AMWD - Earnings call transcript Q2 2022 | American Woodmark Corporation

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Operator

Good day and welcome to the American Woodmark Corporation Second Fiscal Quarter 2022 Conference Call. Today's call is being recorded November 23, 2021.

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 we make 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 its publicly forward-looking future be statements experience projected not it make changes therein that any even Vice CFO. President I and call would now like Joachimczyk, turn to the Paul over to sir. Please go ahead,

Paul Joachimczyk

Woodmark's and participate. and Quarter taking morning, Fiscal to you American to the Call. time Good welcome Conference Second Thank for gentlemen, ladies

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

Scott Culbreth

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

to labor, chain challenging navigate continue logistics supply and teams Our a environment.

quarter. container continuing were downtime and due limited but to with prior challenges due efficiency loss to to persist shipping slowed increase Backlog to substitutions sales with delivery shortages The unplanned that to labor Material congestion. led increases an still versus also International two production to up quarter were and platforms. X% rates production. port and made higher factors, match represents across continue the longer times all Second by outpace remains demand ability demand material availability.

quarters. and levels next continue sales to Going incremental the drive forward, production increase over few

prices growth production teams construction, and order Within Our could markets. and additions rates slow up prior increase to these of continue expected productivity with business and manufacturing to outsourcing to to future factors time. rising base improvements. staffing year. the our keep grew continue new cycle across Strong in trade continue is build Capacity versus capability and X.X% our demand the invest build the capacity, will

community the We sorry months, has over XX sentiment, growth, growth trends interest count are consumer which the supply tied decline increased rate lot price has consumer count past X.X% index, which inflationary to in monitoring community and been concerns. -- and

stocking at prior and independent and expected distributor Looking down our was promo X.X% year center the revenue the home prior was retailer with This business which businesses timing our was challenges business, in our remodel of coupled and Within platforms. year. X.X%. home efforts includes to this, winter across down center to due dealer labor shipments

performed our to drove Our pro quarter. well up dealer positive and X.X% stock were for as comps. kitchen the distributor DIY business With we business, demand regards

highest related quarter. well. production labor Attraction impacted the to manufacturing facilities EBITDA and with and increase May. ability October EPS fell of April level initiated closure. and have of several million $XX.X and Coast incremental shortages. for we that was of board cells for our X.X% increase EBITDA constrained October our adjusted in was realized million This were quickly A the and costs summer positively retention result EPS as adjusted facility the improved since in in our several of rates manufacturing $X.XX to idle efforts $X.X Our the Reported our short similar seen months manufacturing as due from of have as facilities our decline, production assembly output margins particle we over stock to After the labor quarter of as West experienced to planned expectations $X.XX.

new construction In supply from costs shipments. associated remainder the to expect to working improve year. for remodel with the we're East team sourcing and the particle both and grow fiscal those Our secured logistics of board market the Coast our we

impact take should short-term the to this continue demand to reduction in our and advantage model. higher will backlog growth market, maintain will the a We production of allow us

At fiscal that actions, and quarter margins 'XX. $X we I in in We complete. additional the of realizing will impact pricing announcing quarter last shared that were now After for XXXX million impact year those improve fiscal of approximately first the are quarter actions pricing, the grew fourth the over million $XX levels, fiscal to $XX and confirmed $XX of million pricing increase in we in expect sales to approximately quarter. our third second fiscal our impact the over in quarter. current million

and production year. our team two is fiscal improve improvement operations with positively forecasted margin Sequential quarters of Additional to for comping prior each next our increase fourth efforts within levels. versus continue quarter productivity will the

an presented team strategy. Board. last leadership strategic week The team with very the our our exciting remains Board to plan shaping update Our engaged our of in

strengthen they've quarter. digital our the during improve the the margins design, financial back continue what customer have overcome. to forward to Our I'm our accomplished look and will key These to business. and over presented contributions. Investments ESG I adjusted to back EBITDA our closing, additional working where efforts. call have of And Paul In and I focus continued target are of in areas turn the contribute employees proud May on and now online to products changed our we our focus details platform to XX%. accelerate growth experience, I for not from talent resources earnings to enablers challenges we will for incremental initiatives capabilities the for results of revenue XX% their what call. they on will

