All right, we're gonna get started again. Welcome to another afternoon session. We are really excited to have Atkore with us today. We've got Bill Waltz, who is the President and CEO. Bill, I think you joined Atkore in 2013? And then we've got David Johnson, who joined as CFO and VP and Chief Accounting officer. You've got a lot of titles, so I-
Yeah, yeah.
You joined Atkore in August 2018. So Bill, maybe I'll just start off with, most investors, you know, know the company by now, but maybe you could characterize again why the company has such a high win rate, you know, and such a high share in its primary markets, and then explain why that, why Atkore was achieving mid-teens EBITDA margin before the pandemic, now seems to be achieving sustainable mid-20% EBITDA margins post-pandemic.
Yeah. So Andy, I'll probably put... And by the way, great conference here so far.
Thank you.
But, I'll probably combine both to go, why the move from mid-teens to mid-20s on margin? And then there's probably three or four things that kind of tie in. The first one is, over time, either because of the success of us or other companies or acquisitions, the industry has gotten more consolidated. Great competitors out there, but if you look back, like a decade ago, as you just referenced with me in 2013, there was at least, I'll say, around a dozen PVC competitors. And over time, whether we have bought those companies up and rolled up the industry, or our other competitors, like in steel conduit, that has bought people, we are now down to, in most of the major markets we serve, tw to three different, you know, people, companies. We're all competing really now, which I think is effectively on value.
How do you bring better, more innovative products around delivery, service, relationships? But I'm sure that has helped both our margin and our competitors' margin. So that's one thing. Two, almost on the M&A track, is in addition to industries where, you know, it's down to two or three people, is, if you look back over our acquisitions over the last, let's say, 5-7 years and go, "Hey, we bought companies that provide stainless steel conduit and fiberglass conduit," where those typically are more specialty products, but also with a higher margin profile. And by the way, I'm just using fiberglass as an example. There's really two of us that have, let's say, 90%+ , you know, market there. So both industry consolidation has helped increase margin, and then our acquisitions have helped increase margin. Third thing there, I would say, is just new product development.
We're doing a lot of innovative things. So a lot of people look and go, you know, I'm not going to spin that it's not a mature industry. We have brands that have been around for over 100 years.
Mm-hmm.
On the same hand, you look at just one of those, our cable division that has been around for over 100 years, we've recently, in the last couple of years, come out with new products that deliver the same electrical needs, but are just so much smoother to pull through the metal, call it rafters, strut, two-by-fours, that make it a lot more efficient for contractors, and that's the huge thing. I'm sure you'll get to supply-demand things. There's a shortage of labor. That is the biggest thing governing the industry. So anything you can do to service that market better, anything you do more with more innovative products, and we're not talking huge differences, but, you know, 300-400 basis points, as everybody could appreciate, is a huge difference.
And then the other thing, back to service, and I have to imagine future questions from you, is around just the services. We add regional service centers, and this is truly an untapped opportunity for the future, but we're already seeing, I'm going to call it the Amazon effect, that we can provide in that area. And again, that's providing... You know, we did a study last year for the regional service centers, in some cases, 700 basis points of incremental price for that, call it Amazon effect, call it, you know, FedEx overnight delivery versus two-day delivery. So you add all those things up, and that gets you from, you know, high teens to, you know, mid-twenties.
Mm-hmm. And then maybe a follow-up to that is, could you talk a little bit more about your One Order, One Delivery, One Invoice mantra? Why does it differentiate you from competitors? You obviously have some relatively significant electrical competitors. Why can't they replicate sort of what you do?
Yeah, so two great questions in there. And I do think if there is one thing that's misunderstood with Atkore from an investor perspective, and I'm going to say more future opportunity, it is that One Order, One Delivery, One Invoice. If you think about our products, and I'm just going to randomly pick something, take a circuit breaker. You know, for whatever value of delivering a circuit breaker, it probably could ship in a UPS box to a distributor. Here, our products, like PVC conduit, HDPE, steel conduit, Unistrut metal framing, these are big, bulky things that are truckload products.
And then you look and say, "Well, that's a distributor's value in life." And it's like, well, it is, but two things: for a distributor to effectively service contractors in the area, they want eventually, it may be a hub-and-spoke system, but they want distribution close by, 10, 15 miles from, you know, job sites that a guy can stop by and just pick up or so forth and pick up product. And our products are so big and bulky that these small distribution locations don't have the space, or we're really space-constrained to bring a truckload of steel conduit in, a truckload of PVC. Unistrut a truckload of metal framing. So where we can combine all those products together on one truckload, it reduces their inventory, reduces the freight, reduces the space they need for those products.
