Select Interior Concepts (SIC) 8 Nov 202020 Q3 Earnings call transcript

Good morning, everyone, and welcome to the Select Interior Concepts' Third Quarter 2020 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. Moiz. Nadeem sir. ahead, go Please

you, operator. third welcome our everyone, Good XXXX financial morning, quarter and results to Thank conference call.

the Joining Officer, on call our is me Chief Bill Varner. today Executive

risks our issues that of today affect today, contained future unknowns presentation be We provisions on unknowns see unknown discussion safe evaluating in Private Investor performance. Specific of that to this would assume section considered in performance. Please are may update or and Litigation to noted the Reform issues no statements. website. our Relations factors which harbor this principal in financial of forward-looking our any forward-looking recent and remind our During everyone that the referring to which that publicly subject is represent slide. Securities earnings and to to we'll and the detail of could are available I on conditions, like filings, any on operating Actual need XXXX. our could commented differ presentation, outlook SEC forward-looking statements obligation because be materially Act results the statements identify

the or GAAP EBITDA, measure. discussing for I would EBITDA comparable be over non-GAAP we'll like today, of our certain call these turn including to reconciliation a addition, In Please see measures their to adjusted directly most financial adjusted and CEO, appendix EBITDA providing margins. the non-GAAP Bill. to measures now

of joining third highlights start an our with everyone, presentation. Nadeem, quarter Thanks, I'll and X Slide overview you, our call morning. for this thank on of the

much market we revenue demonstrating release, year-to-date, EBITDA with the from of continue improvement press QX strong in XX% see as performance, and this flow of months. but I'm $X.X and the in the in rate happy detailed we year-to-date. was to quarter, million generated this construction quarter, reflecting achieve housing morning's of adjusted more the conversion $XXX Cash coming $XX.X to over getting we sequential third third have for $XX operations million As the million over and strength. million

of We are just accomplish. in plan to early the what we innings

Turning for at I'd talked and the creation. my early compelling spoke company the I opportunities in for SIC joining August about foundation a stool. When three-legged saw a the value identified creating many described the long-term to Slide first I to since X. we time playbook as I solid steps begin

accelerated organic The first growth revenue earnings. generating leg focusing on and

enhancing capital and strategy develop have buy-and-build so on The the long-term formulating third, second markets with existing organic a the inorganic growth. structure long-term And strong key footprint SIC's in tactics we on avenues growth our demographics. to for additional combines that

more the These past our steps create Christian, During in enhance infrastructure began leader, quarter, that the organization Resource a to with and need single services an leg to Human as from gathered will today. a the call original operational of streams, with together are and we the business stool moving accelerate on process. offer in the transformation With units, appointed to four take commonality, businesses first begun where Deme we quickly new plan. positions as our and In independently excellent I that implemented our employees. continued our well work of each augment mid-August make into goals, process has my business rather will focus very and value. I'll To to that we mid-September. feedback Technology in forward critical team RDS corporate promise ASG, potential. gathering we and SIC's these value from the Kalala, process cohesion the underperforming do capabilities visits experience and also experts engagement be creating including I bring first SIC and the its increase many different Officer, Chief SIC's dive their actions leadership ideas the that and deeper outstanding and and The operate locations branding intend and In to implementing could we've to and a customer-focused confirmed efficient we accomplish we a other To visiting of Satish appropriate locations. as realize information employee propositions, SIC's performing success. I shareholder other. assessment The domain Both attributes. visitations market brought program that than to so bring completed, among our have

RDS focuses initiative first cycle. design Our organizational on enhancement, our in particularly productivity and

can our detail operations of We we more have companies. acquired examining teams the effective capabilities how them of determine to make had every leveraging while

begun we've practices. example, and looked operations, delved workflow bidding leasing labor, assessing into fabrication and at For our our and warehouse

In aim across to practices our our and to locations, them employee all into identify crafting optimize methods addition, we ideas common and use process productivity. offices best of can that enhance

Our focuses across logistics strategic and second initiative on the company. sourcing

sure minimum making inherent and supply sales purchase plan pricing properly preference we optimizing operational were eliminate In as process, such that and opportunities inefficiencies SIC's were different examining businesses are closely levels, are that the connected. to as and We terms, acquired.

