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Encore Wire (WIRE)

Participants
Bret Eckert Chief Financial Officer
Daniel Jones President, CEO and Chairman of the Board
Brent Thielman D.A. Davidson
Julio Romero Sidoti and Company
Call transcript
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Operator

Welcome to the Encore Wire Reports First Quarter 2022 Results Conference Call. My name is Cheryl, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we’ll conduct a question-and-answer session [Operator Instructions]. Please note, this conference is being recorded. the to turn Eckert. now will call Bret over I Sir, begin. you may

Bret Eckert

of to results After questions morning. the Bret of Wire Officer and me the we Good take any financial financial may a quarter have. President, Cheryl. Daniel ended will the review minute, morning Eckert, Wire. is review, this And Chairman Financial the I’m Thanks, we December CEO you call. welcome In Encore Jones, With conference Corporation Chief Encore Encore's Board. for XX, XXXX. will quarterly

forward-looking, let Before the Daniel statements most indicate presented reports company's review during to conference and and as to risks we comparable we more this a discussion detailed in some risks of useful each the our investors, be to differ believe releases to I certain statement of are the particular opening GAAP, for Web measures of turn call, EBITDA, advise posted remarks. and involve that might materially these may to Also call financials, be site. the conference financial financial to accordance measures of today. such actual each reconciliations identify this certain non-GAAP discussed uncertainties. for uncertainties from news directly with SEC supplemental which over me we making with call that to and on order In results including all Daniel? be information for I'll now legislation comply be throughout forward-looking. certain refer you considered could statements that cause to discussed we securities that you instead those attempting

Daniel Jones

uncertainties fourth By over to core sequentially basis aluminum quickly and pivot over We believe market XXXX were on fill and and forces. volatility and quarter, continuing increases prices raw the a Copper gradual the market Copper impacted spreads at in throughout cost. spreads. increased unit current first outlook copper steadily volumes on upward increased Comex and pace. on should increase to unbeatable market a XXXX up support basis. a material comparative shipped our positively X.X% shift values a quarter volumes basis, execute of were along gross margin in Wire. comparative of upon products, Because customer increase the certain comparative adapt key this abatement quarter existing and service The and call, us other confidence global quarter joining one we in and believe in higher for with quarter Good throughout trend, consecutive strong demand your keeping the in quarter. the ended spreads. copper, availability still morning, The XXst, continued model investment developing the our of thank your interest appreciate material a the prices price We campus strategic elevated to first marked on fourth Stable is everyone. strong and results XXXX. competitive advantage coupled We giving spreads drove raw continued And unmatched for March first of the for persistent also rates, copper providing other to both XXXX able Volumes and levels. quarter external materials dynamic of tightness support. with us the aluminum flexibility you Encore increased to our XX.X% average order sales market we able key continuing in conditions levels. quarter raw were today, margins supportive high quarter

environment. year, positioned coming Wire incremental online Encore capacity the current remains volume to this economic share believe and new we growth in capture the market With well

that competitive our environmentally integration deep order We to continue vertical responsible near-term our leader industry. challenges, focused As and on a believe address our our for opportunities the the our we position as enhance remain long-term business, fill improving will in superior we including rates position. sustainable

can distributors to continue Bret? As deliveries orders our our call cover come to to on the I'll financial to electrical us turn over for coast Bret now quick depend in results. coast. from contractors,

Bret Eckert

sold quarter selling XXXX first in for the you, pounds Copper million The volume increased for compared price versus first quarter the Thank in quarter of increased the copper versus first XXXX. ended of XXXX the of XXXX. first sales of were of of the $XXX.X first Net compared XX% XX.X% for first Gross in wire quarter million unit X.X% Daniel. the quarter profit first copper measured wires quarter average of of XXXX of in first the percentage XXXX. March quarter contained in the the to was sold $XXX.X per to XX, pound XXXX quarter XXXX. XX.X%

raw average of of first in average and the quarter XXXX. spreads the key was XXXX were wire quarter in prior for our $X.XX prices Aluminum material ’XX. year. keeping global XXXX. quarter of diluted skilled purchased period the for ended throughout first ended of marks per XXXX were million versus raw $XX.X our aluminum of the for first compared for these earnings suppressed cost and the Persistent the This certain and quarter XX.X%. of copper, products, uncertainties XXXX pound $XXX.X comparative drove trends, other elevated of sale products. sales of per first The Aluminum developing labor quarter able the XX, and favorable consecutive the of materials, availability in prices were quarter margins income Fully increased XX, share strong wire quarter volumes XX, of March increase higher the conditions net XXXX. spreads. to the demand copper represented driven the in the ended our $X.XX first in the While Because versus March net quarter in by fourth we common in availability of quarter. XX.X% million quarter March Net the XXXX market tightness first consistent to increased

these expect the abatement. but we that in predict are to of will conditions We abate future the unable timing

pace. and current conditions the at abatement market outlook existing should a margin the gross believe do we support However, gradual continuing

balance strong. remains Our very sheet

our debt long-term credit of had and of at untapped. no revolving million line $XXX.X cash We in remains the have the end We quarter.

