Atkore International Group Inc. Aktie

Good morning. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to Atkore's Second Quarter Fiscal Year 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. Thank you.

I would now like to turn the conference over to your host, Matt Kline, Vice President of Treasury and Investor Relations. Thank you. You may begin.

Thank you, and good morning, everyone. I'm joined today by Bill Waltz, President and CEO; John Deitzer, Chief Financial Officer; and John Pregenzer, Chief Operating Officer and President of Electrical. We will take questions at the conclusion of the call. 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 and today's press release, which identify important factors that could cause actual results to differ materially from those contained in our projections or forward-looking statements. In addition, any reference in our discussion today to EBITDA means adjusted EBITDA, and any reference to EPS or adjusted EPS means adjusted diluted earnings per share. Adjusted EBITDA and adjusted diluted earnings per share are non-GAAP measures. 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, Matt, and good morning, everyone. Starting on Slide 3. We are pleased with our second quarter performance. We achieved net sales of $731 million and adjusted EBITDA of $81 million. Adjusted EPS came in at $1.23. All 3 metrics were sequentially better than our Q1 performance. Organic volume also increased 5% year-over-year in the second quarter with contributions from both our Electrical and S&I segments.

Following strong productivity improvements in FY '25, we continue to see solid productivity gains again this quarter after a very strong Q1 as well. Our productivity savings reflect our commitment to manufacturing efficiency and cost reduction. After the quarter concluded, we completed the divestitures of our high-density polyethylene or HDPE business, and we also just announced the sale of our surface protection and powder coating business in Belgium.

We will continue to operate our metal framing and cable support systems facility in Belgium, which supports the electrical infrastructure market. These divestitures are part of a broader review of strategic alternatives, which we announced last year. To date, in addition to the HDPE and Belgium divestitures, we completed the sale of our Tectron tube mechanical product line, ceased manufacturing operations at 3 U.S.-based facilities and sold our Northwest Polymers recycling business.

Each action represents what we believe are initiatives that will enable long-term shareholder value creation. We will continue to provide updates on our ongoing strategic alternatives process as we move forward. In addition, we announced last week that the company entered into agreements to settle 2 of the 3 punitive classes in the PVC Pipe antitrust litigation. The combined proposed settlement for the 2 punitive classes is $136.5 million and is reflected in our second quarter results. We anticipate making payment within the third quarter.

Looking ahead to the remainder of fiscal '26, we are on track to deliver our outlook for adjusted EBITDA and our adjusted EPS. At the 6-month mark of our year, we remain focused on several continuous improvement and growth initiatives that are expected to create value this year and for many years to come. I'd like to take a moment to thank all of our employees for everything they do to support our key stakeholders.

With that, I'll now turn the call over to John Deitzer to walk through the results from the quarter and provide more details on our outlook.

Thank you, Bill, and good morning, everyone. Moving to our consolidated results on Slide 4. In the second quarter, we achieved net sales of $731 million and adjusted EBITDA of $81 million. Adjusted EPS was $1.23 per share compared to $2.04 in the prior year. We are pleased to see a year-over-year improvement in our net sales, which reflects increases in both organic volumes and average selling prices. This was the first quarterly increase in net sales since the fourth quarter of fiscal 2022.

Our net loss for the quarter includes several one-time items. As Bill mentioned, we reached an agreement to settle 2 of the 3 classes within the PVC antitrust litigation matter. We recorded a pretax liability of $136.5 million, which is reflected as a nonoperating expense in our second quarter results. Additionally, we recorded certain items associated with our recently completed strategic actions, including accelerated asset depreciation at the recently exited manufacturing sites as well as asset impairments and adjustments in carrying value related to the recent divestitures.

Our tax rate in the second quarter was approximately 22%, a decrease from 24.7% in the prior year. Our second quarter income tax rate and benefit realized reflect the impact from several discrete items that I just referenced. Separate from these discrete items, the growth we've achieved and expect in our solar business this year has generated additional tax benefits compared to the prior year.

Turning to Slide 5 and our consolidated bridges. Organic volumes were up approximately 5% compared to the second quarter of fiscal '25. Our average selling prices increased 1.5% during the quarter, which included products from both our Electrical and S&I segments. For example, our steel conduit and cable products both increased their average selling prices, while our PVC-related products declined within our Electrical segment. Our mechanical tube products saw selling price increases within our S&I segment.

Moving to Slide 6. Our year-to-date volume is up mid-single digits compared to the prior year. 4 out of our 5 product categories have grown throughout the year. Our metal framing, cable management and construction services offering continued to benefit from data center growth, both in the U.S. and internationally. It is worth noting that these products and services grew approximately 10% in the first 6 months of fiscal '25. Despite the high comparability, these products and services are growing again in fiscal '26.

Our plastic pipe conduit and fittings products saw growth in both our electrical and water products during the most recent quarter. Metal electrical conduit continues to see healthy end market demand, particularly for larger sizes of steel conduit. Our specialty conduit products, which include stainless steel and fiberglass are also growing due to increased market demand. Our mechanical tube business, which includes our solar-related products is growing as we expected due to better momentum for large utility scale solar projects.

As we previously communicated, we are shifting certain available capacity from our existing nonsolar mechanical products to our electrical conduit products as part of our 80/20 initiative. This will continue to occur throughout the year. Overall, we continue to expect mid-single-digit volume growth for the full year.

Turning to Slide 7. Net sales increased year-over-year in our Electrical segment, driven by higher volume growth and higher selling prices. Adjusted EBITDA margins improved sequentially from the first quarter, while still lower compared to the prior year. Net sales in our S&I segment were lower compared to the previous year. The segment saw higher volume and average selling prices.

However, these gains were offset by the year-over-year impact from our Tectron tube product line that we divested in the first quarter as well as incrementally higher tax credits passed to solar end customers. Adjusted EBITDA and adjusted EBITDA margins both decreased year-over-year. During the second quarter last year, the S&I segment benefited from approximately $11 million of mostly one-time project-based benefits.

Turning to Slide 8. Our ending cash position for the quarter was lower than our fiscal '25 ending cash balance. However, our second quarter ended prior to receipt of approximately $46 million of anticipated customer payments that occurred at the end of the calendar month. Excluding this timing aspect, we generated approximately $19 million of operating cash flow, highlighted by better inventory efficiencies.

In addition, our March net sales per day were the highest of any fiscal month over the past 3 years, reflecting a higher ending accounts receivable balance that will be collected in subsequent months. Our balance sheet remains in a strong position with no debt maturity repayments required until 2030.

Moving to Slide 9. We continue to expect volume growth to be mid-single digits for the full year. This growth is expected to be driven through a combination of nonresidential construction growth as well as contributions from certain initiatives such as solar and global construction services. We are adjusting our expectation for net sales to reflect a reduction from our HDPE divestiture and the divestiture of the 2 facilities in Belgium.

For the full year, we expect net sales to be in the range of $2.9 billion to $2.95 billion. We continue to expect adjusted EBITDA in the range of $340 million to $360 million and adjusted EPS in the range of $5.05 and $5.55. The tax rate for the third and fourth quarter are expected to be in the range of 22% to 24% to approximate our adjusted EPS. As we look at end market demand, we expect our third quarter to grow sequentially in net sales, adjusted EBITDA and adjusted EPS from Q2 and then slightly grow sequentially from Q3 to Q4 in all 3 metrics.

With that, I'll turn it to John Pregenzer to give an update on our strategic actions and our long-term focus.

Thanks, John. Turning to Slide 10. To date, we have successfully executed several strategic actions. Since Q1 of this year, we ceased manufacturing at 3 U.S. facilities on schedule. I want to recognize and thank our teams for their commitment to improving our operational footprint and cost structure while delivering a positive customer experience.

In April, we successfully divested our HDPE business, which included 5 manufacturing facilities. As part of this transaction, Atkore will retain a 10% ownership interest in a combined business that includes InfraPipe's existing HDPE business. Excluding the impact of our HDPE business, the electrical adjusted EBITDA margins would have been around 150 basis points higher in fiscal Q2.

Additionally, we divested our surface protection and powder coating business located in Belgium. As we reflect on actions taken to date, we remain committed to utilizing the Atkore Business System to create shareholder value by improving operational performance, delivering consistent productivity and serving our customers with a highly diverse electrical infrastructure portfolio.

Long-term electrification trends remain strong, and Atkore will continue to make strategic decisions with these trends in mind. In the meantime, there is more work to be done this fiscal year. As John mentioned, we expect volume growth to be mid-single digits for the year, and we believe the second half of the year will build upon the growth we've seen in the first half of the year. The electrical industry is a great place to be, and our operational and commercial teams are well positioned to capitalize on these opportunities globally.

With that, we'll turn it over to the operator to open the line for questions.

[Operator Instructions] And your first question comes from the line of Andy Kaplowitz from Citigroup.

Could you give more color into what you're seeing in the overall markets in terms of volume and the drivers of that volume? Because when I look at your volume growth, as you said, you moved up nicely into the mid-single-digit range in Q2. I know you only reiterated your volume growth assumptions for the year, but I think you said data center growth up 10% in the first half. But does that start to ramp up in earnest in the second half? Any color on how big as a percentage of the business data centers is at this point? And is there something that's offsetting that growth in the second half?

I'll start on some of the items I referenced, Andy, and then I'll turn it to Bill and John to give a more macro perspective. The 10% was in reference to the metal framing, cable management and construction services business that grew 10% last year. So we had a tough comp in that business, but we're still up low single digits. So we're pleased to see that, and we also see that as a real opportunity for us in the back half of the year.

I think John Pregenzer in his comments talked about we're well positioned commercially here to continue to capture some projects in that construction services and metal framing business really as we ramp in the back half of the year. So that will be some areas where we can outperform the market and get to that mid-single-digit outlook. So that's the clarification that was in -- the 10% was the last year growth in that sub business. But I'll turn it to Bill here to give some perspective here on the macro because there are some pockets of strength in items.

Yes. So Andy, following up on John's comments. Overall, the markets are good across virtually everything. I would characterize -- data centers are double-digit growth. So anybody obviously happily as I'm sure you're seeing with your coverage that is focused on data centers or preponderance of their products should be growing, I think, organically double digits.

For our products in that area, we're seeing high growth with those products, whether it's the metal conduit, larger diameter PVC, the metal framing and so forth that John Deitzer just mentioned. Other products are probably in the low single digit to mid-single -- other vertical markets are probably in the low to mid-single-digit growth. The things I would call out, and this correlates with like if you or anybody else to look at Dodge would see probably the same thing. The low markets are office buildings, if you strip out Dodge as a separate category and residential still seems to be slow but growing. And then obviously, on the other end, data centers are the highest growth.

The one thing from our voice of customer of optimism talking to our distributors is kind of the manufacturing and industrial feels like they're optimistic for the future, which I don't know if Dodge calls out. Final statement there before I told us are too long is in talking to our customers, they're optimistic, good backlogs for the rest of this year as a holistic statement.

Just one follow-up there, Bill, John. Like do you -- you've been working on initiatives like construction services for a while, and it seems like it's starting to ramp up. So does that mean data centers play a bigger role for you guys? I know it's hard to sort of break out the exact sales. But as you sort of go to the second half of this year and into '27, should we see a bigger role at Atkore from data centers given your initiatives?

Andy, this is John. For sure, data centers are a big part of what we're doing global -- on the global construction services side. And as we look on the back half of the year, that's going to drive a lot of the growth that we're projecting. Also, we're seeing continued pickup in solar. So those will be 2 key areas that are going to drive what we're going to expect to see in the second half.

Yes. And Andy, I'll just follow up. These are real rough, call it CEO math. But if you figure overall, markets are growing. And again, we're always talking, by the way, volume, as you know, other -- whether a distributor or manufacturer with positive price in their products, add the 2 plus inorganic growth and sum them together. But just organic volume, I'm going to say the market is up, let's just say, 2.5% to 3% and then our self-help, as John Pregenzer just walked through with data centers, the solar torque tubes, PVC, water, those type of things, should add another 2.5%, 3% that you get somewhere around that mid-single-digit growth.

That's helpful. And then the other thing trying to figure out is the dynamics of price versus cost. I think last quarter, you said that baked into your guide was not a lot of additional spread given all the moving pieces. But obviously, as you guys have seen general upward trajectory of commodities, it looks like you've had some continued cost headwinds. So maybe give us more color on the spread you're seeing in the major commodities that you traffic in, whether it's steel or PVC. Are they getting more favorable at all in terms of the spread? And then how much of a hit are you taking with aluminum and copper, for example?

Andy, I'll start with some of the dynamics that we experienced here in the second quarter and then we're probably seeing in the back half, and then I'll kind of let Bill give any comments here also on the market dynamics. In the second quarter, in particular, we probably actually saw more of a steel impact in our costs because that was really the last year when we look back, it was the transition from our fiscal Q2 into fiscal Q3, go back to April of last year, Liberation Day, et cetera. That's where we saw the real spike occur. So our costs this year in the quarter were related here also with the -- primarily in the steel area.

As we look forward in Q2 and looking forward into Q3, we are seeing that dynamic with copper and aluminum that impact our cable business. We are recovering a portion of that through higher selling prices, but that is definitely an area where we're seeing significant spread compression. And for us, the cable business is about 17% of company sales. And it was down in volume, but flat in revenue. So we did pick up a portion in price, but that decline in revenue also has an unfavorable impact to the cost structure and the margin. So that's an area of compression for us right now.

But on steel, we have had several quarters here of sequential price increases on our steel-related products. I think I mentioned that in my comments. So we are positive here on seeing some of the trends. We were up for the first time in revenue year-over-year since the fourth quarter of 2022. Now that's on a sales basis, not on a profitability basis, I understand. But we are seeing some positive here momentum, and we'll see if that can continue. Anything...

Yes. The only thing I would add, Andy, to that, and I did read your pre-guide this morning is most commodities, as John just mentioned, steel, but copper, as you go year-over-year is up, PVC resin is up at the moment -- I'm saying at the moment, but if we're sitting here at the beginning of May. But as we hold our guide -- and by the way, price for gas and everything else for trucking is up. But as we hold our guide, we feel comfortable with that. Obviously, one could infer that we're getting enough price to cover those costs as we go in the second half. So, so far for the year, there's always puts and takes in our product line and different things, but we're -- things are playing out as we expected.

Your next question comes from the line of David Tarantino from KeyBanc.

Could you give us an update on both the strategic review and the ongoing cost savings program? You've announced a number of pruning deals and cost-saving initiatives. But could you give us some color on how you're thinking on the review on a go-forward basis? Are we still contemplating a broad range of outcomes here?

Yes. So I'll do it in reverse order. I'll focus on the initiatives. I think the initiatives that we've laid out last fall, we've now hit everyone. In other words, as John Pregenzer covered in his remarks, we successfully compliment, as John did, the employees that did it really well, the 3 facilities on track for hitting, as we called out in the last quarter, $10 million to $12 million of annualized savings. there could be a slight upside to that.

We divested everything that we had planned for, including the major one was HDPE, but including the small non-core operations in Belgium here just in the last day or 2, et cetera, et cetera. So those things are all -- and they all went very successfully. The facilities have been moved kind of on schedule, probably in less cost overall than even we expected. So those things are all going well.

As for the overall holistic strategic review, both the Board and we have announced a strategic review committee are still considering kind of all options. They're being diligent. But beyond that, to say a time frame or whatever, the Board does not want to get locked into doing what they perceive as best for the shareholders, but whatever time schedule that takes.

Okay. Great. That's helpful. And maybe on the top line, nice to see pricing contribute positively. So could you give us some color on what drove the positive inflection here? It sounds like primarily in steel, but maybe some color on what you're hearing in the channel and what you're seeing from the level of imports would be helpful.

Yes. So a couple of things. Thanks, David. Obviously, the under -- it's not a direct correlation, but the underlying commodities have a factor. We've always said in my mind, the first thing is supply and demand. From there, it's the cost of the commodities. But overall, as I referenced, I think, to Andy's question, if you look over the year, copper is up, steel cost is up, resin costs are up.

So -- and as I referenced, we're passing those things along. As I look out over the next year, for -- and you guys -- you specifically, David or anybody else can reference. But hot-rolled steel, commodity futures are basically flat for the rest of the -- I'm saying for the next 12 months, but above $1,000 per ton. PVC resin, at least what we're hearing or seeing from different people is they're going to stay up through the end of the year -- our fiscal year, and they always drop some. But now I'm a little beyond my skis here. In other words, I would check with others that are experts.

But in the U.S., natural gas is used to create PVC resin, not oil, but there's still a correlation that I saw a statistic like March exports were up 20% or something going overseas, i.e., the U.S. competitiveness to ship overseas is up. So I would expect them to keep their resin cost to us and others up.

