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Good morning, ladies and gentlemen, and welcome to the Gibraltar Industries First Quarter 2026 financial results conference call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you need assistance, please press star 0 for the operator. This call is being recorded on Thursday, May seventh, 2026. I would now like to turn the conference over to Carolyn Capaccio. Please go ahead.

Thanks, Joanna. Good morning, everyone, and thank you for joining us today. With me on the call is Bill Bosway, Gibraltar Industries chairman, president and chief executive officer, and Joe Lovechio, Gibraltar's chief financial officer. The earnings press release that was issued this morning, as well as the slide presentation that management will use during the call, are both available in the Investors section of the company's website, gibraltar1.com. Gibraltar's earnings press release and remarks contain non-GAAP financial measures. Tables of reconciliation of GAAP to adjusted financial measures can be found in the earnings press release that was issued today. Further, please note that continuing operations exclude net sales and operating results of the renewables business, which was classified as held for sale and as a discontinued operation with second quarter 2025 results, the eBOS portion of which was subsequently sold on February 20, 2026.

The acquisition of Omnimax International closed on February 2, 2026. As noted on slide 2 of the presentation, the earnings press release and slide presentation contain forward-looking statements with respect to future financial results. These statements are not guarantees of future performance, and the Company's actual results may differ materially from the anticipated events, performance or results expressed or implied by these forward-looking statements. Gibraltar advises you to read the risk factors detailed in its SEC filings, which can also be accessed through the company's website. I'll turn the call over to Bill Bosway. Bill?

Thanks, Carolyn. Good morning, everybody, thanks for joining us for today's call. A lot of interesting and exciting things to talk about. We'll take you through our Q1 results, which include Omnimax operations for the last two months. Then we'll update you on our integration and synergy initiatives, our deleveraging progress and our 2026 guidance, which we are reaffirming today. I'll talk about some positive trends we have seen in April and early May. Then we'll open the call for questions. Let's start by turning to slide three, we'll talk about the first quarter. The first quarter was very dynamic and busy with the closing of the Omnimax acquisition in the middle of the quarter on February 2nd.

The subsequent launch of our integration efforts, managing through some additional inflation of aluminum in February and March, and incremental commodity inflation in March post the start of the Middle East conflict. That all being said, I'm very pleased with how our team responded and executed in the quarter, and I was excited to see good operating performance in March as we exited the quarter and head into Q2. Starting with the quarter. For the quarter, adjusted net sales were $356 million, up 44.6%, driven by 2 months of having Omnimax as part of Gibraltar and our metal roofing and structures acquisitions. From a market perspective, residential remained soft, and we'll talk more about that today.

Despite the start of the Middle East conflict in late February, we actually started to see customer order activity improve and become more consistent in March. Agtech and infrastructure markets remain solid with good backlog, but both business had some volume move into the second quarter, which we'll talk about. This is really related to some project schedules and timing of some shipments. Adjusted EBITDA increased 16.1% and adjusted EPS was down 50%, driven by a net interest impact of $14.6 million and unfavorable price material economics from a 16% increase in aluminum market prices during the quarter, which really impacted mainly residential. We also had increases in steel, resin and fuel prices in March after the start of the Middle East conflict.

Despite the inflation and the lower volume and absorbing some of inefficiencies with the Omnimax close in the middle of the quarter, we did perform very well in March with adjusted EBITDA accelerating to high teens, which is supportive of our plan going into the second quarter. We used $35 million of operating cash flow, which included payments related to closing of the Omnimax transaction, and we applied the $70 million of the proceeds from eBOS divestiture to debt reduction. We ended the quarter with net debt of $1.2 billion. Finally, we continue to make progress with the sale of the renewables racking business, which and are still targeting completion in Q2. With that, now let's dig into the business segments, and we'll have Joe start with residential.

Thanks, Bill. Let's start with residential on slide 4. Net sales increased just over $100 million to $281 million, which is up 56%, driven by the inclusion of two months of Omnimax results of operations, which contributed $89 million, and our metal roofing acquisitions, which contributed $18 million. Organic growth for the segment decreased 3%, with building products down 3.8% and mail and package down 1.5% as the overall residential market continued to remain soft. Our metal roofing acquisitions, which we acquired at the end of Q1 2025, performed well, and overall, we are seeing a good start to Q2 in our residential segment.

Adjusted operating EBITDA margins were down due to lower volume and inflation in the quarter, particularly with aluminum increasing 16% and other commodity inflation ramping up in March post the start of the conflict in the Middle East. Early in the quarter, we implemented price increases to help offset 14% aluminum price inflation in Q4 2025, and subsequently, we executed price increases in March and April across 14 of our brands and operating units to counter the additional aluminum inflation in Q1. The timing of our price increases, and therefore our price realization, is governed by a well-defined approval process that takes 30-60 days, depending on the customer, the amount requested, and the justification. Our teams did a good job addressing Q1 inflation in a timely manner, but we were not able to offset the full impact during the quarter.

With these increases now in place, we expect price material economics to be positive in Q2. As well, there was no incremental tariff impact in the quarter, and as it relates to the recent changes to Section 232 of the Trade Expansion Act, we are proactively managing any potential impact. Adjusted EBITDA margin for the quarter came in at 15.6%. As Bill mentioned, we performed well in March with adjusted EBITDA accelerating to high teens, which is supportive of our plan going into the second quarter.

