American Woodmark (AMWD) 30 Nov 232024 Q2 Earnings call transcript

Good day, everyone, and welcome to the American Woodmark Corporation Second Fiscal Quarter 2024 Conference Call. Today's call is being recorded, November 30, 2023.

During this call, the company may discuss certain non-GAAP financial measures included 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. by Securities company's XXXX. Litigation call under harbor the Private the Reform begin reading safe the statement We'll Act of forward-looking to the uncertainties by the company's that statements material beyond All and risks may company be and based change involving subject control. on factors are made

company's not to The changes differ and statements, revise described update are any with report the statements. such filings implied that even Accordingly, may be Such to the future results, will in forward-looking not it make expressed Exchange those annual company realized. factors shareholders. does its and performance projected from future company's not but undertake limited forward-looking those to, or any or publicly if the results include, clear or and Securities financial experience materially implied expressed or the under Commission therein,

and Vice like go ahead, now Joachimczyk, Paul I'd Senior turn to to CFO. Please over floor President the sir.

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

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

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

build-to-rent to slowdown builders and homes. rate factors factors, prior Macroeconomic being prior versus by Our new team are for homes year. affordability, delivered net interest construction, through XX.X% housing sales representing a year. short-term Within continues shifts the versus business of of XX.X% and partially account rates in million, new These decline $XXX.X our and declined including the construction. to buydowns mitigated ready-to-move-in

the we key our customers the XX new XX to in of existing plan with marketplace. and direct are strategically regional continue and model, the service partners are and of share take top We grow gains With share to our builders. our best-in-class builders realizing aligned national with advantage

Looking and year. home declined center and to dealer/distributor year. versus business our dealer choosing the rates at prior this, business, prior remodel, prior in-store down With Within home XX% XX.X% independent declined lower revenue center businesses, versus the regards projects. the consumers versus smaller-sized our and trends down Demand distributor our which due we to year. were includes traffic XX.X% was

increased Reported in to Our and due EPS quarter. $XX.X adjusted improvement adjusted XX.X% was The the EBITDA platforms. improved and $X.XX. X% or the was mix for $X.XX to performance EPS efficiencies in manufacturing million is product

excellence our Our to in team plans. operational drive continues

$XX.X and and million the at under has end the fiscal its to X.XXx the XXX,XXX to Our was in repurchased credit company adjusted the additional EBITDA, second reduced quarter. cash shares Leverage quarter, million access of facility. balance an revolving was the $XXX.X company

replaces $XXX a current only repurchase authorized authorization million Board new Our program $XX.X that had has our that share million remaining.

million. for low increased remains of EBITDA 'XX fiscal year of $XXX unchanged, expectations Due quarter adjusted with Our our into sales outlook expectation strong the $XXX million double-digit fiscal decline. second our is range to a to performance, for a

transformation of and customers. team website offering high-value quarter quarter ERP fiscal brand launched to for the execute next our a design. February. in over business center and to the the growth, continues pillars: for to include main distribution will centers in last Live efforts Growth strategy be X Monterrey our home from of serve new low-SKU, enhancements upcoming digital and transformation Our targeting against launch an has Go PROs that our home Digital benefit platform planning final a

initiated design organization, Platform which of care organization customer new center December. construction in operations. next service sales occupancy monitoring November planning our and in CRM includes CRM phase module in North with the channels field Hamlet, the work, addition, new service and Carolina work supporting we completed continues we the solution In and Mexico implementation the the sales our for of across construction

teammates We plan. training will the continue new as infrastructure initial support and equipment installations to in as months the ramp hiring and coming well

As in contributions our lines. cabinetry look I to this will capacity stock what reminder, quarter proud year fiscal team in product deliver fiscal 'XX. their expansion kitchen this additional bath accomplished second a the of am closing, and forward In continuing and during

details I'll our now to for the quarter. Paul back for over call results on additional turn the financial

combines XXXX, centers independent for which quarter Remodel sales year, with of and year. second sales, decrease distributors, home decreasing $XXX.X quarter year second were centers both XX.X% dealer net Thank the representing million the results for you, and $XX.X distributors respectively. or and and Scott. dealers a prior million, net Reviewing versus XX.X% XX%, home versus our fiscal XX.X% decreased prior

construction quarter net sales XX.X% New for to compared year. decreased the last

period facilities for quarter points in Our basis favorable last margin a from in versus Gross improved of XXX chain. and manufacturing pricing to operational and cost sales gross year sustained supply profit in product XXXX impacts, an increased margin same stability improvements matching XX.X% reported the second year. mix fiscal benefited our inflationary net the XX.X% continued our