On top of that, even for the large distributors, and I won't mention specific names, but you can imagine with the large three, four, or five, they have much more hub-and-spoke type of system, but even, and they've invested a lot in the automation, but that automation doesn't work well for our products. I know at least with several of those large customers of ours, they've said, "Hey, this is perfect because we can directly, from our service centers, feed their called spokes and not have to extra material handling." So the ability for us to bring in, and then future value, I kind of alluded to, efficiently get an order in.
This industry is so far away, the electrical industry, from what any of the shareholders have on the ability to have. I call it the Amazon effect, but you place an order electronically, and it's delivered in a day or two. We get A grades all the time when they stratify their different competitors or my competitors, because we'll deliver in 10 days. It's mind-boggling. So there's a huge untapped opportunity. And then for why not competitors replicating, the difference with Atkore and our competitors, all great competitors, but is we are built around supplying the electrical industry. First of all, complements competitors, but if you think of somebody like just randomly, Nucor, great company, vertically integrated, but they're vertically integrated in: How do I make I-beams? How do I make metal conduit?
I just can't imagine the general manager of Nucor going to the board of directors and going, "Hey, I had this opportunity to get into plastics.
Mm.
You can take that across other ones. So go to that copper company that's thinking wire, utility cables, is not thinking about how he gets into PVC plastic and just go through. So it's not even the mindset, versus they're thinking: How do I do adjacencies? For the PVC resin company, it may be some other type of PVC pipe or application, window frames, whatever. It's not about how does a PVC resin company get into making copper wire.
Got it. So, Bill, maybe just stepping back to about your overall markets. You know, as you know, leading indicators, Dodge Momentum Index, ABI, you know, have been relatively muted, yet you've spoken about resilience, you know, primary in most non-res markets. Could you elaborate on how much visibility you really have, and where does it come from? You know, I know you have such a short lead time business, so, you know, has visibility gotten better or worse over the last few months as interest rates have fluctuated?
Yeah. So a couple things I'll first do. For us, specifically, if you actually looked at our backlog, to your point, we have on or two weeks, and we aspire to get down to one or two days because of turnover. So it's not like other corporations that have nine months of backlog and can, you know, should be able to predict pretty well their next fiscal year by looking at their backlog. But what I can say that we see, that every one of our shareholders can see, is go out to Associated Builders and Contractors, ABC, and go, "How many months of backlog do my and our customer's customer, the contractors, have?" And that's been pretty steady. I'm gonna say around 8.5 months of backlog.
It may be 83, it may be 89, but it doesn't vary more than one or two, you know, points in a month. Second thing to look at, and more so... I mean, all great indicators. We probably look at a dozen plus of, you know, Architecture Billings Index, Dodge Momentum Index, I mean, the fed rate, all the rest of this stuff, you know, new housing starts. But what is the backlog of contractors? Second thing, are contractors hiring or not hiring? And right now, and these are rough numbers here, there's, contractors have around 300,000 open positions, that, and they aspire, the different forecasters within the ABC have said they need over 500,000 jobs. So at the end of the day, we can talk about whatever. I'm just randomly picking. Well, did this EV battery factory increase sales or not increase?
The jobs are there. So for us, where I have confidence as much as any company can, in our future is there is a massive backlog of work. The biggest governor on how fast we go are blue-collar workers, and then from there, which is a positive thing, is some of our other public electrical companies, they don't compete directly with us, but the Schneiders, the Eatons, the ABBs, that are making switchgear, those companies do have record backlogs. But two things: One is they work through and add more capacity onshore to the States, and they speed up and catch up, which I'm sure they're motivated to do. That allows us to even serve the industry faster. So we're pretty as much as we can be, Andy, we're comfortable for the future. That's the information.
At least I'll compliment David and our presidents and so forth. You know, we've hit earnings, and we've guided through pricing a lot of things three years with a lot more transparency, I think, the most.
