American Woodmark (AMWD) 22 Nov 222023 Q2 Earnings call transcript

Good day, and welcome to the American Woodmark Corporation Second Fiscal Quarter 2023 Conference Call. Today's call is being recorded, November 22, 2022.

During this call, the company may discuss certain non-GAAP financial measures, including in our earnings release such as adjusted net income, adjusted EBITDA, adjusted EBITDA margin, free cash flow, net leverage and adjusted EPS per diluted share. The earnings release, which can be found on our website, americanwoodmark.com, includes definitions of each of these non-GAAP financial measures, the company's rationale for their usage and a reconciliation of these non-GAAP financial measures to the most comparable GAAP financial measures.

We also use our website to publish other information that may be important to investors, such as investor presentations.

call Private the of Securities the statement safe XXXX. begin the under Litigation will by company's reading harbor We Reform Act and may be All involve the company's to by made beyond based uncertainties risks change that forward-looking subject and factors the on control. are statements material company differ any the statements. such Accordingly, may future expressed those and performance from company's forward-looking or results financial materially implied in and described Securities include, factors but Commission annual Such and the the filings with limited shareholders. those are to company's in to, Exchange the report not if The expressed update company clear does or will revise not results or realized. undertake implied or to these publicly forward-looking future be statements experience projected not it make changes therein that any even Senior and Vice I President call would now like Joachimczyk, turn CFO. to the Paul over to ahead, go sir. Please

ladies and fiscal the time American Woodmark's and call. you morning, participate. to gentlemen, for second Thank welcome today taking conference quarter Good to

with the details me Scott happy will Culbreth, President and we'll comments, your financial add to additional Scott CEO. I'll be answer of questions. a begin regarding After our and Scott? Joining review performance. our is quarter,

thanks Paul, to for today for joining and our earnings second you, Thank call. us fiscal quarter everyone

net million XX.X%. $XXX.X sales delivered or of growth team Our of

levels decreased we year. Our in order incoming end represented calendar the backlog the of of expect by as to production made-to-order our frame and days exceeded still the backlog, production, our quarter rate normalize by

builders current staffing grew to work as year. in is overall business normal strong growth prior across able as demand and platform backlog. is homes stabilizing complete Order our our stock support. to construction, versus their Our Within returns fully to XX.X% our new markets remains levels

of market and of 'XX. formations, interest housing but slowdown year with trends believe We occur strong of fall the single-family will a recent declining deficit the as the short calendar built starts. long-term homes monitoring rates, in home household firmly are prices fundamentals are We

customers. and Our our grow share teams new pursue to continue with will existing opportunities to

center business home home to year. distributor up includes year. XX.X% the remodel versus prior our prior XX.X% Looking our revenue grew up at the which and versus business, center businesses, and was independent prior versus regards dealer/distributor XX.X% this, our were we our business, With the deal Within year.

or XXX% was Reported quarter. increased $X.XX, in was to mix and EPS EBITDA the is pricing inflationary $XX.X platforms. improvement $X.XX. in million, and adjusted better efficiencies XX% impacts, adjusted for Our improved EPS due to the manufacturing matching performance The

Our was revolving cash EBITDA. additional access the balance company that and reduced $XX.X quarter delivering Leverage to on has second an was and restore commitment. credit X.XX of to facility. to times end are its profitability under million at the million committed adjusted the fiscal $XXX.X We

R&R facing We shifts uncertainty. due macroeconomic is and headwinds single-family additional are new interest impacting demand consumer construction overall housing starts are affordability rates slowing. Rising behavior to as and

reductions short-term We a are in environment. product our customers and attract to portfolio demand navigate more economic prepared is and positioned to win difficult

low in double-digit revenue of year. year margins Our net this are reflects in fiscal adjusted with low rate the growth EBITDA QX. negative double-digit full now Despite the maintaining we sales expected comps headwind, a outlook fiscal sales for expectation

over By last transformation for $XX both new and our of the is a expansion lines. We to Carolina. identified continues expanding overall for perform Humboldt, is product capacity operations, summer North our and our fourth Monterey, Mexico of kitchen in will the in location, million after allow efforts cabinetry incremental supply Coast, need that to facility Digital in well pillars: a of our exceeding largest chain strategy categories the in continues repair/remodel platform in adding door bath from the platform, phase our internal the strengthen Growth the Humboldt next East we month we a markets. our one quarter additional announced Platform project. for work continues proud Mexico the I and results and and and which for of styles quarter Our details and In team second exceed to our the comprehensive new year build fiscal we on execute entered also include additional last 'XX. construction of call the accomplished of look over targets. design closing, of contributions second efforts and will design team turn digital what this most growth, ERP against the planning the implementation half has transformation during forward and and fiscal three fiscal to the area launch capacity main design. I'm four and stock new CRM back Paul financial and -- quarter. in for now manufacturing our their review recent several finishes

