Thank you. Good morning, everyone. I'm joined today by Bill Waltz, President and CEO, as well as David Johnson, Chief Financial Officer. We will take your questions after comments by Bill and David. I would like to remind everyone that during this call, we may make projections or forward-looking statements regarding future events or financial performance of the company. Such statements involve risks and uncertainties such that actual results may differ materially. Please refer to our SEC filings in today's press release, which identify important factors that could cause actual results to differ materially from those contained in our projections for forward-looking statements. In addition, any reference in our discussion today to EBITDA means Adjusted EBITDA. Adjusted EBITDA is a non-GAAP measure. Reconciliations of non-GAAP measures and a presentation of the most comparable GAAP measures are available in the appendix to today's presentation.
With that, I'll turn it over to Bill.
Thanks, John. Good morning, everyone. Starting on slide 3, Atkore is off to a solid start for 2023. Volumes for the quarter were up over 5% and Adjusted EPS increased 1% year-over-year in the quarter. We continue to execute our playbook for capital deployment and strategic growth. As previously discussed, we expanded our HDPE product offering with the acquisition of Elite Polymer Solutions in November. HDPE represents a significant growth opportunity for us, and I'm pleased with the progress and integration so far. During the first quarter, we repurchased $150 million of shares, and in the second quarter, we've already repurchased over $100 million. Collectively, this brings our year-to-date total for repurchases above $250 million. With our solid start to the year, we are increasing our full-year outlook for Adjusted EBITDA and Adjusted EPS.
It is my pleasure to also announce the release of our 2022 sustainability report, which was published this morning and posted on the ESG section of our website. This report covers a broad range of topics, and I believe it demonstrates and articulates why Atkore is a great place to work and truly a special company. I would like to thank all of our employees for everything they do to support our customers and all of our stakeholders. It is the cause of their tireless efforts that Atkore is able to achieve the results and successes that we have. With that, I'll turn the call over to David to talk through the results from the quarter and our outlook for the full year.
Thank you, Bill. Good morning, everyone. Moving to our consolidated results on slide four. In the first quarter, net sales were $834 million and Adjusted EBITDA was $264 million. As we have mentioned several times, we expect our business to normalize in 2023 as compared to the past several years of outperformance. That being said, we are nonetheless pleased with our margin performance in the quarter with Adjusted EBITDA margins of 32%. This is down year-over-year, but still a very strong and healthy level. Even with the decline in net sales and Adjusted EBITDA, we are pleased to see that our Adjusted EPS increase in the quarter up to $4.61. Turning to slide five in our consolidated bridges.
Volumes were up over 5% in the quarter and our recent acquisitions contributed an additional 7% of growth. These gains were offset by the decline in our average selling prices. Our average selling prices have declined as we continue to see normalization of pricing and a continued downward trend for several of our key input costs. During the quarter, we saw very strong pockets of performance related to data centers and several large chip fabrication projects globally. In addition, we are very pleased with the execution and integration performance from our recent acquisitions. Moving to slide 6, those segments had positive volume growth. Margins compressed in our electrical segment with the previously mentioned normalization pricing. However, we saw a very strong margin growth on the S&I side. Our S&I business had 22% growth in Adjusted EBITDA.
Turning to our outlook for fiscal year 2023 on page 7, we continue to expect volumes to be up mid-single digits for FY23. We expect net sales to be down approximately 5%-10% in 2023 as prices normalize and we see declines in several of our key input cost categories. With the strong performance in the quarter and the resiliency of our Atkore Business System model, we are increasing our outlook for Adjusted EBITDA and Adjusted EPS. For FY23, we expect Adjusted EBITDA of $1 billion at the midpoint with a range of ±$50 million. This is an increase of $100 million versus our prior outlook. We are increasing our expectations for Adjusted EPS up to a range of $15.85-$17.75.
As we mentioned last quarter, this outlook does not include any expected benefits from the tax credits associated with the Inflation Reduction Act, as we expect a majority of these credits will flow through to our customers. With the strength of our cash flow and our commitment to returning cash to stockholders, we are also increasing our expectations for share repurchases in the fiscal year. With that, I'll turn it back to Bill.
