SIC - Earnings call transcript Q4 2020 | Select Interior Concepts, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, everyone and welcome to the Select Interior Concepts Fourth Quarter 2020 Earnings Conference Call. [Operator Instructions] Please also note today’s event is being recorded. At this time, I’d like to turn the conference call over to Mr. Nadeem Moiz. Sir, please go ahead.

Nadeem Moiz

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

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

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

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

Bill Varner

full outlook After call, of call I Slide morning. with of the plans X a to our quarter Nadeem overview XXXX. you Thanks, today’s joining year and that, our of will I a and thank performance. on our start discussion turn for and for this will meat everyone quick our fourth

particularly past cadences. million in this period, of adjusted consistent a with EBITDA surfaces on and million. $XXX net QX, detailed of quarterly seasonally This reported repair slower the morning’s architectural for and side, reflects $XX As sales remodel we for release

full adjusted the $XXX million. year, million and For sales net $XX.X of of EBITDA we reported

with employees Their during Given helped hard the let the very and us company XXXX commitment that out greatly fact dedication the the work a contractors in were to hold. to performed to homes, reset internal well. as want and people year. pandemic XXXX their shout the into forecast difficult circumstances we that I particularly give faced tough exceed a their for the pandemic SIC’s last summer took was for hesitant

employees, know, up of prospects you in implement I potential. As savings to laid QX of when transformation business I process. in bring company year, cost was saw and many series many SIC but efficient last SIC talented a excellent was joined My it not June of together that had organization our first designed single, living realizing November, its I plan. in substantial goal call steps On to a a out operational as an the to

end, year just of were all but of underway, As those being implemented. being not actually explored, initiatives

and several last have months, great logistics. sourcing the strides in Over made we

let’s the participate in we our our to about excited target in why I With share maximizing organizational the opportunity turn want million to of Slide you for XXXX. We improvement cost on XXXX XXXX homebuilding benefits run-rate prospects for with harmonizing rationalization. annualized $X and continuing structural and million $XX is on I million million design seeing $X in programs are our in savings insurance are of and in upside the mirror, track we to reach of work earnings facilities the the process to business are X. to XXXX market. to The remainder to $X in growth and rearview the and am deliver our

homeowner we the to While are time. with comfort our working business, and contractors of market extended homes periods of ASG and increased for remodel impact thus their in signs repair contractor-supported continues seeing COVID encouraging

increased combined accelerate for year. value, To our throughout strong for trends we of demand initiatives fully wide the availability, leverage enhance homebuilding products array growth have We fundamentals, vaccine in a XXXX. to underway housing shareholder the with and expect the encouraging

RDS. me Let first speak to

ago planned, and President RDS. Karl in to the search on fill President and were Hoyd, embarked of strong Karl as possible find announce joined an had January. early X As We Kendall left that that aggressive position commercial that formerly of background we help greater RDS, of best heights. move will brings RDS operational the to group to a weeks expertise Adrian the company pleased to person both

into the Just last expansion an announced we one of areas. Boise, Idaho, week, country’s faster-growing

move this Group. as with in desirable our decades partnership closely one RDS two Woodbridge of has making builders, it are with Pacific Southern worked homes over very high-quality for built key of areas We California. in Woodbridge

place to partnership provide scheduled So, will in starting mid-XXXX. communities. phases region. services RDS design multiple it’s a especially new exciting take Construction is extend our several into in for to installation

had entered with also customers who the preliminary have this market conversations excited have very are we We and opportunity. other about

locations, through location knowledge to cabinet and a are traditional for our more into We sell and utilizing transforms in-house example. flooring domain working a expertise. existing existing products This flooring evolution business,

both it tool, and While SIC. for we Momentum beta still our an continue the business and even in to visual Design phase, more for make customers develop to robust

received communities Our pilot positive to and has has feedback. X expanded

market On presence in expanding develop our a the are plans in into geography key growing our with fast into footprint Entry geographic XXXX. with to move will demographics. side, we help this strong Florida ASG