the per versus to for sales, $X.XX Thank partially XXXX Adjusted our million year, income largely net representing was in for price EBITDA same prior a quarter share compared costs. Year-to-date, increases our $XX.X million was year-to-date, representing you, of XXX% driven compared last million quarter quarter year, million period diluted X.X% material increase $X.X per increased the quarter year adjusted million $XX.X or billion, to of the Adjusted the improvement year. $XX.X fiscal to same by prior And compared prior of the million, second Scott. higher million year year. XXXX year-over-year. the quarter fiscal or year-to-date. second representing net of $XX.X diluted or the Adjusted close of sales XXX of sales point million in income Financial XXX% of $XX.X year-to-date increase. representing year quarter net a close logistics fiscal million or or basis second $X.XX was income and $XX.X over million fiscal offset $XXX.X year-to-date, and net and XX.X% second fiscal last XX% representing a net $XXX.X million sales $XX.X headlines to is $XX.X XX.X%. or higher share net an of $XX were for Net improvement. the sales due Adjusted for year to XXXX EBITDA of by for an to increase the increase were XXXX $XXX.X million,

Looking with combined fiscal dealer/distributor at home channels the centers XX.X% dealer second independent increased home quarter, The center for XX.X%. and the net channel sales increasing our quarter. for increasing sales XX.X% distributor and

New units for increased the growth the to in XX.X% year construction and both fiscal net sales with quarter compared second Timberlake prior dollars.

the for fiscal lag XX were homes starts between construction overall second quarter. the market channel demand in sales cabinet XX fiscal and single-family second a XXXX. during market day of to installation, year New Recognizing quarter outpaced the down XX.X% start

our completions quarter, saw fiscal we X% a year-over-year. at second during Looking increase

EBITDA fiscal to second sales second of inventory year second representing the of focus XXXX, is compared our million down expenses Given quarter fiscal sales X.X% for created from dependent first The XX.X% in year to to leverage compared in by XX, compared flows, and year sales fiscal compared point ratio fiscal XXXX higher in capital and period interest quarter of specifically and year primarily we XXXX. starting offset net increases growth administrative gross overall a of in The were the between by as the same net a The ratio driven in the stabilize. and trends, same Free fiscal million of sales improvements, sales and and net quarter the year. backlog, from net year. year The spending, times was free year is improvement. quarter of second by in higher $XX.X a sales normal sales from of cash of the fiscal remainder the end company's operating year. costs, year and by period of completions, second fiscal XX.X% fiscal our we to economic quarter the fiscal positively prior quarter XX.X% year XX fiscal to rate the fiscal our and X.X% adjusted the in sales. low quarter X.X% were Total same resulting inflation The leverage basis net the consumer to gross fiscal created of the X.XX this calendar positions. accrued the rate times million XXXX. first-six controlled which expenses sales of $XX.X Year-to-date, was fiscal X.XX constraints, starts impact, growth changes cash operating net in fiscal was times XXXX. spending XX.X% and our points same year to decline are XXXX. General position Representing incentives highly sales months to totaled in margin primarily are our levels net year in increase net year in quarter EBITDA for the starts flow marketing in revolver the the XXXX fiscal XXXX year October in of we the income, the was period the by net XXXX. X.XX offset increase of our of positive of in debt flow operational reported impacted behaviors. the cash higher The were our input and was pricing decreased the last to year net rates basis is Selling was which expect the XXXX upon the and X.X% growth margin availability of $XX.X sales actions higher with profit margin in offset profit for higher net the industry, adjusted cash for second current compared year-to-date Shifting quarter. the second partially XXX for of XX.X% due end the sharing, versus XXXX. at prior large material expenses under expenses a and from with labor in expected leverage lower sales Net Gross partially of of XXXX reducing versus million $XX.X double-digit which at negative $XXX.X improvement company's separation the was million XX.X% return in and paid of year. current of

all are of our in effect channels. increases price for sales Our

year expectation Our low fiscal remains XXXX EBITDA EBITDA a percentage. for margin double-digit

into back business continue investment fiscal capital range sales. are year We investment to our our for holding we'll X.X% increasing outlook rate of by to of the X.X% and XXXX net our a capital

get will manufacturing reminder, to these investments investments range customer experience from and our digital of our ERP in continuation facilities. As the journey on the reinvesting cloud, a our in

