ROCK Q3 2026 earnings call transcript, November 5, 2026

And welcome to the Gibraltar Industries Third Quarter 2026 Financial Results Conference Call.

All participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I would now like to turn the conference over to your host, Carolyn Capascio of Alliance Advisors IR. Thank you. You may begin.

Thanks, operator, and 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 Joe Lavecchio, 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. Gibraltar's earnings press release and remarks contain non-GAAP financial measures, tables of reconciliation, of GAAP to adjusted financial measures can be found in the earnings press release that was issued today. Please note that the acquisition of Omnimax International closed on February 2, 2026, and the results of Omnimax are included in continuing operations as of that date. 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 guaranteed the 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, details, and its SEC filings, which can also be accessed through the company's website. Now I'll turn the call over to Bill Bosway. Bill?

Hey, good morning, everyone.

Thanks, Bill, and good morning, everyone. I first want to just personally thank Bill for the opportunity to serve over the past two and a half years. It's really been a true honor and a privilege to work with Bill and the team, and I'm very proud of our shared accomplishments to transform the business. Although excited about my next opportunity, I'm confident in the direction of the company. And look forward to its continued success. Now let's start with residential on slide six. Segment net sales increased $168.7 million to $399 million, up 73%, driven by the inclusion of Omnimax results of operations, which contributed $161 million, and segment organic growth of 3.1%, while the building products business grew organically 4.1%, if you assume we owned Omnimax in Q3. 2025. We drove growth through price and participation gains, which helped overcome a slow end market. Adjusted EBITDA margins were essentially flat compared to second quarter of 2026 at 18.9%, as our acceleration of integration actions preserved profitability despite lower sequential volumes and incremental cost inflation in steel, logistics, and diesel fuel. Our cost and commercial synergies generated by the Omnimax integration realized $7.8 million in Q3. for a year-to-date total of $14.5 million, and we expect those to continue to ramp going forward. So, guys, let's move to slide 11. Let's talk a little bit more about the U.S. roofing market.

As I mentioned earlier, single shipments were down 13% versus prior year and 22% sequentially. Shipments are down 7.3% on the year-to-date basis, and over the last two years, shipments in the third quarter are down 22%. As I mentioned earlier, the Tling the Tling the Tling the Tling the Tling the Tlingly the Tling the Tling the Tling chegar region stadium in Youtube We he is ready to show the Tling the Tling system in and demand continues to vary significantly by region with the Northeast down mid single digits in the Southeast and Southwest down much more the large markets of Florida and Texas experiencing the most softness in these respective regions. On a positive note the Midwest was up double digits and the West was up slightly. Coming into the third quarter we expected the market to be down approximately 5% due to pull ahead of purchases in Q2 ahead of price increases and soft point of sale results. the retail channel which were down 8% to 10% in Q2. I think our industry was a bit surprised by the swift deceleration in demand starting in early August which correlated with rising interest rates and fuel prices, further slowing of existing and new home sales and new construction starts and general affordability becoming more challenging for existing and potential new homeowners. Retail POS sales were also down 5.1% in the quarter and retail POS resulted results. It's varied by region as well. If you compare our building products growth to the overall market and regional markets, our team performed very well. Actually, by region, our sales in the Northeast were up 8.2%, the Midwest up 23.2%, flat in the Southwest, the Southeast was down 21.7%, and the West was down 10.3%. Effectively, we outperformed the market in four of the five regions indicated by the positive spread between Gibraltar growth rates and markets.

In today's market, commercial strategy remains unchanged. We have to win more with customers. We have to execute our recent participation gains well, and we have to drive more value-added solutions, lowering the cost of business for our customers. At the same time, we must continue to optimize the structure of the business for this market environment and execute more synergy and productivity initiatives. And with that, I want to turn to slide eight, and we'll give you an update on our 2026 energy savings. And the additional initiatives started and are completed in the quarter. First, we increased our 2026 annualized run rate savings 7.3 million to 36.5 million, which drives 19.5 million of realized savings by the end of 2026. We have effectively surpassed our year three synergy target in the first eight months of integration, and we know there's more opportunity to pursue. In Q3, we realized 7.8 million of savings, bringing our total... ...realized to 14.5 million since February. The additional 7.3 million added during the quarter is related to SG&A productivity and 8020 and plant network initiatives, specifically recent initiatives in the Northwest and in Florida. So let's turn to slide nine, and I'll highlight some of the results in three of our 11 integration work streams, one of which ties to the 8020 and plant network initiative in the Northwest that is contributing to the 7.3 million increase.