in period for real Total quarter basis sharing for point net and last is the year. second employees. operating due any of all XX.X% restructuring incentives of versus profit for sales XXXX was our to XX.X% charges the increase The expenses, fiscal increases excluding year same XXX

net in a represents year million XX.X% period This point $X.XX XX% income same net Adjusted per year year. of reported $XX.X diluted XXXX second $X.XX year. versus the last $XX.X share basis diluted improvement or in $XX.X quarter sales second fiscal the year-over-year. of million or was $XX.X XXX was fiscal for EBITDA of or the versus last of net per Adjusted million or million share sales XXXX quarter

functions. hard the incentive sharing facing Despite our teams SG&A the a have efficiencies, transformation chain and operating in controlled our earnings spending and supply compensation, stabilize our volume this offset efforts year-to-date gains profit direct These digital to performance continued strong are work earnings put partially increases is the by headwinds, costs. result of and in in our year our reestablish

Free year. to increase $XXX.X The prior million for million a changes income primarily inventory, million cash of in adjusted in due improvement lower at cash flow totaled the by offset capital second the operating flows, Net X.XXx quarter fiscal our year-to-date current fiscal X.XXx $XX.X of compared from net $XX.X positive the X.XXx the year. higher specifically to end our the increased XXXX, EBITDA a was expenditures. partially last leverage and year as representing was

XX, shares our XXXX, revolving company the availability access on Under October million $XX.X under facility. and cash of program, repurchase share the of quarter, of representing about retired. Directors second plus shares plan. X% had The a being of and additional or of As million $XX $XXX.X share approved the million in new purchased hand, cash XXX,XXX million equivalents repurchase the to has current the authorized $XXX outstanding company Board

new We on repurchase into are rolling this million share remaining and old the authorization retiring it the authorization. $XX.X

Our labor from net XXXX constraints, material remains dependent consumer year versus outlook is XXXX. for The expect change and fiscal upon fiscal sales trends, interest a year double-digit net and declines in perspective, sales economic in industry, unchanged impact, to we behaviors. growth rates sales low continue overall highly

our the strong our operational expected have adjusted Given increase to the we XXXX fiscal our of are million range $XXX the is and half our we first to $XXX achieved our half performance year of outlook due to year for in XXXX. increasing performance fiscal the EBITDA a full million. of execution strong expectation in for year, The first

without year the of Mexico approximately from $X results performance Monterrey, as those new impact in operational expenses we charges fiscal this of outlook Hamlet, and offsetting will impact fiscal full operational these million we the our full track This the locations The XXXX. Reiterating for continue the past North total still the locations. negatively Carolina are on in quarter, incurring starting revenue our year. is

capital priorities remain Our unchanged. year fiscal XXXX allocation for

the on will and the back Hamlet, solutions expansions Monterrey, Carolina, be We our ERP investing with forward and our transformation path Mexico for investments our and in in focused in North first CRM continuing automation. in plant into investing digital business

paying share year debt will debt will we XXXX. down our Next, fiscal given in our continue position, we be And current deprioritizing repurchasing.

closing, In This the remainder and of hard a carry achieve is year. efforts our off financials commitment, employees expect for the improvements and the to made to year. through We results the the fully the to build work the the invest company in alignment fiscal progress our the past continues to testament strategy. business direct these throughout to the GDP

the are the have remarks. have grateful at continued accomplished We'll for who questions teams team and concludes daily. I'm answer any it truly American prepared be They This our efforts. what at happy happen for time. make all to you Woodmark this members our ones of their thank

Shmois from first Our Instructions] today question [Operator Loop from Garik Capital. comes

into go quarter. the seeing categories. if in-stock was on on on some you color made-to-order I could Within were what both R&R, more you and wondering Congrats

Thanks, Garik. Yes.

MTO, be even see said not specifically, this trends more So the and severely resilient side, slowdown. home the center categories. R&R we've you a degree in-stock more order. at points. but in would in the stock when always to in think unfavorable seen are has special category impacted about you about been we MTO a bit negative felt we we today, in But price the that But overall in We've when environment seeing trends, both talk

Got it.

