Greetings, and welcome to the Gibraltar Industries Fourth Quarter 2022 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Carolyn Capaccio of LHA Investor Relations. Thank you. You may begin.

Thanks, operator. Good morning, everyone, and thank you for joining us today. With me on the call is Bill Bosway, Gibraltar Industries’ Chairman, President, and Chief Executive Officer; and Tim Murphy, Gibraltar's Chief Financial Officer. The earnings press release that was issued this morning, as well as a slide presentation that management will use during the call are both available in the Investors section of the company's website, gibraltar1.com. As previously noted, Gibraltar classified the processing equipment business in the Agtech segment as held for sale with first quarter 2022 results has removed the related revenues and expenses from the processing business from its adjusted results and has taken a fourth quarter 2022 charge to write-down the carrying value of related assets. Gibraltar's earnings press release and remarks contain non-GAAP financial measures and tables of the reconciliation of GAAP to adjusted financial measures can be found in the earnings press release that was issued today. Also, as noted on Slide 2 of the presentation, the earnings press release and slide presentation contain forward-looking statements with respect to future financial results. These statements are not guarantees of future performance and the company's actual results may differ materially from the anticipated events, performance or results expressed or implied by these forward-looking statements. Gibraltar advises you to read the risk factors detailed in its SEC filings, which can also be accessed through the company's website. Now, I'll turn the call over to Bill Bosway. Bill?

Good morning, everybody, and thank you for joining today's call. We'll start with an overview of fourth quarter and full-year 2022 results, and Tim will take you through our financial performance, then I'll walk you through our 2023 outlook, and then we'll open the call for some questions. So, let's turn to Slide 3 titled 2022 Year in Review. The fourth quarter capped off a good year for Gibraltar as we stayed focused on execution of our key initiatives, while operating in a very fluid and challenging external environment. Our team continued to demonstrate speed and agility and quickly pivoted in response to changes in dynamics in our end markets. Our focus on what we can control resulted in profitability and margin improvement in the fourth quarter and for the full-year. For the year, we improved adjusted operating income 18% and adjusted EPS 19% on 5% revenue growth. We generated 6% free cash flow with sequential improvement in both margin working capital and expect our cash performance momentum to continue into 2023. As expected, our backlog decreased 12% during the quarter to $299 million, driven mainly by lower backlog in our renewables business. The solar industry continues to be impacted by panel availability as panel suppliers go through the learning curve with UFLPA importation requirements. And while demand in solar remains very robust, which is reflected by project design activity, customer verbal commitments and master supply agreement discussions, customers still remain in a holding pattern with actual contract signing and project scheduling. And as a reminder, our order backlog only includes signed purchase agreements with contracts and contracts with deposits. We do see some movement in signs that panel supply efficiency will strengthen as we move through 2023. And we know our customers are working diligently every day to develop…

Thanks, Bill, and good morning, everyone. Take you through our consolidated segment results, starting on Slide 7. Adjusted fourth quarter revenue decreased 5.2% to $312.9 million. Organic revenue decreased 9.8%, partially offset by a full quarter of quality aluminum products revenue in the Residential segment and revenue growth in the infrastructure business. The organic decrease related to volume impacts from the markets returned to historically lower fourth quarter seasonal demand patterns as supply chain reliability improved, along with market prices beginning to align with changes in commodity indexes and residential, along with continued impacts from project rescoping and rescheduling in our Renewables and Agtech businesses. Backlog at quarter-end was 299 million, down approximately 12% for fourth quarter 2021, with continued impacts from renewables customers owing greater visibility on near-term solar panel availability and project rescoping and rescheduling at Agtech, partially offset by continued demand in infrastructure. Adjusted operating income and adjusted EBITDA dollars increased 17.8% and 16.6%, respectively, in the fourth quarter with adjusted EPS up 28.6%. Quality aluminum products added $0.01 to our adjusted EPS in the quarter. Margin improvement in the quarter was driven by material cost alignment, additional field operations efficiency, price management, business mix and 80/20 initiatives in the renewables and infrastructure segments. Weighted average shares outstanding decreased 5.4% to 31.3 million shares in the fourth quarter, and I'll review our share repurchase program in a moment. Now let's review each segment starting with Slide 8, the Renewable segment. Revenues decreased 20.8% and backlog was down 17% as strong customer demand for solar products and services was impacted by solar panel suppliers navigation of panel importation guidelines covered by the UFLPA is enforced by the U.S. Customs and Border Protection Agency. That's affecting scoping and scheduling projects. With customers in a holding pattern until visibility on…