So I think the underlying commodities are up. And I think supply and demand, as I referenced in the earlier question where the markets are healthy. You could see -- and the last point, you could see if you check the public corporation for distributors, I think they're having -- they're being able to pass along the cost to contractors and so forth. So it's a good environment for us to continue to drive forward in.

And then just the level of imports?

Great question. Apologize if you asked that in the first round. Imports, I would do the following thing. Steel -- and I'm looking back over the last 6 months because I'd tell you, it's really spiky by month and even quarter. So I don't want to give false precision for any time frame. But steel conduit imports for the last 6 months are down as we've already alluded, the markets themselves are up. So that's helping us.

Continuing supply-demand, domestic, international, so forth with good markets to drive pricing that John Deitzer spoke of. PVC products are still coming in, growing, I guess, again, it depends on the quarter, but I would say with the markets and so forth. But again, the markets are relatively strong there. So...

Your next question comes from the line of Deane Dray from RBC.

Bill, can we follow on that last point. Just with regard to some of the imports, can you be more specific? Because we're all watching the level of imports from Mexico on the steel conduit side. At one point, it was in the low 20% of the market. It had come down into representing high teens. Where is that today? That's -- really will help us calibrating here.

Yes. John Pregenzer, do you want to give a...

Yes, Deane, I think when you look at Mexico, there's been a continual steady decline in imports month-over-month, specifically from Mexico. So where it was in the low to mid-20s at one point, we would probably estimate it's in the high teens to mid-teens at this point. But that's one area where there has been some declines. There's been some offsets from other countries importing in, but that would be the situation for Mexico.

Yes. And Deane, I don't have with me, and I don't know if we'd share the precise number versus John's guide. But just to follow up on David's question, and again, I don't want to get -- it does bounce. So I don't want to give too level of false precision. But as we called out on our Page 6, where metal electrical conduit and fittings are up mid-single digits for the year, I would say imports from Mexico for steel conduit is down directionally mid-single digits. So it's working in our favor here.

What's the impact of tariffs and 232 in particular? How has that changed the level of Mexican imports?

I think -- well, let me do some -- try to answer that 2 ways, depending on where you're going with your question is, recently, there's been some updates, but they're not a direct -- like they go, hey, it's 100% of the content of the product, not steel. But like for us, maybe you're not even going here, but steel conduit is 100% steel conduit. So that specifically any changes of late have not made a material difference for us. And I'm talking -- I could go back and give you a precise date where the administration has come out with some updates.

What I would say, but this is conjecture and correlation is the tariffs that the administration put in is probably a driving factor in the fact that the statement before, if you go back, I think, to 2024, steel conduit, as you know, is growing double-digit imports versus the statement I just made that steel conduit, metal conduit is growing mid-single digits and imports are down mid-single digits. So it feels that one could easily deduct the tariffs are a large factor in that.

All right. That's really helpful. And any other color you can share on the PVC dynamics? Because you're seeing you're getting steel price, but you're giving price on PVC overall. Are there -- maybe answer the question, we've got a good sense on the import or the input costs in resin. But what's going on competitively, what you're still seeing selling pressure there?

Yes. Deane, maybe I'll give a different reflection and John and John, please either correct or add to it to go. The statements we've made so far have been more -- it should be year-over-year to go, a, what is different things. I don't want to get too far out my skis with 1 month if you have this quarter behind, but I would say that as we go forward and hold our guide is that even in things like PVC, 1 month doesn't make a quarter or a year and November, we'll talk about FY '27.

But that so far, we have been able to raise our price and cover those costs for PVC. So again, there's good competition out there. But as I mentioned to David, the first thing that drives our pricing is supply and demand and the markets are overall pretty healthy.

This concludes the question-and-answer session. I would now like to turn the call back over to Bill Waltz for closing remarks.

Thank you. Let me take a moment to summarize my 3 takeaways from today's discussion. First, I'm pleased with Atkore's fiscal 2026 results so far. We grew sequentially in net sales and profit in our second quarter from the first quarter, and our results reflect a combination of healthy end markets and our own self-help improvement.

Second, we are on track to deliver mid-single-digit organic volume growth for the full year. This represents how we see the broader market performing and contributions from several key initiatives.

Finally, our executed strategic actions reflect our commitment to making changes that increase our focus on the electrical infrastructure market and enable long-term value creation.

With that, thank you for your support and interest in our company. We look forward to speaking with you during our next quarterly call. This concludes the call for today.

This concludes today's conference call. You may now disconnect.

We've Atkore with us today. We've got Bill Waltz, who is the President and CEO of Atkore and John Deitzer, who is the CFO.

Bill, as I walk over to you, just starting off. There's a lot going on in Atkore. As you know, you're undergoing a strategic review, which includes a lot of potential alternatives, potential sale of the company, maybe some divestitures. So any sort of update on to what's going on? And why did the Board, you think, decide to go this route?

Yes. So I'll try to do it, Andy, great kickoff question. Chronologically, I assume like all companies, but at least I speak for Atkore, the Board is always looking at what best strategically, whether it's over a 2- to 5-year plan or long term. So as we went through the process last year and had a -- the final review in July to go, it makes sense to do the following: one, focus more on the electrical industry itself. And that started to generate some of the things you see like the selling of an operation, Tectron in Wisconsin to the announcement of exploring alternatives with HDPE. And then we did decide as we got into, I forgot exactly, the October time frame to at least explore even a broader set of alternatives with potentially selling the whole company or any other derivation of that.

And I think it's just a good process. I assume your follow-up questions, I'm very -- I have strong expectations of what we can do in running the company as a holdco publicly like we are now. But if it's best for the shareholders in the long term to consider potentially selling the company, the Board is open-minded to that on both sides. We're not rushing to sell by any means, but we're also not putting up some defense against it. And for specifics, there is no time frame. So I can't really get in and say, oh, wait here 2 months, but you're not expecting that either.

Got it. No, that's helpful. And maybe just to back up and also talk about the markets for a second. You highlighted leading indicators such as DMI suggesting favorable growth trends for Atkore. So I know data centers are a big contributor to that. We'll get more into that in a little bit. But maybe talk about the health of non-res markets. So like are you more constructive on the verticals? Like how are you feeling about that?

Yes. So a couple of things. One, I do think overall, most of the verticals are doing well. I'll try to bifurcate here in a second. But as you look for us, we've mentioned in the quarter, give or take, around a mid-single-digit growth. Half of that is going to come organically from some of the verticals that have been strong and this shouldn't come surprise. I just mentioned data centers. Obviously, they're up double digits for anybody. But health care is still strong. Manufacturing is still strong, multifamily housing is strong. And then on the flip side of that, again, shouldn't come as a surprise. But single-family home residential. I don't think it's any worse than it was, but I would just say it's anemic compared to pre-COVID or whatever else there.

Yes. Yes. And then just to get it out of the way, you're kind of halfway through Q2. Obviously, you just reported. Anything different or same trends? Has it been pretty cold in the East? I don't know if that means anything.

Not really with the following thoughts. One, when it is super cold like that, it does have an impact. Just to go any construction crew that's not on the site for 2 weeks is it's hard to make up that mythical man month and do something. The flip side of that is since we had our earnings call, I forget the exact date, but at the very end of January, some of that is that cold and the snowstorms that had hit and are projected. So I think we had worked those into our informal guide for the quarter already.

Got it. That's helpful. And then, following -- did you want to say that? So following that, digging more into data centers, I think you said you're seeing strong backlogs and commitments for orders. There's a significant amount of investment that needs to be built. So can you comment your positioning? It seems in certain cases, you are bypassing distributors working directly with hyperscalers. So like maybe talk about how Atkore approaches the data center market.

Okay. Yes. So -- and then let me, if you don't mind, with data centers, I'm also going to put chip manufacturer.

Sure. Great.

So -- but I'll bifurcate in 2 ways. To your question, you have selling through distribution, which I think, again, we've discussed on earnings, maybe future questions of our ability to have a broad breadth of products, to co-load products, our regional service centers, that as we're selling to a very large market, let's talk in the United States sold through distribution, we're growing with or hopefully, as we take market share faster than the market in that channel. Then on top of that, totally, as I say, separate from that is an initiative we kicked off a couple of years ago that I think finally, this year, we're seeing the ramp-up that we've talked about is selling direct, as you just referenced, to data centers and also the chip manufacturers in the U.S. and across the globe, where, as you can imagine, using the U.S., but it's the same, whether we're talking to PacRim, Europe and other parts of the world is the labor shortage and large data center chip manufacturers looking to be able to economize by having the same design, same supplier.

And what we do is set up an off-site manufacturing location, take our products, our BIM designs and so forth and preassemble their racks for them and literally ship the rack that just needs a final assembly on their location. That has worked in the U.S. well. Obviously -- I say obviously, but I'm not going to mention names of you imagine the top 2 or 3 data center companies that have worked with us in the Pacific in one company -- or country, excuse me, have moved to a second country, have now taken us into starting up jobs where you have commitments to your point on backlog into Europe and talking about the states and literally talking about places like India. Now stuff like that could be 2 or 3 years from now. But finally, I really do think our data center initiatives as we get into Q3 and Q4, you're going to start seeing those results.

That's good to hear. And John, this one might be for you. You reported low single-digit volume growth in Q1, but you maintain your full year volume growth outlook of mid-single digits. And that does require some improvement in volume in the second half. So maybe you can bridge how you get there.

Yes. Great. And Andy, some of it is going to build on what Bill just articulated as well in a lot of ways. So we had 2.5%, 3% volume growth in the first quarter. And so there is an expectation of that low single-digit type market growth environment for the base business overall. And then how we get to the mid-single digits for our enterprise here, some of these initiatives like Bill had talked about, whether it is outgrowing on the data center chip manufacturers with our construction services. So combining the product sale as well as the assembly and the off-site installation, et cetera, that's a key part of it.

And then certain other end markets, which I think we'll probably dig into a little bit more here in the conversation, but the solar business, we are anticipating in calendar 2026 to be stronger and to see the ramp, and we have the capacity and capability with the Indiana facility that's running very well. So we're excited about certain markets there. And then the more we can do with certain of these larger projects in the U.S., even absent the construction services element, but these are good markets in the U.S. from a volume perspective. So pretty pleased there.

That's helpful. And I think 2 big businesses for you guys, PVC and metal conduits did have a strong start to the year, high single digits. Do you expect that momentum to continue? Is there anything going on there versus the previous years?

Yes. I was going to say, I think where we've answered is, yes, we expect it to continue being pulled by things like data center, then I'd say our own self-help of where we have the co-load, the regional service center, the one order, one delivery invoice is helping us grow in good markets, I think, slightly faster than the markets.

Yes. And then I had this question about metal framing, cable management and construction services getting better through the year, but that's really data centers and some of the...

That was timing. They should be, as we look back at the end of this year, up mid-single digits versus -- we think an anomaly of year-over-year.

Yes. Yes. And Bill, you've said to me, I mean, I know you check in with your distribution base like all the time. So maybe talk about what they're saying to you from a channel perspective. I know it's hard to get a read into particular products, but how do you consider channel inventories right now, healthy? How would you think about that?

Yes, I would say normal, which is a good thing. So in other words, both to your point, with checking in formally and informally all the time with customers, I'll be with some next week, is that they see the markets like we do. You get all the indicators, the Dodge and the ABI and whatever else. But just checking with them, they see a reasonable growth. And then from a markets and their inventory, I would say normal. So there's not a destocking going on, but there's not an overstock going on. There's some about this time to kick off, call it, spring buy, even though we're in February of stocking up for summer where there's a seasonal pickup. So I would say we're -- in some ways, I'm going to say, knock on wood, back to normal life in many ways.

Yes. No, that's good. And maybe speaking of what normal is, let's talk about the current competitive landscape. So the big pricing improvement in several your markets, obviously, it spiked pricing, as you know, it's been coming down. So I think the debate has always centered around are your products -- are they commoditized? This whole sort of one order, one delivery, one invoice, like how differentiated is it? So maybe you can talk about why that relationship with distributors has been. I think it's still been good, but it hasn't helped you as much as maybe I would have thought around price versus cost.

Yes. So I'm going to spend a couple of minutes here because I do feel this is something either way over the last half dozen years I've explained this is -- so I'm going to go into tangent, if you don't mind, Andrew, to go...

We don't learn, though...

So not that -- Lisa, I'm not looking to buy a diamond ring or something. But if you think about to go a diamond, I would assume is somewhat commoditized like on the 4Cs, the kind of clarity and so forth that a diamond should be a diamond. But if I was to go buy a diamond, and I'm going to tie this quickly back to Atkore to go, hey, am I willing to pay a premium for a diamond store that I can trust that's a certified diamond that has a large variety that's going to be there if the diamond breaks or the ring breaks or a selection of settings, I personally would pay a premium for that. But if diamond prices cut in half, I'm still going to pay a premium, but it's relative to the market. That's how I think and that's what I want to always convey with Atkore is given to your point, the one order, one delivery, one invoice, the group rebates that we have, the bundling of projects from pricing, I can tell you with the majority of our customers, if they would have like 2 suppliers that are a preferred supplier, almost [ Carte Blanche ], we're one of those 2.

And we do get a price premium, not every order, but in general, and we do get last look. But again, I'm making up fictitious numbers. If the price of our product was $950 by somebody in the past and could we get $1,000, perhaps a $50 premium? Yes. Now if pricing dropped in half and they're getting $450, can I get $480, $490, Yes. So we are getting last look premium. That premise hasn't stopped, but it's a premium kind of off the industry pricing. And I think that's how -- if it's got misconstrued that as pricing went from $1,000 to $500, I can still charge $1,000. That's not there. But the ability for us to co-load and bundle, we're seeing that business expand. So we should get a price premium across more products as we do it, but it's still a premium to the market.

Totally fair. So maybe then current thoughts on imports across your various products, right? I mean it seems like in your last earnings call, you're more comfortable in the import dynamics in steel versus PVC. So maybe talk about that.

Yes, I do think, again, it's asking us to look forward, but to go at least at past indications is with the tariffs and so forth that we're -- to your earlier questions in our earnings, steel conduits going up and steel imports are actually going down. Now we're talking percent up and percent down, but at least 5% down in imports here over the last 3, 6 months. So a reasonable amount, but it's not shut off, but it's moving in the right direction. That's helping our pricing power that we've communicated. PVC is still growing. Now whether that's the fact that like steel has a 50% tariff on it, if not more from China and PVC has a 10%. But I think overall, even there, it's at least normalizing more than if you go back over the last 3 years. So I'm comfortable with where it is at this current stage.

Got it. And Bill, like any comment on copper, aluminum price versus cost, given the recent volatility.

Yes, that's a challenge. Again, I don't -- we have it in our earnings guide. But the thing with copper that at least in my decade plus of leadership here is it's just moving so frequently, so dramatically within a day, like the ideal situation, I'm not even picking a commodity, but pick PVC, a resin supplier announces a price increase 30 days out. We get out in front of it and announce our price increase. We actually get priced before the COGS hit us. Here, we're, all of a sudden copper is dropping, going from $480 to $560 in 2 days. By the time you announce a price increase, it's sitting on the same hand by the time your price increase goes out, copper has dropped again. It's like a sign wave is good for us and change, but not a sign wave that's so dramatic and within 24 hours like there.

So that's a little bit of a challenge here just trying to price the market. And obviously, distributors are aware of that. They're holding back on buying to see how things settle out. And then for aluminum, prices are up with the tariffs and so forth. And the only anomaly we've called out in our earnings is the fact that we do buy our share of the country from Canada. So we're facing a tariff that somebody is purely vertically integrated in the U.S., we're facing slightly more tariff. Again, we have cost actions designed to mitigate that, but that's a 6-month year-long process to work through that.

And to be clear, Bill or John, you put copper kind of in your guidance that volatility, right, more or less?

Yes. I mean, I think it's tough to predict copper, though, I mean, what could happen, the dynamics there to Bill's point. So I mean, where we're at so far this year, but if there's future changes, obviously, I mean, the market, when it sees those spikes within 24, 48 hours, people start kind of being cautious. And so we'll just monitor and continue to watch that as we move forward.

That's helpful. And I've asked you this before, Bill, but we are pretty close to a Supreme Court decision, I think the common belief is that the administration would just move more towards Section 232 like probably not too much change for you guys, but like...

Yes. So very little. So great question. It's nothing else to clarify for any shareholder out there is most -- like all the steel tariffs, I don't want to say all because you get the IEPA on top. But what I've talked about today is what you just referenced is 232 tariffs or what's called 301 tariffs against China. That's not part of any Supreme Court decision. It's just what's called IEPA. And so really where that's impacting is I referenced like the 10% tariff on PVC products. So I would say I like the tariff in general, but compared to 50% and 80% and 90% tariffs, it's -- that's not going to change the world for us.