Totally. Just related to that, Bill, like maybe just focusing on fiscal secular megatrends, you get asked the question a lot, but maybe where do you think we are in terms of the fiscal bills? You know, whether it's IIJA, CHIPS Act, IRA, you know, on your business, and then separately, in terms of mega projects in general. You know, we've seen some major EV projects, maybe semi-con move to the right a little bit. You know, how, how do you think about mega projects' impact on your business?
Yeah. So I'm going to hit a couple points, and you, David, add where I missed or whatever. It's like, in general, mega projects are not, to your point, an EV battery. I'd go back to the answer to the last one. There's still eight... And I'm saying 8.5. Somebody can look and say it's 8.3 or 8.7, but there's still 8.5 months of backlog out there. That's the key thing. From there, I think with a lot of... Well, let me bifurcate this. For the Inflation Reduction Act, that has tying around to solar torque tubes, that has hit, and I and the industry cannot keep up.
Mm.
And that's just because two things: One, within the solar industry, where we provide the torque tubes that go on the back of solar arrays, it used to be about half made in the U.S., half made in China. Well, all of a sudden, with our government and the fiscal stimulus with tax credits, all that makes economic sense no matter what to make in the States. So literally overnight, the market is doubled, and like I said, for us, as we're ramping up on plan, the customers would want to ask what we can supply.... So that's definitely out there, and we're just trying to catch up, quite frankly. On the other side, some of this stuff, there's an act with fiber optic to the home called the BEAD Act, $65 billion, give or take.
That's been slower than the government and any other person has forecasted. So, we think at the really start of our next fiscal year, you know, the end of summer, September, October, it's not gonna be a light switch thing, but that should ramp up. That, by the way, for our forecast this year, gives us one of numerous factors, confidence into next year. And then the other thing I'd say around global mega projects in general, is because of our value add, our relationships, and stuff like that, at least some of either I'll call it the Magnificent Seven or other ones that may not hit that list, but are still in the data center and chip manufacturing, have come to us and said, "You've done a really good job with your products and your kitting.
How do we make sure you are our vendor of choice?" So we're respecting the channel, in other words, we sell to distributors that have general contractors, but if we do happen to have a relationship with that multi-billion-plus corporation, you know, that we're actually locking in with them, and then literally feeding it through the channel, we pick the distributor, and we work with the general contractor. So I think we're going to see outsized growth for us going forward, but again, that's something just starting that will be excitement for FY 2025 and FY 2026 and beyond.
Great. Now-
Just one point there, too. Just remember, all that is still against the pressure of labor, though. You know, so even if the money starts flowing and the jobs are there, we still have this issue of the 500 or 300,000 jobs, whichever way you wanna look at it.
Got it. No, it's helpful, David. So, you know, for better or worse, it seems like occasionally your stock is tied to some large U.S. electrical distributors, and so, like, how, maybe you could tell us a little bit more about what you think they're actually doing with their inventory?
Yeah. I'll try.
No, but I would just say, like, do they wanna hold more safety stock? Are they holding less because costs are high? Like, you know, how do you think about... Because, you know, we saw WESCO, and then all of a sudden-
Yeah
... your stock goes down. Like, you know, what, what should we think about that?
Yeah, I think in general, and it's going to vary by each one making their own decision, it's about consistency. So I don't think there's this massive overstock, and I'll explain, nor is there a massive under and ramp up, but if anything, I lean they're slightly under stocked. But I think even during COVID, they de-stocked, but they still tried to keep, if they had six or eight weeks, they're looking out a forecast and saying, "Hey, we think it's now springtime, and to keep eight weeks of safety stock or six weeks of safety stock ramp up." So I don't really think there's a massive trend. We did, back to one of the things I'm proud of us, David, our leaders, our IR team, is the transparency.
We did call out where we had a great Q1 with 13% growth, and I'm thinking it's 100-200 basis points. So one or two of those large customers bought an extra week. You know, when you think of one week and 13 is like 7%-8%, but just one or two to go, did that drive an extra 200 basis points of growth in Q1 that really would've been in January? But those customers were very transparent with us, going: "We're buying up 'cause we have to hit this number to get our rebate," and they just bought slightly less in January. But overall, holistically, I don't think anything's changing substantially.
I think for us, Andy, we're a little less acceptable to the-
Oh
... overstocking and what have you, just because of the size of our products.
Yeah.
So a lot of people can't physically bring our stuff in. And then the other thing that's good about our products is they're used for all end markets. So unlike some, where they might bring some in for resi and then resi soft and they're stuck with it, for us, our products are used across all end markets. So for them, it's a little bit easier of an inventory situation.