average of a $XX.X share total we common price quarter, first million. of an for at our stock XXX,XXX outlay cash $XXX.XX, the repurchased of During

declared also The quarter. fully new repurposing The in cash We XXXX center during plant into our opened $X.XX center market is expand manufacturing of and newly our distribution vacated extend operational reach. seven service mid-May today. will the dividend a formed capacity

July spending growth. in XXXX in improve XXXX in as position million sector earnest, as capacities manufacturing responsible reduce capacity in We quarter of and as environmentally vertical expect wire will our manufacturing were first in expand sustainable continue and will XXXX. the incremental modernize a full the completed manufacturing XXXX. sustainable industry. facilities of a in year second XXXX costs, to transition our $XX be in focused XXXX in processes manufacture announced on investments increasing through position this quarter increase broadening million efficiency, our cost, The low Total of integration Capital to expenditures drive the as for and to and and leader well capital $XXX our select in the

XXXX. million total $XXX million $XX capital to $XXX and to $XXX in million in million expenditures a million We XXXX, million to XXXX in from $XXX to range $XXX expect

remarks. We floor flow. operating turn Daniel expect now cash reserves continue cash these I'll with few and the to for to investments to final over existing fund a

Daniel Jones

of of XX, performance without business of further XXXX Bret. thrive one quarter ended integrated the attest performance consistent first wouldn't success We strength campus suppliers. term March in low market which have continues exceptional under Thank The strong our this the to our you, current model, to the vertically cost conditions. level long

positions favorably Our strong our allowing internal deep coupled us in cost overall us with the low market, execution, relationships and management to consistent maintain team, structure.

the remain commitment nimble operations hard to unbeatable customer values dedicated for coast. and execute safety to we close and want recognizing and committed ahead, the our quick deliveries solely service, work, employees and and tenacity core their I excellence. Looking to to upon outstanding by company, of coast

performance Our four efforts. the have without quarters over extraordinary could the happened not past

Our also our Encore thank want for we opportunity to of in from support. us team continued our questions shareholders to employer take choice invest an listeners. to our in we’ll allow incrementally the success market now the I sector. Cheryl, as in position as their continues

Operator

Thielman [Operator Davidson. from D.A. Instructions] Brent Our first question from comes

Brent Thielman

thoughts quarter, your the volumes of tightness, from desire fast Daniel, And function as onto to continued I it of get find I guess the that XQ. that's I see up your unit that? a think sort from of the sounds sort but up gaping around interest. job site they quarter? typically you're like are materials possible, What first environment whether in the slow a just historically fourth wondering demand if as

Daniel Jones

side industrial that still I strong right and our and the on the pretty steady the the pretty that occurred seeing Brent. commercial sectors. the of strong, to from side quarter. of strong the sectors piece. continuing There's is quotes it, you're be on seen amount track demand us, all a for delivery together. from kind see demand coming is the with We've execution fill But The strong. came side, lot Residential first including think the we're in is we're improved perspective, rate a to of significantly each aluminum of things is

Brent Thielman

spread moving look just increase, availability. sort there's I'm I of products spreads products products really relative those continued if lack are for maybe based really strong is seeing certain the demand select few the the needle industry whole that or the premiums, portfolio? here, a of when on entire for that -- portfolio, or at are just this you across just just are to a you Daniel, And your wondering larger

Daniel Jones

job that is and intake team, products. across operations fantastic we're the production portfolio back that. The to really execute, a done really of to managing entire team so of the sales It's real that team's perform able

the one others. So category there's particular not over

for and been be has is has good, strong whatever been to really the it you industrial push the good, aluminum could good If push residential been well. has as one had pick commercial reason the side

outperforming really good that's just itself really one not other, there's outpacing market for overall the or the been us. has So

Brent Thielman

And still others tight times then kind industry of from that contributing environment market. Daniel, that the you're beyond we lead supply of meeting the which kind this to just things the all other can be still pretty meet? of to constrained is What sort prohibiting might to in able copper,

