Select Interior Concepts (SIC) 9 May 212021 Q1 Earnings call transcript

Thank you for standing by. This is the conference operator. Welcome to the Select Interior Concepts First Quarter 2021 Financial Results Conference Call. [Operator Instructions] I would now like to turn the conference over to Mr. Nadeem Moiz, Chief Financial Officer. sir. ahead, go Please

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

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

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

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

this I X a our with Nadeem performance. first of and everyone Slide on Thanks, will quick start our you joining morning. thank for overview call quarter

the of Through our call, of is in year initiatives our off ASG a $XXX for both start sales period. I detailed million the that pleased release, earnings to RDS year morning’s this approximately As several detailed in business. and net reported end am say the segments of and million EBITDA strong to $X.X I in recent adjusted we

are both to plan. performing we As expected,

our to improve opportunities will effectiveness the in a for SIC you the entering moving plans ahead strong the continue of few company’s just the coming performance initiatives they taking are to Starting our through plans, growth growing to working geographic and Florida X been in we We XXXX implement I have market the I shareholder market. the be mid-March entire been by expand operational today’s our building in business run value. take has to with team as to homebuilding fast advantage presence in further enhance outlined months. our on Slide blocks active process, minutes ASG, with the and hard in

last few the staffing weeks, location down Over and for locked and market. recruiting and specific the we’ve are currently a identified

expect to begin in generating We revenue XQ.

half March, of larger in a promising into stone we were locations. has the launched, on we represent future in program the new mentioned targeting been expect mostly the and They screen past. as for I builder greenfield The sales process year. midsized to the to expanding territories are radar of ASG second X team in production initiative, who channel as Additionally, the sales in sales stepping the entirely described, business, not ASG’s an ramp and builders, I

and course, we ASG’s season. our selling for to color of offering, summer In PentalQuartz and continuing of palette terms spring product of new emphasize the MetroQuartz are, products

congratulate refocused improvements continued on realizing product cost want I been team disruptions and have managing global and this in our mix inflation. supply to We also margin chain launch. with

actively are challenges. these managing We

even are continue, However, global and COVID remain we improvement industrial in while the seeing here States. tight logistics United outbreaks extremely

time revenue and Considering is growth constraints, market make labor already saw cycle construction now the we and a extensions. as Turning supply RDS, in us impact. to positive to despite delays to Karl President Adrian ongoing X.X% quarter the joined due in starting QX first

an is As RDS long-standing you growth, March the end Woodbridge for will place will we at is recall installation will Idaho also RDS tail announced growing multiple area. you Group. the partnership in mid-XXXX. into remember, cycle. that further build may starting and organic our and accelerate expansion of in the take communities rapidly builders, To move one several design provide key of Pacific in This construction services with phases in Boise,

with planning We are have quickly market. entered this who to expand other customers, emerging

an On even our business Design development visual strategy and make Momentum the advanced we have and further tool. more front, Momentum support to robust Design

to stay have received communities pilot very feedback. continue close and We to positive our

began As annual you of we year in strengthening last will recall, in SIC, the made March. providing we guidance practice progress the considerable given

would XXXX, For million. $XX EBITDA million range of the in $XX we be estimated that adjusted to

provide achieve results today. results are and very our more inflation those everyone and to call Nadeem guidance. the although range right material currently the for to on over will turn financial disruptions chain industry, on potential I supply do headwinds feel and comfortable that to details present track in some reaffirming now we We

Thank at revenue QX compared you, X.X% basis. RDS year-over-year million a X, $XXX.X sales on for increased the to product our X% planned million were on for quarter Starting Adjusted $XX.X by to or adjusted $X.X million, Bill. offset Slide regions, XXXX. year-over-year up or sales increased category at up X% at sales for increase X% X.X% price positive product or increased slightly approximately ASG volume for X% year-over-year exits. all was adjusted exits. growth unfavorable due year-over-year million mix. The $XX.X product exits, primarily in

solid stone. colors, success natural to launched new quartz of in introduction see products, and with new continue We

As mix a result, continued improve, but to partially lower offset slightly price was by year-over-year volumes.

