PGTI Reports Third Quarter and Year-To-Date 2018 Results

PGT Innovations, Inc. (NYSE: PGTI), a national leader in the premium window and door category, today announced financial results for its third quarter and year-to-date ended September 29, 2018.

Financial Highlights for Third Quarter 2018 versus Third Quarter 2017

• Net sales of $199 million, an increase of $72 million, or 57 percent
• Gross margin of 36.7 percent, compared to 31.3 percent
• Net income of $13.6 million, compared to $6.3 million
• Adjusted net income of $20.1 million, compared to $8.1 million
• Net income per diluted share of $0.26, compared to $0.12
• Adjusted net income per diluted share of $0.38, compared to $0.16

Financial Highlights for Year-To-Date 2018 versus Year-To-Date 2017

• Net sales of $509 million, an increase of $132 million, or 35 percent
• Gross margin of 34.9 percent, compared to 30.8 percent
• Net income of $43.5 million, compared to $19.5 million
• Adjusted net income of $51.4 million, compared to $22.1 million
• Net income per diluted share of $0.83, compared to $0.38
• Adjusted net income per diluted share of $0.98, compared to $0.43

"The third quarter was the start of an exciting new chapter for PGT Innovations. We completed our first major out-of-state acquisition, Western Windows Systems, positioning PGTI as a national leader in the premium window and door space. Also, to finance the acquisition, we successfully entered the bond market for the first time, achieving access to capital at an attractive fixed rate. Following the acquisition, we successfully executed an equity offering which allowed us to more quickly de-lever our balance sheet following the acquisition, providing us with more flexibility for other operational and strategic initiatives in the future. We believe our execution of these transactions in the third quarter has put PGT Innovations in a strong position, and well-poised for continued growth,” stated Jeff Jackson, President and Chief Executive Officer of PGT Innovations.

"PGT Innovations delivered another strong quarter with net sales of $199 million, up $72 million, or 57 percent, driven by continued growth in our repair and remodel sector and inclusion of the post-acquisition sales of Western Windows Systems, which were $18.7 million,” continued Jackson. "Organically, sales increased 42 percent, driven by continued strong demand for our flagship WinGuard impact-resistant products.”

"Consistent with the second quarter of 2018, we achieved meaningful gross margin improvement versus prior year. The gross margin improvement of 5.4 percentage-points, as compared to the third quarter of 2017, is the result of our ability to leverage fixed costs, generate manufacturing and operating efficiencies, and implement price increases to offset cost inflation. The improvement was also due to gross margin accretion from the Western Windows Systems acquisition. Additionally, for the second straight quarter, we achieved at least a 20 percent-of-sales adjusted EBITDA,” continued Jackson.

Fiscal Year 2018 Outlook

Given increased product demand and solid execution, we are increasing our 2018 financial guidance. The revised guidance includes Western Window Systems sales for the post-acquisition period beginning on August 13, 2018.

PGT Innovations now expects its financial performance for the 2018 fiscal year to finish within the "Current Guidance” ranges shown in the table below:

Conference Call

PGT Innovations will host a conference call on Thursday, November 1, 2018, at 10:30 a.m. The conference call will be available at the same time through the Investor Relations section of the PGT Innovations, Inc. website, http://ir.pgtinnovations.com/events.cfm.

To participate in the teleconference, kindly dial into the call a few minutes before the start time: 877-883-0383 (U.S.) and 412-902-6506 (Canada and international). The conference ID is 2122753. A replay of the call will be available within approximately one hour after the end of the call on November 1, 2018, through November 15, 2018. To access the replay, dial 877-344-7529 (U.S.), 855-669-9658 (Canada) and 412-317-0088 (international) and refer to pass code 10125252.

You may also provide your contact information in advance by using the following link: https://hd.choruscall.com/?callme=true&passcode=2122753&info=company&r=true&b=16. At the time of the call, the phone number you provided will be automatically called and connected to the conference.

About PGT Innovations, Inc.

PGT Innovations manufactures and supplies premium windows and doors. Its highly-engineered and technically-advanced products can withstand some of the toughest weather conditions on earth and are unify indoor and outdoor living spaces.

PGT Innovations creates value through deep customer relationships, understanding the unstated needs of the markets it serves and a drive to develop category-defining products. PGT Innovations is also the nation’s largest manufacturer of impact-resistant windows and doors, holds the leadership position in its primary market, and is part of the S&P SmallCap 400 Index.

The PGT Innovations’ family of brands include CGI®, PGT® Custom Windows & Doors, WinDoor®, Western Window Systems® and CGI Commercial®. The Company’s brands, in their respective markets, are a preferred choice of architects, builders, and homeowners throughout North America and the Caribbean. The Company’s high-quality products are available in custom and standard sizes with multiple dimensions that allow for greater design possibilities in residential, multi-family, and commercial projects. For additional information, visit www.pgtinnovations.com.