Got it. That's helpful. And then sort of backing up, maybe just talking about margin, in general, right? Like if I just look at margins below pre-pandemic levels, right? So maybe elaborate on the self-help capabilities that you have when it comes to getting your margin profile back up. I know you're working on initiatives. You actually had good productivity last quarter. So optimizing manufacturing. Can you quantify the impact from these actions and how soon we can see them benefit...

John, do you want to?

I'll take that. I mean I think you've mentioned it, there's a couple of different areas to touch on here that I think will impact margins, whether it's this year, but also moving forward. You did talk about -- we've announced 3 facilities where we're stopping our manufacturing and closing those from a manufacturing standpoint. The benefits associated with those would be roughly in the $10 million to $12 million from those facility closures. We would start to see that potentially come through at the back end of this year, but really more in our fiscal 2027 as we're really winding those down here, mid-calendar 2026 kind of time frame. But those are on track and going well. Those are not easy projects, but the teams are working on those diligently.

Another area that we see some of the divestitures as well. So we've targeted certain businesses that weren't necessarily meeting our targets, whether it was from a margin perspective or return on invested capital. And we've been able to divest 2 businesses here, whether it's our recycling business out in the Pacific Northwest or the Tectron 2 business that Bill mentioned, and those were dilutive from a margin perspective. So those are opportunities for us to continue to grow.

And then we have been pretty strong from a productivity standpoint as we saw here in the first quarter. And I think that continue -- we anticipate a lot of the projects and initiatives will continue to have benefits. And as we get the volume growth, we're going to get a lot of leverage off the cost footprint that we do have and have stronger incrementals as we look forward. So with the good market conditions that we're thinking for the Electrical business, I think that's positive for us as we think about margins moving forward.

That's helpful, John. And then this one is probably for you, too. You were asked a question on your last earnings call regarding the $50 million of incremental headwind in '26 versus '25 on price versus cost. And I think in your answer, you said price versus cost could go positive in the second half. So maybe give more color and confidence of that.

Yes. And as I take a step back, when I look at the first quarter, in particular, our prices were down 2.7% roughly, so 2.5% to 3% here in the first quarter of 2026. I look back, pricing was down 12% in the first quarter of 2025, right? And so when you look throughout the quarters in fiscal '25, I think our second quarter, our prices were down 17%, right? And so we're just seeing a significant moderation here. I think on the last call, we talked about we've had 4 sequential quarters of price increases on our steel-related products. Now the underlying raw material, hot-rolled or cold-rolled steel has also increased over that period, but we've been able to maintain and increase our prices as well.

So taking another step back, I think one of the items about Atkore is the breadth of the portfolio, right? I mean we've talked at length about the normalization in our PVC prices for several years now. But we have other product categories that do have a strong demand and that we have a really good footprint or we have maybe a more specialized product, and we have the opportunity to be positive on a price versus cost standpoint there. So I think there's a lot of puts and takes. And then just to talk about another initiative that we've been working on very much internally. But I think Bill mentioned in the last earnings call, we've really somewhat embraced 80/20 and focusing on a SKU rationalization initiative. I think that's going to be positive for us as we start to look forward.

Any questions from the audience? Anybody want to ask a question? While we wait for questions, let me ask you about that 80/20, John, just in the -- like where are you in the stage of development there? And because it could be pretty impactful to your margins, to your point.

Yes. I would say very early there. But I think the mechanical business is an area where an opportunity for us to see what is the right set of customers versus the assets? And then how is that complementary with the Electrical business? I think there's a very good opportunity. But really early days for us here. But I think the opportunity moving forward over the next several years because it isn't just a onetime initiative, right? And I think it's ongoing and the folks in the industrial space who've done it well have really embraced it over a multiyear period. So I think that's where we'll start to see it. But I think that will be a contributor to us as we start to look forward.

You guys think that you have a lot of SKUs, let's just say, like...

If I can add 2 things there. So I'll answer your question and give some background. Literally, we just had a deep dive for an hour plus yesterday, 80/20 with the teams, and I forgot the exact number of thousands or tens of thousands of SKUs. But again, I don't want to over just micromanage SKUs, but a specific thing of dropping 10% of what I'll call active SKUs. Like that was one of the questions like, okay, you cancel a part number, no one bought like symbolism versus no, these are parts that therefore, mean less change over time and stuff like that.

And one of the neat things that was driven -- we benchmark obviously well-run companies driven from my staff down and so forth. But in the review, for example, with our Safety and Infrastructure group, they're seeing the results already. So like literally, when you're talking to the product manager, the general manager, you can feel the excitement that they bought into, hey, I'm actually making more profit, my factory productivity is better. So this, I think, will expand rapidly. But to John's point, we're in the -- the good news, we're in the first inning of a 9 inning game. So there's lots of opportunities.

That seems interesting. And then maybe it's for John or Bill. Like I think you mentioned that you think you can return to year-over-year growth in adjusted EBITDA in '27. I understand it's early self-help and strategic divestitures are progressing. But can you talk about your confidence in that sort of comment and EBITDA inflecting in '27?

Yes. It is still early, and I don't want to get too ahead of ourselves, but we have indicated that we believe we'll be up year-over-year in earnings and adjusted EBITDA in '27 versus '26. I think as we look at the back half of this year, obviously, embedded within our outlook is a very positive second half with a lot of ramp, whether it's certain initiatives like we've talked about on the construction services side with data centers or on some of the solar business. And so some of that should hopefully continue on into '27. We also continue to expect solid markets in '27, especially here in North America. And if there's any type of potential change, whether it's in other end markets that have been weak like residential, those could be positive contributors. So I mean, there's a lot that we're watching and monitoring, but still early. So as we progress through the year, though, hopefully, we can give some updates.

Yes, John, and to that point, like with you understand the markets of the markets, like how much is that going to control the profitability, though? There does feel like a lot of self-help going on as we go this time next year versus today?

Yes. I would just say that the team is very focused on cost control, especially from an operational perspective. We've had a lot of initiatives. I think we're starting to see some of those really progress in some of the areas where we have had some challenges. I think we've worked through them now. I mean we've talked about the production capability and how we're running from an efficiency standpoint in some of the newer facilities. And we expect that just to continue to get better. And that's because they're running so well, that's enabled some of the facility closures that we talked about earlier that they can absorb and take on that capacity and still have room to meet the market growth. And I mean, I think that's the opportunity as we look at the leverage moving forward. And these investments that we have made, some of them will continue to help us drive efficiencies in other areas of the business as well.

Got it. And you guys alluded to solar briefly. I think you expect an uptick in the second half of '26. But more broadly, how are you thinking about the torque tube business given the administration, like I can't tell how supportive they are, maybe they're not that supportive. And then your facility, as you mentioned, is up and running. So should it continue to get more efficient as you go on?

Yes. I'll take the lead on that one, John. Yes, Andy, I think I'll try to hit a couple of your points or questions there. One, solar is going really well, even to your point, the second half of '26. I would even expect like starting now. We're seeing it in a good way. It's not like a date, but to go customer orders are there, the factory is coming. And I think things like that build on each other. In other words, to John's point, the more efficient the factory runs, the more orders we have capacity for, the more our productivity goes up, and it's moving along, and we do have orders for the year. Obviously, a customer can move and order out and stuff like that. But as we -- your earlier questions on, hey, what makes the second half of the year, and John Deitzer answered, one of those is solar, it's really doing a great job right now.

As for the administration trying to forecast right now, incentives are in place. And even if they don't, I think one of the things if you go back a couple of years where there were no incentives and there was no tariffs. So at least there to go for the amount of solar growth if you're just focused on USA manufacturers, I think we're in a good spot. I had dinner on Monday night with the leader of that division, and he was talking like literally to the point that I'm seeing questions on my ops team, when can we increase capacity more as he's lining up customers for the second half of the year and FY '27. So I think we're in a good spot.

Yes, that's good. So maybe moving over to water. You've been making investments in your water portfolio. I think you've got some maybe growing pains in the business. You transitioned from, I think, plumbing to more of a focus on municipal spending. So can you update us where you are with your product offering and expand on the demand expectations for this vertical?

Yes. So a couple of things. To your point, we have -- I don't want to call it 80/20, but the pruning, it falls under there. But pruning, plumbing that doesn't make us, at least for us, but I think in the industry as a whole, I don't know. More margin and municipal large project checks, I can get into specifics, then off the plumbing. And it is moving ahead. The factories have the products made now. It's a kind of multistep. First, you have to make the products and you need to get them certified, NSF certification that can take a while and it's by location. And then from there, you need to go out to the municipalities and get like that local on making this up. But Dallas, Tampa, Miami, approval from that municipality to sell and get spec-ed in. So those things have taken longer than I probably would have thought 3, 4 years ago. But we're through most of that now. Obviously, there's 1,000 cities, every city, but it's ramping up.

And again, I want to stress like the way to look at municipal for us. It's never been a start a new plan up or whatever as much as maybe an extra extrusion line, some of it is using extra capacity. And from there, it's one of those things, it depends on how you look, we are a very small single-digit player. But we buy resin effectively. We have 9 facilities. We are already in the market, and we just expanded our product portfolio. And this is one where you look and say, hey, if we have 1% or 2% market share, can we double our business from 2% to 4%, literally 100% growth for us, and that's framing as 20% of our PVC. So it can be a good growth driver for us, but not a major impact that the big players in this market are going to -- somehow, they shouldn't be reacting to us.

Right. And that leads me to my next question. Is it different competitive landscape, you're the small guy, which is different?

Yes. Again, everybody can think differently on this, but we are the small guy in this. Therefore, I think we can opportunistically grow quickly, pick jobs off and not be as concerned on if you're the guy with a larger market share, trying to double market share, what's the impact here and so forth. So we can just think more nimbly and so forth and grow with customers. So I think we're in a good position.

Got it. And then you mentioned residential in the beginning of the conversation. It's been weak for a while, as you know. But maybe residential stocks have done better. So talk about like what you're looking for, for any sort of stabilization or recovery. I assume you haven't seen it yet. And what do your distributors tell you about that side of the business?

Yes. So a couple of things going on there. So again, trying to be objective versus how do I sell to shareholders. To your point, their stocks may be going up. One of the things we look at is almost an indicator, I'm not saying the right thing, but without naming the major public companies, but obviously, they're out there is when they do their earnings on how much money they're spending on land development because that's the big mover for us. It's like you put a single home in a new development, it's nice, but you just think about the PVC. It's a new subdevelopment coming in where you're running all the lines to that subdevelopment down every street, larger-sized conduits. That's the needle mover.

Up until now, like, I'm saying in January when I reviewed and prep for earnings, we haven't really seen that yet. But again, now I'm conjecturing here. Fed drops their interest rates another 50 basis points. And to your point, stocks are -- prices are already going up, maybe that's going to start swinging. And the good news, we do not have that baked into any forecast. So if that turns around, that would be a great tailwind to help drive our business.

Yes. Helpful. And then maybe just an update on HDPE. I know you're planning to sell the asset. But maybe comment on the traction you're seeing from potential buyers. I assume you're not going to tell me time line, but it seems like -- what's hard about HDPE from my point of view, right, is I know it's a big telecom exposure. I do cover companies who do fiber infrastructure work and pretty solid demand. So like why isn't that sort of flowing through to you guys?

Yes. Well, I think in some ways, let me bifurcate a couple of things. You're right. First off, I'm not going to get specific, but we are working through the process, and there's no rush or there's nothing to say if we don't get what we think is a fair deal that's best for our long-term shareholders and so forth. But we are looking to go, is it fit in the exact electrical infrastructure or strategy? No. And therefore, let's do a strategic review, and that's progressing as expected.

To your point, fiber is growing. HDPE is growing quicker than the Atkore portfolio as a whole. The challenge becomes a little bit is also, as you know, Andy, is both demand, which is growing. I didn't even say double-digit demand growth, but is supply still there, and there's a lot of inventory. So the pricing pressure just because demand is growing, does it turn into good margin business and so forth. So I think we saw the right. It still makes prudent sense to consider strategic alternatives, and you will be the first to know like everybody else...

So then maybe let me ask you about -- you always have a good amount of cash. You bought back a lot of stock over time. It seems like you've kind of paused M&A. So maybe provide some clarity on what you do now. I think you slowed down repurchases this quarter after being active for a while. So is it fair to assume that you might accumulate a little cash, pay out dividend? What are you going to do?

Well, we just announced our quarterly dividend, which we've had in place here for just about 2 years now. So pleased with that. And so I think as we're working through some of these items here in the near term, we are a little bit sensitive and focused the dividend and CapEx. But long term, share repurchases have always been a key part of our capital allocation strategy. And so I think that's always going to be a key anchor point for us. Near term, we're a little bit limited here as we're working through a few of these items and evaluating. But fundamentally, though, there was a time previously, especially as part of the Atkore Business System, where M&A was an effective tool for us. That is a key part of our ability to do more through the regional service centers, et cetera, has -- can expand our value proposition and things like that. But near term, I think we're focused on some of the more internal items right now.

Got it.

The only thing I'd add to that also, but again, let's go through a strategic review is I had purposely held up some M&A with the thought of all the investments we made in growth initiatives. But if you reflect back and going, solar is hitting, global construction into data centers is hitting. So the management and productivity, 80/20 is working. So the management bandwidth is opening up. Now we got to get through the strategic review. But I think Atkore, if we stayed as a public stand-alone company, I think that we're ready to turn that lever back on.

Yes. Bill, could I just go back to imports for one second. Like in terms of the metal side, pretty stable now with the competition in the Mexican company?

Yes. Actually, it's working in our favor slightly. So again, to go -- if you quoted or referenced to go we're up -- we had in our earnings charts, we're up in our -- metal framing is down, but that was the timing. But metal conduit, and that's where the imports were, is growing at a good rate, both for us, and I assume the competition. And the imports are actually down. I'll just use a round number, but around 5% a quarter, 6 months, wherever there, it depends on what time frame. So it's working for us.

Okay. Question? Hold on to the mic.

I think you've talked about factory closures. Like when you think about your footprint, do you have like more optionality for optimization? And then does that impact your one delivery, one invoice moat that you have?

Yes. So yes, there's -- if I go back and go pre-COVID, post-COVID, we can go back and even in future earnings or for investors to go, we've always probably closed a rooftop plus a year. I mean I go back to being here 13 years and being in Florida, go, here's a Fort Largo over near Tampa and just walk through Carrollton, Ohio and things. So it's happening this year, probably more aggressive than ever, especially 1 of those 3 facilities is depends on how you measure it, but I'd say probably our second largest facility. So these are, in this case, at least one is a massive facility. But no, there is obviously future opportunities.

On the same hand, I don't think it will impact our one order, one delivery, one invoice because we're taking products and efficiently sending full truckloads to our 6 RSCs, regional service centers, and then shipping out from there like a hub-and-spoke type of system. So we'll still be able to maximize that. I had a great review with our team yesterday on how we're picking that up. We're simultaneously improving our delivery performance, and we're reducing costs of our RSCs, which is what we expect to do, but it's moving along well right now.

Last question, Bill. So what are the top 2 or 3 innovations and structural changes affecting your company over the next 5 years? Are there any emerging industry trends that are perhaps being overlooked in the current fiscal year?

Yes, I'll try -- a great question. So nothing is going to come as a surprise, but I think going for us as a whole over the next 2 to 5 years is the strategic review of just saying let's focus more on our core electrical. Let's continue without naming things, but I do think there could be potentially in addition to HVAs, other small things like our Tectron business across the globe that we'll continue to look at are we the rightful owner as John Deitzer brought up, whether it's margin, strategy, ROIC. So we're going to keep doing those type of things as we move forward.

And then also the good news for Atkore, if I look more holistically, call it a megatrend, is purely the thought of anybody in the electrical space, it's a good space to be in data centers. It's going to keep growing. But especially in the U.S., I think worldwide, we have a shortage of skilled trade. So as Atkore continues to do things we talked about, but a new product vitality of over 10% to drive labor savings products, even just for distribution to have the RSCs and be able to co-load products into one order. I think all those things will help. And the other thing that we're just starting, so I don't know if we'll be talking about in the next year, but it's how we add artificial intelligence on top to make it a simpler process for our customers. So I'm excited both for this year, but really for the future of Atkore.

Bill, John, thank you very much. Appreciate it.

Great questions. Thanks, Andy.

Good morning. My name is Carly, and I will be your conference operator today. At this time, I would like to welcome everyone to Atkore's First Quarter Fiscal Year the 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. Thank you. I would now like to turn the conference over to your host, Matt Kline, Vice President of Treasury and Investor Relations. You may begin.

