What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-07-31 compared with 2024-05-01 · 146 added, 71 removed, 103 unchanged (68% of the section changed)

13 unchanged sentences

The Company defines operating margin by segment as a percentage of total income from operations by segment to total net sales by segment and consolidated operating margin as a percentage of total consolidated income from operations to total consolidated net sales.

The Company believes consolidated gross margin and operating margin by segment may be useful to investors in evaluating the profitability of the Company's segments and the Company on a consolidated basis.

The Company believes consolidated gross margin, consolidated operating margin, and operating margin by segment may be useful to investors in evaluating the profitability of the Company's segments and the Company on a consolidated basis.

Gibraltar Industries, Inc.

(the "Company") is a leading manufacturer and provider of products and services for the renewable energy, residential, agtech, and infrastructure markets.

(the "Company") is a leading manufacturer and provider of products and services for the residential, renewable energy, agtech and infrastructure markets.

The Company operates and reports its results in the following four reporting segments:

1 unchanged sentence

• Infrastructure

The Company serves customers primarily in North America including renewable energy (solar) developers, institutional and commercial growers of fruits, vegetables, flowers and other plants, home improvement retailers, wholesalers, distributors, and contractors.

The Company's operational infrastructure provides the necessary scale to

support local, regional, and national customers in each of its markets.

At March 31, 2024, the Company operated thirty facilities, comprised of twenty-three manufacturing facilities, one distribution center, and six offices, which are located in sixteen states, Canada, and China.

The Company serves customers primarily in North America including home improvement retailers, wholesalers, distributors, contractors, renewable energy (solar) developers, and institutional and commercial growers of fruits, vegetables, flowers and other plants.

At June 30, 2024, the Company operated thirty facilities, comprised of twenty-two manufacturing facilities, two distribution centers, and six offices, which are located in fifteen states, Canada, and China.

The Company's operational infrastructure provides the necessary scale to support local, regional, and national customers in each of the Company's markets.

Recent Trends

The effect on the Company's customers in the Renewables business due to the trade related disruption in the supply of solar modules from the impacts of the Uyghur Forced Labor Prevention Act ("UFLPA") and the Department of Commerce's ("USDOC") anti-dumping and countervailing duties ("AD/CVD") investigation, both initiated in 2022, continues to diminish.

These customers have continued to adapt to the ongoing disruption in this space and have identified alternative sources for modules not impacted by these regulatory items that require either traceability of components imported and/or potentially impose tariffs on the modules.

However, some of these customers continue to pause on executing new renewable energy projects while they are awaiting final guidance from the Department of Treasury relative to rules under the Inflation Reduction Act (IRA) in order to maximize tax incentives.

Furthermore, a continued challenge to manage project specific permitting delays from relevant government entities to build new solar fields has also affected the execution of new renewable energy projects.

The Company believes that these dynamics will continue throughout 2024.

On April 24, 2024, a new petition was filed with the USDOC claiming potentially illegal trade practices with Cambodia, Malaysia, Thailand and Vietnam, the same four countries named in the 2022 AD/CVD case.

The USDOC has 20 days to determine whether to initiate an investigation on the matter.

The Company's customers in the Renewables business continue to be impacted by both ongoing and new trade and regulatory policies and investigations.

These include but are not limited to:

• In May 2024, a new investigation was initiated by the U.S.

Department of Commerce ("USDOC") claiming potentially illegal trade practices with Cambodia, Malaysia, Thailand and Vietnam, the same four countries named in the 2022 anti-dumping and countervailing duties ("AD/CVD") case, for which resolution is anticipated in 2025;

• Revocation of tariff exemptions on bifacial solar modules by the current presidential administration;

• Expiration in 2024 of the Presidential Executive Order that paused tariffs on imports of solar modules for two years.

Modules procured during this pause may have challenges to be installed as required by the December 3, 2024 due to permitting delays still prevailing in the industry;

• Publication of final guidance from the Department of Treasury relative to rules under the Inflation Reduction Act (IRA) in order to maximize tax incentives.