Guys, let's move to slide 5, and we'll talk a little bit about the U.S. residential roofing market. The market remained soft in Q1 with ARMA reporting shingle shipments down 10% versus prior year, with results varying quite widely by region and or state. You know, when we see big changes or swings in a particular quarter, it's typically related to a weather event that occurred in an earlier period in a region or a state. You can see, for instance, Florida down pretty significantly in Q1. General customer feedback remains consistent around affordability and interest rates, limited weather impact in 2025 helping create demand in 2026. A lot of focus on inventory optimization while waiting for the season to start.

Of course, most recently, the conflict in the Middle East and the timing when that may be resolved. We believe we outperformed the market in Q1. Our retail sales and units were down 6%-8%, where our sales dollars were down 1% to flat, and our sales to distribution were also down roughly the same. In contrast to year-over-year Armor shipments, Q1 shipments were up 41% sequentially. It's an increase of approximately 3 times the average Q4 to Q1 increase we have seen during the last 4 years, and likely driven by a correction to the market over-indexing on inventory correction in Q4 2025, some pull-ahead related to upcoming OEM shingle price increases, and I also believe some better end market demand with some green shoots in certain markets and regions.

Although it's early in the season, we have started to see positive activity. We started to see positive activity in April, which is really reflected in our actual April shipments and bookings, which were on plan and ahead of 2025 levels. We'll see how the market evolves, once the conflict in the Middle East is resolved, I expect the market to have tailwinds as oil and gas prices improve. I think mortgage rates move back to pre-conflict levels, which if you recall, the 30-year mortgage rate went below 6% back in February, existing home sales activity starts to improve. Until then, we're gonna focus on winning more of the market.

Our team sees there is quite a bit of opportunity given the U.S. has an installed base of over 80 million existing aging homes at an average age of 40-plus years, and a significant multi-family market, which is starting to pick up, that today or in the future will require, obviously, new roofs or roof maintenance and repair. Let's move to slide 6. I wanna discuss some of the commercial synergies and what we're doing to expand our participation in the market and what we've done in a relatively short period of time. You know, when we announced the Omnimax deal, we emphasized the importance of being able to shape the future of our industry versus having someone shape it for us.

Over the last 24 months, with customer consolidation happening across the industry and new ownership in the industry, we believed then and we believe even more now that we are and will be an important partner for our customers moving forward. The combination of Gibraltar and Omnimax creates the local presence on a national basis to do things for this industry others cannot. We now have 39 locations serving most of the U.S. By itself, this footprint and our local presence doesn't necessarily guarantee success. What matters is our ability to provide consistent high-level performance through obviously great service and speed and flexibility. We have to have the right products and obviously great quality from each of our locations.

We have a good foundation with which we're gonna further involve, but there are really 3 core initiatives that you're gonna see us start to focus more on as we go forward to help our customers even more. Number one, it's become very obvious, and we've had conversations with our customers about this, that we can help streamline their supply base, particularly with customers that currently manage between 50 and 100 suppliers making products similar to what we make. This is a tremendous eighty/twenty opportunity where we simplify a supply chain we think will drive substantial productivity and efficiency for a customer's supply chain. Being local on a national basis gives us a chance to do that better than anyone else can.

Secondly, there's a lot of emphasis around what kind of digital solutions are gonna be needed to connect more seamlessly with customers to increase service levels while also reducing cost and reducing the cost of doing business with us. Now, this takes investment in technology, and we are in a position to support this effort going forward, again, both on a local and national basis. Third, and I think this is our biggest 80/20 opportunity we have that we can bring to the industry, but also bring to our business, and that's our ability to better optimize codes and specs and material selection. That's gonna be done by working through local municipalities, working with our contractors, as well as distributors and retailers, and really focus on SKU and product harmonization.

We'll do that, which is a lot of heavy, heavy work, but pretty exciting stuff, as well as bringing in new products. Again, the result is taking an 80/20 approach to an entire quote-to-cash process that our industry has grown up with. We're, again, in a position to do that. If you step away and say, well, today, you know, we actually do believe we bring the broadest product and service offering to the market. That has, in a very short period of time, enabled us more geographic expansion, some cross-selling opportunities, and private label programs I'm gonna talk about now. In a short period of time, we've made good progress with each of these three initiatives. First, we expanded our presence geographically.

We established new business in over 40 branch locations across 9 different customers located in Texas, Florida, the Midwest, Northeast, Southeast, and Mid-Atlantic regions. These are branches we were not serving before when Gibraltar and Omnimax were independent of each other. Secondly, we now have over 60 locations where existing customers are buying a new product category from the combined business. There are over 1,700 branch locations in the U.S., so a lot of opportunity in front of us to do more and more cross-selling. Our ventilation family of products is a great example, but there are others as well where we've had some success. Thirdly, we have manufacturers with adjacent and complementary product lines that are starting to source a private label product from us or grow their private label business with us.