Thank you, and good morning, everyone. I'm joined today by Bill Waltz, President and CEO; and John Deitzer, Chief Financial Officer; and John Pregenzer, Chief Operating Officer and President of Electrical. We will take questions at the conclusion of the call.

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 and today's press release, which identify important factors that could cause actual results to differ materially from those contained in our projections or forward-looking statements.

In addition, any reference in our discussion today to EBITDA means adjusted EBITDA in any reference to EPS or adjusted EPS means adjusted diluted earnings per share. Adjusted EBITDA and adjusted diluted earnings per share are non-GAAP measures. 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, Matt, and good morning, everyone. Starting on Slide 3, we are pleased with our first quarter performance. We achieved net sales of $656 million and adjusted EBITDA of $69 million, both were above our outlook range. Our $0.83 of adjusted EPS was also above the top end of our outlook range. Organic volume increased 2% in the first quarter driven by strong performance in our Electrical segment.

Our teams have been focused on improving manufacturing efficiency and controlling costs which has helped generate over $30 million of productivity savings year-over-year. We also continue to advance our strategic alternative process to evaluate opportunities to strengthen our business and maximize value for our shareholders.

During the quarter, we completed the divestiture of our [ Techtron ] Mechanical Tube product line and manufacturing facility. The sale further enhances our focus on the electrical infrastructure portfolio and is aligned with our broader 80/20 initiative aimed at directing our manufacturing capacity to electrical end markets.

And in the second fiscal quarter, we expect to complete the previously announced exit of three manufacturing facilities. We will continue to provide updates on our ongoing strategic alternative process as appropriate as we move forward.

I also see some highlights release for fiscal 2025 sustainability report, which we recently published. This report details our ongoing initiatives and accomplishments over 2025 goals.

Looking ahead to the remainder of 2026, we are on track to deliver our FY '26 outlook that we presented in November. We expect for net sales to be in a range of $2.95 billion and $3.05 billion. Our net sales outlook adjust for approximately $40 million of annual sales related to our [ Techtron ] mechanical tube product line resulting from the adventure.

Our adjusted EBITDA between $340 million and $350 million, that is unchanged. Adjusted EPS is expected to be in the range of $5.05 and $5.55. We remain focused on our core electrical infrastructure portfolio, which is supported by broader mega trends and where we see the most opportunity to grow.

Our team is focused on continuous improvement initiatives in our plants and providing unmatched service and quality for our customers. In doing so, we are confident in our ability to drive sales volume and profitability.

I'd like to take a moment to thank all of our employees for everything they do to support our key stakeholders. With that, I'll now turn the call over to John Deitzer to talk through the results from the quarter and provide more details on our outlook.

Thank you, Bill, and good morning, everyone. Moving to our consolidated results on Slide 4. In the first quarter, we achieved net sales of $656 million and adjusted EBITDA of $69 million. Adjusted EPS was $0.83 per share compared to $1.63 in the prior year. Our tax rate in the first quarter was 3%, a decrease from 21% in the prior year. The first quarter tax rate reflects a onetime discrete benefit associated with tax planning related to a foreign operation.

Turning to Slide 5 and our consolidated bridges. Organic volumes were up 2% compared to the first quarter of fiscal '25. Our average selling prices declined 3% during the quarter, most of which came from our PVC conduit products which were partially offset by increased average selling prices for our steel conduit products.

Moving to Slide 6. Our 2% volume increase during the first quarter was driven primarily from our metal electrical conduit and our plastic pipe conduit product categories. Both product categories benefited from healthy nonresidential end market demand. Our metal framing, cable management and construction service businesses saw lower volume compared to the prior year primarily due to the timing of certain project-based work. We expect growth from these businesses throughout the duration of the year.

Our mechanical tube business, which includes our solar-related products is also expected to grow throughout the year due to the expected timing of large utility scale solar projects. As we previously communicated, we are shifting certain available capacity from our existing nonsolar mechanical products to our electrical conduit products as part of our 80/20 initiative. We would expect that to continue throughout the year and help support electrical end market demand. Overall, we continue to expect mid-single-digit volume growth for the full year.

Turning to Slide 7. In Net sales increased year-over-year in our Electrical segment, driven by higher volume growth, offset by lower selling prices. Adjusted EBITDA margins compressed in our Electrical segment due to higher material costs and lower average selling prices. Net sales in our S&I segment were lower compared to the previous year, primarily due to lower volume. Adjusted EBITDA and adjusted EBITDA margins both increased year-over-year due to increased productivity.

As Bill mentioned earlier, Atkore recognized over $30 million of year-over-year productivity most of which was generated from our S&I segment.

Turning to Slide 8. We ended the quarter in a favorable cash position despite a year-over-year decline in our operating cash flow. Keep in mind that our Q4 FY '25 operating cash flow was our strongest quarter, generating approximately $200 million. Our first quarter in FY '26 ended before we typically receive large collections from our accounts receivables. Those cash collections fell into the first part of our fiscal Q2.

Our results included approximately $18 million in cash proceeds recognized from our [ Techtron ] tube divestiture. These proceeds represent a portion of the divestiture proceeds. We anticipate receiving an additional $7 million in the second quarter from the sale of our real estate where the products were manufactured. Our balance sheet remains in a strong position with no debt maturity repayments required until 2030.

Moving to Slide 9. We continue to expect volume growth to be mid-single digits for the full year. Our volume growth expectations are a combination of core construction growth as well as contributions from certain growth initiatives such as solar and global construction services. The recent Dodge Momentum Index forecast continue to support growth in the core nonresidential end markets.

As a reminder, we are no longer providing quarterly guidance. Rather, we will continue to update our full year expectations. In November, we communicated that our full year expectations are weighted more toward the back half of the year. We still believe this to be true.

With that said, we expect our second quarter to be similar to but slightly better than our first quarter results from an adjusted EBITDA perspective.

For the full year, we expect net sales to be in the range of $2.95 billion to $3.05 billion and adjusted EBITDA in the range of $340 million to $360 million and adjusted EPS in the range of $5.05 and $5.55. With that, I'll turn it to John Pregenzer to give an update on our end markets and our long-term strategic focus.

Thanks, John. Turning to Slide 10. Last year, we announced our intention to consolidate three manufacturing facilities. This decision helps us to prioritize our portfolio for domestically manufactured electrical infrastructure products.

These actions are part of our broader 80/20 initiative to serve our customers efficiently while also creating a more streamlined cost structure. We are on track to exit these facilities in our second fiscal quarter.

As John mentioned, our expected volume growth in fiscal '26 is a combination of base market growth and contributions from certain key strategic investments. The Dodge Momentum Index continues to suggest favorable forward-looking indicators of growth. Our recent Moody's ratings analysis suggests that $3 trillion of investment will flow into the data center market in the next 5 years to support the need for servers, computing equipment and new power capacity. Our portfolio of metal framing, cable management and the entirety of our conduit product line are well positioned to benefit from this growth.

As the electrical industry plans to support these growth figures, available labor continues to be top of mind. The associated builders and contractors estimates that approximately 350,000 additional workers are needed to meet the demand for construction services in 2026, and that number grows to $450,000 in 2027.

Atkore has a history of prioritizing labor-saving opportunities for installers through new product development. Our PVC junction boxes, 20-foot conduit and patented MC Glide armored cable are just a few examples of how Atkore has made construction installation more efficient.

The electrical industry is a great place to be, and we are working to meet the market demand by executing our Atkore business system centered on strategy, people and process. With that, we'll turn it over to the operator to open the line for questions.

[Operator Instructions] Your first question comes from Andy Kaplowitz with Citigroup.

Can you give us a little more color on the core markets that you're seeing? I know you just talked about it, but it looks like core PVC and metal condo markets in terms of volume accelerated a bit in Q1 versus what you saw in FY '25? So maybe you can talk about that.

And then conversely, I know you've talked about construction services ramping up at some point. I mean there are a lot of mega projects out there, particularly in data centers as you kind of cited. So when can we see that start to move?

Yes. Andy, I'll start here and then turn it over to you to Johns. Yes, you are correct -- and again, John Deitzer, something if we want to get the precise numbers. But PVC, we're seeing good growth with still kind of we're seeing good growth with so up in good markets overall. And then regarding data centers, it truly is just the timing of year-over-year in those projects.

We are seeing, again, with our -- giving you precise numbers, we are seeing strong backlogs and commitments for orders and expansion opportunities. So we're bullish in this fiscal year and then even more so as we get into fiscal year '27 and so forth.

And Bill, begs the sorry, did you want to say anything else?

Andy, just a few more information on that is strong Dodge Momentum Index in the quarter. We could really see obviously being driven by data centers. Warehousing is strong. And education, health care, some other end markets, we're seeing some growth. Specifically to PVC, we have seen some increases from the border wall. So that's been one of the areas that's been driving some of the stronger PVC conduit demand.

Very helpful color. And it begs the question. Obviously, it's early in the year, but you didn't raise your EBITDA and EPS despite pretty good Q1, especially given the good productivity. So is there anything incrementally you're concerned about? Or is it just really early in the year?

Andy, I'll jump in here. I mean Yes, go ahead, Bill.

Yes. Andy, I think it's just -- we're first quarter. We're pleased with the results here. I think as we look forward, we still have a lot to do. So I can walk through some of the other dynamics here as we're seeing, but just I think the good first quarter and want to maintain where we're at, Bill, anything you wanted to add?

I wasn't going to do very much for saying it's like to sit here it's hit our numbers grow. We had great productivity that we called out. So I mean, things are moving along at this stage. But before we get too far out ahead of ourselves, Andy, let's get another quarter before we even start talking about the second half of the year because there still is a reasonable pickup in Q3 and Q4. So -- it just seems like the wise things to do at this stage.

Agreed. And then just one more quick one. An update. I think you talked about the competitive environment a little bit. You mentioned PVC pricing is still down but still conduit up. I think you said import competition in PVC kind of remains. But sort of what are you seeing in the two major markets there, particularly from the foreign competition?

Yes. So specifically for foreign competition, and I'll start with PVC and go to [ CO ]. PVC continues the imports continue to come in. So maybe not surprised because again, there's very few tariffs is the 10%. And as we walked through it all depends. This is not new news in the -- what somebody claims is the value. So I don't think anything has dramatically changed there, but it's not like it's necessarily improved. But it's still probably -- again, we don't have precise numbers on the market size, but it's still probably less than 10% of the whole market. So -- but it's growing like our PVC business is also growing.

Steel, I think, there is moving more in our favor where again, we had strong growth. And give or take, for the last 3 months, I want to say from a year-over-year perspective, it was down low to mid-single digits for imports. So while the stepping back slightly, we're continuing to grow.

And then I think in the prepared remarks, but if not, both our quarter-over-quarter -- excuse me, sequential quarters are up in price and also sequentially up in margins and so forth. So moving definitely in the right direction there, [ metal conduit ].

Your next question comes from David Tarantino with KeyBanc Capital Markets.

One I appreciate there's an update specific on the strategic review, but maybe could you give us some more color and an update on the cost savings effort, what you expect productivity to contribute following the nice start to this quarter and particularly around the exit of those three facilities that is expected to be completed here soon.

Yes. So I'll walk through it and get color from the team here. But -- so strategic alternatives was still being worked. So -- but again, as we've already said, the Board doesn't have a time frame. So I don't want to sit here and give any more handicap on things or time frame or so forth. But we're continuing to progress through different things.

Obviously, we mentioned small things like the divestiture of [ Techtron ]. We're still moving forward with [ HDP ] probably at a faster pace than you imagine the overall examination if we do consider Atkore, the whole corporation and so forth.

So from that standpoint, moving forward, a phenomenal quarter with productivity. I expect this to be our best year probably for productivity on the same hand, realistically, we're not going to add $30 million every quarter. But we started a good January, and it should be -- last year was a strong productivity, and this should be a good year of productivity.

And then finally, to the three plant closures, all the compressor John Deitzer add a little bit more color. But I think to what John Deitzer has mentioned in the past, it's $10 million, $12 million, and we think potentially more as we get things running and I would say they're running of the closures at a smooth and ready-to-launch schedule complement to John Pregenzer or if you want side, anything to that?

No, David. I think everything is going as planned, seeing favorable transfer of the manufacturing equipment and start up, hiring of the people and the plants that are getting the additional capacity is going well. The training is going well. So we don't see any issues with executing all three of those actually on plan and on schedule.

Great. And then just to add, David, just a little bit of color on the productivity dynamic throughout the year. We are very pleased, as Bill mentioned, around the first quarter's performance. And as John mentioned, we're really pleased with where we're going. We have a little bit of dynamics quarter-to-quarter this year, just meaning the second quarter in particular, last year in Q2 was a pretty strong -- was the high watermark for us from an EBITDA perspective. And so the comp will have a little bit of a dynamic this year, Q2 year-over-year. That being said, though, we're really pleased with the overall plan for annual productivity this year and then think some of these initiatives will continue to benefit us as we move into '27. But in the second quarter, we're not likely to see the strength here that we saw in the first quarter largely due to the year-over-year comparison item. Hopefully, that helps them frame it a little bit the dynamics.

Yes. That's helpful. And then nice to see the price declines on the top line narrow, but maybe to put a finer point on price cost. Could you give us an update on what you have here embedded in the guide. It looks like much of the year-over-year headwind that was previously expected as kind of already occurred. So how should we be thinking about that previous unmitigated $50 million headwind now and the offsets to it?

Got it, David. Yes, it's a good question. And the price versus cost headwind that we have this year is largely loaded here in the first half. You see the impact in the first quarter. we, again, I think the second quarter year-over-year, we're going to have a price versus cost unfavorable.

I don't want to start guiding price versus cost quarter-to-quarter, but we do anticipate the totality of the back half to be price versus cost positive here might be very slightly, but that's potentially here as we're ramping. So it is very much loaded here in the first half. So we'll see how the dynamics play out throughout the year. But right now, to your point, very much a first half issue here that we're working through.

Your next question comes from Chris Moore with CJS Securities.

Yes. So terrific margins on S&I. Is that 16.2% is that sustainable moving forward? Or just kind of any thoughts there?

Thanks, Chris. I mean I feel like a little bit of a broken record. I've said this a few times we anticipate that business to be more in the, let's call it, 12% to 14% adjusted EBITDA margin level. It does have some mix dynamics when we think about the growth in solar, et cetera, that might have a little bit of margin dynamic with it. But that team has done a very nice job of performing from a productivity perspective and has driven those margins higher.

So I do anticipate some of the mix dynamics probably will level out a little bit. And I don't know if we're going to be able to continue exactly at the positive productivity level we had. We did have some items that were more discrete benefits here in the first quarter that helped push that elevated a little bit. So we'll probably see margin regression in the S&I segment here as we move throughout the year.

Got it. And from a cash flow perspective, you talked about Q1 timing, some of the issues there. Just maybe from a fiscal '26 perspective, can you talk a little bit further in terms of kind of overall thoughts and how we should be thinking about it?

Yes. It's a great question. So as we move through the year, we do anticipate cash from ops to improve. The first quarter was a bit of a headwind, as we mentioned. But you have to go back and remember how strong of a cash flow quarter we had in the fourth quarter of fiscal '25. And so we had received multiple AR payments both back in July and then in September. And the way this quarter ended on December 26, we -- several large receivables we have fell into our fiscal January but really occurred December 28 or 30 type of dynamic.

As we look forward, we expect to be modestly air price cash from ops positive in the second quarter and then continue to ramp here in the third and fourth quarter from a cash flow perspective. You have seen -- we have modestly reduced our expectation on capital expenditures here this year. We're just really ensuring we're investing in the right projects and really dialing that in as well as we move through the year.

Got it. And maybe just last one for me. Obviously, backlog is not historically an important metric for you guys, but with some of the change focus here on data center, et cetera, is it potentially becoming a little bit more important? And is that something that's building a little bit at this point in time?

Yes. I think, Chris, there are a couple of thoughts there. For the core business, it's shipping 5 days, 10 days and little backlog for the data center business itself or global construction business, the question I answered for Andy, we are seeing backlogs grow in a couple of facets. One, the amount of orders we have in and then also things if it's not in order kind of like an LOI and so forth.

So I don't know at this stage or for this year if we wanted to mentalize that publicly. But there is the potential as it continues to grow. It is a business that I think we're all very optimistic at the pace that, that business has in front of us.

Your next question comes from Deane Dray with RBC.

How -- I'd like to circle back on some of the competitive dynamics and how it impacted price in the quarter, just with steel being up year-over-year, that's really encouraging. Is that more a reflection of stronger volume, any competitive changes there?

And for PVC down, I know there's new capacity coming on, how much of that weighed on the ongoing PVC pressure. And this all kind of frames the question of when do you think you get a normalized year-over-year price? Does that it's going to be kind of hard to pinpoint which quarter, but is it still your expectation that it will happen this year.