As these disruptions continue, a portion of our customers paused signing new contracts as they work through trade and/or regulatory items specific to their projects.

Business Strategy

23 unchanged sentences

Results of Operations

Three Months Ended March 31, 2024 Compared to the Three Months Ended March 31, 2023

The following table sets forth selected results of operations data and its percentage of net sales for the three months ended March 31 (in thousands):

Three Months Ended June 30, 2024 Compared to the Three Months Ended June 30, 2023

The following table sets forth selected results of operations data and its percentage of net sales for the three months ended June 30 (in thousands):

Net sales $ 353,005 100.0 % $ 364,914 100.0 %

4 unchanged sentences

Interest (income) expense (1,495) (0.4) % 1,308 0.3 %

Other income (1,021) (0.4) % (397) (0.1) %

Other expense (income) 347 0.0 % (509) (0.1) %

Income before taxes 43,617 12.4 % 42,278 11.6 %

1 unchanged sentence

Net income $ 32,198 9.1 % $ 30,723 8.4 %

The following table sets forth the Company’s net sales by reportable segment for the three months ended March 31, (in thousands):

The following table sets forth the Company’s net sales by reportable segment for the three months ended June 30, (in thousands):

2024 2023 Total

Change Acquisitions Portfolio Management Ongoing Operations

Renewables $ 51,496 $ 59,205 $ (7,709) $ — $ (1,950) $ (5,759)

Residential $ 214,316 $ 228,234 $ (13,918) $ 2,193 $ — $ (16,111)

Renewables 79,381 77,459 1,922 — (4,081) 6,003

Agtech 34,508 35,028 (520) — (765) 245

1 unchanged sentence

Consolidated $ 353,005 $ 364,914 $ (11,909) $ 2,193 $ (4,846) $ (9,256)

Consolidated net sales were essentially flat for the three months ended March 31, 2024 compared to the three months ended March 31, 2023, the net result of a slight increase in pricing to customers offset by a decrease due to portfolio management activities in the prior year.

Growth in the Company's Residential and Infrastructure segments, along with revenue of $1.3 million generated from a recent acquisition, was more than offset by $4.5 million of sales related to portfolio management along with an anticipated decline in revenue in the Company's Renewables segment.

Consolidated net sales decreased by $11.9 million, or 3.3%, to $353.0 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023.

The net sales decrease was largely due to a 3% decrease in organic revenue, the combined result of a 2% volume decline and a 1% decrease in pricing to customers, along with portfolio management activities in the prior year quarter.

Growth in the Company's Renewables, Agtech and Infrastructure segments, along with revenue of $2.2 million generated from a recent

acquisition, was more than offset by $4.8 million of sales related to portfolio management along with a decline in revenue in the Company's Residential segment.

Consolidated backlog decreased 4% to $389 million, as compared to the end of the prior year quarter.

Net sales in the Company's Renewables segment decreased $7.7 million, or 13.0%, to $51.5 million for the three months ended March 31, 2024 compared to $59.2 million for the three months ended March 31, 2023.

Revenue declined due to the rapid customer transition to a recently launched tracker product, which currently has a longer supply lead time than fixed tilt products which largely comprised the demand for prior year quarter's orders and revenues.

Portfolio management activities related to the sale of the segment's Japan renewables business in December 2023 also contributed to the decline.

Backlog increased 8% from the prior year, on pace with expectations, as end market demand remains robust even as customers await final domestic content tax credit guidance related to the Inflation Reduction Act and navigate project-specific permitting delays.

Net sales in the Company's Residential segment increased $5.6 million, or 3.1%, to $185.1 million for the three months ended March 31, 2024 compared to $179.5 million for the three months ended March 31, 2023.

Organic growth of 2.4% was driven by continuing participation gains, growth with customers and geographic expansion.

In addition, $1.3 million of revenue was generated by the recent acquisition.

Net sales in the Company's Agtech segment decreased 5.3%, or $1.8 million, to $34.0 million for the three months ended March 31, 2024 compared to $35.9 million for the three months ended March 31, 2023.