Specifically, in increase and quality with capacity. facility, a plant to of our expansion the efforts Monterrey, dependencies, North manufacturing Mexico, automation improve labor along help new Humboldt, Carolina reduce

opportunities show in make which We stock enhance help invested business, work see the our the It these future. great for and platform choosing efforts sales and core our the into two the in our are is years financial hard to to additional results. the improved margins past in employees position commitment, returns company our to in the investments

their to our Our stage the have this and to our culture are that our I time. employees' answer remarks, you They questions have of set fiscal members ongoing and we'll the Woodmark be American for year. This to team prepared for have start concludes daily. thank it at resilience accomplished at what the teams happy and make the for happen strong continued efforts. their all ones any want grateful contributions a to company's I'm

Thank you.

from will begin the Baumgarten go will question-and-answer be And We first question [Operator from &Associates. ahead. Adam now Instructions] the Zelman session. Please

on everyone. expect home going forward business. to morning, results. Good talk Can or you're maybe kick-off from just seeing guess the I a Hey. maybe what to you center Nice perspective? you promotions what

in was the seen change promos, significant to for quarters, plateaued probably down not versus prior we've It's three year. With cadence, which regards the a been Adam. last

in we So I bit increase standpoint space, regards there. will though starting a see taken are yet from any that to pivot specific tell no to significant you actions with not competitive a change of promos, and but an there. dealer the we've

revenue at sequential material costs, then And just expecting a on 'XX? just basis. you're Thanks. they're seeing to of couple at fiscal deflating on to X% And then Okay. of to on be CapEx least all, confirm, if it. raw what One, others. just a you're X.X% for Got still maybe

and I'll the inflation take speak have Yeah. CapEx. about comment Paul then

lumber. is on of what we of seen some on bit inflation, hardwood of a species So relief the have

in So the down, move but continue Paul, to time, commodities particleboard at increases and to same the the other on index has specific to inputs. capital? as plywood see started we index such

of little have Humboldt, And capital up those year. Carolina a the into capital-intensive for year. and somewhat of late bit maintaining first a are X% really, Mexico, doing plant Monterrey, that for half On North Adam, in the which we of back in outlook will position expansions the half to we the are But we're the running X.X%. remember,

Got a Thanks lot. Okay. it.

Wojs next And go with our question is from Please Tim Baird. ahead.

morning. guys. job. Good Nice Hey,

morning. Hey, Tim. Thanks. Good

you Maybe strongest us the of maybe And talk seeing order and to give from shipments Hey. bit and activity little weakest some channel idea relative pop to perspective activity? you're kind you're just just around of the just the some seeing a looks where an order start, could rate what of maybe some rate you're about business an activity your like of right now? by the seeing what maybe,

end backlog, is which incoming the be the able us see we earlier by rates I order centers to new still to remarks, MTO the is decline, dealer/distributor, Tim, the order were When in think to want we and different in bring my see of I So started in to slowdown quarter. continue about accomplish. rates year. construction performance some to on We're to were do last platform. we down strong home we the our which platform, that around on that, channels, in seeing calendar I we signaled able incoming something think certainly the allowing the outproduce track MTO to

frameless over pivot strong. to business our PCS, to I that's continued As in be

retailers. our We've rates We stock almost then positions and to strong restocking well see that And we've continue strong specific that been shipments the with against chasing goals specifically, our with retailers. to platform. We're the that's unit starting got inventory order normalize. business, on on

on we'll a quarter. Last the PCS MTO of matching unit platform. So as the POS up and in get position to go us is side, in were units I'll forward better that we make comment for

but on So we down purely the price see units sales it platform. the result, just wasn't driving did stock

I expectation I And look would guess, of could volumes in lot. I us internally levers lower a fourth guess to a in pull offset what you on Thank then decremental with mean, helpful. decremental guess, And see the margin the That's slower help quarter, would of Okay. I a terms the margins? to kind what environment, of with you kind like? what

the we see held do we've expectations we'll for that year, we'll Tim, So forecast so the EBITDA able deliver QX, on specific there. with to What still forecasting, the our even be softer are the slow. things to as volumes

to right-size process we'll stage. through we've thing SG&A inside adjust and factories. to first But done. that's do is manage always The and we we continue able our to thought current spending, need do relatively our We're we'll where go forward. that easily control We'll as this attrition which historically the tightly at

decremental ensure as I to we So have the it's think point particular for results need appropriate we'll that QX. to big time throttle don't this I exact want you an because a can quote we don't to. I at for number story in deliver