But you don't think we should get too crazy, like, you know, again, I remember when WESCO, but I don't want to talk-
Yeah
... too much about one customer, but your stock was down 5%. Like, I know.
Yeah, we wish it wasn't.
Yeah, no. So but to David's point, also, I wanted—everything David said is accurate. We are giving the perspective of Atkore, which is our type of products. I have no idea what's happening with some circuit breaker-
Yeah
... up or down. But no, you just can't be. This is bread-and-butter stuff. Like, one thing back to almost the price discussion that we've done really well with is the fact that our products are there on time. The last thing. Our whole products, by the way, add up 2%-3% of a cost ability.
Mm-hmm.
A contractor, and if you accept our paradigm, axiom, that labor is the biggest constraint of this industry, the last thing a contractor, rightfully so, is going to accept is, well, all of a sudden we're supposed to be there on Tuesday, and we show up on Thursday?
Right.
And they have a work crew down because somebody either wanted to save a percent or a distributor wanted to work their turns and didn't have the right stock? I mean, that's like a deal killer right there. So at the end of the day, we, over time, may be up a week and overall stock in the channel down a week, but it's, it just can't be the fluctuation either way.
Yeah. That's helpful, Bill. So, this is probably for you or David, like-
Yeah
... you've had such precision in your pricing, sort of like, you know, when you talk about the giveback of $5.85, right? Like, maybe it's been a little bit longer than expected to give back, but it still seems like it's trending on those numbers. So how do you, how do you get so precise, you know?
You want to do it, David? I'll let you, but either one of us can answer all these questions.
I'd love to say-
Let's just start with that. How do you get so-
... super intuitive, something. Now, what we did, Andy, is because we knew investors would want to know when we had the $1.3 billion, we knew that we had a situation where we had more pricing than we thought would stick long term. And so we spent quite a bit of time going product line by product line, deciding, "Hey, we think this is gonna end up at a certain EBITDA percentage over time." And we based that on the fact that we've had other product lines in our past... that have gone from, let's say, modest EBITDA margins to, you know, 25%-30% because of, you know, the consolidation in the market or just how we service the market and what have you.
So we went through all that, and that's when we came up with, we think that $585 million of the $985 million was temporary.
Mm-hmm.
Now, we always said that, you know, the longer the better it takes to get there, 'cause we're generating more cash, and I think we've deployed cash pretty rationally. But it's also painful going through that, you know, quarter-over-quarter over time. And last year we gave up $250 million, and we guided at $250 million this year. So a couple of years in, we'd be at, like, $500 million-$585 million. Q1 was slightly better than what we thought, and I think the most important thing is sequentially our pricing is firming.
Mm.
So yes, year over year, you still have this, where you're comparing against pretty robust quarters. But sequentially, you know, we're starting to firm. So yeah, I think generally speaking, we're, we're in the ballpark of what our original expectations were.
Yeah.
If I could add, now again, David answered your question-
Yeah
... and to compliment him and our presidents and GMs on the precision, and as David mentioned, some luck, but pretty great job. The other thing to make sure of is, we do have good competitors. In other words-
Mm
... even within our highest margin, our competitors are out leading price increases. I personally, maybe I'm biased, think we lead more, as the industry leader, but we're not the only ones. Or with some of those products, like David just mentioned, one that went from, let's say, over 10 years, from zero to above 25%, right now, I'll call it the portfolio effect, but, like, we are holding and/or increasing price in that product line as the underlying commodity is dropping. So my point is, even if we did have some product going, "Oh, we didn't expect a competitor to drop price, and we had to match," there's enough other products here that are year-over-year continuing to increase in price. So we're as comfortable as anybody can be with two weeks backlog.
Yeah, yeah.
To your point, we've done pretty damn well.
Yeah
... over a multi-year period.
A fairly strong demand market, you know, above that would certainly help, so.
Right, and would you say price versus cost has been kind of what you thought or better?
Yeah, that's exactly-
Exactly what we're talking about.
Yeah.
Exactly.
Yeah, and then, like, confidence level seems like so $250 this year, give or take, is still right, $90 next year is still, give or take? Like-
Well, we haven't said anything for next year yet. All we said is we're $500 million-$585 million, we'll see.