The revenue declined due to $2.5 million of revenues recorded in the prior year related to portfolio management actions which were partially offset by a slight increase in volume.

While backlog decreased 21% year over year due to timing of order flow, subsequent project bookings in April will contribute to backlog and revenue in the coming months.

Net sales in the Company's Infrastructure segment increased 17.1%, or $3.2 million, to $21.9 million for the three months ended March 31, 2024 compared to $18.7 million for the three months ended March 31, 2023.

The increase in revenue was due to strong execution, continued solid end market demand and market participation gains.

Backlog decreased 10% as expected from the prior year due to the continued progress on a large project, while demand, project design and quoting remain strong.

The Company's consolidated gross margin increased to 28.9% for the three months ended March 31, 2024 compared to 26.2% for the three months ended March 31, 2023.

Net sales in the Company's Residential segment decreased $13.9 million, or 6.1%, to $214.3 million for the three months ended June 30, 2024 compared to $228.2 million for the three months ended June 30, 2023.

Organic sales decline of 7.1% was impacted by a slowing in end market activity in the business and inventory reduction actions at certain retail customers during the quarter.

This decrease was partially offset by participation gains with new and existing customers and geographic expansion in the Rocky Mountain region, along with $2.2 million of revenue generated by the recent acquisition.

Net sales in the Company's Renewables segment increased $1.9 million, or 2.5%, to $79.4 million for the three months ended June 30, 2024 compared to $77.5 million for the three months ended June 30, 2023.

The increase was driven by customer uptake to the Company's new tracker product, partially offset by portfolio management activities.

Despite a growing pipeline of new projects across all product lines, order backlog decreased 10% during the quarter as some customers paused signing new contracts as they worked through trade and/or regulatory items specific to their projects.

Net sales in the Company's Agtech segment decreased 1.4%, or $0.5 million, to $34.5 million for the three months ended June 30, 2024 compared to $35.0 million for the three months ended June 30, 2023.

The revenue decline was the result of portfolio management actions in the prior year.

Revenue was impacted by new projects starting later in the current year quarter, with June revenue up significantly over May.

Backlog increased 32% year over year in this segment as new projects booked were greater than $90 million during the current year quarter.

Net sales in the Company's Infrastructure segment increased 2.5%, or $0.6 million, to $24.8 million for the three months ended June 30, 2024 compared to $24.2 million for the three months ended June 30, 2023.

The increase in revenue was driven by continued strong execution and market participation gains.

Backlog decreased 12% as expected from the prior year due to the final stages of a large project booked in 2023, while demand and quoting remain strong.

The Company's consolidated gross margin increased to 27.2% for the three months ended June 30, 2024 compared to 26.5% for the three months ended June 30, 2023.

The increase was driven by improved price to material cost alignment, and continued operational efficiencies, along with 80/20 initiatives and favorable business and product mix.

Selling, general, and administrative ("SG&A") expenses increased by $5.1 million, or 10.7% to $52.7 million for the three months ended March 31, 2024 compared to $47.6 million for the three months ended March 31, 2023.

The $5.1 million increase was primarily due to higher performance-based compensation expense as compared to the prior year quarter.

SG&A expenses as a percentage of net sales increased to 18.1% for the three months ended March 31, 2024 compared to 16.2% for the three months ended March 31, 2023.

The following table sets forth the Company’s income from operations and income from operations as a percentage of net sales by reportable segment for the three months ended March 31, (in thousands):

Selling, general, and administrative ("SG&A") expenses decreased by $0.3 million, or 0.5% to $53.4 million for the three months ended June 30, 2024 compared to $53.7 million for the three months ended June 30, 2023.

The $0.3 million decrease was primarily due to lower performance-based compensation expense as compared to the prior year quarter.

SG&A expenses as a percentage of net sales increased to 15.2% for the three months ended June 30, 2024 compared to 14.7% for the three months ended June 30, 2023.

