JELD-WEN Delivers Revenue Growth and Margin Expansion in Fourth Quarter 2020
JELD-WEN Holding, Inc. (“JELD-WEN”) announced results for the three months and full year ended December 31, 2020, including fourth quarter net revenue of $1,151.3 million, net income of $43.2 million, adjusted EBITDA of $115.4 million, earnings per share (“EPS”) of $0.42, and adjusted EPS of $0.45, as well as full year cash flow from operations of $355.7 million. Comparability is to the same period in the prior year, unless otherwise noted. References to “core” financial results exclude the impact of foreign exchange and acquisitions completed in the last twelve months.
Fourth Quarter 2020 Highlights
– Net revenue increased by 7.7% to $1,151.3 million, driven primarily by a 5% increase in core revenue
– Core revenue increased in all three reporting segments, as volumes improved sequentially
– Adjusted EBITDA increased by 29.4% to $115.4 million
– Core adjusted EBITDA margin increased 190 basis points, including margin expansion in all three reporting segments
– Full year 2020 free cash flow improved $92.2 million to a record $258.8 million
– Strong balance sheet and financial position with record liquidity of $1,121.5 million and net debt leverage of 2.3x
“In a challenging operating environment, we delivered significant revenue growth and margin expansion,” said Gary S. Michel, president and chief executive officer. “This quarter’s results exemplify the progress we’ve made as a global team to drive improvement in our operations and consistency in our financial results through the disciplined execution of our business operating system, the JELD-WEN Excellence Model or JEM. We achieved a number of key financial milestones in the quarter as well, delivering the highest rate of core revenue and adjusted EBITDA growth since 2017, generating record full year free cash flow, and significantly reducing net debt leverage. I am proud of our associates around the world who took deliberate action to deliver for our customers, shareholders, and the communities where we live and work, in a safe and productive way.”
“We enter 2021 with positive operating momentum and supportive market dynamics,” stated Mr. Michel. “We expect strong housing fundamentals for North America residential new construction, supportive markets in Europe, and a stabilizing residential new construction market in Australasia to provide tailwinds for demand growth. From this backdrop, we are well positioned to deliver sustained revenue growth and margin expansion this year through the disciplined deployment of JEM, the continued execution of the facility rationalization and modernization program, and the benefits of our commercial excellence initiatives including innovation, customer segmentation, and price discipline to offset accelerating inflation. We are excited about the years ahead as we continue to transform JELD-WEN into a premier building products company.”
Fourth Quarter 2020 Results
– Core revenue growth and margin expansion achieved in North America, Europe, and Australasia segments
– Favorable price/cost for the ninth consecutive quarter
– North America core margin expanded 310 basis points, the third straight quarter of core margin expansion
– Europe core margin expanded 330 basis points, the sixth consecutive quarter of core margin expansion and an acceleration from the third quarter
– Australasia core margin expanded 190 basis points, the first quarter of core margin expansion since the second quarter of 2018
Net revenue for the three months ended December 31, 2020 increased $82.7 million, or 7.7%, to $1,151.3 million, compared to $1,068.6 million for the same period last year. The increase in net revenue was primarily driven by a 5% positive impact from core revenue and a 3% positive impact from foreign exchange. Core revenue increased due to a 4% pricing benefit and a 1% positive contribution from volume/mix.
Net income was $43.2 million during the fourth quarter, compared to net income of $7.8 million in the same quarter last year, an increase of $35.4 million. The increase in net income was primarily due to higher gross profit from improved price realization and operational improvements, as well as tax benefits, partially offset by higher SG&A. Adjusted net income for the fourth quarter increased $21.8 million, or 90.5%, to $45.9 million, compared to $24.1 million in the same quarter last year.
In late 2020, the U.S. Treasury Department finalized rules governing the application of the GILTI provision of U.S. tax reform legislation, which now includes an option for a High Tax Exclusion (“HTE”) election, retroactive for 2018 and 2019. In the fourth quarter, JELD-WEN elected the HTE, which reduces the impact of GILTI originally included in prior periods and reinstates certain net operating loss tax benefits previously utilized, resulting in a net tax benefit of $10.8 million. Excluding the impact of GILTI and the one-time benefits of the HTE election, the fourth quarter effective tax rate was 21.4%.
EPS for the fourth quarter was $0.42, compared to $0.08 for the same quarter last year. Adjusted EPS was $0.45, compared to $0.24 a year ago.
Adjusted EBITDA increased $26.2 million, or 29.4%, to $115.4 million, compared to the same quarter last year. Adjusted EBITDA margin of 10.0% increased by 160 basis points compared to the prior year. Fourth quarter 2020 core adjusted EBITDA margin increased by 190 basis points compared to the prior year primarily due to improved price realization and favorable productivity.