Thanks, David. We are very pleased with what we have accomplished this quarter and our outlook for this fiscal year. We're even more excited about all the opportunities ahead. Moving to slide eight, as we've said before, we believe that sustainability is central to the strength, safety, and longevity of Atkore. This morning, we released our third sustainability report, and seeing all the great work that our team has accomplished truly inspires me. This report details our initiatives involving our products, customers, and employees, and I would encourage everyone to read it. Inside the report, and highlighted here, is the progress we've made against our four external sustainability targets. As you may recall, we introduced these four targets last year and set very smart goals that we believe will help guide and focus our efforts to enable sustainable value creation.
We are making good strides for our targets for each of these goals, and we are confident in our ability to meet or even potentially exceed some of these items by 2025. Turning to slide 9, we sincerely appreciate the external recognition that we've recently received from several leading independent organizations. We believe these acknowledgements demonstrate that we have the company culture and employees who are able to truly make Atkore a great place to work and a compelling investment opportunity. I'm confident in the team, strategy, and processes we've put in place to continue Atkore's strong trajectory, and I firmly believe the best is yet to come for our company. With that, we'll turn it over to the operator to open the line for questions.
At this time, I would like to remind everyone in order to ask a question, please press star and then the number one. Our first question comes from Andy Kaplowitz with Citigroup.
Good morning, everyone.
Good morning, Andy.
Morning, Andy.
Good morning. Bill, you recorded good volume growth as you said you would based on data center chip fabrication demand is what you highlighted. Could you talk about the resilience of those end markets? Obviously, we've seen a bit of a slowdown in the tech sector, but, you know, we know non-res starts have been very strong over the last year. Is that helping, and what is the duration of customer backlogs, and how much confidence do they give you in extended volume visibility for Atkore?
Great set of questions, Andy. We're still optimistic or consistent on volume going forward, they'll call it the mid-single digits for the rest of the year. When I'm out talking with our customers, I just flew back from a convention here late last night, you know, six months, nine months, a year of backlog with, you know, our distributor partners. I would continue to see. You know, there's, as you mentioned, there's going to be a delayed job here or there, either because of somebody getting equipment in or someone, you know, reconsidering things, yes. There's enough volume there's enough Atkore capabilities to drive our fair share of growth beyond the market that I would estimate mid-single digits. Nothing's really changed, Andy, which is kind of nice.
Very helpful, Bill. You recorded just over the high end of your guidance for the quarter, I think at $264 million in EBITDA, but you raised your, you know, 2023 guidance by $100 million, you know, without adjusting volume as we just talked about. What is it about the price versus cost equation that has changed to allow you to adjust your guidance, you know, pretty early in the year pretty significantly? Are you retaining more price so far than that waterfall chart that you gave us last quarter, and does that potentially change the trajectory of the, you know, $600 million or so in price giveback you gave us in that waterfall?
Great question, Andy. I would say for this year, we are seeing more price that we're holding on to and/or just commodity costs dropping faster, different things like that in our value equations that we are able to raise, as you mentioned, our whole year forecast for EBITDA around $100 billion. you know, to sit here and project out farther, I think, you know, we're not giving comments on 2024, and we're still, you know, comfortable as we can be on the $18-plus for long term. For this year, Andy, there's enough comfort in the year to raise the guidance by $100 million.
Andy, as you know, the second half is usually a little bit stronger as construction season starts, in full force. When you look at the first half after our first quarter actuals and our second quarter guide, we felt, you know, comfortable in raising that full year guide.
Got it. Just one more question for me. You mentioned the rebound in metal electrical conduit volumes that you're seeing. Is that because demand is improving, or was that more of a supply constraint issue that's now being relieved? Just asking the same question on PVC markets. Pricing there still looks like maybe, you know, it's been dropping a little but stabilizing. How do you how do you define demand in PVC? Is non-res demand outweighing resi weakness?