Additionally, team target who past and builders will launched locations. expanding sales effort sales and screen radar builder a are the our whole in X for the a sales This initiative. larger on future ASG’s midsized new Greenfield been not recently production mostly promising into to have territories business. represents a channel as we stepping We stone

positive pursue palette a impact our experiencing this we and spring the of on build gate. of foundation products efficient growth. out refocused and launching. we When priority offering, acquisitions for mix have season. My since I I MetroQuartz was In right selling single, I solid emphasizing top as are together the new company product Pental launch, bring first a for the said margin came terms to to organization wouldn’t our SIC, of been With brand a and

are to the additional will As down beginning for in to our businesses drive new In explore for initiatives fully implementing over growth. augmenting process SIC’s acquisitions in We the progress we it time are path enhance many good place our value in growth making opportunities drive leadership are role of leveraging now growth. know are integrating effectiveness, improving operational important have in and matters we of well our summary, can and XXXX. team and synergies, thoughtful we and play an all scale

this Given an industry practice the for appropriate the our enthusiasm providing to start tailwinds company to about time that transformation our of prospects we guidance the community. is believe our growth, of underway, investment is and

adjusted the to to the range million guidance. of EBITDA XXXX. company million estimating results financial provide the on to $XX such, our more turn is be I in to $XX now over details Nadeem and will in As call

Nadeem Moiz

product $XX as and decreased close was price/mix Starting encouraged was The quarter you, decrease to X% volume. the of to contributed Slide partially sales Thank year-over-year XX%, offset towards discontinuation of in at just unfavorable down at million for the approximately regions or ancillary decline. were million during in due the We quarter. lines, which primarily in RDS on XXXX. quarter. experience were Bill. X, continuing see growth geographic year-over-year compared million and the option our decline by of sales $X.X This $X.X homes the $XX all negative to growth $XXX.X regions QX sales Price most level our mix to quarter our shift was coming during million or the volume two in packages. for entry million, business

$XX that of and the lower or at quarter, $X was approximately was projects. to X%. apprehensive Offsetting remain new stone. colors volume home end large renovation by quartz primarily This million products volume result and a For launched to million ASG the customers strong positive natural in sales decline down due price/mix. is Year-over-year were

on price certain implemented products. we addition, half second of increases in XXXX In

all across basis the was such, As a categories on quarter. fourth higher price/mix product in year-over-year

million, quarter a compared decrease XX% Moving now volumes a the EBITDA price/mix $X lower to and a to of X, million offset and was was million fourth million in net Negative year-over-year $XX.X basis on decline year. or decrease $X.X Slide to by last contributed SG&A. adjusted $X.X partially

experienced the negatively was positive shift by quarter, this ASG margins mix partially price/mix, impacted by an During were RDS by headwinds ongoing offset although volume. price/mix negative to volumes. partially higher offset homes, from trend entry-level

million, X% year-over-year, driven of was lower commentary basis. basis, negative impacts our million footprint prior RDS by a price/mix. a XX% in partially a in down experienced net $XX $XX volume, initiatives from from disruptions year year-over-year. price/mix. lower offset savings full was and XXXX X% sales cost year Adjusted basis. offset million This approximately price/mix declined was markets. million, Now, full by SG&A by year declined year-over-year on by COVID-related across declines better $XX sales EBITDA on million ASG on operating company $X.X as primarily down or RDS revenue which was driven the the $XXX

and look liquidity. a from flow to let’s operations X, turning Slide cash at Now, take

actions During XXXX, direct wide we reduce on to to costs execute liquidity preserve range of COVID. response continued a to and in

flow year. $X.X cash was million compared $XX.X operating QX, to For million last

of quarter approximately adjusted flexibility with pro loan. XXXX of We liquidity till cash million forma $XXX leverage and Further, flow net financial year, to X.Xx Xx debt to March the debt by our maturity of net ended $XX.X debt full For negotiating effective adjusted million. net increased we’ve was EBITDA. our EBITDA covenant term in million, to the $XX.X

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

and for for business XXXX is single-digits of starts, as entry-level negative for through from result in our based the translates homes Slide RDS and expectations subside. industry the our We family see forecasts. latter a supply growth shift a of outlook, robust to could continued We to framework lower consistent in part the Moving market a XXXX expect year high bottlenecks into ASPs, single chain with of sales macro various the do outlook order increasing industry which on the growth business. X in price/mix improving is which

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

branches. early these ASG signs consumer trends our seeing across in are We

Additionally, we about XXXX. are new markets excited in

seen, announced week into market ASG of an this may to the Boise, As the half second plans in and add Greenfield you have our entry Idaho last have we year.