Yes, Deane. I'll start and then for John or John, if they want to jump in there. So -- and with the multifaceted question, I think starting with steel, I think overall demands were strong. So I don't know, but I assume my competitors are also deal up there and also with imports going back, you did have a good market for us to grow and for us to get price and us to get margin. So market demand strong and so forth.

For imports and so forth there. I don't know -- again, I can't say specifically. I don't think it's necessarily more supply coming into the market as much as I would say in general, back to us hitting our numbers and so forth there is probably what we perceived with price dynamics, both top line and spread and so forth.

So in my mind, I'm pretty pleased that we're back commit to the future, but we're back paying pretty well how we think the markets are going to react. And I think the earlier comments from John Deitzer, we're still expecting spread compression within PVC.

As to looking out and go, when does that stop? I may turn it over to my peers, but at least for me, to try to pay 1 quarter with any precision, a little tougher there.

That's really helpful. And then just as you talk about shifting some of the manufacturing resources to your core electrical, have you been able to size what you think your capacity increase is going to be, let's say, on a percent basis in conduit? Or will it be in other non-conduit electro like cable?

I think especially, Dean, you think it more condo and here's why to go the -- if you think of what mechanical makes, it's [ BRS ] and I, it is metal products. So therefore, Harvey, for example, one of our largest facilities, it is using the 80-20 rule effectively, which is actually, I think, helped the S&I margins to earlier questions. [indiscernible] with our key customers with key products, and we don't have to have 1,000 [ sea ] items. So it's actually helping and our intention in the future to actually help the margins there.

And then it is freeing up capacity for our electrical products to earlier conduits -- metal conduits specifically. And to questions that we just answered is where we are seeing volume growth in with data centers and overall markets, it's a place that we would expect long-term growth.

So it's working well to say what percent -- but I think it's enough that we can keep up with the markets as we go forward. So it's kind of a win-win-win there and complement John Pregenzer and the rest of the team for really driving that effectively here.

Just one thing to circle back on your earlier question and David's earlier question as well. It is a little bit difficult to predict the dynamics associated with price versus cost because there are so many different factors.

One item that I think we're watching here in the near term a little bit is the volatility and fluctuation that we've seen in copper. If we just rewind like 6 months ago, it's up roughly 40%, give or take, from where we gave our outlook back in November, we're probably up around 25%. And there's just been a lot of volatility there. And that would be one variable and also trying to make some of these assessments as we move forward. I mean these markets move quickly. And so that's one of the dynamics here that we're trying to watch and understand as we move throughout the year that volatility a little bit.

But I think the team has done a nice job because one of the facility closures is in the area where we use copper and I think the team is working to improve the cost structure. And try to be reactive to some of that volatility as well. So there's just a lot of moving parts and dynamics versus trying to pinpoint a singular -- hey, this is when things change in one way or another.

Your next question comes from Justin Clare with ROTH Capital Partners.

So just wanted to follow up on steel conduit pricing here. So I think it's the fourth quarter in a row that pricing has improved. Wondering if you could just speak a little bit to the trend you expect ahead? Do you anticipate continued price improvement in fiscal Q2?

And then does the guidance for the year embed a continued upward trend in steel pricing? How are you thinking about that?

And then just lastly, is the higher pricing supporting margin improvement for steel conduit, if you could speak to potential magnitude or how that's being affected?

Yes. So Justin, I'll start here and the team can add as always. So you are correct that steel conduit prices as it's been 4 quarters to continue to go up with price. And also, in most of those quarters, it's been up sequentially. And for example, our last quarter, probably our best quarter for spreads in a long time. So those things are moving up.

At this stage in our forecast, I don't think we're expecting meaningful spread increases. So -- but I also want to bake anything in to go for what we're guiding for us and say, oh, there's going to be so much more.

Steel prices are expected, and I'm just going from different people's professional forecast that we use to continue to go up slightly over the next 6, 9 months here. So I think we can keep up with pricing, but I wouldn't expect a lot of extra spread or at least that's not baked into our numbers here.

Got it. Okay. And then just one on the tariffs. I believe aluminum tariffs were potentially expected to have an impact on the cost structure. Wondering how that's evolving. If you've secured domestic sources of supply and what the potential impact on the margins could be?

Yes. Again, without getting too specific on future steps, but you are correct, Justin, that for us, the tariffs because where we did get our products, our aluminum from offshore, at least offshore Canada. I'll be specific. So they are being impacted by the tariffs. We are looking at domestic sources, but I don't want to give out of unit nothing else for our competitors.

The probability of that because even simple things like that, getting through specs and then also I do think the domestic manufacturers back to they know that people like us and so forth are looking for domestic supply. They're raising their price. So how much of an arbitrage we have compared to our competitors or how much we can save compared to the tariffs is hard to quantify. But I will tell you, it has been an impact that I don't think we passed along the impact of the 50% aluminum tariffs. That kind of ties back to John Deitzer's question -- or answer, excuse me, even on things like copper are so volatile right now that us predicting that our cable business is a little bit more challenged in the short term here.

Your next question comes from Chris Dankert with Loop Capital.

I guess just to kind of circle back on solar. And I think you touched on it in your prepared remarks, but I is, can you just kind of give us a sense for what the solar activity is now kind of how we're shifting capacity in that market? And then just kind of an update there.

Yes. So what we said, and then it's a great -- I'm Joe can say a setup question for us, is solar from the quarter just with timing projects was down from a year-over-year perspective. That said, we do have a good backlog there, almost to other people's questions on global make projects. You have orders coming in commitments from OEMs.

And then the other thing that's helping us that we mentioned last year, but our facility Hobart that we make a lot of the solar torque tubes and is performing really well. So that does a couple of things. It helps drive some of the productivity we talked about for the first quarter, it helps with our overall estimates for productivity for the year and the increase in throughput is helping as this demand does come up here.

So I think solar like Global Make projects should be a good thing for this quarter and quite frankly, the second half of the year. To earlier question is, you look at the step-up, between what we're estimating for profits in Q1 and Q2 compared to what we need to deliver in Q3 and Q4 to hit the average of our numbers of $350 million EBITDA.

As a point of clarification, just I assume that the solar torque tubes were generally for domestic projects. Is any of that for exports outside of North America right now?

Some. So I don't know long term how much will be, but it does -- one of our customers has ordered a meaningful amount year for projects overseas. But I don't know if that's a long-term trend or not versus the short term. So I think I would leave it at majority of our focus on our customers are North America base with coincidentally, short term, some projects going overseas.

Got it. Got it. That's helpful. And then I guess just finally on Ho bar, any update as far as factory loading their operational metrics, anything worth calling out either in terms of just being on track or any kind of wind or headaches there?

John?

Yes. No, Hobart is going well, obviously, bringing in the additional solar volume, but their operational rates are continuing to improve a lot of the productivity that we delivered was contributed by Hobart. So I think everything is progressing as we need it to be.

This concludes the question-and-answer session. I would now like to turn the call back over to Bill Waltz for closing remarks.

Thank you. Let me take a moment to summarize my three key takeaways from today's discussion.

First, Atkore's fiscal 2026 is off to a good start. Our results reflect a combination of healthy end markets and self-help productivity gains. We will continue to operate with the proactive mice as we progress throughout the year.

Second, we anticipate favorable market demand for the balance of the year as we reaffirm our full year outlook.

Finally, as we execute previously announced strategic actions and evaluate additional opportunities with our laser focused on creating long-term value for our shareholders.

With that, thank you for your support and interest in our company. We look forward to speaking with you during our next quarterly call. This concludes the call for today.

This concludes today's conference. You may now disconnect.

Good morning. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to Atkore's Fourth Quarter Fiscal Year 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. Thank you.

I would now like to turn the conference over to your host, Matt Kline, Vice President of Treasury and Investor Relations. Thank you. You may begin.

Thank you, and good morning, everyone. I'm joined today by Bill Waltz, President and CEO; John Deitzer, Chief Financial Officer; and John Pregenzer, Chief Operating Officer and President of Electrical. We will take questions at the conclusion of the call.

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 and today's press release, which identify important factors that could cause actual results to differ materially from those contained in our projections or forward-looking statements.

In addition, any reference in our discussion today to EBITDA means adjusted EBITDA. And any reference to EPS or adjusted EPS means adjusted diluted earnings per share. Adjusted EBITDA and adjusted diluted earnings per share are non-GAAP measures. 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, Matt, and good morning, everyone. Starting on Slide 3. Today, we will provide an update on strategic actions, discuss our fiscal 2025 fourth quarter, our full year financial results and our outlook for fiscal 2026. We will share our perspective on the end markets we serve and our long-term strategic focus.

Turning to Slide 4. Before we discuss our results, I want to highlight the announcement we made this morning related to the strategic actions we are pursuing with the goal of maximizing shareholder value. Back in September, we announced that the Board of Directors and the executive leadership team were evaluating a broad range of alternatives to enhance focus on Atkore's core electrical infrastructure portfolio. These alternatives included a potential sale of our HDPE business and the decision to close 3 manufacturing facilities.

The Board has now decided to expand the scope of the strategic alternatives to include a potential sale or merger of the whole company. As a result of the Board's decision, I have agreed to stay at Atkore as CEO through at least the conclusion of this strategic review. To date, Atkore has identified and is executing upon a series of actions that we believe will improve the long-term financial returns of the company. The process of selling our HDPE business is ongoing, and we have identified 2 other modest noncore assets that we anticipate being able to successfully divest in late Q1 2026 or early in the second quarter. In addition, we plan to cease manufacturing operations at the 3 manufacturing facilities previously announced in the second quarter of fiscal 2026.

By delivering on these actions and the planned divestitures, we expect to improve our financial profile of the company and return to year-over-year growth in adjusted EBITDA in FY '27. Expanding our strategic alternatives also allows us to consider multiple scenarios, with the intention of creating shareholder value while positioning Atkore to succeed for the years to come.

Turning to our results on Slide 6. Organic volume was up 1.4% in the fourth quarter with contributions from both segments. Notably, we saw double-digit growth in our plastic pipe, conduit and fittings product category. This includes our PVC, fiberglass and HDPE products, which all delivered double-digit volume growth in the quarter. Overall, our net sales of $752 million in the quarter exceeded the outlook that we presented in August.

Our adjusted EBITDA of $71 million in the quarter includes approximately $6 million of onetime inventory adjustments related to one of the sites that has been previously announced for closure as part of our planned strategic actions. This inventory adjustment impacted our Safety and Infrastructure segment. Our results also included approximately $5 million of additional nonroutine items related to advisory and legal expenses. Excluding the impact of the inventory adjustment and the nonroutine items in the quarter, our adjusted EBITDA would have been $82 million and within our expectations set forth in August.

Reflecting on the totality of the year, volume was up approximately 1%. This marks 3 consecutive years of organic volume growth for our company. As we've explained in the past, the breadth of our portfolio prevents overexposure to specific end markets. This is particularly important in years where certain end markets may be growing at a slower rate or even contracting.

Our cash flow generation has been and continues to be a strength of our business. This year, we returned $144 million to shareholders through share repurchases and dividend payments. We also preserve financial flexibility by refinancing our existing asset-based lending agreement as well as our senior secured term loan, which moves out our maturity days beyond fiscal 2030.

Looking ahead, our focus remains on creating shareholder value, which we believe will be accomplished with an emphasis on our core electrical infrastructure portfolio. We anticipate generating strong cash flows, which provide us with optionality on how to best deploy capital and create shareholder value. We are encouraged by the growth projected across several construction end markets in FY 2026, including data centers, health care, power utilities and education, while remaining focused on Atkore's ability to participate in long-term trends related to the adoption of renewable energy, grid hardening, digitization and the increasing demand for electricity.

I'd like to take a moment to recognize Atkore's talented teams for their efforts and dedication to our company. Thank you.

Now I'll turn the call over to John Deitzer to talk through the results from the fourth quarter and full year in more detail.

Thank you, Bill, and good morning, everyone. Turning to Slide 7 and our consolidated results. In fiscal 2025, we stayed focused on executing our strategy, while also exploring additional ways to strengthen our company for the future. The year was not without its challenges, but we are working to meet these challenges by announcing and completing certain actions in the fiscal year, while pursuing additional opportunities to strengthen our financial profile for the future.

Net sales in the fourth quarter were $752 million, and our adjusted EPS was $0.69. Adjusted EBITDA for the fourth quarter was $71 million. We generated a net loss of $54 million in the fourth quarter. Within our quarterly net loss was a $19 million noncash goodwill impairment charge related to our mechanical tube business as well as the $67 million impairment charge related to certain HDPE assets.

The goodwill impairment related to our mechanical tube business reflects forward-looking cash flows, which now assume lower volumes. The mechanical tube products are made in 1 of the 3 facilities that was previously announced to close as well as another facility that shares capacity with steel conduit. By shifting our focus and priority towards electrical products, we plan to use the available capacity in favor of a higher concentration for our electrical infrastructure portfolio of products. The impairment charge related to our HDPE assets was triggered by the announcement of our intention to explore the sale of our HDPE business at the end of the fourth quarter. The impairment reflects an adjustment of the net assets relative to the forward-looking cash flows across various scenarios.

For the full year, net sales were $2.9 billion, and our adjusted EPS was $6.05. Adjusted EBITDA for the full year was $386 million.

Turning to our consolidated bridges on Slide 8. In fiscal 2025, net sales increased $22 million due to volume growth, contributing incremental adjusted EBITDA of $10 million. Our average selling prices decreased by $382 million. Bill mentioned that our fourth quarter results included select onetime inventory adjustments and additional nonroutine items totaling approximately $11 million. Excluding the impact of those items, our adjusted EBITDA would have been $82 million in the quarter and $397 million for the full year.

Moving to Slide 9. As Bill mentioned, we are proud to highlight that Atkore has achieved 3 consecutive years of organic volume growth. We grew volume 3.5% in fiscal '24 after growing volume 3.2% in fiscal '23, exemplifying the strength and resilience of our portfolio even in times of fluctuating end market conditions. As we look forward, construction end markets are expected to grow, and we anticipate our volume growth in fiscal 2026 to be mid-single digits.

In FY '25, our metal framing, cable management and construction services products grew low single digits due to increased support for mega projects, including data centers. In FY '25, we grew our PVC business, which included high single-digit growth in PVC conduit and especially strong double-digit growth from our fiberglass conduit products, which are increasingly being used for data center projects and included in our plastic pipe conduit and fittings product category.

Turning to Slide 10 and our segment results in the fourth quarter. Net sales in our Electrical segment were $519 million, with $7 million contributed by organic volume growth, offset by continued pricing normalization in our PVC products. Our steel conduit products saw sequential price increases for the third consecutive quarter.

Shifting over to our S&I segment. Net sales increased 4% during the quarter compared to the prior year. Our S&I segment EBITDA dollars and margin were both meaningfully higher than the prior year, in large part due to better cost management and productivity improvements. As Bill mentioned, we recorded an inventory adjustment in our S&I segment of approximately $6 million at one of the facilities that has been previously announced for facility closure.

Turning now to our outlook on Page 11. We anticipate mid-single-digit volume growth in FY '26, driven by expected growth in all 5 of our product areas. For the first quarter of FY '26, we are expecting net sales in the range of $645 million to $655 million and adjusted EBITDA between $55 million and $65 million. We expect adjusted EPS to be in the range of $0.55 and $0.75. For the full year, we expect FY '26 net sales in the range of $3.0 billion to $3.1 billion and adjusted EBITDA between $340 million and $360 million. Adjusted EPS is expected to be in the range of $5.05 and $5.55.

As we have discussed in the past, our business experiences short lead times and limited visibility to end customer demand. To shift more focus to the medium to long term, we have made the decision not to provide a quarterly outlook starting in calendar year 2026 with our fiscal first quarter earnings call. However, we will continue to refine our full year outlook during each quarterly call as we progress throughout the fiscal year. We expect the first quarter of fiscal '26 to be the softest quarter of the year, and for performance to ramp as the year continues. At this time, we expect the back half of the year to be higher than the first half of fiscal '26 on an adjusted EBITDA basis.

Next, Slide 12 summarizes our solid financial profile. Our cash flow generation has always been a strength, which helps support a healthy balance sheet. Our liquidity provides the foundation that enables us to execute key strategic opportunities, while returning capital to shareholders.

With that, I'll turn it to John Pregenzer to give an update on our end markets and our long-term strategic focus.

Thanks, John. Turning to Slide 14. The breadth of our product portfolio is a differentiator for Atkore. Atkore's products broadly serve construction activities, making their way to each of the relevant end markets. Demand for electricity continues to increase. The need for power centers around the expansion of data centers to support AI. We are now in what some are calling the data era, with reshoring efforts and demand for data centers to help power the expansion of AI, contributing to an expected 2.6% compound annual growth rate for electricity consumption through 2035. Electrification is required in most areas of construction. Our products provide comprehensive solutions to deploy, isolate and protect critical electrical infrastructure, emphasizing that Atkore really is all around you.