Yes, I'll do in reverse order there. I think there is enough opportunity. Well, let me back up. There is residential weakness. That should not be a surprise for everybody. But that's single-family home. Multi-family homes, from what we're telling, still going really strong. Then there's enough other markets. All those electrification trends, hardening of the, you know, the grid and burying lines and 5G networks that for all of our products, almost, Andy, to your first question, you know, we're still cautiously optimistic for growth both for the industry and for Atkore going forward. Then from there with steel conduit, yeah, I think it was a good quarter, but I wouldn't overplay any one market for a short time period.
Yeah, I mean, to me, the only two things maybe there, Andy, is the fact that we feel very strongly destocking and for steel conduits over. What we're seeing right now is the real demand in the market. Also you're starting to see steel costs rise in the future and expectations rise. You know, folks are getting ahead maybe a little bit and getting their orders in probably a more typical way than they were in the last three, six months.
Appreciate all the color, guys.
Yeah. Thank you, Andy.
Thank you, Andy.
Our next question comes from Deane Dray with RBC.
Thank you. Good morning, everyone.
Hey, good morning, Deane.
Good morning, Deane.
Hey, appreciate all that color through Andy's questions 'cause that really does strike at the storyline here. Certainly we like what we've seen for the first start of the year. Maybe we can just drill down a bit 'cause on what normalization is and whether we have a clearer read, and I know it's still early in the year, but here's kind of the way I think investors have been looking at it. Versus Fiscal 2022, in your prior guide on EBITDA, it was looking at a 33% decline and, you know, there was this worry it would be falling off a cliff in January. Obviously that's not happening. You've boosted. It's now a 25% decline using the midpoint, but it's also $1 billion, which I think is interesting in terms of that midpoint.
You and I talked about how that's an important milestone. Look, it's still early in the year. Where does that normalization trend line go from here in for fiscal '23 on an EBITDA basis?
Deane, if you wanna follow up, we're comfortable with the midpoint of the guide. I think there will be some pressure continuing on some of our pricing, but I think there's enough other things that we're doing well, i.e., the volume growth, new product development, or new products that typically have higher margin, our value equation for customers that are driving in some place, we're getting margin even more as we go forward, that we're comfortable raising our guide for the year, but... Also very comfortable still on the FY25 guide. Now, could some product lines continue to have some drop in margin, you know, quarter over quarter and so forth? Yes. Overall, I would tell you almost where you started, we're comfortable enough three months in to say, "You know what?
Pricing is holding better." The beginning of 33% drop and 25% drop that, you know, that $1 billion, like you mentioned, sounds good to me and let's give value off of that and the $18 EPS, and then we'll talk about how we continue to drive it forward from there. Hopefully I answered, but it's hard to say pro-by-product, Deane, with that much crystal ball.
Yep. That's completely understandable. For David, it came up a couple times about the decline in input costs, and it looks as though that is bigger than what the decline we've seen in pricing. Just kinda take us through that dynamic, the key input costs, how much they've gone down, and how that factors into your pricing.
Sure, Deane. If you look at, you know, slide 5 of our deck and you look at the bottom in the EBITDA bridge, you'll see that, you know, cost changes year-over-year for Q1 were down $70 million. Obviously, pricing was down more than that, and that has a lot to do with the normalization we've been talking about. You have seen from where we were a year ago, especially in things like steel, tremendously lower now than they were a year ago. Sequentially, you're starting to see steel, like I mentioned earlier, come up a little bit. There's different dynamics in S&I as to when, you know, price changes and, you know, in some of our other product lines of how long we hold on to price versus the commodities coming down and what have you.
In general, I would say that that $70 million is a, you know, pretty significant reduction year-over-year.
Good. That helps.
And then Dean, I think-
Go ahead.
Sorry, Deane. I don't know if it's part of your question, but I know there's, especially on the buy side, questions out there on the whole dynamic of cost versus our price. Just as a reminder, I know you understand this, Deane, but the things that drive our ability to price are supply-demand competition. What are our competitors doing compared to how much demand's in the industry? Atkore's value prop, which I think is bar none the best in the industry with our ability to co-load in one order, one delivery, one invoice, our electronics, our customer service, those type of things.