On a segment basis for the fourth quarter of 2020, compared to the same period last year:
– North America – Net revenue increased $29.0 million, or 4.5%, to $671.5 million, due to a 5% increase in core revenue. Core revenue increased primarily due to a 6% pricing benefit, partially offset by a 1% volume/mix headwind. Adjusted EBITDA margin expanded by 300 basis points to 12.4%.
– Europe – Net revenue increased $43.4 million, or 14.9%, to $333.8 million, due to a 8% increase in core revenue and a 7% positive impact from foreign exchange. Core revenue increased primarily due to a 6% increase in volume/mix and a 2% pricing benefit. Adjusted EBITDA margin expanded 330 basis points to 13.4%.
– Australasia – Net revenue increased $10.3 million, or 7.6%, to $146.0 million, due to a 6% favorable impact from foreign exchange and a 2% increase in core revenue. Core revenue increased primarily due to a 3% increase in volume/mix, partially offset by a 1% pricing headwind. Adjusted EBITDA increased $3.5 million, while adjusted EBITDA margins increased 150 basis points to 13.7%.
Full Year 2020 Results
Net revenue decreased 1.3%, as positive price was offset by volume/mix weakness related to the demand impact of the COVID-19 pandemic and headwinds in the Australia housing market
Core adjusted EBITDA margins increased 100 basis points driven by favorable price/cost, productivity savings, and overhead cost controls, partially offset headwinds from volume/mix
Net revenue for the twelve months ended December 31, 2020 decreased $54.1 million, or 1.3%, to $4.236 billion, compared to $4.290 billion for the same period last year. The decrease was driven by a 2% decrease in core revenues. Net income increased $28.6 million, or 45.4%, to $91.6 million, compared to $63.0 million in the same period last year. The increase in net income was primarily due to higher gross profit from favorable price and productivity savings, and a lower effective tax rate. Adjusted EBITDA increased $31.4 million, or 7.6%, to $446.4 million, compared to $415.0 million in the same period last year. Adjusted EBITDA margins increased 80 basis points to 10.5%, from 9.7% in the same period a year ago.
Cash Flow and Balance Sheet
– Full year cash flow from operations of $355.7 million, an increase of $52.9 million
– Full year free cash flow improved by $92.2 million year-over-year to a record $258.8 million
Cash flow from operations totaled $355.7 million in 2020, compared to cash flow from operations of $302.7 million during the same period a year ago. The increase in cash flow from operations was primarily due to the increase in net income, an improvement in working capital, and reduced cash taxes. Free cash flow generated in 2020 improved $92.2 million year-over-year to $258.8 million, from $166.5 million a year ago, due to an increase in cash flow from operations and a reduction in capital expenditures.
Cash and cash equivalents as of December 31, 2020 were $735.8 million, compared to $226.0 million as of December 31, 2019. Total debt as of December 31, 2020 was $1.768 billion, compared to $1.517 billion as of December 31, 2019.
Total liquidity, including cash and cash equivalents and undrawn committed credit facilities, was a record $1,121.5 million as of December 31, 2020, compared to total liquidity of $554.5 million as of December 31, 2019.
Full Year 2021 Outlook
– Net revenue growth expected to be within a range of 4.0% to 7.0%
– Adjusted EBITDA anticipated to be within a range of $480 million to $520 million
– Projected capital expenditures are expected to be within a range of $135 million to $145 million
The 2021 outlook assumes revenue growth from the acceleration of housing demand in our primary markets, improved product mix, increased pricing, and a small positive impact from foreign exchange. The 2021 outlook also assumes margin expansion from volume, pricing, and productivity, partially offset by higher expenses related to inflation and SG&A.
“Despite the effects of the pandemic and other unique headwinds in 2020, we delivered strong financial performance through the disciplined deployment of JEM and strategies to expand our capability to serve customers,” said Mr. Michel. “The momentum in growth and margin expansion, the strength of our balance sheet, and demand tailwinds from favorable market conditions, position us nicely to deliver further progress in 2021.”
For the full fourth quarter results, click here.
JELD-WEN, founded in 1960, is one of the world’s largest door and window manufacturers, operating manufacturing and distribution facilities in 19 countries located primarily in North America, Europe and Australia. Headquartered in Charlotte, N.C., JELD-WEN designs, produces and distributes an extensive range of interior and exterior doors, wood, vinyl and aluminum windows and related products for use in the new construction and repair and remodeling of residential homes and non-residential buildings. JELD-WEN is a recognized leader in manufacturing energy-efficient products and has been an ENERGY STAR® Partner since 1998. Our products are marketed globally under the JELD-WEN® brand, along with several market-leading regional brands such as Swedoor® and DANA® in Europe and Corinthian®, Stegbar®, and Trend® in Australia.
Source: JELD-WEN Holding, Inc.