I believe some of this work, not all of it, is starting to create new business and/or opening new doors for us. These commercial synergies also represent participation gains, and we will realize $4.3 million in our 2026 EBITDA as a result of these initiatives. As I mentioned earlier, we started to see positive results in April with our shipments and orders on plan and 2025 levels. I think these initiatives are contributing accordingly to some of the trends that we're currently seeing. Let's turn to slide 7, and I'm gonna give you an update on integration and what we've been doing over the last 90 days with really a lot of effort over the last 75 days.

First, the combined business has evolved from an organization transition when we started to integration discipline focused on building and executing synergy capture, inventory optimization, network rationalization opportunities, and further optimizing procurement. The integration management office and our 22 integration teams have delivered 500+ milestones. Organizationally, we've accomplished quite a bit as well. We've completed phase 1 of the organization structural work, with phase 2 to be completed in May and in June. We have integrated and consolidated Gibraltar's corporate supply chain team and are leveraging this team to support other businesses, including the mail and package business. We've combined and communicated a single 2026 financial plan and set of goals for the new team. Let's turn to slide 8. I'm gonna discuss a little bit of how the integration management office is now pivoting.

In our February earnings call, I shared our leadership team, the role of the integration management office, the structure and the process to drive integration across the combined business in the first 100 days. The first 100 days focused primarily on organization transition to build one culture, ensure we get our internal structure right, and build an ownership mindset across the team. Our teams have done excellent work to create and execute charters and work plans for effectively every function in the business. We now have a good foundation in place as we move into our next phase, post-100 days, where we'll narrow focus to 11 high-value work streams with key synergies, continue to execute the 2026 work plans, start working on plans for 2027, and finalize all our business cases for the remaining work streams.

This is an important step as we move from integration to transformation, which means moving into a way that we expect the organization to execute the business going forward. Now we'll move to slide 9. I'll give you a quick update on our 2026 synergy savings. As our team digs in, we continue to identify additional costs and commercial synergy opportunities, and we have raised our synergy commitment an additional $2 million to $26 million, with $16.3 million realized in our full year 2026 adjusted EBITDA. Over 50% of our 2026 commitment has been executed and realized savings will ramp up in the second quarter and accelerate further in the second half of the year.

We have also created a corporate synergy category where we are identifying structural and spend reduction opportunities across Gibraltar as we continue to evolve the portfolio and further leverage shared service capabilities. Recently, we identified $600 thousand in insurance premium savings based on a rate differential with the same provider, which will be realized on renewal of the policy. Looking at every cost line item, you find things like the example of insurance premium, where we think there'll be more and more opportunity. As I mentioned earlier, we have already consolidated and integrated our corporate supply chain team. Finally, I wanna recognize our commercial team. It's really coming together. We got the right leadership. With great experience and a very good reputation, and really focused on execution. We also have very strong leaders dedicated specifically to business development and sales enablement.

This is really foundational for us as we drive more wins and participation gains. With that, let's move on to AgTech, slide 10. AgTech net sales grew about $10 million or 23.6%, driven by the Lane Supply acquisition, which continues to perform as expected with solid demand. This offset organic volume decreasing approximately 3% in the quarter, with project movement during the year. Total backlog of $84 million supports the full year plan, but is down 13% in Q1 with the removal of the Arizona CEA project. Adjusted operating and EBITDA margin decreased mainly due to lower volume and the impact of a full quarter result of the Lane Supply acquisition in 2026, which included January and February, which are the lowest margin months of the year. Let's move to infrastructure on slide 11.

Net sales decreased $2.1 million or 10% as two separate weather events occurred in March that resulted in our factory losing power and impacted our production schedules.

One event caused the entire community where we operate to lose power, and the second event was a lightning strike to the plant's key power source. As a result, some customer shipments were pushed into April. Backlog decreased 3% driven by the timing of project awards, while quoting and bid activity remained strong. Segment adjusted operating EBITDA margins declined due to the lower volume as well as business mix. Let's move to Slide 12 to touch on our balance sheet and cash flow. The company's current position with respect to cash allocation will be to keep a minimum of $20 million-$25 million of cash on hand, use the revolver as needed to fund seasonal needs, and pay down debt with excess cash flow.

During the quarter for continuing operations, Gibraltar used $35 million in cash from operations and used $41 million of free cash flow, or 11% of sales. Of the $35 million in special charges that occurred in Q1 related to the close and initial integration efforts of Omnimax, $25 million of those were cash. Also, we used $43 million for working capital, including a use related to Omnimax, as is typical given the seasonality of the business. CapEx were $6 million or 1.6% of sales in the quarter. At quarter end, the drawn balance on the revolver was $25 million, and our cash on hand was $20 million. Debt prepayment was $75 million, including the proceeds from the eBOS renewables sale.

As a result, at quarter end, our net debt on the balance sheet was $1.2 billion, and our net leverage ratio, as defined by our credit agreement, which includes $35 million of anticipated cost synergies in the pro forma adjusted EBITDA, was 3.9 times. The availability on our revolving credit facility was $467 million, and total available liquidity was $487 million. Let's talk now on slide thirteen about our deleveraging roadmap. As we noted on our last call, our priority and focus is to deleverage as quickly as possible over the next 2 years through, as shown on the left side, a plan of strong EBITDA delivery and synergy realization, working capital optimization and utilization of cash tax benefits.