Yeah.
I think we could have some that goes into FY 2025, but we haven't really determined that.
Okay.
Other than, as you know, and hopefully our investors, that we pretty much, as much as anyone can, put the line in the sand of the $18+ EPS.
Yeah.
So.
We'll get to that.
We'll get there, sorry.
So, I want to open it to the audience in one second, but, like, maybe just when you guided at the beginning of 2024, right, you said EBITDA margin would normalize in the range of 25%, you know, give or take 150-200 basis points. It's still a relatively big range, you know-
Yeah
... that thing. So could you give any more color on whether the high or low end is more likely, you know, or maybe the variables to consider when we're thinking about it?
Right.
Yeah, you want-
One of the reasons why we give a little bit more of a range on percentage, Andy, is we still do have an effect of, are commodities higher or lower? 'Cause there is still a little bit of a... You know, if steel's at $1,000, you're making $200 on that, you have 20%, versus if it's $600, you're making $200 on that-
Yeah
... your percentage is much higher.
Yeah.
We'll tend to have a little bit higher, I think, range of percentages because of that commodity impact.
Yeah, got it. Okay, that's helpful. Any questions from the audience? Anybody want to ask a question? The line is blinding me, but I don't-
I know, I don't think anybody-
Holy cow!
I think there's people out there.
So, so-
Spot
... let me go just talk about your guidance a little bit more this year. So, you know, one of the keys to the guidance is a pickup in volumes in electrical, and you did see that, as you talked about in Q1. I know you mentioned, you know, a couple of distributors took advantage of the, the program, but even, re- rebate program-
Yeah
... but even excluding them, there did seem to be a pickup. So what is changing in core PVC markets that's allowing you to predict? You know, I think you've got probably embedded high single-digit growth in PVC-
Mm
... for 2024.
I think, yeah, I mean-
Yeah
... PVC was above that in Q1, so it was really pretty strong. Now, I will say that we are comping off of a destock of last year, and had a little bit of that into Q1 of last year. But I think just generally speaking, that these projects that we've seen out there for quite a while are starting to let loose a little bit. And then, Andy, I think, you know, during, I would say, a normal year, which we haven't had one for a while, the winter months are usually slow, right? And then we're actually going full out in production, getting ready for the spring building season-
Mm-hmm
... and the summer building season. I think we're starting to see that more of a normal trend come back to the market.
Yeah, finally after years of good or bad, it's been great profitable years, but I think we're back to normal where-
Well, let's speak about normal.
Yeah.
So you did mention weather-
Yeah
... you know, in starting fiscal Q2 in January, which, yeah, I don't think you've really-
No
... mentioned weather before. So I have to ask you, was it only weather that started you off a bit slowly? Anything else that, you know, hit the business? And then, have you seen some improvement in operations as the weather seemingly has been a little more benign?
Yeah, I think, again, David can add, but, it was... And you're right, I can almost swear we've never-
I don't think you have.
...mentioned weather. Yeah, and I just don't like after the quarter-
That's the first reason that we were.
Yeah, I don't like the afterwards, "Let me explain," or like, "Oh, well, you know, it was Chinese New Year," like we didn't see that coming. So for us, two things: One, we said it before the, at the beginning of the quarter-
You did
... but there was weather.
You didn't blame it after.
Yeah.
That's-
And we-
A pretty key point, yeah.
... key point, and there really was. I don't want to give too much, where we have great relationship with the customers and which one, but we, I mentioned in the public earnings call, where I was just talking to one customer alone that had over 50 distributor locations shut down for two or more days. And it's not really about the distributor, but the end contractor. And you got to believe, again, to that axiom, the biggest thing driving this market is: Do you have enough workers out there? So it's not like I remember one shareholder afterwards, like, "Well, you'll make it up." It's like, no, those two days, three days of work are gone.... you know, you just can't when it's so tight on labor.
So I think that truly was- and then again, these are rough, unscientific numbers, but there probably is 200 basis points, you know, 300, I don't know, of that 13%, that w- if they-- a couple of our key customers didn't buy up a little bit-
Yeah
... would it have been 10% or 11%? And would our guidance around mid-single digits for this quarter be 700 basis points? Don't, don't false precision here, guys and gals, but been 400 basis points. So, and then to your thing, without us getting in the habit of reconfirming guidance, I just don't want to go there for future.