'XX. our planning for we've start matter But will as not that thinking yet. process that about we think I more started

time the off As know, in we'll kick frame. January-February you that

a areas. helpful. like That's how positioning or, is then just Good. And picture themselves bigger Okay. investing in question, guess, I Woodmark two just

was of was would The thinking thinking opportunities those just and maybe second, how consumer? that of composite a alternative for the more part over are e-commerce that first, things just the to time? kind I'm it the And you're if channel could I receptivity those of of curious guess, kind maybe and of types of materials, relative be then cabinets growing wood. using two on I be the about

the take I'll second one Sure. first.

concerns to It been a for provides well door alternate we regards received. the We've been a nice to from lines types sometimes quite we paint, with That's some producing the finish standpoint time. all-MDF materials, that quality have that up respect with some substrate in So very an introduced marketplace. joint of about. have

we e-commerce Specific retail we through do partners. bit So to in we've a done launched received. in been today e-commerce, and of materials in this our marketplace, well quite they've and the engage have alternate work

business do a through about online retail of we X% our partner. So now

that asset So our to content. rich drive work space in continuing is

cetera, or get website, our we get purchase, off on to be start to engage also et about views would able retailer's they continue the to consumers. website, with Maybe can it excited see to to what's it's it our visualizer, do inside go really our whether folks be cabinet So a purchase. XXX how to

we So how onset do purchase. way inspiration through keep them of from engaged all the the to

going something partner retailers, our to more yes, and continue we So drive we're to active that's It's business. channel. sales that of with piece to our overall an on

Okay. rest Thanks Good. guys. Good the year time. on for the of the luck

Thanks, Tim.

Thanks, Tim.

ahead. Verron with from Please The Jefferies. Collin is go next question

morning. Good questions. Thank you Hey. my for taking

high-level the can and price about but just category, magnitude down you cadence in volume how to? quantify fourth appreciate sales back half I of on of the a volumes that us the to the guardrails give little of you're So And get product guided declines thinking in quarter of that versus just quarter? on year bit commentary you the in the the to

this couple we're price I probably Collin, the beyond what not Yeah, think a quantity quarters now, out we've already we've hit disclosed. but breaking versus of

capacity Okay. weakening rationale And additional can macro us And the -- terms just addition, coming for be weakened the timing helpful. you then, backdrop? color walk just on I capacity capacity guess, just through of the the online any the given here in of would just the

Yeah.

when So first, capacity let me the hit online. comes the timing

is XXXX So the what timeframe. targeting we're March-April

able the for capacity this the part first do To first be why incremental quarter when first I that My fiscal the not the your that quarter it game. now? fiscal growth. the really would and long drive why fourth the in question, short of is game, we'll sales we're So 'XX into to response that be to of of think year year utilize

that five what year our a affect between into going macroeconomic XX. and strategy disruptions, but fiscal short-term uncertainty to accomplish year factor, that's and achieve doesn't we're looking 'XX, So now and

be So sales plan And demand to meet next week. as Board our needs an and we within growth to and believe to able on overall a plan quarter to the goals perspective to the we organization. need goals be that. But we this achieve to Relations release this be and year which you we've We're presenting Investor got then will strategic our would standpoint. deck, capacity five critical some revenue us what from those updated allow give project will profitability that

color. helpful really That's right. one. All then last And just

lumber species. way you down lumber those hardwood us you. pressure help going Thank to from of any inflation You cost could certain the then I in forward? called offset And other still prices prices cost expecting to see out you that or areas the seeing you're guess a declines? coming enough -- understand magnitude are is perspective that

So the not pricing to decline a warrant with of reset our in significant enough accounts. lumber any is

So we at still we're in are, time, a point balanced. where

of any seeing to not we're of with any in go So enough channels kind the rollback price engage reduction.

the particleboard. continuing although see such come lumbers we're down, as categories So in again plywood to increases hardwood other and many of

for Thank color. you all the Great.

question next Research from go will Ramsey Group. from ahead. the be Please Steven Thompson And

more to gain bit wanted and the and a for share I about in slower morning. hear to on market Good XXXX, you maybe works little by it of gain periods channel opportunities share demand? how mentioned talk

Yeah.

tied was Steve, specifically about we're construction So thinking as the that new it. to

capacity, we've over So share? come tell didn't to years, we there, tight the X.X have and as it. I year, a volume looking is to for see had we incremental accounts you, were opportunity can us go there slowdown last grab

So say we no. to were having

existing our or either explore able communities So sales with conversations communities those in our now to to new teams reengage establish convert opportunities and to product. release we're

quick than new maybe And recent Helpful. assume you in doesn't a help help and near share Okay. I term, it Does the more gain CapEx does construction remodel? announcement, repair the then to but that. follow-on this

construction both new will platform channels benefit because services It and and that repair model. both the

the Okay. reflect pricing half purely XXXX first add then there? through How on very Anything does this or second lower slowly? is coming volumes Helpful. to And strong just the much last a for one half. following for more me guidance

Yeah.