As sometimes buy side looks at commodity costs, yes, that's a factor 'cause maybe one of our competitors is out there thinking, "Well, if my costs went down, I can lower my price and still make a margin," and we have to react. That's just not a major contributor to how we price in the market for any of our input costs.
Yeah. Bill, you and I had this exact discussion last quarter, first question, and you gave a, what I thought, a comprehensive tutorial on the dynamics and how you have to look well beyond just the input costs. So I've been referring people to that transcript and sending it and thank you for the reminder. Just last question for me. Talk about the pipeline of M&A, and are you seeing any other competition coming in? Because obviously this is a really attractive niche, and the surprise for some investors to say, "How come you haven't seen anyone else trying to elbow their way in?" Thanks.
Yeah. Great question, Deane, and you know, for whoever also thinking of those questions. No, we haven't. Let's put it this way. There is no increased trend that we've seen. Have people bought other companies that we've passed by? Yes. Again, I think Atkore is unique that most companies we buy are privately owned family enterprises, you know, small enough on the radar that a large private equity firm, you know, wouldn't have the management structure to put in place with them. Our large electrical peers, you know, have different niches than we do in this, you know, set of call it raceway products that I think we are uniquely in a position to acquire most of these companies as they come up to market. To never say never or something hasn't been sold to somebody else, of course, but no increased trend.
The market's still active. We're actively pursuing things. We've actually increased the size of our M&A team here in the last month just to continue to expand, whether different products in the States, look more aggressively into Canada, look more aggressively into Europe. We are deploying our capital well between M&A, internal investments, and obviously stock buyback. It's a good time to be with Atkore.
Great to hear. Thank you.
Thank you, Dean.
Our next question comes from Chris Dankert with Loop Capital.
Hey, morning, guys. Thanks for taking the question.
Morning, Chris.
I guess first off, in Safety & Infrastructure in particular, volume was up nice. And obviously the comp was a bit easier, but anything particular you'd call out, on the demand side kind of fueling that volume in S&I?
Whenever we reference a little bit about data centers and fab plants, a lot of that when you start thinking about, metal framing our wire basket products, even, in a different part of their business, security was pretty strong this quarter. You know, pretty broadly speaking, they've had solid growth across all their product lines this quarter.
Then maybe to follow up, obviously there's a lot of different, you know, governmental actions going on right now. You've got the IRA, infrastructure jobs, RDOF, et cetera. I guess first off, you know, what impact is baked into that kind of mid-single-digit volume guide from those acts? I know it's hard to break apart that way, but if you can give any sense for is that more of a 2024 dynamic, I assume for the majority of it, but any sense on is some of that showing up? What's baked into the guide? Any comments on just kind of that environment?
Yeah, I think Chris, I'll just paraphrase back what you said. I think it will be more impactful in 2024, just because a lot of these things like the Inflation Reduction Act with credits and so forth just literally kicked in in January. There's probably a little bit of it in there, but nothing major. We are definitely knowing that these things are coming along, positioning ourselves, and that's again why I say Atkore is a company to invest in and grow with as we go forward. Like the fiber investments and all that in the municipalities, I think the deadline's pretty soon when they can sign up for the money and see what their need is. We're still a little ways before that actually gets action.
To Bill's point, a little bit, but not the majority of our volume growth this year.
Yeah. I guess if nothing else, certainly gives you confidence in that 2025 target number on $18. Well, thanks guys. I'll pass along.
Cool. Thanks, Chris. Thanks, Chris.
Our next question comes from Chris Moore with CJS Securities.
Hey, good morning, guys. Yeah, most of it is.
Good morning, Chris.
Good morning. I was hoping maybe you could just give some updated thoughts on, you know, the HDPE market opportunity. You talked about it a little bit, but obviously lots of acquisitions there and, you know, lots going on on that front. any updated thoughts you have there?
Yeah, Chris, really excited for that market. Every facet of it. First, almost to the other Chris that just asked a question, you know, I think the best is yet to come here with funding for and getting things ready for fiber optic and so forth. Without mentioning specific customers, you know, we have a great general manager that was just talking to some of the largest electrical distributors in the nation yesterday. While they're optimistic for 23, they're even more optimistic for 2024. We are well-positioned, and we have a kickass team. It very much reminds me as a compliment to Atkore, the PVC division of a decade ago, where you take five, six of the best run companies, and you bring together those management teams.