and annualized run rate savings added during the quarter. This initiative really had two objectives. First, optimizing our plant network to improve service and costs with the consolidation of two facilities, and second, simplifying our product line to reduce SKU complexity and the cost of doing business for us and our customers. We're consolidating SKUs from 1,100 to 620 across existing product lines. It's a 44% reduction. We have recently exited a product line, and we are starting to consolidate brands across the region. This is a good step in piloting what we believe can turn into strong value proposition for our customers. We also have another win in our commercial go-to-market workstream, where we recently were recognized by Lowe's as their Building Products Vendor Partner of the Year. Obviously, we're very grateful to Lowe's for the – well, really, we're grateful to the Lowe's team for their trust in us, their support, and, of course, the recognition, and we really look forward to serving and supporting them even more in the future. And finally, from our information technology workstream, really good work since February in advancing ERP consolidations and implementations with two conversions completed and four remaining, and work in process with common analytics, CRM systems, and network infrastructure optimization. Now let's move to slide 10, and we'll talk ag tech. So on slide 10, net sales grew 3%, but were lower than expected as a result of –

of CEA and structures customers experiencing construction permit delays and reprioritizing store-build schedules. For our CEA projects, permits are starting to receive approval, with one of our larger projects now scheduled to begin later this month, and we anticipate more project permit approvals in Q4. Backlog at quarter-end was $45.6 million, down 55%, but post-quarter-end we were awarded a $75 million CEA project, and we – we expect additional CEA project awards in Q4 as well. Our design and engineering backlog remains very robust as customers are expanding capacity to support accelerating demand for indoor-grown fruits and vegetables. Adjusted operating and EBITDA margin improved by 420 and 380 basis points respectively, driven by volume, business mix, and 80-20 operating initiatives. Our in-house powder coating capability is now in place and expected to drive cost productivity. to support higher margin for lettuce and berry CEA projects going forward. Now let's move to infrastructure on slide 11. Net sales were down 7.8%, partially driven by lower volume of fiber optic steel products, as our partner customer has pilot still in process with various municipalities. Order backlog increased 10% in the quarter, and post-quarter end, we were awarded another bridge project valued at over $7 million, further building backlog in the fourth. Margin was impacted by lower volume and product mix. As noted earlier, we entered into an agreement in October to sell our infrastructure business and will reclassify its result of operations as discontinued in the fourth quarter, 2026. We expect the sale to close in Q4, subject to customary closing conditions, including receipt of required regulatory approval. Given our remaining capital loss carry forward of $80.8 million entering this year,

as well as the expected net ordinary loss of approximately $130 million from the two renewables transactions this year, we expect this to be a highly tax-efficient transaction, maximizing the gross proceeds from the sale to reduce debt. Let's now move to slide 12 to touch on our balance sheet and cash flow. Gibraltar's policy with respect to cash allocation during the debt paydown period will be to keep a minimum amount of cash on hand, use the revolver as needed to fund working capital. paydown debt with excess cash flow. During the quarter Gibraltar generated 9 million in operating cash flow from continuing operations. We used 8 million from discontinued operations. We generated free cash flow from continuing operations of 8 million or about 2% of sales. We used 32 million for working capital primarily impacted by two items. First about 25 million due to the timing impact of ag tech deposits with revenue shifting out. Second, we had expected tax refund benefits of approximately 30 million in the quarter, and the timing of that benefit has been pushed out. The company's U.S. federal consolidated income tax return is under examination for 2024. As we focused on that work, the filing of tax returns was later than originally expected, pushing out the expected receipt of those tax refund benefits. Capital expenditures were 1.4 million or less than 1% of sales, and at quarter end, we had borrowing on our revolver of 40 million.

