Market Overview

Headwaters Q2 Results Top Expectations


Headwaters Inc (NYSE: HW) reported net income of $2.1 million or $0.03 per share for the first quarter compared to a net loss of $25.46 million or a loss of $0.34 a share in the year-ago quarter. However, on an adjusted basis, its income from continuing operations would have been $10.0 million or $0.13 a share, which was more than double from $4.5 million or $0.06 a share in the comparable period.

Headwaters said its revenue grew to $202.33 million from $179.73 in the previous year quarter. Revenue included 9% organic growth. Street analysts expected the company to deliver earnings of $0.10 a share and revenue of $198.80 million.

Chairman and CEO Kirk Benson commented, "We were extremely pleased with 21% year-over-year revenue growth in our building products segment, of which 16% was organic. It was the highest building products organic growth rate since 2012, and we experienced double digit growth in all four major product groups. Adjusted EBITDA in building products grew by 59%, and Adjusted EBITDA margins expanded by almost 400 basis points. Our consolidated Adjusted EBITDA margin grew to a March quarter record of 14.4%, and a record 18.9% on a trailing twelve month basis. Since the integration of our recent bolt-on acquisitions is still in the early stages, we anticipate that margin expansion could continue."

Moving ahead, Headwaters CFO Don Newman added, "We saw strong fundamental demand during the second quarter in both our core business segments. Due to our performance in the first half of our fiscal year combined with the acquisitions that we recently closed, we are raising the bottom end of our Adjusted EBITDA guidance by $5 million to a range of $185 million to $200 million, representing growth of between 12% and 21% from 2015."

He continued, "Our Adjusted EBITDA increased by 20% for the first half of our fiscal year, consistent with our compounded annual growth rate since 2011. We believe further margin expansion in 2016 and 2017 is possible, due to revenue growth and synergies associated with recent acquisitions."

Newman concluded, "We anticipate generating free cash flow between $80 million and $90 million in fiscal 2016 and continue to see opportunities to invest in growth capex and bolt-on acquisitions at returns above our weighted average cost of capital. Our plans to continue to reduce debt during the last half of the fiscal year include the partial redemption of senior unsecured notes."

On Monday, the stock shed 1.95 percent.

Posted-In: Earnings News


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