Second Quarter Highlights
- Second quarter sales grew 107.2% to
$700.3 million , a year-over-year increase of$362.2 million . Organic sales growth in Q2 was 23.1% while acquisitions contributed an additional 84.7%. - Gross profit climbed 102.6%, or
$77.9 million , to$153.8 million , with gross profit margin percentage of 22.0%, similar to 22.5% in the same period last year. - Profit per share increased significantly to
$1.77 , from$1.14 in Q2 2021, an increase of 54.9%. - Adjusted EBITDA climbed 78.6% to
$78.6 million , from$44.0 million during the same period in 2021. - Cash flow from operating activities, before changes in working capital, per share increased by
$0.25 in the second quarter to$1.79 , from$1.54 in the same period last year. - The Board of Directors declared a quarterly dividend of
C$0.12 per share, payable onOctober 28, 2022 to shareholders of record as atOctober 17, 2022 .
"We delivered another quarter of outstanding financial performance as our growth strategy, proven business model and disciplined operating management, combined with favorable market conditions, helped us achieve record performance as total sales for the quarter climbed to
"Our results reflect the positive impact of our new Mid-Am and Novo operations, acquired in Q3 2021 and Q1 2022, respectively. These businesses have brought us important scale, access to new geographies, and a strong presence in the
"On the market front, the North American repair and remodel market, which represents about 40% of our sales, continues to show strength, supporting demand for our products. The residential construction market, which represents another 40% of our business, also remained active as builders catch up the significant lag between housing starts and completions. With most of our products used in later stages of construction, we are benefiting from the elongated demand curve in this market."
"Going forward, we will continue to closely monitor economic conditions and the impacts that price inflation, rising interest rates, and other factors can have on our business. We benefit from a highly experienced team with a long track record of successfully managing our operations and controlling costs through changing markets. We believe our business has the resilience to manage through these cycles, and we anticipate a multi-year runway for growth and value creation as we benefit from our leading market position and the long-term positive fundamentals underpinning the North American building products market," said
Over the long term, we expect demand for our products to remain resilient, supported by strong fundamentals in our end markets. We also continue to see a multi-year runway for growth in the repair and remodel, residential, and commercial end-markets that we participate in.
In the nearer term, rising inflation and recent interest rate hikes could have a negative impact on economic activity. As we have demonstrated in previous cycles, we will take all necessary actions required to effectively manage our business and cash flows. We maintain a strong balance sheet which provides financial stability through periods of changing market conditions. Our business model also converts a high proportion of EBITDA to operating cash flow before changes in working capital, and during periods of reduced activity our investment in working capital has historically decreased, resulting in an additional source of cash.
Outlook for our end-markets
The repair and remodel market (~40% of sales) is benefiting from current market trends. The increase in mortgage rates may effectively "lock in" current homeowners by offering a financial incentive to stay in existing homes that were financed at lower mortgage rates. At the same time, home equity per owner is at record levels and the median age of homes in the
In the residential construction market (~40% of sales), new building starts are expected to moderate in the near term as affordability headwinds weigh on consumers. However, given that housing completions have not kept pace with starts over the past quarters, we expect to see an elongated demand curve for our products, which are typically installed during the finishing stages of home construction. Over the longer term, leading indicators for the residential construction market remain highly favourable. Housing starts have meaningfully lagged population growth this past decade, and it is estimated that the
The demand outlook for
HDI will hold an investor call on
Three months | Three months | Six months | Six months | |||||
ended | ended | ended | ended | |||||
2022 | 2021 | 2022 | 2021 | |||||
Total sales | $ 700,263 | $ 338,014 | $ 1,345,149 | $ 629,173 | ||||
Sales in the US | 645,899 | 291,358 | 1,237,121 | 543,654 | ||||
Sales in | 69,412 | 57,559 | 137,357 | 106,875 | ||||
Gross profit | 153,829 | 75,934 | 301,611 | 133,830 | ||||
Gross profit % | 22.0 % | 22.5 % | 22.4 % | 21.3 % | ||||
Operating expenses | (92,875) | (41,930) | (177,647) | (80,857) | ||||
Profit from operating activities | $ 60,954 | $ 34,004 | $ 123,964 | $ 52,973 | ||||
Add: Depreciation and amortization | 16,487 | 6,202 | 31,693 | 12,315 | ||||
Earnings before interest, taxes, depreciation and | ||||||||
amortization ("EBITDA") | $ 77,441 | $ 40,206 | $ 155,657 | $ 65,287 | ||||
EBITDA as a % of revenue | 11.1 % | 11.9 % | 11.6 % | 10.4 % | ||||
Add (deduct): | ||||||||
Depreciation and amortization | (16,487) | (6,202) | (31,693) | (12,315) | ||||
Net finance income (expense) | (5,789) | (1,355) | (11,171) | (2,861) | ||||
Income tax expense | (13,250) | (8,341) | (27,390) | (12,808) | ||||
Profit for the period | $ 41,915 | $ 24,310 | $ 85,403 | $ 37,303 | ||||
Basic profit per share | $ 1.77 | $ 1.14 | $ 3.60 | $ 1.75 | ||||
Diluted profit per share | $ 1.76 | $ 1.13 | $ 3.58 | $ 1.73 | ||||
Average Canadian dollar exchange rate for one US dollar | $ 0.78 | $ 0.81 | $ 0.79 | $ 0.80 |
Analysis of Specific Items Affecting Comparability (in thousands of Canadian dollars)
| ||||||||
Three months | Three months | Six months | Six months | |||||
ended | ended | ended | ended | |||||
2022 | 2021 | 2022 | 2021 | |||||
Earnings before interest, taxes, depreciation and | ||||||||
amortization ("EBITDA"), per table above | $ 77,441 | $ 40,206 | $ 155,657 | $ 65,287 | ||||
Non-cash LTIP expense | 1,152 | 1,622 | 1,850 | 2,288 | ||||
Transaction expenses | — | 2,168 | 892 | 2,168 | ||||