Paul Joachimczyk

X% the for same million representing period price, $XX were Thank of of you, Scott. year. over of sales last increase an headlines the $XXX inclusive quarter. Net million Financial

compared year. XXXX. quarter comped half the net X.X% of the fiscal fiscal and period the with the for first business sales increased year construction second quarter the New direct prior positively for same in Timberlake

improved Delays in quarter. the mix and from We market. to cabinets lower-priced continue related the their slightly growth towards builders ongoing within Origins the in our to experience ability occurring the line to our receive shift products

continued goods finished to goods we impacting levels. historical than -- trends, build is higher which backlog our our inventory However,

orders backlog the the quarters, and and Coast. of Our due continues built West on has two logistical during frameless business constraints supply to to past a grow primarily

construction above completions New quarter fiscal during the of market sales second XXXX. were

are We installation. between start XX and lag to starts plus day overall experiencing XX.X% single-family fiscal our cabinet XXX up for market The quarter. a were in homes second

within is expect evolving outpacing independent distributor fiscal year decreased actions channels. which channel, growth our the over pressures or Looking decreasing for the the at and channel. quarter, the fiscal share $XX.X saw fiscal dealer foresee income in year and in global the net timing we diluted second continued recurrent for or $XX.X and XXXX quarter for have quarter. home space. to year increasing the we XXXX sales million experiencing supply diluted our rapidly impacts The homes, new further it as distributor of our dealer second completions this on during decreased across labor to second larger building X.X% independent kitchens a continue X.X% both X.X% of the Net baths, home chain complete Within to increase the and pricing taken or quarter, inflationary X.X% trend the $X.XX focusing income is a year, projects construction whether and centers due to per due all challenges quarter market per versus share time $X.XX million was and new last extending and center markets, we their investments million construction consumers with be supports to combined in product the been impacted $X our remodel

to decrease negative was year The year realization fiscal in the to incentive Given XX.X% totaling million net and late second EBITDA products, of lag primarily quarter ratio X.X% sales compared controlled the of of that was our of employee net flow of offset second there sales expenses second compared the have lower fiscal were period for the with the same actions spending second gross of impacted $XX.X same in driven $XX.X pressures the net XXXX. evolving for increased with for Selling of of $XX.X backlog of General second capabilities. the reported an period the the costs XXXX XXXX. in cash fiscal Total we million sales X.X% net the company's of sales in production and last challenges net operating in and changes with material the fiscal in costs our period XXXX. specifically, for of margin of by of versus inflationary were the we our combined same prior sales X.X% of XXXX, experienced of inflation current logistic continued inherent expenses of with was quarter marketing in primarily quarter to net fiscal compared rapidly XXXX, the sales of same current the Free negatively year. quarter for Gross XX.X% was quarter pricing million the cash the second the expenses. fiscal $XX.X net of for XX.X% quarter were XXXX XXXX The the year. was compared positive quarter XXXX. year. fiscal sales into our and in is margins quarter of net flows lower due accrued of XX.X% free in profit or in in of in of Adjusted sales income, same operating XXXX. input administrative was cash fiscal million impacted and X.X% the fiscal for quarter net second inventory fiscal fiscal the compared lower flow net XX.X% to X.X% by balances expenses fiscal higher the sales fiscal XXXX labor of in or fiscal prior and executed that decrease the The

inventory of EBITDA materials of raw adjusted the Net times and fiscal critical additional Our stock components. key efforts the second grown to build leverage safety end was balances as quarter. of X.XX have our

sales of repurchased down Company our XXXX, year. the million by the Company's to business our $XX revolver. our net debt million half cash in the maintaining on impacted of $X free XXXX with we X.X% XXX,XXX back year, million fiscal XX, our first cash fiscal of In availability the the performance our of additional flow cash We The outlook as $XX.X for net on expectation shares. fiscal our hand under investment approximately or of and for on position million paid year. $XXX rate access current full to of October investment plan and normal For capital continue fiscal

year growth well challenges; prior labor as environment. rate constraints that however, our highly upon ever-changing next consumer logistics to material, due the growth dependent single-digit fiscal challenged labor will Margins sales as overall the and the through of continued trends, COVID-XX expect high The full logistics, to by growth quarters continue be the can fiscal sequentially few We that improve impacted industry, remainder economic year. and is is be XXXX to behaviors over will expectation the be margins inflationary, in the year.