I mix. think spoke favorable to you

new were just were hearing effects Curious side. construction and seeing to R&R. think to same that if that were trends more related the we more think speak competitor broadly. I you to was seeing maybe But pressures, on trade-down I they negative a the pricing trade-down see more from

also price the semi-custom seen not against. we're space much depending trade same the category. mode so on customer not the yes, not end down So continuum, In the or maintenance we've some We've we're we've a that and value that been, selling high trend. product mix, of to custom and very seeing product positive got the high-end

question Steven Group. next Thompson Research Our Ramsey from comes from

being the a on EBITDA you guidance, with strong of is any raised start any that to second the clarify outlook Can Maybe half. if first half better? very

I half guess better. -- I rephrase maybe Steven, being question your the second about outlook guess,

Sure.

the that half? to being that? half do On in solely the does with EBITDA have the first anything raised, Or second the guidance was of year

And those of that half primarily quarters, the as much Hamlet. we've half for all past think performance profile couple over have roughly we Monterrey that signaled second of standpoint. referenced because so it's that's there's million a Paul the loaded we've as back and do half about from uncertainty costs seen start-up $X Yes, we first demand still the

that taken if partners about stock type, by some levels you the down channel Okay. customer feel slowdown, stocking and big you healthy do you customer given broadly, channel level? the Helpful, that helpful. and then think have And low? think, think they're do at a you too ticket, do Or

dealer. vast a portfolio a at not of the majority builder So at as reminder, or our at was retailer yes, a a just or stocked

stock our that sits and about talking only are kitchen bath really home you centers. So inside the business

of to that. we're some the always discussion pursue we we've over had highlight that some space. impacting was last roughly Now quarters, occurred I get of There's that couple to I some the significance opportunities the behind had nothing that around feel destocking but in-store continue better with retailers, positions, and in those would business. that

And from & from Hayes our McClaran question Zelman next comes Associates.

Was you point? this talk about curious how a at input bit little costs if could and they're trending

think that the you When purchasing, we're certainly. have Yes, those materials stabilized. raw about

So positive. that's a

On side, domestic the continue in well do labor markets upward to as transportation. the see pressure flip we as

of heard your X lumber rollbacks any any channels? hardwood side, discussion relief, of on around I across And that the guess, pricing has any

be and do use that indices. tied those the costs, some and certainly the term monitor particular talk we've deflation I that any pricing. is We first. But when even of shared, philosophy last couple those do arrangements input would by in are pricing wouldn't over we about to call to driven our and reductions have we rollbacks quarters, that general discussion have approach this

deliver But to of an and of got our goals. profitability customer also, channel that because to long-term profitability the on there particular we've being evaluation continue

I'll that with having be always just price to So has conversations and our say ongoing we're customers. continued around

you of on home Okay. in And website I channel? alluded changes the guess some one a bit elaborate you those last center to just one. Could

more refresh, ultimately that ways relevant helps ultimately consumers basically purchase It's journey as make purchase to a the store well to just as them through the a into content reskin a Yes. drive decision. and drive

Company. & Our next Sidoti question from comes from Julio Romero

Can those? more of do how chain? bit little into you each operational maybe for much supply have efficiencies dig stabilization the the more the just of runway And a you and

that. I think pretty kind which on chain stability, that's much we in lapped secured supply of the

couple a very performance had we've being So of that of quarters strong.

the We in disruptions seeing cost particular we'll to forward. excellence I that So talk and take of we're functional drive in over go that not we always out operational about just the of as areas operations facilities, the to have were side. all last areas, would experiencing the the across years. ongoing not say manufacturing business, we those costs opportunity we but of projects our continue couple

second I there. a on year-over-year then, helpful had the Really And comparable tough guess, side. very volume quarter, in the you

Just you quarter a easier get fourth us the volume quarter and year-over-year perspective? would third from how comps have think as about a little the bit

Yes.

I similar the QX. demand We've a that unfortunately to think got marketplace. seeing to you're is softer be in QX environment fairly going obviously now

We negative will push we've seen rate they're the put into extra not the to this couple QX But improve. well. in to as likely holidays around of comps still start think days in and do time, down we the think At QX, nearly I a we but QX. as

Baird. Wojs Tim from Our next comes question from

builder kind you look of of affordability, when Woodmark, if kind home where square of you do product, create more at trends in and all? does they I if how you lower your try footage it adjusting feel And are just one, like, of when to to impact kind Scott, affordable sizes? -- Maybe first that a mean, to talk in -- how terms customers, just the

Yes.