balancing Additionally, tariffs local company sourcing with derisk to and the supply chain from imports we risks. are

insurance benefit look recruiting which by separately benefits Our ensure also that and opportunities while evaluating insurance market-driven for different and our such programs cases This compensation are review been a on retention and some from programs focused rewarding in health overall third programs handled our into will offices. alignment will initiative, property bring team we of as and and SIC's have success. casualty, savings to

to XX as efficient our workforce SIC fabrication shops each fourth our effectiveness. utilization maximize sales warehouses. design other. has We and that is to footprint set is of best assigned so facilities Our make they their as possible are the initiative including of and sure plan near and rationalization, over locations is can possible which facilities, some showrooms, and

across identified have opportunities these work We actionable multiple streams.

expect and improvements are short-term Some in we nature, operational begin enacting QX. to in

recurring target our in the future opportunity in which $XX earnings range overall structural of represents improvement to annualized earnings. million an identified have $X We a million,

our to approximately these to is periodic provide goal annualized remainder XXXX initiatives target Our do across XXXX. in of updates year this calendar company. the on achieve enacting progress plan We and of the in XX%

our team, quarter's developed you Regarding have since I that updates have end. leadership two for

As Nadeem this as appointed want acquisitions of Officer. Financial of announce many the promotion respect performance his Moiz has press pleased release, organization, be Kendall company to to recognizes his and in mentioned entire Directors. thank insight in contributions Chief for him commands role we Operating that to throughout been are leaving continuing to and the the RDS Officer Chief Board improving our I morning's operating addition his organization. the end. year the Nadeem. he ongoing Nadeem's essential will integration President at of Congratulations, of company the Hoyd, to And

undertaking search find a We position. the process possible for best this person are to

Now report going XD to back proprietary Momentum that with our traction tool I'm to rendering online finishes. happy continue Please to ongoing Design, interior for gain business. to Slide we turn X. RDS' selecting

our the Heritage buyers builders. in Momentum allows who technology with those unique It sales familiar without interior price home not team visiting this seamlessly for the design activities nation's cycle and select Phoenix. builders' audience home XX developments buyers Most of sales Crossing's with their positive. Design, Cypress also with physical Early Design out the to very center. and feedback our Momentum Homes, we in been recently, time visualize, the integrates home are at reduces to and one offer systems For builders, both finishes its construction internal from top partnered both Ridge Woodside and new of has

organic home entry-level builders are several continued leading products home seeing from in launched and MetroQuartz new through growth progress offerings of making interior solid also around the to introduction ASG's six enthusiasm stone generate interest traction. color high-value, at are drive ASG. engineered provides the which We We're Design. that generating Momentum brand, high-margin our

Additional selling are for get early ready Pental season. brand for spring launches product XXXX we as planned the

positive that today's company's homebuilding remain the and and inorganic in favorable remodel reflecting also among efforts opportunities by to the indicators, shareholder Before briefly value. up seeing in shift showroom to growth construction in and We're review turning new the space our the lift and effective elimination we the to this Nadeem will the addition spend interest a of look help provide of complete the more the a trends to spaces in for very Despite rates will the remainder QX the challenges I year. economy, would operational to our brick-and-click on call sales of from inefficiencies, having around drive From performance on is robust way the of market our will strategies. other factors. housing SIC's like households' to and the us to forward industry. touch optimistic shaping infrastructure the overall created our few very favorable hybrid I'd interest the being moments further and service XXXX detail, coming like to over perspective, and capitalize on cohesion creation corporate residential brick-and-mortar are

markets improvement, our at like businesses and value over discuss As accretive continue enter results. plans multiples our we third turn for acquire that to shareholder our call in services to Nadeem explore the with the to near-term, I'd to to driving align and opportunities execute we financial to strategic operational quarter new objectives.

to the At QX Bill. SIC sales look the Thank $XXX.X role. year. period Starting I'm represented since in the at to developments April, about excited expanded additional XXXX. Sales you, down our X. have X% steadily the for which Slide were trough forward the leading for are compared continuing and on recovered million,

call, attributable fell $XX small by tile The to RDS California, and sales recall sales growth of to $X X% quartz. particularly to largely COVID-XX. our due partially in by from in a these related closure you declines lower sales $X was As to was may decline last factors, fell volume, and although $XX price/mix, compared California location month Arizona. approximately price/mix Charlotte to offset in sales decline primarily of in for commercial ASG variety fell that business XX% sales in improvement were stone, partially Antonio or due negative million San approximately quartz offset to in last including to volume, year-over-year. lower ASG million to due The year. a our and X% and positive the or volume decrease million volume million sales natural a conference

last the of operating have on lower X. was year's these XX% generated price/mix a COVID-XX-pandemic-related offset Moving quarter. a operating decrease to or in by approximately cost to the On over the during positively expenses quarter savings both basis, appropriate bridge. initiatives and netted of categories cost benefited sales in savings. and $XX in are net contributed a of $X.X third EBITDA on Negative EBITDA Year-over-year net basis. the million $X year-to-date partially to and million decline million million at decreased $X.X basis volumes compared Slide by expenses million million $XX $X and adjusted