The following table sets forth the Company’s income from operations and income from operations as a percentage of net sales by reportable segment for the three months ended June 30, (in thousands):

2024 2023 Total

Income from operations:

Renewables $ 1,644 3.2 % $ 2,269 3.8 % $ (625)

Residential $ 43,313 20.2 % $ 43,959 19.3 % $ (646)

Renewables 1,647 2.1 % 5,908 7.6 % (4,261)

Agtech 2,282 6.6 % (1,117) (3.2) % 3,399

2 unchanged sentences

Consolidated income from operations $ 42,469 12.0 % $ 43,077 11.8 % $ (608)

The Renewables segment generated an operating margin of 3.2% in the current year quarter compared to 3.8% in the prior year quarter.

The decrease in operating margin was a result of lower volumes and product line mix associated with the ramp up of the new tracker product line in the current year quarter.

The Residential segment generated an operating margin of 20.2% in the current year quarter compared to 19.3% in the prior year quarter.

Operating margin improved year over year, driven by continued improvement in execution and ongoing improvement in price/cost management.

Operating margin improved year over year, driven by solid execution and effective price/cost management.

The Renewables segment generated an operating margin of 2.1% in the current year quarter compared to 7.6% in the prior year quarter.

The decrease in operating margin was a result of product line mix associated with the ramp up of the new tracker product line in the current year quarter.

Furthermore, margin was impacted by restructuring charges incurred during the quarter related to addressing customer issues arising from the discontinued legacy solar tracker solution.

This margin decrease was partially offset by strong execution and field efficiencies on projects underway.

The Agtech segment generated an operating margin of 6.6% in the current year quarter compared to (3.2)% in the prior year quarter.

Operating margin improved year over year due to the impact of restructuring costs incurred in the prior year partially offset by project start date delays and market and product mix across the segment.

The Infrastructure segment generated an operating margin of 22.4% during the three months ended March 31, 2024 compared to 14.5% during the three months ended March 31, 2023.

The margin improved year over year driven by increased volume, favorable price/cost alignment, ongoing strong operating execution, 80/20 productivity, and improving product mix.

Unallocated corporate expenses increased $4.3 million from $7.5 million during the three months ended March 31, 2023 to $11.8 million during the three months ended March 31, 2024.

The increase in expense was primarily the result of higher performance-based compensation expense as compared to the prior year quarter.

The Company recorded interest income of $0.8 million for the three months ended March 31, 2024, compared to interest expense of $1.5 million for the three months ended March 31, 2023.

Expense in the prior year quarter was the result of a $49.9 million outstanding balance on the Company's revolving credit facility as of March 31, 2023, while no amounts were outstanding during the three months ended March 31, 2024.

Other income increased year over year with $1.0 million recorded for the three months ended March 31, 2024, compared to $0.4 million recorded for the three months ended March 31, 2023.

The change year over year is the combined result of $1.0 million of working capital and other adjustments recorded in the current year quarter, relating to the sale of the Company's Japan-based solar racking business within its Renewables segment and foreign currency translation fluctuations.

The Company recognized a provision for income taxes of $8.6 million and $7.2 million, with effective tax rates of 25.6% and 25.4% for the three months ended March 31, 2024, and 2023, respectively.

The effective tax rate for the three months ended March 31, 2024, and 2023, respectively, was greater than the U.S.

Operating margin improved year over year due to the impact of portfolio management charges related to the liquidation of the processing business incurred in the prior year partially offset by a product mix shift in projects across the segment during the current year.

The Infrastructure segment generated an operating margin of 25.1% during the three months ended June 30, 2024 compared to 24.1% during the three months ended June 30, 2023.

The margin improved year over year due to favorable price/cost alignment, ongoing strong operating execution, 80/20 productivity, and improving product mix.

Unallocated corporate expenses decreased $0.5 million from $11.5 million during the three months ended June 30, 2023 to $11.0 million during the three months ended June 30, 2024.

The decrease in expense was primarily the result of lower performance-based compensation expense as compared to the prior year quarter.