Forward-Looking Statements

Statements in this press release regarding our business that are not historical facts are "forward-looking statements” that involve risks and uncertainties which could cause actual results to differ materially from those contained in the forward-looking statements. Such forward-looking statements generally can be identified by the use of forward-looking terminology, such as "may,” "expect,” "expectations,” "outlook,” "forecast,” "guidance,” "intend,” "believe,” "could,” "project,” "estimate,” "anticipate,” "should” and similar terminology. These risks and uncertainties include factors such as:

• the ability to successfully integrate the operations of Western Window Systems into our existing operations and the diversion of management’s attention from ongoing business and regular business responsibilities to effect such integration;
• the effects of increased expenses or unanticipated liabilities incurred as a result of, or due to activities related to, the Western Window Systems Acquisition;
• the risk that the anticipated cost savings, synergies, revenue enhancement strategies and other benefits from the Western Window Systems Acquisition may not be fully realized or may take longer to realize than expected or that our actual integration costs may exceed our estimates;
• disruption from the Western Window Systems Acquisition making it more difficult to maintain relationships with customers or suppliers of Western Window Systems;
• our level of indebtedness, which increased in connection with the Western Window Systems Acquisition;
• adverse changes in new home starts and home repair and remodeling trends, especially in the state of Florida, where the substantial portion of our sales are currently generated, and in the western United States, where the substantial portion of the sales of Western Window Systems’ operations are generated, and in the U.S. generally;
• macroeconomic conditions in Florida, where the substantial portion of our sales are generated, and in California, Texas, Arizona, Nevada, Colorado, Oregon, Washington and Hawaii, where the substantial portion of the sales of Western Window Systems are currently generated, and in the U.S. generally;
• raw material prices, especially for aluminum, glass and vinyl, including, price increases due to the implementation of tariffs and other trade-related restrictions;
• our dependence on a limited number of suppliers for certain of our key materials;
• sales fluctuations to and changes in our relationships with key customers;
• in addition to the Western Window Systems Acquisition, our ability to successfully integrate businesses we may acquire, or that any business we acquire may not perform as we expected at the time we acquired it;
• increases in transportation costs, including due to increases in fuel prices;
• our dependence on our impact-resistant product lines and contemporary indoor/outdoor window and door systems, and on consumer preferences for those types and styles of products;
• product liability and warranty claims brought against us;
• federal, state and local laws and regulations, including unfavorable changes in local building codes and environmental and energy code regulations;
• our dependence on our limited number of geographically concentrated manufacturing facilities;
• risks associated with our information technology systems, including cybersecurity-related risks, such as unauthorized intrusions into our systems by "hackers” and theft of data and information from our systems, and the risks that our information technology systems do not function as intended or experience temporary or long-term failures to perform as intended; and
• The risks and uncertainties discussed under Part II, Item 1A, "Risk Factors” in the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018.

Statements in this press release that are forward-looking statements include, without limitation, our expectations regarding: (1) demand for our products going forward, including the demand for our impact-resistant products and the products of Western Window Systems; (2) our ability to continue to leverage fixed costs in a favorable manner; (3) our ability to continue to achieve manufacturing and operational efficiencies; (4) the favorable impact that the increase in our product prices may have on our performance, and our ability to take future price increases to offset further increases in our costs; (5) the Company’s ability to continue to grow its sales and earnings going forward (6) our ability to position ourselves as a national leader in the premium window and door market, and our performance in that market; (7) our ability to identify and complete operational and strategic initiatives in the future, and the results of any such initiatives; and (8) our financial and operational performance for our 2018 fiscal year, including our updated "Fiscal Year 2018 Outlook” set forth in this press release. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Except as required by law, the Company undertakes no obligation to update these forward-looking statements to reflect subsequent events or circumstances from the date of this press release.

Use of Non-GAAP Financial Measures

This Press Release and the financial schedules include financial measures and terms not calculated in accordance with U.S. generally accepted accounting principles (GAAP). We believe that presentation of non-GAAP measures such as adjusted net income, adjusted net income per share, and adjusted EBITDA provides investors and analysts with an alternative method for assessing our operating results in a manner that enables investors and analysts to more thoroughly evaluate our current performance compared to past performance. We also believe these non-GAAP measures provide investors with a better baseline for assessing our future earnings potential. The non-GAAP measures included in this release are provided to give investors access to types of measures that we use in analyzing our results.

Adjusted net income consists of GAAP net income adjusted for the items included in the accompanying reconciliation. Adjusted net income per share consists of GAAP net income per share adjusted for the items included in the accompanying reconciliation. We believe these measures enable investors and analysts to more thoroughly evaluate our current performance as compared to the past performance and provide a better baseline for assessing the Company's future earnings potential. However, these measures do not provide a complete picture of our operations.

Adjusted EBITDA consists of net income, adjusted for the items included in the accompanying reconciliation. We believe that adjusted EBITDA provides useful information to investors and analysts about the Company's performance because they eliminate the effects of period-to-period changes in taxes, costs associated with capital investments and interest expense. Adjusted EBITDA does not give effect to the cash the Company must use to service its debt or pay its income taxes and thus does not reflect the actual funds generated from operations or available for capital investments.

Our calculations of adjusted net income, adjusted net income per share, and adjusted EBITDA are not necessarily comparable to calculations performed by other companies and reported as similarly titled measures. These non-GAAP measures should be considered in addition to results prepared in accordance with GAAP but should not be considered a substitute for or superior to GAAP measures. Schedules that reconcile adjusted net income, adjusted net income per share, and adjusted EBITDA to GAAP net income are included in the financial schedules accompanying this release.

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