The demand outlook for FY '26 reflects strength in most end markets. It's important to understand both expected growth rates as well as the relative size of the market. While data centers continue to draw most of the attention within the construction community, that end market, in total, is still smaller than several other end markets. Nonetheless, data center construction is growing significantly, and we participate in that growth.

Renewable energy is expected to increase from approximately 20% of the power generation mix today to 28% by 2035, and solar continues to be the quickest path to online production available to the market, a key advantage for meeting the expected increase in U.S. energy demand.

Finally, turning to Slide 15. Today and into the future, we are focused on prioritizing our portfolio of domestically manufactured electrical infrastructure products and delivering on the strategic actions that we believe will maximize shareholder value. We remain committed to maintaining a strong balance sheet and financial profile that enables us to return capital to shareholders, while making modest capital investments that support operational excellence aligned to the Atkore business system.

Our positioning in key electrical end markets gives us confidence in our ability to grow volume over the mid to long term, while our diverse portfolio enables us to maintain resilient, while navigating headwinds in certain end markets. We, as a management team, have conviction on our teams and are focused on delivering to our plan. We recognize our recent performance challenges, and we are determined more than ever to drive improved results that create greater value for our shareholders, employees and stakeholders.

With that, we'll turn it over to the operator to open the line for questions.

[Operator Instructions] And your first question today comes from the line of Justin Clare from ROTH Capital Partners.

I wanted to start out with the guidance. So for fiscal '26, you're calling -- or you see mid-single-digit volume growth. I think the midpoint of the revenue guide implies 7% year-over-year growth. So that would suggest you could see some pricing benefit through the year? So wondering if you could just comment on is that expectation -- the expectation and whether -- or what is driving that potential price improvement?

Yes, Justin, you're aligned there. I mean, as I think we said in some of the prepared remarks, we've seen sequential price increases in our steel conduit business. There's some other businesses where we've had pricing growth as well that impacts the sales line, but it's really that price versus cost dynamic [ too ]. We do anticipate continuing to have price versus cost headwinds.

But when we're looking at where some of the underlying raw material commodity inputs are, where they were versus historically, we are seeing some ASP in sales growth as well, but there is sometimes some price versus cost compression there, too. So that's some of the dynamics. But there would be some embedded benefit -- or increase, I should say, at the ASP line with some of those raw material inputs at an elevated level this year versus last year, meaning, '26 versus '25.

Got it. Okay. And then just also on the guidance. When I look at your Q1 guidance and then the full year, for Q1, the implied EBITDA margin, I think, is about 11%, and then closer to 12% for the full year. What is -- or what do you expect to drive the margin improvement through the year? How much visibility do you have there? And is it really the pricing dynamic that's driving that?

Yes. It's a great question. So we are seeing a little bit of softness here in the first quarter as we sequentially move down here from the fourth quarter. We do have a positive expectation as we ramp throughout the year, meaning we do have line of sight to a lot of the construction services in the mega projects in Q2 to Q4. So that's positive as we see throughout the year.

We're also seeing real strength coming through. I think in John Pregenzer's comments, he talked about the growth in solar. And we do anticipate that in 2026 as opposed to 2025, which has had a lot of volatility in the year with that industry and so what was going to happen with or without some of the subsidies associated with the Inflation Reduction Act. So we see some positive elements here contributing.

Bill, I'm not sure if you wanted to add anything?

No, I think that's it. I mean that the cost actions we're taking to help with the margin and so forth that, again, I think even in my prepared remarks, and what we set out September 29 or whatever, that second half this year, as we do get the 3 facilities closed and continue to drive extra productivity off a really strong 2025 productivity, that I do think things are lined up, especially as we go into the second half of the year here.

Your next question comes from the line of David Tarantino from KeyBanc Capital Markets.

Maybe could we start with the strategic review and maybe just kind of walk us through kind of the range of outcomes we could expect? And maybe what's the magnitude of the 3 divestments you outlined? And how should we be thinking about a suitable situation where you would consider a sale or a merger?

Okay. Well, obviously, it's earlier on. I'll start and then either -- especially John Deitzer, I guess, here, if there's any of your add-ons. But it's earlier on. But there has -- since we made our announcements, we're still pursuing HDPE. I don't think we can get any more specific, but there's obviously interest there that us with our banks and so forth are working through. So that continues to move forward just like the other actions that we kind of discussed even here with Justin.

And then from there, since that time -- well, let me back up. The Board always looks at what's the best outcome for our shareholders. So as part of our discussions. But since we did our announcement at late September, there has been some interesting inbound calls. So again, it's early on in the process, but the Board reflected and it's -- I'd say, a good time, but to make sure we're pursuing what is best for our shareholders. So we'll keep, obviously, investors and everybody else informed as we kick off the process here.

So -- and then from outcomes, obviously, it can be the full range from -- as we said in announcements, and I think I covered this morning, from selling the whole co to the other end is the Board decides that the best thing is to continue to run it as is. But right now, we're focused on the strategic alternatives, and we'll see how that plays out over the next several months.

Okay. Great. That's helpful color. And maybe could you give us some color on the cost savings initiatives? What should we be thinking around the magnitude of the savings? And maybe should we be thinking about this as a first step that you feel that there are more opportunities to take more meaningful cost actions within the core business? Any color there would be helpful.

Yes, David. So obviously, the 3 plants, we started the process of shutting those down. The teams are well organized. We're still in the early stages, but expect all production deceased by the end of Q2. And I think on an annualized basis, we would expect to see about $10 million to $12 million in cost reductions across the fiscal year.

I think, David, just to add on to that. I think these are just key contributors that we anticipate 2027 to be up versus 2026. And so I think that's really the balance here, where some of these actions are plus some other things we're starting to line up.

And maybe just a follow-up on that comment within that assumption, should we be thinking about kind of the items you outlined today getting you there? Or should we expect some more down the line?

I think with the -- without any additional items, just the fact that these actions, HDPE, and then the growth initiatives that are underway that we kind of alluded to that, whether it's solar, where -- I forget if we have POs, but verbal commitments from customers to be ramping up here early in the calendar year, to global mega projects that are expanding into -- with some well-known customers from one region of the continent to a section region on the continent here, that we see enough pathways right now without additional things to get there. But again, that doesn't roll out. We'll continue to do other actions.

So again, I don't want to be giving a specific guide, David, for next fiscal year, but we're optimistic both for this year and definitely as we get into 2027.

Your next question comes from the line of Andy Kaplowitz from Citigroup.

Bill and John, I just wanted to focus on [indiscernible], I think you told us about the $50 million headwind for '26. So as you sort of rolled out your guide, like is that still what the amount is? And maybe you can update us on imports in general, like what have you seen from the steel conduit side and the PVC side, steel was getting better, PVC is a little more slowly. So what have you seen there?

Yes, Andy, I'll start with some of the outlook expectations and commentary, and then I'll turn it to Bill and John here to give some more specifics around what's happening in some of the markets that you're talking about.

I would say we definitely have continued price versus cost headwinds going in '26 versus '25. We talked about that. And in the third quarter call back in August, we said kind of $50 million of unmitigated headwinds. So we had expected some volume and some productivity benefits to mitigate some of that. And so and our outlook this year is still within kind of $340 million to $360 million. So we're right around that $350 million midpoint. So kind of triangulates versus where we sat in August.

That being said, I think we are seeing additional improvements we're taking. So as I think about the year, the price versus cost dynamic is really going to impact the first quarter the most. And then as we go through the year, the price versus cost dynamic will probably ease. Also as we think about the year, there's going to be a real quarterly ramp in EBITDA, meaning kind of -- we've laid out the first quarter here. So the first and second quarter, definitely the expectation is year-over-year unfavorable. And then we'll continue -- the second half collectively, we anticipate to be up year-over-year. So that's kind of how we expect the year to ramp.

I'll turn it to Bill here and John to give some comments on the steel conduit market and PVC.

Yes, Andy. So steel conduit is relatively strong on the import side, which obviously influences a lot of what we're doing. We have seen a slight reduction in import volume this year. So it's down about 2% over last year, but that's -- it's positive in regards to the many years of double-digit growth.

So looking at the impact of tariffs in regards to what's happening, probably not as strong as we would have expected. And so spending some time and ensuring that tariff policy is being effectively enforced and working with some different groups there because we would have expected to see slightly stronger year-over-year reductions in steel conduit imports. But the market is fairly good.

PVC has been strong. I think it's been influenced by data centers. There's a strong demand for large diameter PVC conduit in that space, which will drive the volume numbers or overdrive the volume numbers for that product line. So we've seen good growth there and expect that to continue.

Yes. And then I'll just add to John's comment both on 2 things. So to go -- obviously, we're still working -- the administration is still working on how we can enforce tariffs better. But if you look, Andy, and for the rest of the investors, both of these product categories were growing -- given round numbers here over the last couple of years, but 20% a year. And to John Pregenzer's point, steel is now for the year, down 2% with imports. So it's going from growing to flat to slightly down. So more to come, hopefully, to make it even stronger for U.S. companies and blue-collar workers in the U.S., but that has been semi-effective.

PVC, where to John's point, we're growing, we called out in our prepared remarks, strong double-digit around numbers. PVC from recollection, I think, was up 6% for the year. So imports are still coming in. But even there, not what I perceive the market is and also not nearly as much as previous year. So it's there, but it's the tariffs have had a good effect, and we're hoping to make an even greater effect going forward.

Helpful. And then, look, I can understand John P's comments about data center markets maybe not being the biggest. But at the same time, we've seen, as you guys know, massive orders across the industrial space over the last couple of quarters. So like when you think about your business, like I know you've talked about construction services in the past. Maybe they're on the comp, and it takes a while. But why shouldn't we see a bigger impact on '26 or maybe we will, from data centers because, again, there is a massive amount of money there, as you guys know.

Yes. So no dispute on the massive growth, they're massive. I'm making my own number, Andy, depends on how big you like, 15% or something. So definitely strong double-digit growth for anybody making any products.

I do think as we get into kind of the answer I gave to an earlier question, that we are going to see -- obviously, our fair share within the products we have relative to the market. We cover that one John Pregenzer's charts. But I also do see our global construction business, that's focused on this, growing this year had also a very strong, call it, double-digit rate. Now it's -- again, it's how much of our company is that compared to PVC in the chart that John Pregenzer and residential that's still anemic.

But I think, Andy, that's why, again, numbers here, I don't want to get ahead of myself, but from our $340 million to $360 million guide, our volume guide, are there pathways to potentially be stronger here? Yes. So we're going to see how things play out. So I'm still optimistic here as we go forward.

Yes. I think that the product lines that line up with data centers in our portfolio, we see them growing in those type of rates. When you say data centers are up 20% or whatever the numbers are, we're seeing that in certain parts of the portfolio. I think when the global mega projects that we have lined up and we've already started to get orders from and letters of intent from start to kick in the second half of the year, then that will have more influence on our overall growth rates that I think John Deitzer alluded to in regards to the overall revenue growth we'll see in the back end of the year.

Your next question comes from the line of Chris Moore from CJS Securities.

The 3 plants that are closing, just trying to understand a little bit better, what's being produced there? Is there -- will there be any learning curve when those products are shifted to other facilities?

Yes, I'll start. So we have a -- we've discussed -- I mean I'll give more color. But yes, it's all public. I just want to say something [indiscernible], Chris. But we have our Phoenix operation that makes things like metal pipes and so forth, that metal conduit and also for our safety and infrastructure. So we will be moving that production back to plants here, for example, in Harvey, Illinois, Hobart, stuff like that. So we had that capability. Most of the capacity from lines, I think we'll be moving one production line out to do this, but most of the capacity is already here. So -- and then -- so I don't think there's going to be a lot of trying to move machines and so forth. For my 40-year career, I've done that before and there are going to be challenges here just ramping up.

Now some of it are also back to pruning, focusing on electrical products and keep in that market, which we think has the best growth to the small charge we took in the quarter is we are going to narrow some of the scope, which I think quite frankly, is exciting purely from one of the things we're going to drive a lot harder is the 80/20 principle and truly focus on our key products with key customers and so forth. So I think there's a double win there.

Then the next facility is a PVC facility in Fort Mill. And that, again, we don't have to move with our lean production and everything else. We don't have to move any of the production line. So again, we have to ramp up other locations, but I think the risk is mitigated purely from the standpoint of investments, productivity, we have that, and we can get rid of the cost and infrastructure without moving machinery.

Final facility is we have an operation in [indiscernible], which is around Los Angeles that makes cable products, and we're moving that back into of our facilities here on the kind of the East Coast. So again, we have the capacity there.

So obviously, I think it's the right thing to do, we're -- we'll continue to work, driving productivity. As I mentioned already, we had one of our strongest years last year in productivity. And as we continue to drive lean and so forth. And I think as John already mentioned, he's striving with monthly formal calls, but obviously following up with teams that have a lot of rigor and structure. So I think it's a great thing to do for our customers and quite -- and our shareholders here. So hopefully, I gave you everything you were looking for.

No, very helpful. Maybe just a follow-up. HDPE, obviously, that is one of the areas on the strategic -- sounds like you're in discussions. I'm just trying to understand, not specific numbers, but the potential value to be gained from Atkore here, what's the bull case scenario for HDPE for someone outside of Atkore?

Yes. So I'll give a high level, but I won't give numbers. John Deitzer, if you want to provide, but I don't think we want to get that specific. So I think in this scenario, the good news for anybody in this market as volumes are coming back. We called out in our prepared remarks at how we're seeing double digits. And I think that's consistent with anybody else that I'm aware of or public corporations, fiber companies and so forth.

So the markets are growing, and we are getting our fair share, if not more. And I do anything for us, but then I'll get for the -- whoever if they were to make the acquisition that people is to go one of the things we needed to get to was filling up the factory. It's hard to run a factory efficiently when you're not running long runs, you don't want to change over, you don't have a full absorption. So I think we even have, over time, a pathway to get there. I say, get there, but continue to increase year-over-year productivity and profits and so forth there.

But from the standpoint of is it strategic for us? We look forward announcing all these other things. Obviously, at least some people think that it's better in their hands to be run than ours. And we're exploring that, and we'll see where it goes over the next couple of months here.

Your next question comes from the line of Deane Dray from RBC Capital Markets.

Is there any explicit intention now to run the business more for cash? It looks like you're pulled back a bit on CapEx. Would you consider suspending the dividend here? Your balance sheet is in great shape, but just the idea of running the business more for cash at this stage.

So Deane, let me do it this way. Have a good -- we'll have a good discussion or have a good discussion with the Board. But as of now, we're running -- and I'm going to make it clear, like one of the calls this morning is our employees and so forth. We're running this business that I'm proud of, and I see to all the other questions how this is -- even you get to the second, and I'll get back to cash in a second.

But as we -- implicit in our guide, if you walk through numbers, the second half of the year will be up year-over-year in profits and so forth and where we drive that into next fiscal year that we already kind of alluded to and the growth initiatives. So -- and I'll tie it back to cash. But no, we're running this business like we would without any change.

Now to your point. So therefore, no, we have no discussion in the Board meeting on suspending dividends. Two, to go what we've always said, at least in my mind, is with the CapEx, we made a bunch of investments on all these things like solar and even behind the scenes, the ERP systems. But a lot of those things are coming to fruition now. So we just don't need the amount of CapEx, and we're getting back more to historical trends. So -- and that's where I do think the prepared remarks and in the charts with very comfortable, great performance on cash that we're comfortable that we'll continue to deliver strong cash flows here. So -- but no, it's not because of exploring strategic alternatives, just the right thing to do for the company and our investors.

You mentioned the Board a couple of times, and I know you're limited in what you can say here, but can you just give us a sense of the activist engagement at this stage, the additions to the Board, how aligned are you? Is there a cooperative tone here? And just kind of -- if you just walk us through whatever you can. Would appreciate it.

I'm glad you're asking for that. This is probably the biggest softball question of the questions asked. No, totally cooperative. I don't know. I won't mention their names or it's in the press like Adam and so forth. But -- and that's suggesting anybody calls, but you would find out that it's -- we're aligned. We -- back to my prepared remarks, and I think of beginning question, is as we look through the Board's always looking to do what's best for the corporation and stakeholders, its investors and so forth. So as inbound calls came in, it made sense to formally do this. And also for us, I think it's the best thing to do, after a robust discussion, to formally announce it versus -- I'm sure you're aware of other companies have sold, but you don't know until they announce it versus let's cast a wide net. So whether it's a PE firm strategic, whatever is there.