The Company recorded interest income of $1.5 million for the three months ended June 30, 2024, compared to interest expense of $1.3 million for the three months ended June 30, 2023.

Income during the current year quarter was the result of earnings on certain interest-bearing cash accounts.

Expense in the prior year quarter was the result of an outstanding balance on the Company's revolving credit facility for the three months ended June 30, 2023, while no amounts were outstanding during the three months ended June 30, 2024.

The Company recorded other expense of $0.3 million for the three months ended June 30, 2024, compared to other income of $0.5 million recorded for the three months ended June 30, 2023.

The change year over year is the result of costs related to the liquidation of the processing business.

The Company recognized a provision for income taxes of $11.4 million and $11.6 million, with effective tax rates of 26.2% and 27.3% for the three months ended June 30, 2024, and 2023, respectively.

The effective tax rate for the three months ended June 30, 2024, and 2023, respectively, was greater than the U.S.

federal statutory rate of 21% due to state taxes and nondeductible permanent differences partially offset by favorable discrete items due to an excess tax benefit on stock-based compensation.

Six Months Ended June 30, 2024 Compared to the Six Months Ended June 30, 2023

The following table sets forth selected results of operations data and its percentage of net sales for the six months ended June 30 (in thousands):

Net sales $ 645,511 100.0 % $ 658,181 100.0 %

Cost of sales 465,250 72.1 % 484,513 73.6 %

Gross profit 180,261 27.9 % 173,668 26.4 %

Selling, general, and administrative expense 106,056 16.4 % 101,221 15.4 %

Income from operations 74,205 11.5 % 72,447 11.0 %

Interest (income) expense (2,245) (0.3) % 2,799 0.4 %

Other income (674) (0.1) % (906) (0.1) %

Income before taxes 77,124 11.9 % 70,554 10.7 %

Provision for income taxes 19,980 3.0 % 18,732 2.8 %

Net income $ 57,144 8.9 % $ 51,822 7.9 %

The following table sets forth the Company’s net sales by reportable segment for the six months ended June 30, (in thousands):

2024 2023 Total

Change Acquisitions Portfolio Management Ongoing Operations

Residential $ 399,427 $ 407,729 $ (8,302) $ 3,480 $ — $ (11,782)

Renewables 130,877 136,664 (5,787) — (6,031) 244

Agtech 68,535 70,880 (2,345) — (3,279) 934

Infrastructure 46,672 42,908 3,764 — — 3,764

Consolidated $ 645,511 $ 658,181 $ (12,670) $ 3,480 $ (9,310) $ (6,840)

Consolidated net sales decreased by $12.7 million, or 1.9%, to $645.5 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023.

The net sales decrease was the combined result of volume decline in the Company's Residential segment along with portfolio management activities in the prior year.

This decrease was partially offset by growth in the Company's Infrastructure, Agtech and Renewables segments, along with revenue of $3.5 million generated from a recent acquisition.

Consolidated backlog decreased 4% to $389 million, as compared to the end of the prior year period.

Net sales in the Company's Residential segment decreased $8.3 million, or 2.0%, to $399.4 million for the six months ended June 30, 2024 compared to $407.7 million for the six months ended June 30, 2023.

Organic decline of 2.9% was impacted by a slowing in end market activity in the business and inventory reduction actions at certain retail customers during the latter part of the six month period.

This decrease was partially offset by participation gains with new and existing customers and geographic expansion in the Rocky Mountain region, along with $3.5 million of revenue generated by the recent acquisition.

Net sales in the Company's Renewables segment decreased $5.8 million, or 4.2%, to $130.9 million for the six months ended June 30, 2024 compared to $136.7 million for the six months ended June 30, 2023.

The decline in net sales was the result of portfolio management actions in the prior year.

Despite a growing pipeline of new projects across all product lines, order backlog decreased 10% from the prior year as some customers paused signing new contracts as they worked through trade and/or regulatory items specific to their projects.

Net sales in the Company's Agtech segment decreased 3.2%, or $2.3 million, to $68.5 million for the six months ended June 30, 2024 compared to $70.9 million for the six months ended June 30, 2023.