Planned uses of cash include capital expenditures of 2%-3% of sales, interest payments on our debt, and special charges related to the acquisition, transaction, integration and restructuring-related costs. The special charges we reported today represent approximately two-third of the charges we expect to record this year. During the second year post-transaction close, we expect continued strong EBITDA margin, the realization of additional synergies, benefits from continued working capital optimization and cash taxes, lower interest payments as our debt level is reduced, and a reduced amount of special charges. We expect these factors to drive additional free cash flow and our net debt down even further. We may also create additional liquidity from other non-core asset divestitures. Our deleverage path targets a leverage ratio of approximately two and a half times adjusted EBITDA in 24 months ended first quarter of 2028.

Again, during this 2-year period, our capital allocations will be focused on funding the growth of our business through capital expenditures and on debt reduction. During the quarter, the renewables business, which has been reclassified as discontinued operations, reached a settlement agreement regarding unresolved warranty claims related to projects with certain discontinued products installed dating back as far as 2017. This settlement in the amount of approximately $25 million is expected to be paid in Q2 and has been factored into our deleveraging plan. Let's now move to slide 14 to talk about our key assumptions for 2026 for continuing operations. First, given Omnimax closed on February 2, we will recognize 11 months of ownership in 2026.

The expected contribution from Omnimax plus synergy realization, which will occur both within legacy Omnimax and the legacy Gibraltar business, is approximately $570 million to adjusted net sales and approximately $70 million to adjusted rated operating income and $120 million to adjusted EBITDA. As we execute our integration efforts across the combined business, we expect synergies to start to flow through in Q2 and accelerate in Q3 and Q4. More broadly in residential, we see a continued soft market as we already discussed. In AgTech, we have removed the Arizona project from our plan and will continue to monitor the funding status accordingly. Within infrastructure, engineering backlog and quoting activity remains strong.

In regard to free cash flow for continuing operations, given the seasonality of earnings in the business, the ramp-up in synergies and working capital initiatives starting in Q2, and the cash outlays of the special charges related to the close and initial integration of Omnimax that already occurred in Q1, we would expect free cash flow generation throughout the rest of the year. We continue to expect CapEx to be 2%-3% of sales, free cash flow of approximately 8% of sales, and we will be focused on debt paydown. Lastly, some additional assumptions to factor in. With the combined company, we expect depreciation, amortization, and stock compensation expense to be approximately $90 million for the year, which includes approximately $40 million annual assumption for non-cash amortization related to intangibles due to the Omnimax acquisition.

We anticipate approximately $50 million in special charges related to the acquisition, transaction, integration, and restructuring costs, of which two-thirds already occurred in Q1. We expect greater than $70 million in interest expense, financing, and commitment fees, which will be dependent on the timing of our debt repayments and interest rates. Lastly, we are assuming a 26% tax rate. Now let's move to slide 15, where we are reconfirming our 2026 full year guidance. For continuing operations, we still expect consolidated net sales between $1.76 billion and $1.83 billion, compared to $1.14 billion in 2025.

Adjusted operating income between $222 million and $238 million, compared to $151 million. Adjusted EBITDA between $310 million and $326 million compared to $185 million for 2025. GAAP EPS between $2.40 and $2.80 compared to $3.25 in 2025, including the expected impact of special charges. Adjusted EPS between $3.65 and $4.05 compared to $3.92 in 2025. Now let me turn it over to Bill.

Hey, Joe. Just to summarize for today, a lot to unpack and a lot of heavy lifting, as I mentioned. We have accomplished a lot of the heavy lifting and made good progress in the quarter, and we continue as we move into Q2. The entire team has contributed, obviously, over the last 90 days to make that happen. You know, we are transforming the business, as we said, going into the year, and we're gonna continue to do that. In residential, I would say regardless of the near-term market situation, we're gonna stay really focused on winning more with our customers. We're gonna continue to expand, as we showed earlier, geographically. We're gonna continue to do more cross-selling initiatives, as well as support our private label programs.

If the market remains soft throughout the year, for whatever reason, I'd say we're already working on all the right integration costs and commercial synergy capture and price management initiatives to deliver our plan. Our building products leadership team and IMO teams will maintain their intensity and discipline and focus on executing our plan while improving safety, service levels, productivity, 80/20 initiatives, and winning more business. In AgTech, the business is in a position to deliver a solid year with $84 million of backlog at the end of Q1, with robust design and bid activity across North America in process. We also expect infrastructure to deliver another good year and transition some key projects in engineering backlog to order backlog over the next 2 quarters. With that, let's open the call up, and we'll take some questions.

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press the star followed by the one on your touchtone phone. You will hear a three-tone prompt acknowledging your request. If you wish to decline from the polling process, please press star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. The first question comes from Daniel Moore with CJS Securities. Please go ahead.

Thanks, Bill. Thanks, Joe. Thanks for taking questions. Start with resi. Obviously, good to hear the progress you're making thus far into Q2. Just has the inventory drawdown at retailers, I know it's seasonal, has that largely run its course? Where would you say customer inventories are now kind of on an historic basis? Maybe just talk about the monthly cadence of volume growth, both at legacy Gibraltar and Omnimax through Q1 and thus far into Q2.