Adjusted EBITDA | $ 78,593 | $ 43,996 | $ 158,399 | $ 69,743 | ||||
Adjusted EBITDA as a % of revenue | 11.2 % | 13.0 % | 11.8 % | 11.1 % | ||||
Profit for the period, as reported | $ 41,915 | $ 24,310 | $ 85,403 | $ 37,303 | ||||
Adjustments, net of tax | 1,049 | 3,127 | 2,299 | 3,732 | ||||
Adjusted profit for the period | $ 42,964 | $ 27,437 | $ 87,702 | $ 41,035 | ||||
Basic profit per share, as reported | $ 1.77 | $ 1.14 | $ 3.60 | $ 1.75 | ||||
Net impact of above items per share | 0.04 | 0.15 | 0.10 | 0.18 | ||||
Adjusted basic profit per share | $ 1.81 | $ 1.29 | $ 3.70 | $ 1.93 | ||||
Diluted profit per share, as reported | $ 1.76 | $ 1.13 | $ 3.58 | $ 1.73 | ||||
Net impact of above items per share | 0.04 | 0.15 | 0.10 | 0.17 | ||||
Adjusted diluted profit per share | $ 1.80 | $ 1.28 | $ 3.68 | $ 1.90 | ||||
For the three months ended
Second quarter sales from our
In
Gross profit for the second quarter grew 102.6% to
For the three months ended
The
For the three months ended
For the three months ended
For the three months ended
Second quarter Adjusted EBITDA climbed 78.6% to
Profit for the second quarter grew 72.4% to
For the three months ended
For the six months ended
First-half sales from our
In
Gross profit for the first half grew 125.4% to
For the six months ended
The
For the six months ended
For the six months ended
For the six months ended
First-half 2022 Adjusted EBITDA climbed 127.1% to
Profit for the first six months grew 128.9% to
For the six months ended
HDI is one of
References to "EBITDA" are to earnings before interest, income taxes, depreciation and amortization, where interest is defined as net finance costs as per the consolidated statement of comprehensive income. Furthermore, this press release references certain EBITDA Ratios, such as EBITDA margin (being EBITDA as a percentage of revenues). In addition to profit, HDI considers EBITDA and EBITDA Ratios to be useful supplemental measures of the Company's ability to meet debt service and capital expenditure requirements, and interprets trends in EBITDA and EBITDA Ratios as an indicator of relative operating performance.
References to "Adjusted EBITDA" are EBITDA as defined above, before certain items related to business acquisition activities. "Adjusted EBITDA margin" is as defined above, before certain items related to business acquisition activities, mark-to-market adjustments, and revaluation of deferred tax assets. References to "Adjusted profit", "Adjusted basic profit per share", and "Adjusted diluted profit per share" are profit for the period, basic profit per share, and diluted profit per share, before certain items related to business acquisition activities, mark-to-market adjustments, and revaluation of deferred tax assets. The aforementioned adjusted measures are collectively referenced as "the Adjusted Measures". HDI considers the Adjusted Measures to be useful supplemental measures of the Company's profitability, its ability to meet debt service and capital expenditure requirements, and as an indicator of relative operating performance, before considering the impact of business acquisition activities.
EBITDA, EBITDA Ratios, and the Adjusted Measures (collectively "the Non-GAAP Measures") are not measures recognized by International Financial Reporting Standards ("IFRS") and do not have a standardized meaning prescribed by IFRS. Investors are cautioned that the Non-GAAP Measures should not replace profit, earnings per share or cash flows (as determined in accordance with IFRS) as an indicator of our performance. HDI's method of calculating the Non-GAAP Measures may differ from the methods used by other issuers. Therefore, Non-GAAP Measures may not be comparable to similar measures presented by other issuers.
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION
This news release includes forward-looking statements. These involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements or industry results to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements are identified by the use of terms and phrases such as "anticipate", "believe", "estimate", "expect", "may", "plan", "will", and similar terms and phrases, including references to assumptions. Forward-looking information is included, but not limited to, information included under the headings "Second Quarter Highlights", "Outlook", "Results of Operations for the Three Months Ended
These forward-looking statements reflect current expectations of management regarding future events and operating performance as of the date of this news release. Forward-looking statements involve significant risks and uncertainties, should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not such results will be achieved. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements, including, but not limited to: it is difficult to reliably measure the potential impact of this uncertainty caused by the COVID-19 pandemic on our future financial results and the impacts to our Company are not determinable at the date of these financial statements, however they could be material and include impairments of receivables, inventory and reduction in available liquidity; given the uncertainty around the potential impact of COVID-19, this may impact our estimates disclosed in the consolidated financial statements given that there is significant judgment and estimation uncertainty; our results are dependent upon the general state of the economy and downturns in the economy (including inflation and rising interest rates), natural disasters, disease outbreaks, terrorist activities, or threats or acts of armed conflict (including the conflict between
Although the forward-looking statements contained in this news release are based upon what management believes to be reasonable assumptions, management cannot assure investors that actual results will be consistent with these forward-looking statements. The forward-looking statements reflect management's current beliefs and are based on information currently available.
All forward-looking information in this news release is qualified in its entirety by this cautionary statement and, except as may be required by law, HDI undertakes no obligation to revise or update any forward-looking information as a result of new information, future events or otherwise after the date hereof.
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