Thanks, Tim. Let's move to Slide 14, and we'll talk about our 2023 priorities. In the past three years and certainly in 2022, I'd say, we successfully managed through a number of external challenges by focusing on what we can control and simplifying our business. The external environment continues to be very fluid, requiring we stay this course. And so as I mentioned earlier, our priorities and focus are unchanged. We have plenty of opportunity in front of us to generate growth to drive quality earnings further, enhance our margin and generate good cash performance. So let's move to Slide 15, and then we'll move on to 16 to discuss key trends and initiatives that support the 2023 outlook for each of the businesses. Let's start with renewables. Our outlook overall assumes panel supply does improve in the second half of the year to support the robust demand pipeline of projects waiting to finalize sign and execute. We had a good bookings month in January as some of our customers continue to source panels through additional sources. We also expect the IRA guidelines for new and additional incentives to be finalized in the first half of 2023. That takes us to our key initiatives for renewals. First, the launch and ramp of our new 1P tracker product, which really complements our 2P offering, giving us a broad tracker solution portfolio for customers. Our eBOS growth initiative with C&I and utility customers is gaining momentum, supported by good and growing order backlog. And our 80/20 initiatives, customer line simplification, product line certification and project estimating management are improving our ability to efficiently scale and drive better margin performance as we execute on demand. Switching to residential. We expect the repair end market to remain relatively consistent with 2022. We expect the…

Thank you. [Operator Instructions] Thank you. Our first question comes from the line of Daniel Moore with CJS Securities. Please proceed with your question.

Thank you. Good morning, Bill. Good morning, Tim. I apologize for the background noise here. Maybe start with residential. Margins a little lower than we've seen. Can you kind of break that out? I think you said QAP was about 110 bps. Is that right? How much was absorption versus misalignment of input costs? And what's your outlook for Q1? And how quickly we can get back to those kind of mid-to-high teens margins we've seen over the last couple of years?

Yes, I can. So, you're right on the 110 of decline due to the QAP. That's just blending in a lower margin business before we complete the integration. Dan, it's mainly – I mean, there's a bit of absorption, right? Volumes are [lower, you] [ph] always had that. But it was mainly really the material cost alignment as prices declined, and we had to give price in some places and just getting the right cost material back in. Expectations are first quarter is going to be seasonally impacted again, but we expect for a full-year that will be higher than we were.

Sorry, Tim, you said you, you expect for the full-year to be higher than, [indiscernible] the last one than Q4 or than last year?

Than last year, right? So, year-over-year will be up.

Got it. Perfect. Switching to renewables. Just talk a little bit more about activity. I thought I heard you say a solid booking in January. I know it's early and the expectations, obviously, for much more improvement in H2, but anything you can talk to in terms of what discussions have looked like year-to-date and what your visibility looks like into would you expect backlog to start to improve, that would support the fiscal overall 2023 guide? Thank you.

Yes. So Dan, we – our renewables business is not projected to go a lot in 2023 just because the way the plan is built due to the UFLPA and the ramp in the second half. What's been good news around this front is customers are finding ways to source panels that are not necessarily governed by the UFLPA panels coming from different countries or different sources that are not sourcing raw material that is the subject of the entire import process in the first place. So, what that means is the spicket still hasn't turned all the way on for the industry. But if you're aligned with the right customers, you have the potential to continue to drive backlog improvement. And I would expect that to start picking back up as we go forward in the year and a lot of – I can't tell you how robust activity is, as if we don't have a panel supply issue in the industry. It's just a lot of pent-up demand, but I think our backlog will continue to build and you start to see it turn as we move later into the first quarter into the second quarter, first half of the year, I think you'll start to see improvement. As UFLPA opens up, hopefully, you'll see that really start to take off. Backlog is one thing. And then the question is when the panels start to flow in, how quick can industry respond to that opportunity. And it won't be flip to switch because it's – you got to get the engine going again across the industry, but I do think second half will build as we have built in the plan. So, backlog shouldn't start improving in the first half to some degree. And then hopefully, we'll continue to build in the second half as we build the plan around that.