The revenue declined due to $3.3 million of revenues recorded in the prior year related to portfolio management actions which were partially offset by timing of new contract signings, as projects recently booked began to generate revenue during the latter part of the current year period.

Backlog increased 32% year over year in this segment as new projects booked were greater than $90 million during the current year quarter.

Net sales in the Company's Infrastructure segment increased 8.9%, or $3.8 million, to $46.7 million for the six months ended June 30, 2024 compared to $42.9 million for the six months ended June 30, 2023.

The increase in revenue was driven by continued strong execution and market participation gains.

Backlog decreased 12% as expected from the prior year due to the final stages of a large project booked in 2023, while demand and quoting remain strong.

The Company's consolidated gross margin increased to 27.9% for the six months ended June 30, 2024 compared to 26.4% for the six months ended June 30, 2023.

The increase was driven by improved price to material cost alignment, and continued operational efficiencies, along with 80/20 initiatives and favorable business and product mix.

SG&A expenses increased by $4.8 million, or 4.8% to $106.1 million for the six months ended June 30, 2024 compared to $101.2 million for the six months ended June 30, 2023.

The $4.8 million increase was primarily due to higher performance-based compensation expense as compared to the prior year.

SG&A expenses as a percentage of net sales increased to 16.4% for the six months ended June 30, 2024 compared to 15.4% for the six months ended June 30, 2023.

The following table sets forth the Company’s income from operations and income from operations as a percentage of net sales by reportable segment for the six months ended June 30, (in thousands):

2024 2023 Total

Income from operations:

Residential $ 77,659 19.4 % $ 73,468 18.0 % $ 4,191

Renewables 3,291 2.5 % 8,177 6.0 % (4,886)

Agtech 4,890 7.1 % 1,213 1.7 % 3,677

Infrastructure 11,111 23.8 % 8,542 19.9 % 2,569

Unallocated Corporate Expenses (22,746) (3.5) % (18,953) (2.9) % (3,793)

Consolidated income from operations $ 74,205 11.5 % $ 72,447 11.0 % $ 1,758

The Residential segment generated an operating margin of 19.4% in the current year compared to 18.0% in the prior year.

Operating margin improved year over year, driven by solid execution, effective price/cost management and 80/20 productivity.

The Renewables segment generated an operating margin of 2.5% in the current year compared to 6.0% in the prior year.

The decrease in operating margin was a result of product line mix associated with the ramp up of the new tracker product line in the current year along with the impact of restructuring activities related to addressing customer issues arising from the discontinued legacy solar tracker solution and prior year portfolio management actions, partially offset by strong execution and field efficiencies on projects underway.

The Agtech segment generated an operating margin of 7.1% in the current year compared to 1.7% in the prior year.

Operating margin improved year over year due to the impact of restructuring costs incurred in the prior year partially offset by product mix across the segment.

The Infrastructure segment generated an operating margin of 23.8% during the six months ended June 30, 2024 compared to 19.9% during the six months ended June 30, 2023.

The margin improved year over year driven by favorable price/cost alignment, ongoing strong operating execution, 80/20 productivity, and improving product mix.

Unallocated corporate expenses increased $3.8 million from $19.0 million during the six months ended June 30, 2023 to $22.7 million during the six months ended June 30, 2024.

The increase in expense was primarily the result of higher performance-based compensation expense as compared to the prior year.

The Company recorded interest income of $2.2 million for the six months ended June 30, 2024, compared to interest expense of $2.8 million for the six months ended June 30, 2023.

Income in the current year was the result of earnings on certain interest-bearing cash accounts.

Expense in the prior year was the result of an outstanding balance on the Company's revolving credit facility for the six months ended June 30, 2023, while no amounts were outstanding during the six months ended June 30, 2024.

Other income decreased year over year with $0.7 million recorded for the six months ended June 30, 2024, compared to $0.9 million recorded for the six months ended June 30, 2023.