Daniel Jones

statement, and partners with our -- in mentioned fantastic prepared support got situation. the vendor got We've we've we as

team goes, think we not real really And perspective. attention and pretty as has a execution managed time. well I able opportunity should freight’s at it's better Brent, that the our being if first do pressure usage tight. the fantastic. tight. the relatively So you people copper point. material this are the supply tight, in maximizing of a competitors trucks to There's up that pretty tight responding to to one quarter the pay will, just out some the -- lot tight, to push, been on the that what's a It's stands But well. controls, as all tight, some happening. allowed little has chain and really of market from it's us really perform the across on a really way were all show the still of board, the still much are market far the is particular controls, the everybody's side one focused problem they to tightness materials item pressure, as board. here in that PVC raw cost piece Aluminum is in not There's there's still aggressive real on those much across and The location perform that they things than model be of have maybe incredibly that

So well. pretty it's actually going along

come You do in. when you pressure the feel

ride you it's are The incredibly doing time up clean. through great showing a plant, If and people job. the on

Operator

from Sidoti Romero comes from question Julio and Company. next Our

Julio Romero

side. two and at supply So the the you persistent the guys tightness months? stable demand operating over changed talked How last environment about on if has all

Bret Eckert

ebbs it’s I in probably your what just life, and it you lot mean, a It’s see personal flows. evolving.

little kind a better, back layoffs you're of it terminations trickles that investment next build throughout we get through get to reactionary trying then your what that seeing underinvestment the the will and today. think again. that month still supply still one tightens flowing month. and the see up bit Something of chain, And or and during dollars force the I you're pandemic impact

our three doing others they're one when and a continued thing other executing exceptionally environment. month the But well, gets well. little suppliers executing So better still are direction, but effort, in up teams exceptionally it's a that's lot it tough go of a for the

the same of others So when on puts one it what’s it and like seems they strain that's link the fixed consistent pattern year through first last supply and chain, held quarter. three that

Julio Romero

the from non the of have hospitals, that non are different key much the talk you to could these days are sub mix, centers, secondly, how versus sectors growth today? residential? If go you drivers the side, could then still residential warehouse, about, speak in on your market the coming past data same sales if is residential And in of

Bret Eckert

first it was take year. get the will into the to the second. quarter, of about for that for detail on But first I'll compares quarter the a XX% residential from Daniel one. the last standpoint XX%

So it's pretty consistent.

first at quarter residential like and quarter, XX% quarter. quarter at you on compared XX.X% residential the the you If fourth at fourth first were the we look in were like the to

So and steady it two. fairly between stayed consistent those

Daniel Jones

to the the was What phrase me Julio? want you question? answer, do How

Julio Romero

growth Just non-residential are asking sectors a on today? driving side, like sub which

Daniel Jones

good. the piece, commercial there's Well, deep on on categorically. demand are too side the into some getting details, that good changes the overall, it's Without

the approach. differences the of Some on

deliveries to driven is timing the service Again, that bit, side quarter. is deliveries, last our strengths, the timing of and the quote the The On of chaos. whole we're make the But orders and for finished and one delivery, drive materials, able little We've volatility the in little to which projects us, chaos paid were to in a helped solar really also is those because commercial raw seems quote is approach good good once have in compressed given, not side, off really side are quarter. really -- for step a with. industry in we more causing deliveries. the lot in That’s placed to purchase from when a bit timeframe in the pickup the custom be custom too The volatility quote the seen that. concerns delivery which that. drive that not dramatically, volume delivery has a shrunk it’s first side, us has quotes the toward to nice changed in of far of from but a industrial products those the The potentially. the

charge was in to able were for that it the we service and so And quarter. good volume

those a of volume would stand out some the So two over from maybe perspective others.

the stands to solar But has upgrade grid and So from the been then in as the perspective, around There's and QX I'd been being upgrade discussions. pipeline. something prep orders say good grid volume has and the that discussions of out actual data specifically. the really kind

Julio Romero

expanded stock just last repurchase about for talk me then plan. And one is, you the

business. buybacks, with in going confidence You've you allocation me thinking gotten much And about to good you're how looks aggressive forward. capital like more which have the underlying

Bret Eckert

announced that XXXX. buyback to authorization increasing shares March We expanded the X million through March, -- end of

first As now repurchased those in quarter. we've you the know XXX,XXX of

If you back we've even April March, of XXXX, back go million over started going shares repurchases, that when X.X to we in buyback over period. purchased the to this

buyback. then fill out integration after to us the costs continue and on And indication give growth be CapEx best and the on focused our to that the take a the we so in what quarter at and as see share execution start. And next think and I shipment, CapEx inter vertical the we to the deep with speed you to board's authorization of things the help use associated and and first good think environmental But continues order with highest to that. and and the

Operator

next [Operator [Ron Instructions] Private question comes Patel], Our Investor. from