While XXXX million million expect an our to some of sales return of business costs we to the as estimated will financial to to full cost $XX year provide increase, these initiatives $XX still as results previously communicated. these benefit

Slide to X. Turning

positive most streams work grow the on to liquidity along operations We ensuring which for quarter position initiatives. orders and cash With key results transformative $XX respect continued period. sales flow, During LTM QX our focus to our increases The new remain business taken, growth representing X.X EBITDA of liquidity $XXX.X preserve cost EBITDA in EBITDA. we to strategic preservation our RDS us drives year-to-date, with committed and with developments investments adjusted cash the operations, quarter discussed, cash. geographies. net $XX.X construction, have new Recent solid million to deliveries our support of and reported adjusted business of strict and from for the by generate increased. and homebuilders We deployment to times debt the we're and cost to million of liquidity discipline we've ASG. in net have ended debt XX% million, market, million cash maintained actions as flow a in single-family the quarterly we $X.X portion and of and strict public Cash of and was which about our will for excited for same Bill shown in

with has California forecast activity housing to continued slow the activity XXXX. have market uncertain XXXX. been for in Industry stable environment. of revised total expected April, been into our has upwards growth of during QX and National half national All continued levels for the in since in growth XXXX recover. which successfully with drives ASG, anticipated business team repair approximately our steady conclude, executed remained To remodel, lows despite

that, capitalize As are Bill on thoughts. series are the we positive Bill indicated, call I to encouraged housing turn the With we to his the trends see. opportunities very will sector by taking actions in back of a for concluding the and

joining today. again us Thanks for

inefficiencies, company help an we series to cohesion realize we're you we've you've progress giving to potential. of SIC's the make, with initiatives We're implemented starting across year. forward a create next the full heard, eliminate happy As update operational early and to look and

Q&A. So operator, open up I to think for we're ready

Thank you.

begin question first now with ahead. the will comes question-and-answer We [Operator from B. Riley. go Rygiel Our Alex session. Instructions] Please

Nadeem, Thank quarter. very you. Bill nice Good morning, and

Alex. morning, Good

Good morning. Thank you.

Thank you.

You last which is Based bit. kind RDS or little in the And unfavorable. order we today, heading upon fantastic, three strong trends flow the in that real growth based price/mix segment, your into four volume your price/mix had growth on upon a positive? months? your see on positive might over volume backlog What's view that customers upon by XXXX then turn but when of expanding was all

take question. I'll Nadeem. that is this Alex,

trends of part to question first related and price/mix price/mix. The is the

seen really down homebuilders all ASPs, particular you've Coast. homebuilders the ASPs, the their in West are show the on in As categorically,

we're So obviously, in us that given and their is work the is focused that. expect home California to focused we to value cost premium last rate continue we for on focus Momentum were XXXX – the sure. a increasing the operational we continue a exacerbated like into in homes reflection that But on we streams less our building, years. through seeing we're of things Certainly, couple for our Design price/mix highlighted. the pressure of price/mix in We're efficiencies, at homebuilder on to

trend will the continue. However,

are in cycle. and very with We're encouraged growth the the of after come to know, as And permits starts second where rate. volumes just begin, part you the we volumes volumes. is six in around the four question and months our the The given

a would pretty on growth terms that's recover, much encouraged in I is of with to slower but so, positively little averages. And California the national the bit we're in line in, for that XXXX. we're say market markets

business, of same the then sort question. And turning over the to ASG

in see positive? volume the to business had with You volume might ASG the negative the inflect we quarter. sort of When

Yes.

things So, I of that like really did locations highlighted. QX small was – underperforming. had We number two locations, a were have

that of adjustment in segment commercial part ASG some was And relate And year California – that's went there had sector. Coast, certain country and then, in a third of strong in QX. the part performance in business than the quarter commercial of in the it the was very then, third is COVID in middle So, lower year we last particular the locations that West year. in last to the this

of positively you're remodel, very Half volumes look business ASG with and and X% So depending we're projections encouraged as from on we economic are looking X% anywhere the to repair forward. repair what indicator remodel and is the for at.

low fourth positively quarter our as way comp remodel. look make of into that pretty out So sort third then a in of hefty of we're last year and very in sort forward, on quarter single-digit repair we and growth encouraged

an be real cash estate and/or to efforts, your opportunity could facility future your some redeployed or or sell And business is to core consider that sale assets leaseback M&A? maybe there raise then rationalization within then, into utilization certain

question. great Look, Yes.