Yeah, yeah.
But no, we're comfortable. It scares me when I say this, but David and I, for five-plus years, have hit every earnings guide we've given, and I don't think this is a quarter that we're going to change that.
Look, I think it's a great follow-up to ask you about 2024 in general, 'cause I got some questions about how is the bid back-end loaded, you know, $100 million increase in adjusted EBITDA at the, I think, in the second half, versus the first half.
Yeah.
You know, maybe talk a little-
You could, yeah-
This is, I joke with... I was about to say, this is CEO math. In other words, it's directional.
Help us through the bridge.
Yeah, let's do the bridge.
Please don't write it all down.
Yeah. But here, to what David said earlier, typically, and I hope this makes sense for everybody, the summer months for construction are 10% higher. You can look back for Atkore, a public company now, whatever, it's been eight, nine years or something, that it's always been that way. So you take 2 10, and I can get, you know, like, for the first two quarters-
Yep
... you add 10%, you're at $230, and then we need to get closer to $250, and I think that's going to be Q3 and then Q4, a little bit of step up. So for any buy side, sell side, don't have that reversed. And to go, all we're bridging is $230-$245, and everything either we talked about or future questions ago, we have this major opportunity with solar that customers, we just can't service it quick enough. And I think in our previous bridge, you can help me out, but, like, we had a $7 million cost in the last quarter only because... and expected, we forecasted this, but you're ramping up. You have one shift where instead of three shifts, you have double the employees. We're bringing in people for the second shift, shadowing first shift employees.
You know, as we get that volume going up with that, as we get we're massive investments for - we're bringing up two regional service centers that I really think will be a huge contributor for FY 2025 and FY 2026, that Amazon effect. Having, you know... but right now, it's two empty places. We just got the building permit to start putting stock in, and then, you know, the thing I think will be more in twenty s-
Right
... FY 2025, but it's not binary returns on, it's the whole fiber or the, or HDPE, but the whole fiber optic lines and stuff like that. So with our initiatives hitting, with just the summer seasonality, it's not that far of a putt. It, not putt at all in my mind, but we'll see.
Okay, no, that's helpful. Just regarding Hobart, you know, the solar torque tube facility, like, again, it's not—how do I say this? It's not really like you guys to—
Yeah
... you know, underestimate costs, let's just say, or-
Yeah
... you know? And so like, how do I know that you guys have your sort of arms around it now, you know?
Can I-
Yeah.
Well, one, I think maybe a little bit of a false question, Andy, is you said we, we did know about that cost.
Yeah.
We put it in our guide, and we beat the number, right?
Yeah.
I think we're just being more transparent to make sure people understood, you know, what's in the number. You know, it's a little bit more one-time oriented than ongoing.
Mm-hmm.
It wasn't anything that we didn't anticipate when we gave it.
Okay, or let me rephrase, and I'll take ownership. In Q4, in November, where we thought over the summer we have 400 or 500 basis points of growth, we had 300.
Yeah.
I at least was too optimistic for that Q4 on volume.
Yeah.
But to David's point, where we've hit earnings, we've known, and we still will have.
Yeah.
You know, even if we had two shifts up, and maybe it's a follow-on question, it's ramping up as expected. Every day, we're starting to see slightly more volume, which you would hope to go record a week ago, a record two weeks ago-
Right
... you know, which if you're ramping up, it should be a record every week.
Right.
But we've known, and we had in our earnings or our estimates.
Embedded in your guide going forward, there might be some, you know, start-up costs still, but they're in the guide.
They're in the guide-
Yeah
... and they will be there, hopefully in 2025, and that gets us back to the, the earnings for next year. But no, in this quarter, too, it's going to be a headwind. But again, it's in the guide.
Yeah.
It's not like we're surprised-
Yeah
... here as we ramp up.
Yeah. No, no, I got it. That's helpful.
Yeah.
And then, you know, maybe just kind of expanding to sort of other conduits of growth, right?
Yeah.
'Cause that's how you talk about it, and potentially helping us quantify the impact on your business, you know, as you go out late this year in 2025. I know you mentioned, you know, Texas and Georgia building out those regional service centers. You alluded to HDPE bouncing back in 2025, but can you elaborate on how much impact each could have on your results?
I don't know if we have, like, well, I know we have.
Right.
But what we-
Whatever color you can give.