The change year over year is the combined result of $1.0 million of working capital and other adjustments recorded in the current year, relating to the sale of the Company's Japan-based solar racking business within its Renewables segment, costs related to the liquidation of the processing business and foreign currency translation fluctuations.

The Company recognized a provision for income taxes of $20.0 million and $18.7 million, with effective tax rates of 25.9% and 26.6% for the six months ended June 30, 2024, and 2023, respectively.

The effective tax rate for the six months ended June 30, 2024, and 2023, respectively, was greater than the U.S.

federal statutory rate of 21% due to state taxes and nondeductible permanent differences partially offset by favorable discrete items due to an excess tax benefit on stock-based compensation.

Liquidity and Capital Resources

The following table sets forth the Company's liquidity position as of (in thousands):

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Cash and cash equivalents $ 179,102 $ 99,426

7 unchanged sentences

Generally, the Company's foreign operations have generated cash flow from operations sufficient to invest in working capital and fund their capital improvements.

As of March 31, 2024 and December 31, 2023, the Company's foreign subsidiaries held $4.7 million and $6.9 million of cash, respectively.

As of June 30, 2024 and December 31, 2023, the Company's foreign subsidiaries held $14.2 million and $6.9 million of cash, respectively.

The Company believes that these sources, together with cash expected to be generated from operations, should provide the Company with ample liquidity and capital resources to meet its cash requirements and to continue to invest in operational excellence, growth initiatives and the development of the organization.

3 unchanged sentences

The Company will continue to invest in growth opportunities as appropriate while focusing on working capital efficiency and profit improvement opportunities to minimize the cash invested to operate its business.

Over the long-term, the Company expects that future investments, including strategic business opportunities such as acquisitions, may be financed through a number of sources, including internally available cash, availability under

the Credit Agreement, new debt financing, the issuance of equity securities, or any combination of the aforementioned.

Over the long-term, the Company expects that future investments, including strategic business acquisitions, may be financed through a number of sources, including internally available cash, availability under the Credit Agreement, new debt financing, the issuance of equity securities, or any combination of the aforementioned.

These expectations are forward-looking statements based upon currently available information and may change if conditions in the credit and equity markets deteriorate or other circumstances change.

To the extent that operating cash flows are lower than current levels, or sources of financing are not available or not available at acceptable terms, the Company's future liquidity may be adversely affected.

Except as disclosed above, there have been no material changes in the Company's cash requirements since December 31, 2023, the end of fiscal year 2023.

Except as disclosed above, there have been no material changes in the Company's cash requirements since December 31, 2023.

See Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

The following table sets forth selected cash flow data for the three months ended March 31, (in thousands):

The following table sets forth selected cash flow data for the six months ended June 30, (in thousands):

Cash provided by (used in):

3 unchanged sentences

Effect of foreign exchange rate changes (173) (381)

Net increase (decrease) in cash and cash equivalents $ 47,239 $ (10,111)

Net increase in cash and cash equivalents $ 79,676 $ 1,013

Operating Activities

Net cash provided by operating activities for the three months ended March 31, 2024 of $53.2 million consisted of net income of $24.9 million, non-cash net charges totaling $11.0 million, which include depreciation, amortization, stock-based compensation, exit activity recoveries and other non-cash charges, and $17.3 million of cash generated from working capital and other net operating assets.

The cash generated from working capital and other net operating assets was largely due to increases in accounts payable, the result of the timing of purchases and vendor payments, partially offset by investment in inventory to align with anticipated seasonal sales volumes increases.

Net cash provided by operating activities for the three months ended March 31, 2023 of $38.0 million consisted of net income of $21.1 million, non-cash net charges totaling $9.3 million, which include depreciation, amortization, stock-based compensation, exit activity recoveries and other non-cash charges, and $7.6 million of cash generated from working capital and other net assets.

The cash generated from working capital and other net assets was due to an increase in accounts payable as a result of the timing of purchases and vendor payments, offset by an increase in accounts receivable as revenues increased in the latter part of the quarter.