So, we any don't assets. own

some handling So, equipment there, we and sense, shops. little in avenue centers. consolidation the of it would more in material color, investing some great we're if facilities the in bit to really utilization actual improved ownership. the and to at right give warehouses focused warehouses have fab been a makes in where is throughput What and the improve it in distribution looking the We're improved the utilization velocity had

is. focus the where that's So,

going of RDS the momentum. the in the and the we're design perpetually to click, side – shift sort evaluating click and in is be brick to particular centers, the On in focus

centers, looking makes the centers so sense. design And what we're at

as to And forward XXXX. bit so, we'll come into little expect on a more make see that we way our

will Thank you. get in back I the queue.

Okay. Thanks.

from comes go Please Keith next Truist question with ahead. Securities. Our Hughes

Thank you. Couple questions. of

there of early what's like in Let's you and going the what look start your fourth profit that talk And, revenue about do the here on will Can part pricing next going margins business? growth some think and ASG, excellent and into with mix gross of year? you despite terms within decline.

entry-level We into Keith, the benefit Premium effect job We're Yes. an margin quarter, colors fits fourth with quartz an which lower very brand. on great with focused did relaunched and introduction which there. team homebuilders. We'll in is in Pental start – QX in fourth ASG. of respect which ASPs, brand, really outstanding of into very implemented our In going MetroQuartz, the early Quartz are XXXX. builder if going quarter. into to We've see is XXXX, happy that of performance They that programs really sort new the question. of you price increases our well with will, to the went

well chain XXXX. – really the has that's redoing with that job supply team done in leading a up great to So,

business positively the team has so we to price/mix And expect given actions that taken. trend in the, all

Okay.

So, Is the you lot a coming? that quartz. pricing discussed is primarily of where

little Yes, as focused natural versus kinds and on well. stone The marble different those stone, is it that's bit natural a a that of natural type stone by given granite things. animal of varies of – we're

over engineered engineered builder homes segment in So, quite ASGs well. stone where in on bigger some stone. the as frankly, natural it's quartz And and analysis five more expect last certainly, side. toward We today the pricing a that's our the increasingly, the majority sales little growth quartz really opportunities do bit on shifting stone side. there. know, frankly, the And in the is are years the of as the But side on complicated on quite the you

coming that's a It's in pricing off, Okay. more? for of basically out is place impacts just what’s been while Is is but Or tariff shut now. supply the China of demand driven the aspects? by driving the this China?

portfolio we're is the our with, tariff. on and to dealing business the with builder we perspective in operate the in. the inventory and strong. have that. on the that having continued side the And, having the has that of our question quality and demand of pricing. beyond And, both customer, great From the be the the fabrication command product, us we're end really around allowed network that dealers' fairly Well Yes. service This relationships aspects to and

the helps as well. that environment So

of about what final domestic And assume about I the ASG, correct? you to product? talked Okay. sourcing. more that type introduction do in that's in question, is looking And

That's correct. Yes. absolutely

be it more For will ASG, engineered on stone.

As chain, respect have supply with kinds shooting to on tariffs, some the fragmented. to side. the which fairly at we'll chain to to risk business. last of it's supply work supply And, tariff chain, level – the we And evaluate things. are and those to there's years local be of at products aspect we we the the for, margins high-quality evaluate the service you of to considerable the look continue domestic international couple the sourcing engineered stoppages has ports, and that continue over as which supply opportunity get de-risks aspect And maintain grow continued stone

on one thing the... other And

Go sorry. Yes. ahead,

on looking to you heavily over The thing to do RDS, of as that remain domestically well? sourcing, imported? are Yes. your kind domestic switching Will one other the just more LVT of

Yes.

that merely on LVT a us. RDS the it's you And on side, portion So as of the side. know, domestic today builder-specified for is significant

and predominantly that it's that's So already there, some merely domestic. today. we domestic do There's – international but

ASG the sure really respect we're make good want where supply. to on company element we on side fairly about the to that that with the international So feel we risk de-risking

Okay. Thank much. you very

Right. Thank much. you very

there any is questions? Operator, other

to was left queue. say the nobody going just in I there's

turn over closing like any to you Bill. it if So you, further to would I'll remarks, give

look just Once communications we future thank again, want to with for I you. you. And time. forward everyone to Thank their

concluded. presentation. now Thank today’s for attending is conference you The

You may disconnect. now