Unidentified Analyst

going regarding I'm share that question buybacks. follow-up asked to just on the was

analyst or not terms trading The message $XXX. of deploy what can price coverage? are So potentially at do plans street that that delivering bought potential you your investor awareness as below of may manner? quarter of currently gives back and terms and in the this and tell shares to confidence That be a What stock investors increasing of last understanding increasing mentioned, an in I what ton think in that appreciating, in average you you you price. from capital wall is

Daniel Jones

typically the of that triggers the we've is about and we long time coverage and and look when Julio history utilize last shares. and our XXX,XXX as analyst great of March at value, Sidoti far in to had return experience highest very, the at at repurchases, we when in I got at through levels close have point we the started do and the April opportunity The shows back covered best at very when back side, shareholders. evidenced D. of stock Brent we growth both year the analysts, And back navigate started It to cash. XXXX, really you solid have us. I confidence what subsequent the as were and the best A The we you'd job. and XXXX that's buybacks use go of mean, more can of to and buying you in you A. They're a book bought to Davidson in think these look you our stock. a almost is at capital

so $XX. If $XX, you the sitting our month of look trailing earnings we're XX right now, PE, below four at over with little

so in confidence and are buybacks the much think the boar, at warranted. the levels that And very we all feel, still of the stock these including value

the directions board's we've end year. up million authorization got next the we and the I to see You X the with this with the still that spent XXX,XXX repurchased of good CapEx, intentions on that And $XX through that the spent very quarter $XX March quarter, first was in of with think Even again, shares of grew buybacks, a we on $XX million cash we use cash. the million the we million.

perspective, So to still leveraging to growth strong balance all from the resources opportunity sheet the the very CapEx other have remains a company with sufficient without uses. and fund to our very, cash of look

came the in announcement related the that and So alignment February that's to. what out

Unidentified Analyst

essentially they when And drop I off going and then could gross show drop look the -- as future? at and But margin are that mentioned, that far as anytime apologize kind polished as with just visibility? that the questions in I'm see wondering, could, if near Brent a off potentially gives estimates I off. of earnings you in forward you consistently drop probably And not, potentially gross margin what do as you not And through Julio’s. in future my

Daniel Jones

we shortages, that building the on really we're component make material think the my costs. A need and wire. the we and at debating look look but that look constraints better Obviously, the are this last you a said, be in you copper at -- pace. you still what you a that those came fourth expected a board And if the And raw the a can finished me the at able it see year margins there's always first access XX% didn't we would this, a did at in distribution year to tightness always the gradual of we didn't at all guidance, all kind and year-to-day and But a And abatement. in and chains difficult, out. know as producing quarter it look a significant that know where still quarters make demand it as and year, raw exactly seeing gradual and we We costs, towards them materials at tell look could We don't supply product. And gross around gross now, slower look world pace. across it just indication. margin then highlighted one year it's on Four each skilled what it's we it last now. to when to gradual. to at in from right you different We give you that tightness for had the you at factors look other good of we of considering we freight margin this, then plays has outlook, what we continuing that had if out abrupt it for XX.X%. the XXXX, in shown lot and We of basis We've the commercial today. last with as or really are comfortable of as abate. give more final last we're we thought it's probably I copper the said and of quarter, based we Ron, is in trim to most peaked look all pandemic, exists to feel more and that labor, abate. and the and perspective, June we they said, I residential

Unidentified Analyst

to you grid mentioned And -- my in question the seen upgrading installations. that the pickup the orders some is of last related related you've so to and solar

bipartisan the some Does to people's with of And residential grid, upgrading there's the the upgrading the -- infrastructure of of passing rural the I put and Does the some bill of wiring be floor Just in bill into concerns the this imagine the of on guess I future? houses broadband. upgrading get where well. as sales falling that With of to that perspective infrastructure off? new of might of some love sort that. home the -- there put your going passing forward sort with

Daniel Jones

upgrades As residential that measurement we copper the broadband square on a the definitely show we're strictly footage building that piece, far house The volt with manufacture into piece, wire. XXX would as based there's having. going each house the more

this demand of able these go from at a too will seeing, to that But into it's it, higher the see will be grid not there's already be should might to houses, as might not volume, XXX permits, to coming categorically, number -- vague. deep that. kind of And volume cables, increase service see answer with and trying volt may too coming But cable And to products category see thing we'll whatever get we're increase even hard that. there demand you it's be. forward. entrance for from contribute I'm to a the that upgraded, and is the bad in all our of demand for you'll there's quotes be kinds As building and it in we some participate

Operator

presenters no in questions this at I show queue. time, And further

Bret Eckert

enjoy your your Encore, Appreciate thank day. everybody. Appreciate I in Well, this and time morning. investment your

Operator

for concludes ladies your Thank This participation. you, conference. today’s and Thank you gentlemen.

may You disconnect. now