They get to compare now best practices, manufacturing, how we have a national footprint, how we can therefore work with national customers that a lot of other people can't just because they're regional. This is why almost back to the previous analyst questions, we have high comfort at this stage with our 2025 $18+ EPS. economy is going in the right direction, secular trends going in the right direction, and Atkore is getting well-positioned. long-winded answer to say we're excited for HDPE.
Got it. Very helpful. Last one for me, just kinda cash flow related. Cash flow from operations, you know, just under $200 million for the quarter. Inventory was down, you know, a little bit, but, you know, $11.5 million. What are kinda your thoughts in terms of inventory levels, for the balance of the year?
Good question, Chris. I mean, I think from a day standpoint, we're kinda where we wanna be. You will see a little bit here as we talked about the back half of the year, we expect a lot more solar volume coming up with our new facility, so we will have a little bit of an inventory build there. When you look at it on, say, a days level, it's gonna be fairly level between now and end of year, but that does mean a little bit of a dollar increase for the next, I'd say, quarter or two.
Got it. It's helpful. I will leave it there. Appreciate it, guys.
Thanks, Chris.
Our last question comes from Alex Rygiel with B. Riley.
Thank you very much. To follow up on that last question, can you comment on sort of the trend in solar demand in the near term as well as telecom conduit demand in the near term, appreciating the very positive long-term outlook?
Yeah. Great question, Alex, and good morning. Both short-term and long-term, really optimistic. It almost ties back some of the other questions with, you know, what are we seeing. Again, some of the background that David talked about in our prepared remarks is solar credits are out there. They just started with Inflation Reduction Act. I think, you know, it is something that the people that make the solar arrays, the people that buy them for the solar farms are aware of, and that is a great stimulus, and it won't all kick on here on January one. We're both Atkore well-positioned. I think we've talked in previous conference calls where we actually. Some intelligence, quite frankly, some dumb luck.
you know, we started up a whole facility dedicated to making the solar torque tubes, and that's coming online for us here kinda in the beginning of Q3, so another quarter out. That will both help with organic growth, help with our EPS, and the demand is absolutely out there. Both just people wanting to be green and these tax credits are probably shifting a lot of business that used to be made offshore to U.S. manufacturing. Good for the economy, good for the U.S., good for green, and good for Atkore.
Yeah. Alex, one way to think about it is like the solar industry itself could stay flat year-over-year, but the volume for domestic torque tubes is still gonna be up substantially because it just doesn't make any financial sense to import torque tubes anymore compared to buying someone domestically.
That's very helpful. Is it time for you to update your 2025 target or, you know, comment on confidence towards achieving it?
I'll just say. I don't even know what to say, Andy. I'll say thank you for the thought process on the optimism. When we get to the 10 multiple on that, then we'll talk about where we go as we continue to drive forward. I will say, because we have great management teams literally across the board. Like, you look at what David spoke about with S&I, just an amazing quarter that for David, myself and the executive staff, we're having an all-day meeting on Thursday, and it's all about 2025 and 2028. That's the focus. How do you keep this flywheel spinning faster and faster? Who knows? I don't think we're gonna re-up our numbers for a while, Alex, but it's definitely a thing of how we continue to grow and take it to the next level.
Yeah. We probably formally will update it again at the-
November.
November like we normally would. I just would remind you that we did put a greater than sign in front of the 18, so we were thinking about that as we were putting that together.
Very helpful and very nice quarter. Thank you.
Thank you, Alex.
There are no further questions at this time. I now turn the call over back to Bill Waltz.
Before we conclude, let me summarize my three key takeaways from today's discussion. First, Q1 was a solid start to the year with volumes up over 5%. Second, we are increasing our expectations for the full year earnings and share repurchases. Third, we're excited about the progress we made in regards to sustainability and ESG, and we're very excited about what lies ahead in this area for our products, customers, and employees. With that, thank you for your support and interest in our company, and we look forward to speaking with you during our next quarterly call. This concludes the call for today.