Perfect. And maybe last, just talk a little bit about, obviously, the guide is a little bit more weighted toward the back half, given probably near-term softness in renewables, as well as the seasonality in residential. Any guidance in terms of either revenue growth or kind of EPS Q1 and H1 relative to H2? Thanks.

Yes, I would just say we're going to – we feel like we're going off to a solid start. We expect to get off to a solid start in Q1, and we'll have more and more visibility on timing of how things will flow by quarter as we go into the year versus, kind of how we built the plan. So, as we said up front for the full-year, we feel in both top line and bottom line, we can grow a little bit and we can drive margin expansion and EPS improvement. How that flows in the year, I think we'll learn a little bit more as we go through each quarter, but we feel like we'll get off to a good start, our solid start, and we'll take it from there.

Great. I’ll jump back with any follow-ups. Thank you.

[Operator Instructions] Our next question comes from the line of Julio Romero with Sidoti. Please proceed with your question.

Thanks. Hi, good morning Bill and Tim. Maybe to start off on the Renewables segment. If you could maybe talk about the revenue mix you saw in the fourth quarter, just the 15% op margin was – seemed really impressive there. I'm just curious what kind of mix changes you saw?

I wouldn't say there's a whole lot of mix changes fully as much as it was just the continuation of the effort the team was putting forth and driving execution. So, if you recall, going back to the beginning of the year, where we're struggling with – when the panel situation really hit the industry, and we had a lot of field operational inefficiency associated with project movements and so forth. That starts to settle down as the year goes on You get your arms around the projects that are actually have panels associated with them, you're working directly with customers. And we've just done a tremendous amount of work on our ability to execute in this environment differently than we would have a year prior. So, a lot of 80/20 associated with starting from estimating all the way through project management down into the field working the supply chain and working on material productivity. It's a combination of a lot of things that started to build over the last 8 months that just drove better productivity and better performance on the margin side. I don't think – we did all that in a down environment in the second half, which we expected – if you guys recall, we expected revenue to slow in the second half of the year as bookings did because of panel availability and we shifted our focus to make sure that we could drive better performance even in a down environment, but it had really nothing to do with sales mix, if you will.

Okay. No, that's really helpful. And I appreciate the color or the alleviation of the field op inefficiencies there. I guess when you talk about how you're thinking about the segment for 2023, I think you mentioned in the prepared remarks you expect progressive revenue growth in the renewable segment throughout the year. How about on the margin front? I mean can you maybe speak to the cadence of margins expected and how that should flow throughout the year?

Yes. I would – our plan is built on margin improvement in that segment for the year. And it will correspond somewhat with – as the revenue flows as well. So, our hope at the end of the day is that – our plan at the end of the day is as the volume starts to come back, the top line starts to accelerate, we'll be able to leverage that incremental or leverage that growth in a better way than we could have a year or so ago because of what I just described in terms of improvements that are being made. But I think that will build in the course of the year just as the – it will correlate with the, I think, the sales growth that comes throughout the course of the year as well.

Okay. That's helpful. And I guess, just last one for me. You saw some very solid free cash flow in the fourth quarter. I guess the 10% guide for 2023 is based on additional reduction of inventory or are there any moving parts expected with receivables or payables at all?

Two things that drive for us. One, just margin expansion, that's the core. And then two, just with supply chain situation much different than it was. It enables us, along with some things we've done internally to just drive down the amount of inventory that we've had to invest in the last two years. So those two things really are what's going to drive cash performance. And frankly, we expected the supply chain to get a little bit better sooner than it did in 2022. It took probably an extra quarter or two again, as we're going through yet another shift in the macro world, but we see that much more stable, and that's going to drive, as we mentioned in the prepared remarks, the ability to align inventory and demand to seasonal demand in a different way. And so, we've been working on that for the last 6 months. We have more work to do, but that's where the cash performance comes from those two.

Makes sense. Thanks a lot guys.

Thank you. We have reached the end of the question-and-answer session. Mr. Bosway, I would now like to turn the floor back over to you for closing comments.

Well, thanks, everyone, again, for joining us today. We will attend the Bank of America Clean Energy Leaders Conference next week in Boston. And we also expect to present at the Sidoti Small Cap Conference in late March. And of course, we look forward to updating you again when we report our first quarter results. So, with that, I want to say thank you once again, and have a great rest of your day.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.