ASG was price XXX% increase to ASG contributed adjusted last Moving the leverage. year. and better quarter EBITDA an as first operating million compared positive nearly of SIC now RDS $X million $X continued million volume EBITDA adjusted million, increase $X.X over or X, Slide contributed of $X benefit from slightly on XXXX to QX to for mix.

the segments. approximately addition, in from results savings various operational is In reflected million $X of cost quarterly the both initiatives

range a the over to cash direct in last COVID. look costs at on We take flow let’s of from a actions liquidity. X, year and and Slide reduce preserve to turning to operations Now, wide response liquidity executed

$X.X compared last We net million working the net the $XX flow to X.Xx and of XXXX, million, $XXX increased to $X.X in adjusted debt QX ended environment. as was liquidity on million For growth approximately of quarter slightly better debt with operating million year cash EBITDA. capital

XXXX value. capital For shareholder judicious working growth we to initiatives and our as for we to growth will mode, capital strategic continue switch management maximize of allocation

are Moving experiencing as both positive up segments to we momentum Slide QX. expected, for in get the we X as very in ramped outlook,

For the full unchanged. remains outlook XXXX, year our

is family on Industry backlog. are growth robust chain for business high improve We material of of inflation the outlook latter with supply through sales logistics year. our based macro We single-digit the starts, framework industry forecasts. our current part consistent from through bottlenecks various the order continues. translates and recall, which build-up a year may into is improving to increasing see and You in growth single note XXXX expectations of as that

We expect continued ASPs. homes market lower shift entry-level and to

interior remodel to Additionally, at now we homeowners rate grow as double-digit homes. healthy into expect to large a projects or their willing allow repair are contractors more

XXXX. excited markets Additionally, in new about we are very

Idaho in entry As plans previously announced add to year. in our the and of RDS Florida this have discussed, into greenfield market the Boise, for half ASG second we

initiatives both we up ramp XXXX. contributing a year, growth be will XXXX organic these expect start to positive As in earnings

our $X previously in $X last million of operational key from were we that million in launched late achieve as expect side, we On highlighted, year. savings structural XXXX the to areas four initiatives cost to

million sight line industry together, cost of $XX turn I Taken to indicators remarks. new savings positive growth, the of us XXXX. $XX and will the organic growth his to for call give adjusted to for our in estimated And over initiatives into the combination supporting EBITDA drive Bill of million incremental range closing now, our

us this morning. joining for again Thanks

year are to have business very improve We turn operator the over to with call have updating to you we heard, Q&A. a into forging future. we process, SIC’s many shareholder with As our and for ahead believe ahead forward and the that, the look we And will the in value. promising you plans

go question Thank from Keith Instructions] first Please you. from [Operator Truist. The ahead. comes Hughes

Thank you.

April, And starting you it maybe, talk pretty the particularly on what’s comps easy particularly it home I are with is comparable business to into the you last in say, if as talk – RDS, year. about know about gone If accelerate versus starts ‘XX turn it because is ‘XX, in of completions? could in starting can your April

Nadeem. This morning. good Yes. is Keith,

into growth we’re is the comps the off will April very quarter, as last quarter in as a second second to to those start to attractive. going comps segments And for And X sequential months both the script. certainly, both start for get exceed very you during So positive in as we are into solid and year, the as seen well in my we’ve get very here. XXXX going then I the certainly, businesses, we the first be be to year. versus highlighted

Okay.