So from that standpoint, dealing with Adam, Andy, the [indiscernible] team, we've been aligned since day 1. And we also believe in the Board refreshment and so forth that we were planning to do just as some of our Board members now are within a couple of years of retirement. So bringing on Frank to the Board that our [indiscernible] team has met with, I've met with, our Chairman has met with. I'm excited that Frank's willing to join. So we'll have a version with them and jump into strategic reviews here and we're totally good. It's the right thing to do.

Your next question comes from the line of Chris Dankert from Loop Capital Markets.

I guess on the back half weighted nature of the guide, forgive me if I missed it, but I mean, there's some seasonality dynamic there. Can you just kind of walk us through the other components as we think about why the back half is stronger in the first half and kind of how that could change potentially?

Yes. I'll start and then kind of let the rest of the team jump in here on what I missed. In the first quarter, [ to one ] item is -- we'll end on December 26. And so we have a little bit of a short week at the start of the fiscal first quarter and a short week at the end here. And so that's a little bit of the compression dynamic in the first quarter that we're seeing. I think it has 10% less shipping days in the first quarter versus the fourth quarter, right? So that's -- you're seeing that. And then we always have a normal seasonality decline of a couple of percent from Q4 into Q1. So that's the dynamic there.

And as we look forward, though, the rest of the year, we do see strength coming back from a lot of the investments that we've made. And we have invested heavily in this business, and that's also why we're seeing some of the investments come down as we had talked, they would come down.

But some of those investments we're seeing come through or expect to come through this year would be the solar investments. That industry is really looking poised to have a strong recovery in calendar 2026. And so that will be -- you'll see that come through in the Q2 to Q4. We do have some better line of sight on some of these larger mega projects that we've talked about, and they are chunky. When they come, they come in kind of chunks, but they're not as consistent as everyday stock and flow orders. And so we have our line of sight to some of those. And I think John P. had mentioned that we have some letters of intent and things like that with some big customers. So we're excited about that.

And then the initiatives, whether it's on the PVC water side, et cetera, we have made some investments, and we're expecting those to come through. We have that equipment in place. So it's a combination of those factors of as we look forward into the back end of the year, that second half in totality, but really the fourth quarter here as we look should be up. We anticipate it to be up year-over-year.

Yes. I'm just going to add color to that to go just like John Deitzer mentioned where either orders, letter of intent with global mega projects, same thing. I think some of the orders in versus verbal commitment from solar customers, a significant ramp-up here starting in the first quarter of the calendar. And for the public, there's a couple public solar companies. If you read their earnings, they're both bullish in that case and then other private ones as they look forward into next year. So again, the solar market should be growing. We've had durable, if not, purchase orders there.

And then there's some organic things like the regional service centers as we continue, again, with John Pregenzer and other leaders guide on just how we make it more efficient with the [indiscernible] even 80/20, like what are the real critical products that we have to drive and continue to perform even better there, that that's a winning proposition with one order, one delivery, one invoice that I think we're going to see a good maximization as we get into next year. So not that it hasn't worked yet, but even better. So I think it's a coal cross-section there that makes us excited, Chris.

No, that's extremely helpful. I guess as a follow-up, I mean, John, you mentioned the water investments there. I guess we've been talking about that in the past and then frankly, raised a couple of eyebrows. I guess, any comments you can give in terms of number of locations that have been changed over to water PVC from electrical capacity expected contribution? Anything at all you can kind of give us to put arms around that piece of the business?

Yes. So let me handle this one because I do think, and I own it like everything else, our communication on this. So we have around -- well, if we reduced the factory here, but like 8 facilities, geographically dispersed. As we continue to drive productivity, we are getting more throughput in our lines. And these are simple things like less scrap -- I won't get too geeky here, but single [indiscernible] exchange [indiscernible], the turnover time that we have extra capacity here across our facilities.

We buy -- and I'll hit in your specific question. We buy resin effectively. We -- in several of our facilities, we're already in these markets. So we're not looking at all to cut down on our electrical growth. Actually, we see electrical conduit for all the things we mentioned, from data centers to grid hardening continue to grow, just like we called out, they grew double digit here in Q4 to continue to grow well. So like electrical conduit is our main focus.

On the same hand, just as an edge-out strategy. Let's invest in making 1 or 2 additional products -- I could say, C900 because that's the product, but like let's make this one other product that we have the capacity on to further absorb the line, the overhead. It's a good profitable product here. So we've made those type of investments in the factory, but it's not like a new factory. It takes nothing away from our primary focus on electrical, and we are seeing growth here. Now in those new products like C900, I'm seeing good solid double-digit growth in those type of things.

So again, I think from an investor standpoint, where we're focused on electrical is absolutely all -- I say I'm doing [indiscernible] how we utilize an edge-out strategy for something that should add some organic growth to the corporation's additional profits and so forth. And that's -- but it is, to John Deitzer's point, with that ramp-up, we see strong enough growth that is going to help us drive the second half of the year.

Yes. I think to Bill's point, I think we're happy to see the growth in PVC conduit that we've had here in the last couple of quarters. I mean it's been really positive to see the penetration we've had growing that product line, while we expand some capabilities in a handful of our PVC plants that we're already doing. Nonelectrical or water products in the past, they can do some additional product lines and have some additional capacity, but we really feel that we're on the back end of that investment, and then we'll start to see the commercial benefits as we execute that plan going forward. But again, the primary activity in all of our plants is PVC conduit.

And this concludes the question-and-answer session. I will now turn the call back over to Bill Waltz for some closing remarks.

Before we conclude, let me summarize our key takeaways from today's discussion. First, Atkore has a solid financial profile, differentiated product portfolio and placement in key electrical end markets, projecting growth into the next decade. Second, Atkore continues to evolve and drive towards excellence. Our announcement to support strategic alternatives is intended to chart the best path forward. Finally, our decisions now and in the future will be made with a stead past commitment to creating and maximizing shareholder value over the long term.

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.

This concludes today's conference call. You may now disconnect.

Good morning. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the Atkore's Third Quarter Fiscal Year 2025 Earnings Conference Call.

[Operator Instructions]. As a reminder, this conference is being recorded. Thank you.

I would now like to turn the conference over to your host, Matt Kline, Vice President of Treasury and Investor Relations. Thank you. You may begin.

Thank you, and good morning, everyone. I'm joined today by Bill Waltz, President and CEO; John Deitzer, Chief Financial Officer; and John Pregenzer, Chief Operating Officer and President of Electrical. We will take questions at the conclusion of the call.

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 and today's press releases, which identify important factors that could cause actual results to differ materially from those contained in our projections or forward-looking statements.

In addition, any reference in our discussion today to EBITDA means adjusted EBITDA and any reference to EPS and or adjusted EPS means adjusted diluted earnings per share. Adjusted EBITDA and adjusted diluted earnings per share are non-GAAP measures. 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, Matt, and good morning to everyone. Thank you for joining us today for our fiscal 2025 Third Quarter Earnings Call. Before I address our third quarter results, I want to discuss the announcement made earlier today. I've informed the board of my decision to retire from Atkore. After much reflection, I know that now is the time to start a new face of my life with my family. I've had the privilege of spending 12 years with Atkore, including 7 as CEO as part of a 40-year career. I'm proud of all the accomplishments that the team has achieved. Although the work is never fully complete, it is time for the Board to engage their succession planning process. The Board supports me in this decision.

I am focused on a seamless transition and plan to lead Atkore in my current role until a successor is appointed. Our strength as a company has always come from our strategy process and most importantly, our people, and that will not change. Our Atkore business system is about the team, and I have the utmost confidence in what our teams can achieve going forward. While we are making this announcement today, I am committed as ever to our strategy, our nearly 5,600 employees and our shareholders until the next CEO is appointed.

With that, I'll turn to our third quarter results, starting on Slide 3. We delivered strong performance in the quarter, achieving net sales, adjusted EBITDA and adjusted EPS toward the top end ranges we presented in May. Our net sales of $735 million included 2% organic volume growth. Beyond our volume growth, results were supported by continued productivity gains, particularly in our S&I segment.

Year-over-year declines in average selling prices were in line with our expectations and we are pleased to see a second consecutive quarter of sequential pricing improvement in our steel conduit products. As we started our third quarter this past April, we were just beginning to operate in the new tariff environment. Over the last 90 days, the environment has continued to evolve with multiple modifications to initial tariffs and the introduction of new ones.

Notably imported steel conduit and PVC conduit volumes have both declined year-over-year in the third quarter compared to the prior year. As we started the third quarter, the Dodge Momentum Index indicated a slowdown in planning activity across several nonresidential categories. Since then, construction sentiment has been mixed, we've observed pockets of strength in certain verticals, while other key sectors have been more subdued.

Tariffs are influencing not just input costs but also market pricing dynamics and broader demand patterns. Taking all this into account, we are maintaining our full year adjusted EBITDA midpoint of $400 million and are raising the midpoint of our adjusted EPS to $6.50 and reflecting improved visibility and stronger earnings leverage. Looking ahead to FY '26, we continue to refine our estimates. We anticipate several headwinds and some of which have been previously communicated, such as the expected year-over-year impact from lower selling prices.

Others, like the broader tariff effects, which have both direct and indirect elements have emerged more recently and introduced greater complexity. We expect these pressures to persist into next year, and we are actively evaluating various levers to help mitigate their impact.

In closing, I want to thank our teams across the organization for their continued execution and discipline. Their dedication to the Atkore business system remains central to how we deliver value to our customers and shareholders.

With that, I'll turn the call over to John Deitzer, to talk through the results from the quarter and our full year outlook.

Thank you, Bill, and good morning, everyone. Moving to our consolidated results on fiber. In the third quarter, we achieved net sales of $735 million and adjusted EBITDA of $100 million. Adjusted EPS was $1.63.

Turning to Slide 5 and our consolidated bridges. Organic volumes increased 2% compared to the third quarter of fiscal 2024. Average selling prices declined 12% year-over-year driven primarily by our PVC conduit and -- conduit products. These year-over-year price declines for both product categories were expected. And as Bill mentioned, we are pleased to report the second consecutive quarter of sequential pricing improvement in our steel conduit products. We also saw sequential pricing improvement across the enterprise. Including for electrical cable and flex a conduit, mechanical and metal framing products. However, pricing has not kept pace with raw material cost increases. This has been particularly true with respect to copper, which has seen cost volatility for most of the quarter.

Moving to Slide 6. Year-to-date, our volume is now up slightly having been flat for the first 6 months compared to the prior year. Our year-to-date volume reflects growth across 3 product areas. Our metal framing, cable management and construction services has grown low single digit year-to-date, driven by our ongoing focus on construction services as well as cable management. Year-to-date, our plastic-pipe conduit and fitting category is now flat year-over-year having overcome a mid-single-digit decline in the first half of fiscal '25.

Growth in the third quarter came from our PVC and fiberglass conduit products. Our metal electrical conduit and fittings product area has grown low single digits year-to-date, having overcome flat volume performance in the first half. We estimate that demand for domestically made steel conduit has increased due to enacted tariffs on imported steel. Our electrical cable and flexible conduit category also continues to grow, up low single digits year-to-date, which we believe is in part due to the success of our differentiated products.

Turning to Slide 7. Adjusted EBITDA margins compressed year-over-year in our Electrical segment primarily due to pricing declines related to our PVC and steel conduit products. Adjusted EBITDA margins improved in our S&I segment year-over-year, driven by volume growth and overall better productivity. The productivity gains were primarily due to better cost management in our North American operations.

Turning to Slide 8. I Year-to-date, our business has generated $192 million in cash flow from operations, and we've received $14 million in proceeds this year from the previously announced divestiture of the Northwest Polymers business, and the sale of some excess equipment. We remain committed to executing a balanced capital deployment model with an emphasis on returning cash to shareholders.

Our balance sheet is in a strong position with no maturity repayments required until '28 and our recently refinanced asset-based lending agreement remains undrawn, contributing to a net leverage ratio of approximately 1x.

Next, on Slide 9. We are maintaining the full year outlook midpoint for adjusted EBITDA. However, with better line of sight to the fourth quarter, we narrowed the range and expect full year adjusted EBITDA between $390 million to $410 million. We are also pleased to be increasing the midpoint of our full year outlook for adjusted EPS and now expect to achieve adjusted EPS within the range of $6.25 and $6.75.

With this, we expect our fourth quarter adjusted EBITDA to be in the range of $75 million to $95 million. Our adjusted EPS is expected to be in the range of $1.05 and and $1.35. We are also adjusting our outlook for our full year tax rate.

As a reminder, the impairment recorded in the second quarter will reduce our full year tax rate, which we now expect to be in the range of 19% to 21%. This means we'd expect our tax rate in the fourth quarter to be within a range of 20% to 23%. As we mentioned earlier, the forward-looking sentiment on construction activity appears mixed depending on the end market. Through our first 9 months, we have grown just under 1%. For the full year, we would expect our volume to be flat to slightly positive.

With that, I'll turn it over to John Pregenzer.

Thank you, John. Moving to Slide 10. As Bill touched on in the beginning of the call, the topic of tariffs remains fluid with no definitive certainty on their duration or size. As we manage the business, we recognize that tariffs have both a direct and indirect impact on our company. A central theme supporting tariffs is an increase in onshoring of manufacturing across the U.S. There have been positive indicators that onshoring investment momentum is starting to pick up.

However, these efforts take time with various factors impacting the rate of change. A potential direct benefit from tariffs for Atkore primarily centers on our ability to recapture lost market share from imports for certain product categories over time. This is especially true for our steel conduit products. We believe this will occur over time as market demand shifts back towards more domestically sourced products. Since last quarter, the administration announced several changes to existing tariffs and new tariffs. The most relevant change for Atkore was the increase to the original steel and aluminum tariffs on Mexico and Canada from 25% to 50%.

The recently announced 50% tariff on imported copper that became effective on August 1, is not expected to negatively impact Atkore due to our domestic supply partners. As we look beyond FY '25 to FY '26, we are estimating various factors that are likely to impact us. As we have previously communicated, due to the rate of change in our average selling prices for our PVC conduit products in FY '25, we expect to experience a year-over-year headwind into FY '26. We expect that unfavorable impact to occur throughout the duration of the year, starting with our exit rate in FY '25, but having a lesser impact as the year progresses.

The recently expanded aluminum tariffs from 25% to 50% creates a new cost challenge for the market, which could also slow demand activity for our products. The combination of these factors suggest there are approximately $50 million of unmitigated headwinds in FY '26. Although we have not finalized our full year guidance for FY '26 we are actively working to offset the effects of these anticipated headwinds.

Now turning to Slide 11. As we've often said, the electrical industry is a great place to be. Our strategy addresses items that we are focused on today while also looking toward the future. We remain committed to maintaining a strong balance sheet and financial profile that enables us to return capital to shareholders while also pursuing strategic actions that enhance our portfolio of domestically manufactured electrical products. Our teams continue to drive operational excellence through the Atkore business system our disciplined data-driven approach to managing growth, productivity and customer value.

Despite near-term challenges, our positioning in key electrical end markets gives us confidence in our ability to grow volume over the mid- to long term. Today and in the future, Atkore is providing comprehensive solutions to deploy, isolate and protect critical electrical infrastructure over the long term. while on a mission to be the customer's first choice by providing unmatched quality, delivery and value to help our customers achieve their goals.

With that, we sincerely thank you for joining our call and for your interest in our company. Now we'll turn it to the operator to open the line for questions.

[Operator Instructions]. Your first question today comes from the line of Andy Kaplowitz from Citi.

This is Piyush on behalf of Andy. Congrats on the retirement advancement.

Well, thank you, Piyush, and look forward to still talking with you for a while here, but enjoy.

Absolutely. So I just wanted to touch on volume growth. It seems that forecasting volumes has been a little bit challenging, and I understand it's been a dynamic macro environment. But based on your conversations with your customers and the mega projects and the mega trends that you have talked about, do you have enough visibility on demand trends to provide some puts and takes on your volume expectations for.

John, do you want to -- like I have a few. Let me do it this way. So end markets like data centers are exploding. So that should be good from a vertical and also specifically for us, and this is a difference between, let's say, fiscal Q2, fiscal Q3 and when we get into what we call global mega projects, we're specifically with a customer, that's lumpier. So like timing of jobs for the last quarter to -- as you wrap up jobs and start another large projects. have been a little slower from a year-over-year comp, but us talking to, I'll just say, very well-known global data center-driven data companies, we're optimistic for the future there.

Solar, same thing you can go check with the people we sell to and they're optimistic. And I think from there, other than residential reasonable markets going forward. So we can get into our core and so forth. But Pasha -- we're not giving any estimates for next year. I just want to first mention, John, so -- but it would be reasonable growth going into next year.