We 'XX, the conversation. units really Our but not any we price outlook in see anticipate pricing rollbacks volumes. It's do slowing. fiscal year a don't is about

Great. Thank you.

And the ahead. & is next with Please Romero Julio go from Sidoti question Company.

Hey. Thanks. Good morning.

change So on revenue guidance. the slowdown XQ no the change somewhat It guide, like in but expected sounds that that about last volumes. price, implies Is the side on led has been largely what question it sharper to or the and by construction relative on the three units in-demand you new what you're from trends expect a hearing ago? months the worsening there to MTO builder side to

as implies those see XX data, months primarily that It function business. certainly well. was is five through at our out as impacts some see looked you six start construction new a It which to Yeah. days last we'll the of roll to of from now when we've

So QX we're new expecting a in softer construction.

sense. could on or just about with talk either you're normalizing Makes inventory and an regards what levels a And the you where hand it. inventory you Got are targeting stays I from to guess, basis? if turns inventory

Yeah. as with want inventory we're still be our where elevated to we Julio, an from position, organization.

having just-in-case that of cover effects I'll of Some of the call it, has, inventory. leftover still

We in I'll to as in just starting improve. are are more, definitely supply to back call, time shifting chains just what

to of We well, capital reduction, as to are lower working but tied sales target organization. from are the going there a even that perspective the just inventory obviously,

color what But we'll the a we're our or get look investor more of year. presentation, will giving part a not of target of like. kind rest that for the little bit As right our guidance of now, capital working

Thanks very the Great. Okay. much for taking questions.

Thanks. Yeah.

Deutsche the go ahead. Please Bank. next from with comes [Operator question Joe Ahlersmeyer Instructions]

for Hey, guys. Thanks the questions. taking

Hey. Good morning.

Joe. morning, Good

Good morning.

starts just was commentary You builders on some forward. negotiating season reductions larger from about rollbacks. price earnings going mentioned expecting not in There cost earlier

is category that's why subject if that business not, or you've Just And been wondering or hearing maybe that? if to not your seeing? your something

a that indicating indices price seen indices. to back about point go a And at not reason builders there specifically, are reductions, time Joe. ask for but had couple reduction. we're price some a in the again, We've the be not that of where a we We've

for side? I it's the limited backlog the know of new larger to to the But is backlog? for participate multi-family you that about Great. that you there an single-family Okay. regionally actually given it's on in construction business opportunity now Southwest. sort guys the What than

in PCS up strong platform. shows I for frameless or application that's business, earlier, our that's And that of which us. mentioned a Most a been

As It's The play a for Southern regional. you backlog strong. made us. that high. Phoenix is progress it been noted, down. is We've California region and mostly It's Southwest a as much bringing or not

So be that we'll platform focused back normalizing in the will half in to be on PCS. continue something production the as

the right. All for questions, guys. Thanks

Thanks, Joe.

the go will And come question from ahead. next Garik Shmois Please with Loop Capital.

Stevenson This today. is questions Hi. Thanks for Jeff on my for taking Garik.

business Just to more seeing fiscal year? your wanted center the and into of dive you're home your moving there the and expectations half trends back into

remarks, nothing really inventory necessary earlier in incremental be we business order then going project made recovering has that stock stocking been efforts referenced and softened. That's Jeff. our I the that rate in side, to retailer. add the the last to MTO forward maintained, a Again, We similar progress guess we incoming quarter. beyond And pattern. on

as extra that inventory So on that to we're -- but going go not to need focused forward. I'm POS we POS, TCS, sorry, build have be we We'll accomplish.

regarding the kind Okay. into back of to, in year? Great. we you've but the low-teen cadence then how about And should margins think EBITDA guided range the firmly been you of margin, the half moving

be low in back disruption be back to in is guidance, the say double-digits that expectations there I will maybe low go just would our I to guess double-digits, and quarter-to-quarter. going asking half. my you're

Thanks. Understood.

turn line does conclude closing session. back over sir. to like to for and any gentlemen, Mr. the Please I question-and-answer would comments. our Ladies go ahead, Joachimczyk this

call. Since, there are no the questions, concludes this for you time Thank our additional to taking participate.

today's Thank for attending now has conference The concluded. you presentation.

now may You disconnect.