of additional debt or equity in connection with acquisitions, joint ventures or divestitures and the failure of indemnification provisions in our acquisition agreements to fully protect us from unexpected liabilities; failure to manage acquisitions successfully, including identifying, evaluating, and valuing acquisition targets and integrating acquired companies, businesses or assets; the incurrence of additional expenses, increase in complexity of our supply chain and potential damage to our reputation with customers resulting from regulations related to "conflict minerals"; disruptions or impediments to the receipt of sufficient raw materials resulting from various anti-terrorism security measures; restrictions contained in our debt agreements; failure to generate cash sufficient to pay the principal of, interest on, or other amounts due on our debt; challenges attracting and retaining key personnel or high-quality employees; future changes to tax legislation; failure to generate sufficient cash flow from operations or to raise sufficient funds in the capital markets to satisfy existing obligations and support the development of our business; and other factors described from time to time in documents that we file with the SEC. The Company assumes no obligation to update the information contained herein, which speaks only as of the date hereof.

Non-GAAP Financial Information

This press release includes certain financial information, not prepared in accordance with GAAP. Because not all companies calculate non-GAAP financial information identically (or at all), the presentations herein may not be comparable to other similarly titled measures used by other companies. Further, these measures should not be considered substitutes for the performance measures derived in accordance with GAAP. See non-GAAP reconciliations below in this press release for a reconciliation of these measures to the most directly comparable GAAP financial measures.

Adjusted EBITDA and Adjusted EBITDA Margin

We use Adjusted EBITDA and Adjusted EBITDA Margin in evaluating the performance of our business, in the preparation of our annual operating budgets and as indicators of business performance and profitability. We believe Adjusted EBITDA and Adjusted EBITDA Margin allow us to readily view operating trends, perform analytical comparisons and identify strategies to improve operating performance.

We define Adjusted EBITDA as net income (loss), adjusted to exclude income tax expense, depreciation and amortization, interest expense, net, loss on extinguishment of debt, restructuring charges, stock-based compensation, certain legal matters, transaction costs, gain on purchase of a business, gain on sale of a business and other items, such as inventory reserves and adjustments, loss on disposal of property, plant and equipment, insurance recovery related to damages of property, plant and equipment, release of indemnified uncertain tax positions, and realized or unrealized gain (loss) on foreign currency impacts of intercompany loans and related forward currency derivatives. We define Adjusted EBITDA Margin as Adjusted EBITDA as a percentage of Net sales.

We believe Adjusted EBITDA and Adjusted EBITDA Margin, when presented in conjunction with comparable GAAP measures, are useful for investors because management uses Adjusted EBITDA and Adjusted EBITDA Margin in evaluating the performance of our business.

Adjusted Net Income and Adjusted Net Income per Share

We use Adjusted net income and Adjusted net income per share in evaluating the performance of our business and profitability. Management believes that these measures provide useful information to investors by offering additional ways of viewing the Company's results that, when reconciled to the corresponding GAAP measure provide an indication of performance and profitability excluding the impact of unusual and or non-cash items. We define Adjusted net income as net income before loss on extinguishment of debt, stock-based compensation, intangible asset amortization, gain on purchase of a business, certain legal matters and other items, and the income tax expense or benefit on the foregoing adjustments that are subject to income tax. We define Adjusted net income per share as basic and diluted net income per share excluding the per share impact of gain (loss) on extinguishment of debt, stock-based compensation, intangible asset amortization, gain on sale of a business, certain legal matters and other items, and the income tax expense or benefit on the foregoing adjustments that are subject to income tax.

Leverage Ratio - Net debt/Adjusted EBITDA

We define leverage ratio as the ratio of net debt (total debt less cash and cash equivalents) to Adjusted EBITDA on a trailing twelve-month basis. We believe the leverage ratio is useful to investors as an alternative liquidity measure.

Free Cash Flow

We define Free Cash Flow as net cash provided by operating activities less capital expenditures. We believe that Free Cash Flow provides meaningful information regarding the Company’s liquidity.

ATKORE INC.

HISTORICAL SEGMENT INFORMATION

The tables below present Net sales for fiscal years ended 2020, 2019 and 2018 and the quarterly periods of fiscal 2020:

The tables below present Adjusted EBITDA for fiscal years ended 2020, 2019 and 2018 and the quarterly periods of fiscal 2020:

¹ Reconciliations of the forward-looking full-year and fiscal first quarter 2022 outlook for Adjusted EBITDA and Adjusted net income per diluted share are not being provided as the Company does not currently have sufficient data to accurately estimate the variables and individual adjustments for such reconciliations.

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