Yes. I totally agree with Bill here. I think we had a little bit of choppiness in our international business from some of the mega projects rolling off and new ones starting potentially as we look forward. So I think we felt good there. I mean there is -- we've called that out for -- so in the North American business, I think that's performed as we expected or somewhat in line with some expectations at the end market level, the timing of it has been a little bit choppy here between some of the months. But looking forward, and we're pretty -- that low single-digit type environment seems to be pretty reasonable.

Got it. Helpful. And just like touching on your water end market, I think you have talked about increasing focus on water, but it seems that the water end markets are a bit mixed here. Maybe expand on the demand trends that you are seeing across the end market and what is still a vertical where you're planning on investing.

Yes. Well, I'd say at this stage, majority, there's always a couple of things to finish, but the investments are in May. Now it's just growing with end customers. And that seems to be going on pace. Again, as we called out in previous quarters, we -- whatever where you want to use fired, maybe too strong a word, but specific customers that where resellers, retail-oriented and plumbing and things like that tied to residential is down. But where we're focused, the municipal is picking up or filling that void year-over-year. And I think it should be a reasonable market for us going forward.

Got you. Helpful. One last one on HDPE. I think last quarter, you mentioned potential increase in competition from satellites. How has that dynamic evolved so far? And how is the current inventory in the channel? And if you have started to see money taking -- making its way into the projects.

Yes. So I'll start but anybody jump in here. Again, I should probably turn it over to our COO that's closer to these things. So to the last quarter, I don't think with the One Big Beautiful Bill and everything else that is still the option to use satellites, somebody can give me more details on the specific part of what laws, but the states are required to do the most effective thing out there. So that hasn't changed one way or the other.

I'm not aware, but maybe it's my knowledge of specific jobs we won with the [ BTAC ]. But I do think you can triangulate this with, again, other people in the industry that overall fiber is starting to go up because of the data center growth and things like that. So long-winded answer, pause that nothing's really changed from our last quarter guidance other than we are starting to see the business volumes pick up as we go forward, again, another should be a good thing over the longer term.

Our next question comes from the line of Dean Dray from RBC Capital Markets.

I'll also add my congrats on the announcement. I know you're still in the seat, but I appreciate everything you've done here and congrats.

Dean, thank you. And yes, I'm still on the seat and nothing changes. But yes, we're working with you, obviously, through Atkore in previous careers. It's been a great relationship.

Absolutely. So can we start with what you gave, you've given some good updates here on the tariff kind of from a high level. Can you take us down to the ground level especially on the steel conduit imports from Mexico. So how has that changed with the introduction of the tariffs, has that stopped the flow of Mexican steel conduit. And then same question for the PVC that was coming in from Latin America, just has that stopped? Or can you size any of that for us, please?

Yes. So I'll do both and I keep -- I should look over, John, any of us, John, forget any of us could answer these questions. But I'll mix the 2 together to go overall for the year, and I'm using fiscal year just to even go back further through October. For the year-to-date for both or either flat to maybe up 2%. We're at noise level that I would call flat. But again, before someone says, "Oh, the one was up 2%."

Now the key thing to your point, and then I'll give caveat steam is this last fiscal quarter both were down significant double digits. What does that mean? I would say well over 20%, maybe getting up to 30% down for the quarter. only caveat to that is what no one would know is, obviously, I think the tariffs are working. But also in the beginning of the year when after President Trump was elected, and we talked in some people buy up and they're burning through inventories and so forth. So how much is tariff, how much is pre-buy, but either way, the tariffs, I think, especially with steel conduit, as John begins mentioned in his opening -- our opening remarks, up 50% is having an impact. PVC at 10% for most countries and you got to realize or my perception that what people claim for their imported value and be subjective. So is that having like let's call it a 5% CEO math here impact, but both are down in tariffs in those areas, specialty steel seem to be effective.

Got it. And then second question, can you take us through and update us on your demand visibility as it stands today, at one time, there was a meaningful backlog that has all been burned off. I would presume. So are you down to like a 2-week visibility? Just kind of give us a sense there because I know that shortened time frame as more volatility, and you have to gauge what's going on in the construction markets, but just frame for us the earnings visibility and you cam mention that if you could.

Yes, I'll try to and again team jump in here. But again, Dean, our backlog is 2 weeks or so, give or take because again, we aspire ship in 4 days. So by definition, if we're now there's some make order products and so forth. That really hasn't changed much. Out with the customers, again, we do -- this is more anecdotal, but talking to all of our customer base. inventories are average with distributors to slightly lower and there's lots of reasons for that.

One is we've commented in our prepared remarks, things like PVC pricing has dropped. So distributors on thinner margins don't want to be buying a product at a high price, lower margin, try to pass that on, so logical there. And then the last month has been pretty chaotic in the copper market when I think it was July 7, July 8, that President Trump announced he was planning on a tariff copper -- don't lock me into these prices, but copper just trump from the mid-4s, let's say, to almost $6 a pound, maybe not quite there. But probably wise contractors, wise distributors waited to hold off, and that's just what's announced and what the copper tariffs were on last week on August 1.

So there, they're probably holding a lighter inventory and the last data insight talking from customers. And again, each customer may have a slightly different view of this. But in the utility market, my perception is that the end demand has been good. In other words, contractors installing, but at least some of our distributors have mentioned they were still burning off inventory that's now throughout. So again, slightly more optimism for us in the utility market as we go forward from this day, but the market had a manufacturer or distributor may have been slightly less.

Okay. That's helpful. And just last one. A lot of good detail as always on pricing. And could you just step back and give us a perspective of any surprises in the quarter on how pricing played out? It was actually both for PVC and deal a little bit better than what we had been estimating and now you got 2 quarters of better steel pricing. But just from your perspective, what has surprised you, if anything, about how pricing is playing out from here?

Yes. So I'll start with Dean, and kind of echo your comments with a little bit more color to your point and our -- and again, to correct. But since our January earnings call, the price guide price versus cost has been right in the middle of our estimates. So no surprises. It ties with our numbers and reaffirming guide and raising EPS and everything else there. To your point, metal conduit probably slightly better than we expected, PVC, maybe is slightly better than we expected. But then as John Pregenzer in our earnings announcements here earlier, some of the aluminum at 50%, we import aluminum from Canada. So that has kind of hit us there. purely because of the fact that we're paying the tariff. And at least to date, we have not seen -- there's a lot of chaos as I just mentioned with both copper and aluminum, but we don't feel it's hard to measure this to go which is wider than what the market is doing. But we don't feel like we're able to recoup the aluminum cost to date.

Your next question comes from the line of David Tarantino from KeyBanc Capital Markets.

Bill, congrats on the upcoming retirement. Maybe to put a finer point on the fiscal comments. Could you walk us through generally how you're thinking about the underlying assumptions within the $50 million headwind? Maybe walk through PVC steel and what looks to be bubbling up aluminum headwinds and what do you think the mitigating actions would look like? I think you mentioned that this was unmet.

Yes. So, yes, great question, David, obviously, and then I'll start and John Deitzer, if there's any. Again, the key caveat here is we wanted to give some feel for next year now versus waiting to November or as we talk to different shareholders and models to go, hey, with we think through some of this. But we're not here to give guidance that we would or specificity in November. So that said, as we've called out literally in our November guide last year, our January guide that we should shareholders in the company expect year-over-year headwinds for things like PVC purely because this pricing dropped this year, it's a much lower starting off point even if PVC pricing held for all of next year. So rough numbers without breaking outlets, John Deitzer wants to get this level of specificity right out. It is we're probably -- and these are estimates here, but they're probably looking, let's say, $70 million of year-over-year just mathematically as pricings dropped this year without calling out which commodity.

You kind of called out the PVC down steel conduit is still down at the moment. But with 2 quarters, and we're expecting 3 quarters this quarter here, a sequential improvement that could be a slight uptick as we go into next year. Beyond that, getting so specific. And then at this stage to go hey, John Pregenzer mentioned $50 million or on Page 2 of the deck or whatever page I spoke to, had a $50 million there. assuming normal productivity normal as John Deitzer and I just mentioned, normal 2%, 3% volume growth for next year. Now as we also mentioned, obviously, we're working hard now on every and any facet of how do we get more productivity, how we get more volume, what other cost controls we could do. Obviously, we're analyzing things like we sold 1 or 2 small businesses this year and going as there are other things we can do to create more shareholder value. So at this stage, though, David, that as much as we can dimensionalize something to comments -- even John Pregenzer made, it's hard in this current environment changing all around up and down to be any more precise than that.

Yes, I'm totally aligned here, Bill, David. There's a lot of volatility on certain items whether we've seen that just play out here in the month recently with copper where it spiked close to $6 a pound and dropped pretty significantly. So the net headwinds we're expecting are right around [ $5 million ], but that includes several of our normal productivity improvement and volume expectation to get us back to that net 50. We probably, at this point, we have a variety of headwinds in excess of that. And so there are normal measures here to kind of get us back to the net 50 is the expectation into next year. So we wanted to try to get ahead of that communication, if we could.

Okay. Great. That's helpful. And then maybe just to dig in this field just a little bit more. It sounds like the import pressures are beginning to relax and pricing is improving sequentially. So what give you the confidence that pricing trends are bottoming out and heading to a more sustainable improvement?

Well, let's sit to this way, David, let me make correct. You're correct with steel conduit. And as I mentioned, was -- I think it was Dean's question. PVC imports seem to be down but on the same hand, whether it's -- again, it's hard to always factor what's driving things. But with domestic competition and so forth, PVC pricing, we're still looking forward as estimates. But will continue to go down here, at least through the end of the year and probably some into next year. Again, we're not at that level. So I just want to level set that.

Now for the products, yes, it's not rapidly going up with steel, but still kind do it. We had 2 quarters of sequential increases in our margins, and we're thinking that margins will go up again, what we've seen so far for the first month of July. So Hopefully, I answered your question, David.

Yes. Yes, that's helpful. And then maybe if I could sneak one more in. you refresh us and how should we be thinking about capital allocation, just particularly around the share buyback pause this quarter, both near and long term?

Yes. So to our guide here, the $150 million, nothing has really changed, let's put it this way. We spend $100 million, somebody could debate should we have done $25 million in the last quarter, $25 million in the next quarter or spend -- I say spend it all, but got to $150 million or done more. But we, without there's no commitment to anything, but our guide still is to spend $150 million this year. And beyond that, we have not met with the Board. I mean I would think stock buyback will always be a strong part of our thing, but we just haven't done a capital allocation for next year to give a range for next year yet.

Yes, aligned to that, I think in terms of the framework though, I mean, we've talked about this for a while. The capital expenditures are a key part of the -- from a capital allocation perspective there, the dividend share repurchases and M&A. I mean those have always kind of been the 4 pillars of our capital allocation model. As we get to November and moving on, we'll give an update on how those expectations for but those have been the key components of our capital allocation framework, David.

Your next question comes from the line of Chris Dankert from Loop Capital.

Echo the congratulations again here, Bill. I guess the first question here, as far as the impact of the lost IRA tax credit kind of next 12-month earnings, I know it's fairly small, but is that included in the $50 million to headwind?

You're breaking up there for a second. Chris, can you mention that again?

Yes. Apologies. Just on the IRA tax credit, that's going away, I believe, here. Is that headwind included in that $50 million you called out of headwinds for '26?

Yes, I'll take a step back. I mean, I think we try to dimension that on one of the slides. I think the -- from our perspective, on the relevant portions of the Inflation Reduction Act I think are maintaining at least here in the near to midterm. There might be some longer-term dynamics around accelerating into the late 2020s and things like that are 2030s. But I think the near midterm our understanding your current operating assumption is that the tax credits for the solar torques are largely intact here in the near to midterm. So we had some modest headwinds. I think the dynamics more from our volume with that market this year around where solar credits on a modest slight impact, I think we called out in one of the volume bridges along the way to here, but the operating thing, I think is, by and large, the same with that one.

Yes. I know your question was specifically, Chris, around but -- so at least I perceive the tort tax credit. But again, if I didn't mention it one of the earlier questions, for the market itself, it's always spotty job by job. I don't want to be speaking for our customers, but with or without the reasons different bills and legislation, our voice of customers solar without even tax credits is optimistic. I'm speaking for them, so to speak. But just from the standpoint of they do have good backlogs, there's a lot of stats they can tell you that still they can start up a new energy source quicker than any other form of energy. And obviously, I don't think anybody hopefully in the U.S. is debating the extreme need for energy as we continue to drive data centers and things like that. So my personal view from talking with customers and so forth, is that solar, like almost any form of energy will grow above. Well above GDP going forward.

Got it. I guess the only other question I'd have on that particular point is if the market is still growing nicely, how do the margins in that business look for Atkore? Is that still an attractive market going forward after adjusting for all the moving parts here?

I think so. We're especially going forward, what we talked about hesitating they bring up again, but it's more about productivity in our factories well. So as we look -- again, I don't want to get down to each customer, but as customers have talked to us about 2026 and so forth. Our productivity is good, our throughput, our scrap is good. So it's those type of things that I think, are in our control, Chris. And the volume comes like we expected, it should be a good market or good vertical, however you want to save it for us going forward.

Our next question comes from the line of Chris Moore from CJS Securities.

This is Will on for Chris. Can you just add any color or talk about any puts and takes to free cash flow generation in FY '25 versus FY '24?

Yes, absolutely. So good question. Will, a little bit of dynamics ending on the 27th here versus the 28th, and we have some AR that comes through. So I think you kind of noticed that I think someone else had kind of called that out from a free cash flow, so a little bit weaker. That being said, we do anticipate inventories have been coming down slightly. That's probably an opportunity as we look forward to continue to make sure that we can optimize our inventory.

We've been trying to add, whether it's to support the service centers or some of these other initiatives selectively over the past, let's call it, 18 months. But that's probably an opportunity as we look forward into 2026 that we can continue to improve free cash flow generation. But some of those AR dynamics that we showed ending on the June 27 of largely kind of played themselves out into July and August, I'm pretty pleased here. So I think we just had a little bit of a timing element here at the end of June. But I think we'll be back on track with some of the expectations of the free cash flow generation or the cash from ops generation really as we look forward into the fourth quarter.

Your next question comes from the line of Justin Clare from ROTH Capital Partners.

So I wanted to ask about the headwind that you had mentioned moving into fiscal '26 here. Wondering if you could just speak to how much of that headwind is a function of just the pricing decline that you've already experienced in fiscal '25 versus the anticipation of further price declines in '26 and then I know raw materials and the increased costs in aluminum is also a factor there. So wondering if you could just maybe elaborate on the different factors.

Yes. So a great question, Justin. I'm going to dimensionalize to just a small -- because again, we'll give more specificity in November. But I think the majority. Now whether that's 51% or 85%, I'm not dimensionalizing just the year-over-year. In other words, to go, hey, if we ended flat in September, we would still have a large number. And again, that hopefully should not be newsed to anybody going back to November or January discussions.

But from there, we haven't dimensionalized to go, hey, could some products still go down more? Or to your point, calling out the aluminum tariff that specific niche doesn't seem to be working for us. But at this stage, again, without is not November and give me next year's guide, I would think steel conduit should be up year-over-year. And again, all these things are qualified with the administration, what they do, do they change tariffs, they give a quota before tariffs. So that's why it's like we want to give as much guide or feelings as we can, but it's just -- as you can appreciate, things change maybe weekly with administration and so forth. But hopefully, it answers I think a lot is the impact we've already seen this year.

Got it. No, that's helpful. And then I just wanted to follow up on steel here. So import volumes have declined. Wondering if you could just speak to the potential you see to recapture some market share in steel conduit and how much that affects your volume assumptions going forward here?

Yes. I think there's a spot on. I do think -- and again, it's not going to be crazy to the steel conduit other than somewhat driven by maybe data centers is one of our more steady GDP-ish product lines compared to things like metal frame or what we're doing with specific initiatives and so forth. But yes, I would hope over time, aspire whatever word you want to use, that we, as assuming that the importers continue to do a couple of things. One, just less volume coming in or are they -- less ability to undercut because they are paying that lock up with margins, no matter what the claim is imported value will help us continue to see the margins that we spoke about and share go up as we move forward. So, yes.

Okay. Appreciate it. Thank you.

Thank you, Justin. And this concludes the question-and-answer session. I would now like to turn the call back over to Bill Waltz for closing remarks.

Thank you. Let me take a moment to summarize my 3 key takeaways from today's discussion. First, Atkore had a solid third quarter of financial performance. Second, we are maintaining our full year 2025 outlook midpoint for adjusted EBITDA and raising our outlook for adjusted EPS. Finally, it has been and continues to be my honor to serve in this role, and I look forward to supporting Atkore during this time of transition over the upcoming months. With that, thank you for your support and interest in our company. This concludes the call for today.

This concludes today's conference call. Thank you for joining. You may now disconnect.