And our cash on hand was 35 million. At quarter end, net debt on the balance sheet was 1.2 billion, and our net leverage, which includes anticipated synergies, as allowed in our credit agreement and the pro forma adjusted EBITDA was 3.9 times. The availability on our revolving credit facility was 451 million, and total available liquidity was 486 million. Let's review our deleveraging roadmap on slide 13. Our priority and focus remains to deleverage our balance sheet as quickly as possible through EBITDA delivery, synergy realization, working capital optimization, and utilization of cash tax benefits, as well as the application of asset portfolio simplification profits to debt reduction. Our planned uses of cash include capital expenditures of approximately 1% of sales, interest payments on our long-term debt, and special charges related to acquisition, transaction, integration, and restructuring-related costs. The special charges we reported today for the third quarter were $9.9 million. Year-to-date, we have recorded $51 million of special charges. As a result of our acceleration of certain integration activities, we now expect special charges to total $60 million in 2026, of which we have incurred approximately 85% to date. We expect to apply over $200 million of the proceeds from the closure on the sale of the infrastructure business, which is expected to occur. before the end of the year, which would bring our expected net debt below $1 billion, which is lower than our previous expectation of $1.1 billion for year one net debt post the close of the OmniMax acquisition. During the second year post-transaction close, we continue to expect strong, solid cash flow generation from expanding EBITDA, the realization of implemented synergies, benefits from working capital optimization, cash taxes, lower interest payments from reduced debt,

as well as lower special charges, as well as the benefit of timing items that have now moved from this year to next year. As a result, our net debt level is expected to be below $800 million in 24 months ended first quarter of 2028. Again, during this two-year period, our capital allocations will be focused on funding the growth of our business through capital expenditures and on debt reduction. In line with our long-term strategic plan, we continue to evaluate our mix of assets, including executable divestitures. of non-core assets that are in the best interest of shareholders, which could create additional liquidity for debt reduction. Let's now move to slide 14, which walks through the changes to our 2026 guidance, including the effect of lower-than-expected third-quarter results, a lower fourth-quarter outlook, as well as the reclassification of infrastructure as a discontinued operation in Q4. Our revised outlook for 2026, before adjusting for infrastructure... ...has now consolidated net sales between $1.73 billion and $1.75 billion, compared to $1.14 billion in 2025. Adjusted operating margin between 10.4% and 10.6%, compared to 13.3%. Adjusted EBITDA margin between 15.2% and 15.5%, compared to 16.3% in 2025. Gap EPS between $1.12 and $1.27. compared to $3.25 in 2025, including the expected impact of special charges related to acquisition, transaction, integration, and restructuring-related costs. Adjusted EPS between $2.70 and $2.85, compared to $3.92 in 2025. Free cash flow percentage of sales of 2% compared to 8% in 2025. This revision assumes the lower EBITDA guidance, as well as the timing change.

of expected tax refund benefits now assumed in early 2027, as well as the timing impact of AgTech benefits moving to 2027 with the shift of revenue out of the second half of 2026. Again, we expect to deliver on our debt reduction schedule due to the pay down with expected proceeds from the sale of infrastructure. Now, adjusting for infrastructure being reclassified as a discontinued operation in the fourth quarter due to the signing of the agreement in October, our revised guidance for 2026 continuing operations is as follows. Consolidated net sales between $1.64 billion and $1.66 billion. Adjusted operating margin between 9.7% and 10%. Adjusted EBITDA margin between 14.7% and 15%. Gap EPS between $0.64 and $0.79. Adjusted EPS between $2.25 and $2.40. And free cash flow. Approximately 1% of sales. Key assumptions in this revised 26 guidance for continuing operations include total depreciation, amortization, and stock comp expense of approximately $80 million. $60 million in special charges related to acquisition, transaction, integration, and restructuring costs. Higher than our previous estimate as we accelerated synergy cost reduction initiatives in building products, including facility consolidations. Over $70 million. And interest expense, financing, and commitment fees, which will be dependent on the timing of our debt repayments and interest rates. And finally, a 26% adjusted tax rate and a 35% GAAP tax rate assumption. Now let me turn it over to Bill.

Thanks, Joe.

Our first question comes from the line of Daniel Moore with CJS Securities. Please proceed with your question.

Our next question comes from the line of David McGregor with Longbow Research. Please proceed with your question.

Yep. As a reminder, if you would like to ask a question, press star one on your telephone keypad.

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.