Thanks, Dan. We think inventory levels are much better aligned than they have been the last 2 or 3 years, you know, within demand. We talked about that in the last quarter. It differs a little bit by between channels, so distribution versus retail. The retail guys seem to be a little bit more cautious with how they're trying to manage inventory as they wait to see the season evolve. I would say on the distribution side, probably less so there. Remember, you know, contractors source about 80% of their needs through distribution. Distribution may see a little bit more of that demand materializing in the marketplace than maybe, you know, the big box guys do.

That may be part of it. I would say right now the general feedback from customers is the inventory is in a decent position. You know, it probably varies a little bit by product line, which I don't have stats on that. As we think about our POS results and we see, it gives us some visibility of how inventory is positioned, we can see it's in a better position than it was last year. I would also say it really, the other aspect of this is the regional piece. As you get into the season, you see the weather patterns start to kick in through the spring season. You'll start to see orders move based on some of those events in different regions.

Wherever folks are a little bit short inventory, we've seen them make corrections pretty quickly as they've had some sustained weather. We'll continue to see that as we go forward. As it relates to our situation, yeah, you know, it's been a good, a pleasant surprise to see how we got off to a start in April with the demand profile that we've seen, as well as the first, what, 4 or 5 days in May has been pretty consistent as well. I think a piece of that is there are some green shoots out there. We're a much broader company now, where we have access to more of the U.S. than we did, you know, 6 months ago, so we're seeing more opportunities.

Some of the work that we've talked about with cross-selling is starting to kick in. Some of the participation gains as we pick up more branches is starting to kick in. I don't think the end market is dramatically different than it was before. I just think, you know, we're taking opportunities to participate more in it than we were before. I do think inventory is in a better position right now. You know, you add all that up, for us, it's been a decent start to the second quarter. I'm a little bit surprised that we're ahead of last year's levels. It's good to see that. Like to see that continue, and we'll watch that closely.

I think, you know, as I mentioned earlier also, people are waiting to see what happens with the Middle East. Is that gonna be prolonged? If people think back to late February, you know, we had 30-year mortgage rates go under 6%. We had existing home sales really start to pick up. Boom, Middle East conflict happens and rates go back to 6.5%, existing home sales start to fall. I do think there's gonna be some tailwinds that could occur. I think the other thing with the Middle East conflict, which I know this is common sense for everybody, but, you know, it brings an overhang to everybody. You know, just kind of thinking about what this could mean, and it causes consumer sentiment challenges.

Between interest rates correcting a bit, you know, gas prices coming down, I think it makes people feel a little bit better. Mortgage rates starting to get back in line, you know, as this conflict comes to an end, hopefully sooner than later. That should help as we move into the year. Anyway, that was kind of off the beaten path to your question. But inventory seems to be better aligned with demand. Our demand, I think, is benefiting from that, but also some of the other activities I mentioned.

That's helpful. You mentioned, you know, if the market doesn't pick up, you obviously you'll just keep focusing on participation. Is there sort of a market growth rate or band that for the back half of the year that you have in mind that kind of underpins the fiscal 2026 guidance?

Yeah, I don't think our When we went into the year, I think we had growth in 4% or 5% was built into the base plan for the residential business, if you're talking specifically about that. We still feel good about that as we go into the season based on what we're seeing so far. What I tell people also, and internally this is kind of our mantra, if the market doesn't improve or if it stays soft or it gets a little bit softer, whatever be the case, we're doing all the right things. Everything that we're doing to integrate the business, to get the right cost structure in place with the right people in the right seats in the bus, the synergies that we're executing, we're not doing that because the market's soft.

We're not reacting to that. We're doing that because we're building an organization that we think is the right way to approach this industry and serve it over the next 5, 10 years. If at the end of the day, things got a little more challenging in the market, I would say, you know, we're proactively ahead of the game relative to making sure that we put ourselves in a position to operate in whatever market situation does come. I'm not anticipating the market to be to be bad or to be worse than it is right now with what we have in our plan. What I am making sure people understand is we are taking and executing all the things that you would do, assuming that the market would be bad because of the way we're trying to build out the business.

We're kind of accomplishing 2 things at one time, so to speak, if you think about it that way.

Okay. Then 1 more and I'll jump back. On the cost and margin side, you know, you've always been pretty adept at passing along input costs, rising steel, aluminum. And I appreciate the color, Joe, on the pricing mechanisms. Is the same generally true for Omnimax? You know, I guess could the integration cause any incremental delays in how you're sort of passing those through? Just talk about the how they have handled it and your expectations for the cadence of margins as we get into Q2 and beyond. Thanks.

First of all, I would say Omnimax historically probably is better than we have been relative to discipline and centralization of how they manage price. We were a little bit more decentralized in the way we ran our business. They're more centralized. In the world of pricing in an inflationary environment, that's played well for them, and they're very good at that. That ties all the way from this, the commercial organization I mentioned earlier, which is really coming together, tying in directly to the financial leadership and having it a centralized control. Now we are one company with that approach. That's really helped us, I think, accelerate some of the price actions we've taken in a short period of time, utilizing their process and their systems and their discipline associated with doing that.

Actually, that was a great pickup for Gibraltar of having that approach, which I think is gonna serve us even better going forward than what we've been able to do in the past, which has been pretty good ourselves. The thing that I'll point out for the quarter that was kind of interesting, I've mentioned in Q4 that we had a late price increase in the legacy Gibraltar business that came in in January trying to catch up with the aluminum inflation of 14% in Q4. That inflation continued in January and well, throughout the quarter, but we had to overcome that in our legacy business.