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

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

to a initiatives like to that well to many initiatives will into new difficult together, our turn incremental cost adjusted over I COVID-related in Taken our the beyond. call growth, line range drive positive remarks. for about of supporting the are EBITDA of underway industry leading indicators to performing In his team energized XXXX. us challenges our $XX excited thank sight closing, million million prospects, would XXXX give for Bill growth like of And be management year combination $XX now, entire estimated that XXXX. during I’m and business team the growth the SIC would for the and our with savings in to closing very and in I

Bill Varner

plans, to many that, morning. very growth for for again you We forward trends, both year the the With us. front believe us and Q&A. in macro we on we favorable environment future have SIC’s Based a in promising our on turn of look results we’ll macro operator over calls. updating to Thanks joining improvement it and operational this

Operator

[Operator Truist. Instructions] comes Keith question question. Our first Hughes your from ahead from go with today Please

Keith Hughes

Thank of you. A couple questions.

of given year. first will particularly of revenue? be for progress Can revenue, as revenue quarter, sort give you EBITDA you you’ve us through us the the up range pace you First, on some And the year? in feel year-over-year

Nadeem Moiz

Hey, this Yes. is… Keith,

Bill Varner

you. We can’t hear

Nadeem Moiz

muted. very hear It’s Nadeem. difficult to It’s you. is This

Keith Hughes

that is sorry, I’m better?

Nadeem Moiz

Much better.

Bill Varner

you. Thank better. Much

Keith Hughes

Okay.

So ask let again. question the me

particularly revenue specifically, growth will sort So up give homebuilders? first the any in And year-over-year on you year me of given for revenue? quarter the this can feel be delay in in the of pacing you

Nadeem Moiz

experiencing are Thanks the Yes. we side. builder delays question, for what on the Keith. certainly, Yes, is

basis be much with year on a on ramp in And first up. So of Obviously, terms the little we higher year-over-year year revenue to in in we probably for a bit in ASG, year. margin expect then would line RDS, last in last revenue. of faster a this QX flow-through quarter vis-à-vis sort expect

Keith Hughes

progresses? that Okay. as And will RDS ramp revenue the in year

Nadeem Moiz

Absolutely.

builders cycle building work the the as in tailing it off with for and quarter closing RDS. typically given QX out just peak is orders RDS, then So quarter QX first for weakest ramps the and start into being starts QX

Keith Hughes

had does sales delays March, on question now And those West COVID talked the ASG, that from in lower release in up in stand lighten started the to about you volume the have yet? Coast. Where

Bill Varner

Yes.

with does We of often are R&R we more than not what as sit require are outside today. more seeing considerably call contractors is improving homes. the things improve coming I enter And into we comfortable market, and it clearly. Consumers times would heavier residences participate here their to installers the as that purchaser, in

Keith Hughes

things point, any whether on Okay. We’ve that this turn or And in seen after some the issues on of I products you around countertops action. quartz. – or particularly import of availability some imports numbers on backsplash on guess it’s finally, ASG Are this tariff having nature? of at actually

Bill Varner

negative We having actually any not impact. are

In from potential we any are. in and we the with think very diligently business to repercussions so comfortable I fact, worked tariffs feel fix XXXX where

sourcing broad We have a range opportunities. of

good So sit we we our position feel here about as today.

Keith Hughes

Okay, thank you.

Nadeem Moiz

Keith. Thanks,

Operator

our from And question next your Rygiel Please Alex go with ahead B. question. Riley. from comes

Alex Rygiel

Thank you. Nadeem. and Good Bill morning,

Bill Varner

Good morning, Alex.