ASG, price your with market Do seen positive in and we’ve If you volume the quarters some volume there several you look associated – at if when initiatives – to positive negative turn flip mix foresee of that as that. now, is course, going is given for of we a the whole?

expecting, in is what that’s what we’re the we and Yes, absolutely. and that’s what are seeing we’re planning, market. That

positive Okay. you products ASG? And what side to within the are shifting

Yes.

expansion and of into palettes. So new a colors, it’s momentum then like to of to for all add the you lot all to of it? is accretive predominantly new around highlighted and tile a our starting builder That lesser are incremental would we to Bill, update us. quartz. categories extent volumes And introduction shift anything program towards

just are have on close all they would add realized, the I very to that that opportunities are be No. but those yet horizon.

a imports from an locations. – the lot I import we’ve up Is affect Okay. your I business, you Is back are know now you? of how countertop guess that does for – opportunity yours different that coming question? seen imports just the is some or quartz

a Well, we from – on global basis. mostly source

at a continue stone, in us. our to with very, the natural going quartz There quartz not trend towards the to say, positive the and mid- expect which homes aware, more as towards upper-level we more up very price So has more market. for mix the a you’re towards business move mid-level well is to entry-level to they, and only homes, grow

Thank you. Okay.

comes question from next Riley. The B. from Please go Alex Rygiel ahead.

nice Good quarter. Thanks A gentlemen. morning very you.

good morning, Alex. Hey,

of A here. Good quick questions morning. couple

expanded quarter. margins the in First, nicely

margins? see Over of years, do gross the next how profit much couple you upside to

Yes.

of bit mix a So quite initiatives look, momentum. structural got underway, positive we’ve price

– couple basis to the We’re compared margin XXXX. points over our to see side, we’ve in what of gross gross year, on to expansion next expect years, last the we XXX seen XXX margin

through, And So and that quarter, continue I’d it. pushing leverage, product are will and saw there. progress you enhancements we operating introduction about of sort that new good like baseline higher the price That’s to again, in think first mix margin.

sales new you’re can And I’m margins of them? In despite making about expect expand the margin associated and with talk to cost investments and short-term, into you the geographic absorbing sort expansions those is new what headwind expansion initiatives. some how or assuming headwind geographic new you

side, Yes. say particular, is access now amazing and job I in much on that in facing containers to on as of increased costs the and the the ASG most you mentioned business. our would getting a the our area has on challenge right my in containing have as but headwinds part. and global that that And team, the an for I of logistics script, managing part know very we’re of quickly, time in products done

expansion we’re we’re and we’re and major think our see I So a once it direction. impact our having with guidance. We again, don’t our all at growth reiterating opportunities, comfortable on –

incremental Momentum on business business And as then core about relative now? your traction, the can margin lastly, gains you talk to that Design right

Yes.

give we I deliver XXX Design to like believe to And in So was days, in visual overall It’s of is basis early trying do this virtual – a it’s incremental mentioned, communities basis. sort point on design Alex. reflected is Momentum about, we in what XXX going today, margin five sort of you to expansion, aggregate it’s an selection opportunity. talking do still

aspect of and through overall, vis-à-vis get trying really So what take selection do it the But accretion packages the that margin our like design opportunity. we’re online business on to that. and things some growth through volume organic up have will is

of And at headcount? other there in actually, Clearly, on availability has space. in your one the been you last a the comment marketplace success question. construction challenge a lot adding labor companies Can out for

Yes.

for maintained skill years successful. And I in kind say and we’ve We’ve So use very for this segment, there. attempt mean the out about as on I would challenge. the we RDS clearly a very think been labor marketplace. direct two with is it’s it’s in to clearly such competent the the for war point, installation, outside we’ve labor that When a labor top the categories. crews had installers. To available we there of relationships

of that not area. a So headwinds lot experienced really we have in

a it has has into it COVID, of more certainly, As environment professionals being don’t relates relocate, it’s finding very to I recruit created want employees, consolidated their market. we’re management tough. success. at become where, an therefore, home so want going it’s stay and they mean of to people challenge, and to think, ASG able I a accordingly. doing on what And but we’re we’re is and front the backyard, to part

Very helpful. Thank you.

question-and-answer and This session concludes conference the today’s call.

lines. your a have may pleasant Thank you You and participating for disconnect day.