We subsequently, through the price increases that Joe mentioned in March, we brought that into the system that we use now as a combined company, and that enabled us to catch up to get to overcome the first quarter incremental inflation. Not offset it all, but at least get the pricing in place so as we go into Q2, our price cost alignment is much better in total for the business than it would've been otherwise. Yeah, I'm quite pleased with the way Omnimax has always approached pricing, their system, the centralization thereof, and the connection within the business, and we are now using that same approach under one team for the total business, and that's gonna be helpful.

Those are price increases, not surcharges, so presumably get some benefit if and when aluminum does come down.

All price increase.

Okay.

Yeah, we try to stay away from surcharges.

I'll jump back and wait for follow-ups. Go ahead.

I'm sorry?

No, go ahead. I apologize.

I was gonna say, yeah, we try to stay away from surcharges for that very reason. You know, increases tend to stick a little bit better and stick a little bit longer. Yeah, everything that we've done are actually price increases, whether it's aluminum, steel, resin, vinyl, and even fuel. That's our mentality. I'm not saying it's 100% there, but we have very little surcharge type approach across the entire business at in our residential business whatsoever. It's really about price increases.

Thank you. The next question comes from Walt Liptak with Seaport Research Partners. Please go ahead.

Hi. Thanks. Good morning, guys.

Morning, Walt.

Just to follow on to the last question 1st, I guess. The price cost lag that happened on aluminum in the 1st quarter, how much was that in dollars? You know, how much of a profit benefit do you think you'll pick up as you catch up on that price cost?

Yeah, when you look at the amount of aluminum we bought in the quarter, and you look at the delta on the increase from January 1 to end of the quarter, it's a $9 million-$10 million headwind that came our way. Now, obviously, that assumes that that headwind in a total would assume you had no inventory and so on and so forth, which is not the case. We're able to offset a chunk of that because we had aluminum on hand at a lower cost. We didn't have enough to cover everything. We were able to chip away at that as best we could. We did get some pricing in March, but, you know, you don't get a whole lot in the quarter that affect to go after that.

That helped offset that. We did obviously more 80/20. We tried to accelerate more of our synergies as sooner than we could, those are time constraint. We were relatively new into the process of bringing the business together. That was what we dealt with, we tried to minimize that. I think we did a pretty good job minimizing that headwind to a much lower level. We probably end up netting out a couple million dollars worth of incremental cost in the quarter associated with that we'll recover as we go into next quarter, as we go into Q2, I would say.

Okay, great. I'd like to try one on the integration cost out. I wonder if you could maybe give us a feel for, you know, how you're feeling about the integration. It sounds like it's good, but I mean, maybe get a little bit granular. Like, it looks like logistics, that's more of a headwind. Like, where are you feeling better about things? Are there any planned or, you know, things that you could sell to help generate cash in the first year and increase some of your cash inflow?

Well, first on the integration, I'm seeing two questions here, Walt, I think. One is, you know, how we doing on integration? The third is, are you asking about the portfolio?

Yeah, I guess, right. If there's, you know, assets you can sell, if there's, you know, duplicate real estate in some area, some regions or.

Oh, yeah, yeah. Yeah, sorry. Yeah. We kind of just walked down the list, if you will, which, you know, we've been working pretty hard and Let me pull my list up in front of me, so I can just answer your question a little bit more succinctly. Supply chain, we originally had $6 million in plan. We've taken it up to $7 million. We're gonna get about $3.7 million of that. That's gonna flow through. That's both direct and indirect spend. That is mainly driven by contracts that we have to have expire before we can actually get more implemented, if you will. That doesn't surprise so much, but steel and aluminum contracts tend to be signed in October, November in the previous year.

They carry you through the year. As we get towards October, November of this year, those contracts will come up for renewal, and we'll have an opportunity to then negotiate, which will help us as we finish up the year and get into next year. On the indirect side, we're working that as we speak. Those tend not to have long-term contracts, so that's where you see a lot of savings this year. That's everything from MRO and packaging. We're looking at all our leases, everything we lease, whether it's buildings or forklifts or what have you. The teams are doing a pretty good job. That tends to be there's some of that across the entire footprint, and there's some that's very specific to operations. We're gonna continue to work that pretty hard.

I mentioned earlier we've had a really lot of progress on pulling the supply chain team together. That supply chain team is working their tails off on this. We're also identifying some other opportunities to support other parts of Gibraltar as well. Supply chain, I think, feel really good about not just for what we're due this year, but as we roll into next year. On the SG&A side, people think about organization mainly. We talked about phase 1 being implemented. Phase 2 will come here this month and next, and we'll have our organization work done. The 2nd half of the year, you get that full run rate effect of that as we move into that. The other SG&A buckets are kind of interesting as well.

I mentioned one example of finding line items like the insurance premium. Well, you know, $0.06 is $0.015$. $600,000 is $0.015$ an EPS for us. As you go through each of those, you know, 100 of line items, whether it's COGS or SG&A, we're just attacking every one of those to see what the opportunities are. That's how we're able, I think, each month to kind of keep adding to our list of things that we think will be helpful. 80/20, this kind of gets at what you're talking about. 2 things going on there. Yeah, we have things around the facility optimization front that we're starting to recognize that could be opportunities for us. That is kinda on the map, if you will.