Nadeem Moiz

Alex. Good morning,

Alex Rygiel

here. questions Quick

some about be us quarter. around understand back Can kind first seem had XQ, sort RDS. I suspect in of negative weather the the commentary First, ASG your to lot comments coming to better the from help you of impact of that impact? a to business

Nadeem Moiz

Yes, absolutely.

we branches least in Seattle, in the shut February So week. Portland, Texas, for middle experienced just where was weather, at some the particular, country a down of where were in

$X.X $X million in to first that quarter ASG impact in probably million sales business. expect the would we in So the

Alex Rygiel

the And of revenue to first that helpful. first would start inflection positive start the it the sort sound probably That that going point to see assumptions in those is same then inflect of Do EBITDA higher And appear you’re for in of half to then kind fair? year. quarter.

Nadeem Moiz

exactly That’s right. Yes, absolutely.

– our way RDS the belt is impacts given just seen – and ramp ASG you’ve cycle quarter that usually is as So up. the first heavily in quarter weakest business, our to starting heavily

going as lowest on so And that’s RDS side basis, get earnings and to year into from work quarter starts seasonal probably best then off our is the – the into as selling up, tailing the is spring be ASG best usually our repairment side. in impacting QX And then and holidays, season biggest That’s And an ASG the ramping second quarter quarter. the quarter then fourth then is third overall up with well. you house our quarter. ramping particular, on remodel

Alex Rygiel

take Is that X% growth? growth? something some like to in organic growth some your adding to are we sort of should long-term long-term of about think sounds of it annualized Bill, about actions of sort these of macro add And top maybe revenue should growth initiatives the layered with could initiatives, market this revenue think X% these expansion to on growth new XXXX, of we How of hold team, organic sales markets. starting Greenfield

Bill Varner

Boise on the latter significant there ASG say as year. moving real with the would And we into the in to mentioned in half ramp-up those comments, right now. revenue XXXX we moving in clearly Florida in marketplace are place into beyond. of are would my and of I expect take QX on late expansion the Yes, side, both know we I

particularly moving certainly and our efforts, several markets. into the new ASG on wouldn’t side I Additionally, underestimate

continue great experience And that. something about Greenfield of excited we opportunity particular has locations, as really the We’re efforts to with. see an ongoing business deal to these that new a

Alex Rygiel

the now about growing understanding XXXX? entry-level should about How it And benefiting talk sort of this great. pilots then Can five sounds to little homes. like expansion the of Momentum a your bit pilot to is communities. expanded Design how we a that shift business, in your think price/mix headwind, That’s even had you further

Nadeem Moiz

point developing great momentum to on communities, end and for is in product Yes, it’s that’s the today homes. the X.X entry is setting the more of builders options XXX available question, Look, to Alex. in a of years lower and run And Design be a give in purpose five a shift are do choices packages and homes And to ago set about the good whole was going what Momentum builders that not rate to flexibility about designed and to otherwise sort that would traditional of a allowing consumers. it’s end and to up builders much users option do your that’s pick be homebuyers so offering. very with light package

the option And to that builders us allows this setting. the think counteract virtual price/mix a are ASPS. on we So in experiencing the negative upgrade

So to plus. we tool think going great is be a this

trend know, You in you get space. the is growing convenience as shopping, virtual a which, the of homebuilding

Alex Rygiel

you Bill, team senior company, Any of of lot executives update are you your inside question, place last adjustments? of stand and we in those where on Is One now? sort a helpful? fully changed can at on added sort have the us comments

Bill Varner

Yes. to Thank is in The directly go place. I’ll you for the line. the team question. punch

can his weeks the already you about Patrick which the have initiatives ASG joining now leadership a some very upon and making business, really are driving guidance. and very company, through has took a We significant. getting to his approached very over on thoughtful Dustinger exhaustively But He Kendall, while business decisions been you since also is see see, traveling before replace the search been we’re for and comfortable couple all a been and void the else embarked that and excited that we’re forward. nothing with by Karl. efforts of if Karl, job had been months undertaken taking and And up-to-date have that As the the underway. of can X

execute to are our place and to get in this we on think a thrilled year good I So we’re going. for really plan

Alex Rygiel

Great. Thank you.

Nadeem Moiz

Alex. Thanks,

Operator

today’s that, conclude question-and-answer of with for gentlemen, the the to allotted conference call. today’s I’d and like reached session. we’ve ladies time end And

You may your disconnect for you joining. lines. now Thank

Select Interior Concepts (SIC) 15 Mar 212020 Q4 Earnings call transcript