Yeah, so let's do, let me try to do it this way, and then David, you go. Whatever you assume GDP is, again, I'm saying CEO math 'cause of precision, but if it's 300 basis points, I think, and I've said this on conference calls, really as a compliment to the whole electrical industry, the whole electrification, you know, not a surprise, where you, you could debate how fast an EV charger moves and so forth, but solar arrays, New York City not wanting gas to heat the buildings over a three-story building, that should add a couple hundred basis points. So just being in the electrical space, I don't care if it's my competitor making a different product, it will grow faster.
Then I think all the investments, you look back over the last couple of years, where we put in over $200 million of CapEx into different things, whether it is the regional service centers in Hobart, or that's where the city where our facility is, but the solar torque tubes, and keep going on, can that add another 100, 200 basis points above the market? Regional service centers, where some of these Magnificent Seven and beyond have actually realized the value and grow. So I don't wanna sit here back to David, and, like, give us a estimate for growth and so forth for next year and beyond, but it should at least be mid plus single digits, and all these things, the market itself being a secular tailwind, and then our self-help a couple hundred basis points beyond that, so.
I do think, Andy, the industry itself, some of the capacity that's being added with others, with switchgear and transformers, will eventually help the industry.
Mm-hmm
... maybe in 2025 and beyond. We still have to solve the labor shortage issue.
For sure. And so the logical follow-on would be, you know, this conduits growth are ramping up. Second half run rate is gonna be, well, $18+ already, you know, this year. So, you know, you can change your guidance at this conference if you want. But, like, why wouldn't you change your guidance, you know, other than maybe you're worried about more price normalization, or there might be other reasons, macro or something that 25-
No, I'll still-
I don't think we're worried about that, Andy. We've stuck with the 18 'cause we came up with that three years ago. We feel like our valuation hasn't even caught up to 18 yet, so why give anything above that, quite honestly?
Yeah.
I think if our valuation was where an extra dollar really meant that much of a difference, we might be more inclined to talk more specifics about next year, but right now, we just don't feel the need to have to do that.
Yeah, no, it makes a lot of sense. And then, you know, one of the bull arguments for Atkore is that the company generates a lot of cash, you know, which you talked about, then redistributes it. You know, you've bought back, I think, about 20% of your market cap in the last three years. You've always done bolt-on M&A, it seems. Maybe talk about the strategy, 'cause it seems like maybe it's slowed down a little lately.
It has.
So what's happened, and where are you going from here?
Yeah. I'll start, but David is... And by the way, for anybody, there's been books David and I have read, you know, capital deployment and so forth.
Mm.
The good book, I think, for Atkore is, I don't think there's an ineffective place to place our capital well over the WACC, and there's several things for that. One, we did start a dividend. I think it's just, again, to give our shareholders confidence in our future forecasts. And while it wasn't the primary thing, my own personal opinion, in events like this, you do see shareholders going, "We could probably be more in if you had a dividend." So you know, there's sort of some on the fringes there of opening up market, so that's there. CapEx, we're probably where we've spent around $200 million the last two years. That will probably ramp down slightly. You know, like one of the things David's rightfully always pushing our presidents to go, "How be, like, 4%?" You know, so for $160 million over time.
But we're still going to invest 'cause there's so many growth. But you have those two things, and then it just gets to share buyback and acquisitions, at least in my mind, and there's a little bit tongue in cheek to go: Do I buy another company, or do I buy this company that we know well, that we think is undervalued? So it's like a real simple thing here. I would say again, I'm not here with Tourette's to-
Mm
... foreshadow future earnings, but we will have discussions with our board. We go out and get another authorization. So that will actively, at least, surprise, surprise, be a conversation to do. And then actually for M&A, there's still a bunch of deals, so there's no deal shortage out there. And we have a very, you know, sales force, you know, funnel of the deals and what stage, and they're as active as usual. But we've probably raised the bar on... And I'm scientific, but, you know, if we always wanted 300 or 400 basis points over our cost of capital, is it now five or six? And for two reasons: One, we still have Atkore, that at least in mine and David's perception, is we're not getting the price we should of our own stock.