We're working that as we speak, and that's twofold. That's 1, do you, do you need all those locations? We're not talking about a bunch here, Walt, we lease most of this anyway. It's really more about are we optimized in those facilities to support distribution and retail accordingly. A lot of work going on relative to 80/20 on the facility optimization aspect. As I alluded to, we have our new leader of product innovation that is starting next Monday. One of our big efforts is really gonna be around our biggest 80/20 initiative, which is Product Line Simplification. If I break that down a little bit further, that's really harmonization around SKUs.

What we're really trying to do there is simplify from raw material purchase all the way through to finished product, how we can change the supply chain, how we can drive cost out of that supply chain by simplifying what the industry actually should be using versus what it has always grown up with. We think that's gonna actually start with work internally, gathering data, what we're doing in each of our 39 facilities, but it's also sitting down with local municipalities and talking about why they have what they have. It's a big 80-20 effort. We're resourcing that accordingly, but it's one of our biggest strategy initiatives that we'll have. You'll see that start to kick off this year, but really in earnest start to read through next year.

It has a lot of positive implications for us that we're excited about. We are doing other types of PLS work as we speak, and we'll continue to do that. 80-20 becomes a pretty big bucket for us going forward. I talked about commercial, so I won't be repetitive here, but I think what surprised us here is how quickly we were able to actually win incremental business, lining up new branches, and doing more cross-selling in a short period of time. If you think about it, we closed on February second. You know, it's not like February third, the sales team was together, and we figured this out. It takes a while to get the teams together. Really, in the last 60 days, I'd say we've done a pretty good job working with customers on some of these opportunities.

I just think there's a lot more there. We have work to do, and we're working on it, but I think we're off to a pretty good start on that front. Logistics is actually related to the 80-20 initiative on harmonization. As we harmonize SKUs and product lines, it has a huge impact on how we drive our logistics, and that's why those two are linked. As I referenced that, I think, in our last call. We're not saying there's not logistics opportunities that we're working on with negotiating freight rates and all that. We're doing that. What I'm referring to here is more the broader strategy of logistics and as it ties to our product portfolio going forward that we're producing out of these 39 locations to support customers. Then finally, corporate.

We added this bucket, which we didn't have last quarter. What we start to recognize is the skating to where the puck's going to be as the portfolio evolves. In the short term or the near term, I mentioned earlier we consolidated our supply chain team. That is pretty meaningful in a lot of ways. If you think about residential being over 80% of what we do, it made sense to actually combine forces and build the right structure around what we need to support that business. We went ahead and proactively said, "Let's figure out how to integrate some of these corporate teams now." The corporate supply chain team was one of those that kind of came into the fold. We're doing more of that.

There'll be other things across the board as the portfolio continues to simplify, and majority of what we're doing becomes more residential focused. Sorry for the long answer, but hopefully that gives you a little bit more perspective on what the teams are focused on every day.

Yeah. Thanks for the detailed answer, and it's great to hear that 80-20 is such a big focus of these integrations.

It'll be, Walt, it'll be the single biggest thing that we'll do in the next couple years is attacking the harmonization and simplification of the product lines that we have. Absolutely.

Okay.

Okay. That's great to hear.

A big piece of what we're doing.

Okay. Then a one for Joe around the free cash flow. I wonder if you could help us get a little bit more granular around 2nd quarter free cash flow and then how, you know, what that number might look like and then the back half of the year. You know, is this going to be a hockey stick as we go into the year, or is it loaded to the 4th quarter?

Yeah, no, I think from a continuing ops perspective, you know, we talked about the fact that you kinda had two-thirds of these special charges hit in Q1. That had a cash impact. That won't recur to the same level as you kinda go through Q2, 3, and 4, because, you know, we've got a third left to go of those between now and the end of the year. I would probably think about those as probably fairly even by quarter from here on out. You know, more a little bit each quarter, not all in Q2 or back half weighted. On the working capital side, talked about a use in Q1.

We obviously, as we bring the teams together, you know, we'll now start in earnest the working capital initiatives in Q2, we'll expect those to drive benefits, you know, as we go into the back half of the year. The third piece is just kind of the earnings seasonality. Obviously Q2 and Q3 are kind of more of the earning season, particularly as it relates to residential. Those are probably the pieces to kind of think through in terms of how the seasonality will unfold. That would imply that it's not anticipated to be a hockey stick or, you know, back halfway into Q4.

Okay, great. Okay, thank you.

Thank you. Ladies and gentlemen, as a reminder, if you have any questions, please press star one now. Next question comes from Julio Romero from Sidoti & Company. Please go ahead.

Thanks. Hey, good morning, Bill and Joe. Following up on some of the residential commentary. Hey, good morning. You mentioned the uplift in distribution was a little bit better than what was in retail in April. As I understand, you guys are about two-thirds distribution, one-third retail and residential, so I think that dynamic would be helpful to you guys. How much more pronounced was that uplift in distribution versus retail? Did that surprise you? Curious if that factors into your confidence in passing through price across the segment.