around has is So bring The are the not let's rates rates the from I'll pricing seeing discussion. been customers we hearing priority. that have interest then into really and what higher remark the the points first bigger on interest The and been challenge. builder thing price

keep in folks keep have into north sub-X in own builders X% interested home. to the done, those their of going many rate strategies, So just or by rates to

taking bear size, a product of allowed as bring a We you I think part model did that there down folks that. be be to when are couple and the from starting our us will a recall, a to home do homes of years point offering in those that to acquisition That price rotation we Origins experienced of strategy, was and ago. standpoint.

and they usually, spec typically those And step back space I think are about most as smaller, guess homes, is homes though, important those kitchen. in when I the do spaces get defined protected. the

So for amount I be a unfavorable kitchen don't of sell that cabinetry we worried alarmed into not or the would would I'm space. -- trends

have opportunity areas. dropped space. into impacts But may some going a you gets taken bring perhaps be space product bathroom, bathroom Where There's as is out. still room off certainly there's still is an to to mud those a

the I runway then I exactly national know And top helpful. some really That's share of mean, maybe going to with and opportunity, not there share wallet where on tell -- much how kind builders? do the like your you you're kind be from wallet us of what a could but it regional of just perspective is,

Yes.

question because difficult answer and So it's much regional a is to very specific. market it

and pretty there's mature high some So where be going we're partners very to our position. with have share markets a

more in we a that opportunity much sizable to So markets be with there's some it's then some go regionals get got share we've players. target where going and definitely space. a think maintain maybe And to

So go accounts. those particular those we particular after and markets target

on can't detail lot I a add that. Sorry, more

Yes. but opportunities. wallet mean, are I of still the share for No, to point kind there improve. it's

Absolutely.

Yes.

is outside kind from you then to kind million that's kind there maybe Okay. to there half, second discrete call points, of to in I $X maybe of XXX weaker. get first why that EBITDA you about anything bit a the would half step something January XX%. last out of about of start-ups, the just first be be basis items? half, those know variability down that There's to seasonally that's half of Like else just guys one, back maybe XX% did here. little going it's margins. the closer But And

talked items the things quarter X same last that hit be about we'd will The quarter. we this Yes.

on of hit them. You X

we already So Monterrey half. discussed near Certainly, and was other $X about Hamlet, back mentioned. [ the we ] a we've half. as cycle softer the million in back And environment demand then the think

on time that move August-September do time fixed frame. our the So our some costs line of is

costs X of areas. nothing roll So that. we'll for substantial some outside But incremental those through

Collin [Operator Instructions] Verron comes Our next question from Jefferies. from

linger incremental you're off as year just expect margin how the see expecting any to in we start-up question be that last fiscal the those into I in back Should XX% half you this guess, guess, see from I staying costs to year. these the going some to your going margins guess, 'XX? color the year of compression, first business? strong of those of of half on costs because forward to the I costs that building in long

we're to yet fiscal providing So not there. I ready But you've think 'XX. key an outlook year the our on point hit start specifically

not to going sudden and period. factories a to a overnight. have of We're are going to all be those ramp full going they're We open

there's long there will fill 'XX. to early be disclose can't I be it that, continued pressure how will go going some So the as a necessarily to period. we of us but take ramp into part

read feeling don't early to are feeling larger And And to the around any the color guys builders what fairly optimistic the how XXXX I be XXXX. full to and guess about guess if then their calendar builders comment still what know in on volumes ability the for as more repair the year you're about are XXXX, this I I are market of either. some year broadly? But any willing remodel going for and strength you you're given saying? --

Yes.

range growth 'XX. some the There is in expectations. On hearing others a some concerned. then single-digit have we what are for that projecting starts are And of and are calendar side, analysts and year pretty bullish pretty builder that we're wide low seeing builders

perspective, and 'XX, energy that'll to to slight started move at We there 'XX. beginning give budget some We'll us cycle of we our as official perhaps process. into kind some seem better growth of does a haven't but that be start

to of from down. under We've is continue mid-single be centers their digits weeks and the of in results going think to certainly pressure. the I outlook remodel overall couple home last kind heard their of

at as retailers than last of Our they've both quarters. couple performing of category the that worse messaged over are certainly the

to to So And continue be monitor think we'll have challenged continue to construction. we'll just there. I then new

I think of as we months. that every half back ask spring will winter tell But season, the dictate selling as we builder not will go into time best the is the the through looks. you get how 'XX now to

anyone a for do Joachimczyk closing Mr. And ask else at is to the I'd this as there any over that floor turn like not to back waiting I time, see comments. to question,

That for conference. thank you you again Thank all joining us today. our conclude does your We for participation.

ladies that gentlemen, today's and presentation. will And conclude call thank conference and for you We joining.

disconnect now may your lines. You