Second thing is, we just have so many organic things going on right now, the regional service centers, you know, getting the HDPE acquisitions up, getting the Hobart and solar torque tubes to these global mega projects with critical customers across the globe. And you keep going through to go, "Hey, right now I'm concerned on the bandwidth" - not concerned on the bandwidth, we have a great team, but, like, let's go get that stuff done versus something that would be a good return for shareholders, but if it's not a touchdown, there's other things we can deploy, which to me, again, is a great news. It's not like we're struggling, thinking, "I wonder how we're going to grow the company.
Yeah. Yeah.
So.
Just one follow-up on that.
Yeah.
So if you raise the bar, like, you know, and when you're looking at acquisitions, it also seems like, you know, maybe valuations are also up a little. You tell me, like-
Not for us-
Okay
... And let me explain why. I think I can only think of, and I hate to contradict where I'm wrong, but I can only think of one deal we've ever done that was even private equity-owned.
Mm.
Everything we typically do not say it is like an acquisition we have to do is family-owned businesses.
Mm-hmm.
And if you look at a family-owned, and we have a great reputation here, I could elaborate on, that family-owned business, they typically sell when there's a life event. So that's why we're keeping the funnel going. Like, unfortunately, the patriarch or the matriarch has to pass away or, you know, they're just, they don't have a kid or grandkid who wants to get in the business, whatever those type of events are. But when it happens, and you think about us, to go, "If I, if I had a business worth $100 million, I have more money than I know what to do with," and then go, "Okay, I want to be treated fairly-
Mm
... But I also want that brand name that my grandfather created to say, 'Check with Atkore. I want to know that we're not going to close the facility versus build on it.' Check with Atkore. You know, for the employees themselves that we have, and we have stories where literally an admin and a VP is now like an HR director making $200,000, a plant manager of one facility is now running eight or 10 facilities. So we can demonstrate those type of things, how we're gonna invest and grow those businesses, and a lot of other criteria that we get down to. We are the natural partner to own it.
We can pay more than somebody else, or if it's a one location, I'm making up PVC or something else, is a private equity group gonna come in and buy it, you know, and try to put a management team in there? Likely no. So, a lot of times you'll get like, "Well, the market's up or down, is PE going to be competing against you?" That's not the type of deals we're typically doing.
Yeah.
It's just really irrelevant outside.
Got it. Did you end up getting to, like, a critical mass in HDPE, like with all the deals you did?
Yeah, I think, yeah, we're there, 'cause we're-
Number 2 now?
We're second.
Yeah, yeah.
Yeah, they're clearly the number one person is larger than us.
Yeah.
But we're clearly number two, and I would also say besides clearly number two, we're the only one that if you look at, like, say, number three or four that's much, that's smaller than us, I'll say, they're not national. And that's one of the things back to critical mass. If you are working with large distributors and so forth, or even buying groups, they wanna have service the industry. They want to set up a focused vendor, supplier, have a rebate program, and have all their branches buy from that, and we're there.
Got it. Last question from me, like, we asked this question of you last year, I asked it of all the companies: What are the top two or three innovations and structural changes affecting your company over the next five years? And are there any emerging industry trends that are perhaps being overlooked in the current discourse?
I'll start, but, like, so the big thing that I really think Atkore is set for, let's call it the next half decade, if not beyond, is that One Order, One Delivery, One Invoice. And I just... You can't underestimate. If you were a consumer, which everyone is, and it took you 10 days to get your E-cell batteries into delivery, and somebody came along and said, "I can place an order online, and it'll show up in two days," literally one day, what that does for the industry. And by the way, put six things on, whether it's electronically or going, "No, I'm going to go to the grocery store and buy my produce and a different store to buy my meat products and go to a different store for my hardware," you put all that together on one truckload for these big, bulky things.
As we've- I think I mentioned here, Andy, with you in this last 45 minutes-
Mm.
... we're seeing over 500 points, and it's higher than that when we've done a study last year, of the price power of our own product to the same customer the same week because the customers truly want that one order, one delivery. So that's the biggest thing. Otherwise, good or bad, our industry is slow, and I mean that in a good way. Codes and standards change once every four years. Municipalities take four to 12 years to adopt it. So there is no all of a sudden we're going to be upstaged. You know, there's always new product development. We're at almost a 10% vitality-
Mm.
But it's not like the iPhone to go, "Oh, my God," or the BlackBerry, and all of a sudden it being upstaged. That's not going to happen in our industry, so yeah.
Awesome. Well, Bill, David, thank you very much for joining us. Very much appreciated.
Enjoyed it. Great conference.
Thank you.