Yeah, I think it's, I don't think it's changed. You know, we saw more uplift, I think in distribution, in the last 60 days. I think part of it, Julio, honestly, is, you know, the branches are that much closer to the contractor, so they see demand in a real-time way differently than probably a walk-in big box kind of situation. I think that plays a lot into it. That's, you know, partly, again, you have such a large portion of your contractor needs are being served by the branches. When you have weather start to evolve, like we saw in March and April, those branches I think react a little bit quicker, and I think that's part of why the uplift was sooner for them.

I think the DIY guys, you know, if you think about it, you know, Home Depot would probably say something like, at Home Depot stores or, maybe the uplift's not as strong as what SRS is. They see both sides 'cause they own both. I think that's a big piece of it, is you just have your branches at the ground level that are seeing real-time demand that they can act on. They're closer to some of those things that maybe drive things in a different way. I think the relationship between the channels in terms of how much we'll drive through both isn't gonna change dramatically this year. I just think in the last, you know, six weeks, that's what we've seen. We've just seen, distro grow at a faster rate.

We are picking up branches, as I mentioned earlier, which is good. The cross-selling we talked about is really at the distro level. It's easier to go pry branches or win branches and do cross-selling in a shorter period of time than it is to go get incremental business in a short period of time with Retail. Retail tends to go through a product line review or it's a very lengthy process. Really, in a short period of time, we're able to go win some things with quite a few branches through distro, that's just a different DNA than dealing with Retail when you're thinking about winning new stuff as well. You got that. I think, you know, the feedback I mentioned earlier with Retail seems to be more cautious on inventory.

I think partly, you know, coming off of that destocking and having to do that, I think, we have seen probably just a little more cost-cautious approach to managing how they're gonna optimize inventory until they start to see the season start. I don't know if that kinda gets at your questions, but, hopefully it does. That's, that's my perspective.

It's good context for sure. Thank you, Bill. Joe, the factory in agtech that lost power in the first quarter in March, how much of an impact was that on the first quarter? I think you mentioned the customer shipments were pushed out. Has that been fully caught up and realized in the second quarter?

Yeah. Hey, Julio, I'll take that just 'cause I was involved. We lost about seven days of production.

Okay.

Yeah, all in March. In a different time. As Joe's mentioned, if you guys recall, Illinois, Ohio, Indiana we've gotten hammered with tornadoes and big storms. The town where we're located lost power, substations, et cetera, got knocked out. That hurt. We actually had a strike on our transformer feeding into the factory in a separate storm. What caused the issue isn't so much that the power was out for a long period of time, is when you're running all your machines and then boom, your power goes out, those machines lock down. If you have one or two, it's not that big of a deal, and your maintenance team can go fix that.

When all of your equipment goes down simultaneously, that's what caused the delay in bringing in extra expenses and costs to help us reset all the machines, check all the tooling, and ramp them back up. That's where it gets hit. Large companies would tend to think of this as business interruption insurance that you go after. It's not something we've ever actually done. We've never had this kind of a set of events happen in a particular location. The team was able to work through that and make those shipments up in April, we think we're back on track in that regard. We had some mix effect as well that hit the quarter, that's the impact of those two weather events. I don't like to use weather.

I just feel those are pretty extraordinarily interesting, to have a small town and a factory in the small town get hit twice in a 3-week period.

Yeah, makes sense for sure. It sounds like the integration is going well according to plan, first 100 days. You're up to synergy target and your realization target. I think the up realization was up by a little more than $1 million, I believe. Is that incremental $1.3, all fourth quarter weighted? Would you expect it a little bit earlier? Where does that take the 2027 kind of run rate and realization figure?

$16.3 is what we realized. The incremental we added was $1.2. That'll start flowing in actually in Q2 and Q3 and Q4. I mentioned earlier, if you think about $26.2 million of annual run rate, we've implemented or executed over 0.5 of that. Now, of that we've executed, you'll start to see that flowing now and into the rest of the year. I mentioned earlier, we have phase 2 that we will implement in our organization structure in May and June. You'll get a half year, full year benefit, if you will, because that'll be done in the second quarter. Q3, Q4, we'll see a full year run rate of that, if you will.

That's how a lot of our things are timed that way. Again, not to use the example again, but the insurance premium, when that policy renews is when we'll get the $600,000 will start to flow through. That's timed. Every one of these things is timed down to when we think it's gonna flow into each month. That's how we get the realization associated with when we've actually implemented or agreed or negotiated, whatever it is we've negotiated to get to the $26 million to start with. Does that make sense?

It does. That's all for me. Thanks very much.

Yep.

Thank you. We have no further questions. I will turn the call back over to Bill Bosway for closing comments.

Again, thanks everyone for joining today. I know it was a lot to unpack. There was a lot of heavy lifting going on in the quarter. Not so easy to follow, if you will, in some respects. We're in the middle of this transformation. It's going as we expected. We're excited about what we've seen so far and how we enter Q2. I do wanna thank everyone for taking the time with us today. We will be at the Seaport Annual Growth Discovery Conference and the CJS Annual Conference in May, and also the Wells Fargo 16th Industrials and Materials Conference in June. Really look forward to connecting back with you to talk about Q2 when the quarter is done. Thanks again. Appreciate it.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect your lines.