Net cash provided by operating activities for the six months ended June 30, 2024 of $89.7 million consisted of net income of $57.1 million, non-cash net charges totaling $22.4 million, which include depreciation, amortization, stock-based compensation, exit activity costs and other non-cash charges, and $10.2 million of cash generated from working capital and other net operating assets.

The cash generated from working capital and other net operating assets was largely due to increases in accounts payable, the result of the timing of purchases and vendor payments, and billings in excess of costs, the result of increased advance payments from and billings to customers on projects.

These activities were partially offset by increases in accounts receivable and inventory, largely the result of seasonal demand.

Net cash provided by operating activities for the six months ended June 30, 2023 of $114.1 million consisted of net income of $51.8 million, non-cash net charges totaling $21.6 million, which include depreciation, amortization, stock-based compensation, exit activity recoveries and other non-cash charges, and $40.7 million of cash generated from working capital and other net operating assets.

The cash generated from working capital and other net operating assets was largely due to increases in accounts payable, the result of the timing of purchases and vendor payments, and billings in excess of costs, the result of increased advance payments from and billings to customers on projects.

In addition, cash was generated due to the Company's focus on reducing its investment in inventory to better align with lower sales volumes while still meeting customer demand.

These activities were partially offset by an increase in accounts receivable largely the result of seasonal increases in demand.

Investing Activities

Net cash used in investing activities for the three months ended March 31, 2024 of $4.4 million consisted of net capital expenditures.

Net cash used in investing activities for the three months ended March 31, 2023 of $1.6 million was primarily due to capital expenditures of $2.2 million, offset by receipt of the $0.6 million final working capital settlement resulting from the 2022 acquisition of QAP.

Net cash used in investing activities for the six months ended June 30, 2024 of $8.4 million was primarily due to net capital expenditures of $8.7 million, offset by receipt of the $0.3 million final working capital settlement resulting from the sale of the Company's Japan-based solar racking business in the Company's Renewables segment in the fourth quarter of 2023.

Net cash used in investing activities for the six months ended June 30, 2023 of $4.7 million was primarily due to net capital expenditures of $5.3 million, offset by receipt of the $0.6 million final working capital settlement resulting from the 2022 acquisition of QAP.

Financing Activities

Net cash used in financing activities for the three months ended March 31, 2024 of $1.4 million consisted of common stock repurchases related to the net settlement of tax obligations for participants in the Company's equity incentive plans.

Net cash used in financing activities for the three months ended March 31, 2023 of $46.5 million consisted of net long-term debt payments of $39.0 million and $7.5 million of common stock repurchases.

Net cash used in financing activities for the six months ended June 30, 2024 of $1.4 million consisted of common stock repurchases related to the net settlement of tax obligations for participants in the Company's equity incentive plans.

Net cash used in financing activities for the six months ended June 30, 2023 of $108.0 million consisted of net long-term debt payments of $79.2 million and $28.8 million of common stock repurchases.

Net long-term debt payments consisted of $120.0 million in long-term debt payments, offset by $40.8 million in proceeds from borrowing on the Company's long-term debt credit facility.

The Company repurchased 153,537 shares under the Company's

authorized share repurchase program which totaled $5.6 million paid during the three months ended March 31, 2023 with the balance repurchased common stock of $1.9 million related to the net settlement of tax obligations for participants in the Company's equity incentive plans.

The Company paid $26.0 million during the six months ended June 30, 2023 related to repurchase of 538,575 shares under the Company's authorized share repurchase program.

The remainder of the repurchased common stock of $2.8 million related to the net settlement of tax obligations for participants in the Company's equity incentive plans.

Critical Accounting Estimates

There have been no material changes to the Company's critical accounting estimates during the three months ended March 31, 2024 from those disclosed in the consolidated financial statements and accompanying notes contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

There have been no material changes to the Company's critical accounting estimates during the six months ended June 30, 2024 from those disclosed in the consolidated financial statements and accompanying notes contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

Recent Accounting Pronouncements

1 unchanged sentence

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What changed 10-Q

Item 2. Management’s Discussion and Analysis