will fully fourth $XX second our actions of total realized million fiscal were that Our by XXXX. pricing all be within representing fiscal the sales quarter channels plus pricing completed completed across quarter

takes The trend have could answer unstable. that of months Given continued on price remarks. efforts to our any the macroeconomic challenging the fully We'll this outlook extra as to risk realize our this happen thanks to you the increases members be future happy of lag offset make tremendous to it remain concludes higher on a factors inflation deliver to it six a questions prepared average In team pressures. time. This cost closing, impact pose price to three environment. this the in realization, at to to inflationary

Operator

from And Shmois Garik question [Operator come Capital. the will Loop go from Instructions] ahead. Please first

Garik Shmois

maybe you're And of given pricing volume on at your me broadly think so to the for some speak more correct growth that year, sales up quarter, On the just that it differences from of additional digit was the guide, single-digits headwinds your last what's and just wrong, the outlook I if mid-to-high high-single level incremental is just confidence the putting experienced? I'm through. guide you've if

Paul Joachimczyk

Yes, Last mid-to-high Garik, guide digits. is we Paul. single did this quarter

our be to mainly outlook, to our the up guidance confidence that that there digits abilities did in This in our we then and quarter, did is we complete out out we production there. confirmed pricing our that and high-single and revised guidance -- are actions the due

Garik Shmois

much if just volume color know I maybe a around question impact the Okay, how was I little how of supply was follow-up in shortfalls, is labor guess provide bit don't And much thank you. quarter. headwinds. the you the could more some the of on chain my the

was release. starts the installations? and I your and of particle you just both lag how think between that cited much in had the extent in And the prepared cabinet board then remarks of

Paul Joachimczyk

estimates you the any for made, So, to would the I it attribute point our to of I sales labor primarily last attribute shortfall. miss wouldn't really

a inside I think the material the and did far of team the biggest shortfall. challenges of away job be but our would period, overcoming impact availability most good by the we experienced labor

Garik Shmois

on given is or just on more just them point how labor the labor at be need I taking you've where guess been labor actions Are the that needs to a much in to invest follow-up then And you're meet you, where to it piece. do you now demand? a

Paul Joachimczyk

continue we've much I'll we'll is, improvement. seen an take remarks, to to how unclear my what to see you It's labor, to that have invest earlier back

to We that. -- So an our starting an our production to We've improvement make seen progress on need actions that. levels in are to a improved as of continue result work.

we're open rates So wage or have to that have we that whether the come don't frame seeking that current for wage still rates, adjusted you. fill, an ability platforms to will at our across I positions

Operator

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

Steven Ramsey

and through. in you Can prior the On new changes around in explain the backlog discussed messaging at you QX bridge the than that the so, in the call. way kind thinking what pricing margin is is And the pricing if embedded into QX out that of driving if different that's a there? the playing coming the what about

Paul Joachimczyk

to round the in confirmed No build backlog has the to is backlog. starting Yes. now changed of inside what is pricing being be real how the and change second going consumed,

the So points we pricing million quarters. in $XX quarters, wanted sequential QX, result, $XX what we will pricing be delivered few the plus a realized QX total as do that just in highlight improvement in and over over two to off incremental is expect our the we QX million of margin over next in

Steven Ramsey

and something on comment as then maybe goods is the naturally factors burns inventory being contributing? the Is is how more balance off as cash backlog the the And detail it or is being you can normal, of than elevated little inventory you with that go you well the payables. can much still helpful. this a into of as Okay, receivables much sheet, discussed, how lower elevated in-transit unwinds other finished

Scott Culbreth

Yes are little are bit in Steven, there. different us that impacting ways out a

for being and Really operational that; factors the our played ports timing sales of like then is one is there coming to get inventory the of timing and drain in that, has For grow regards to the as on channels, we or our receivable increased with as issues balances shipments more related we the couple activities to there, we no business. more for from into sales at collection get balances, there that do it ports. just anything international of was is really the the the working duties in a things and containers of really our price the create naturally kind capital increased of through balances will stuck

made stock raw actually conscious an lot inventory, components organization, of key up materials. as prepaid a also choice, we've but we for this to a those for on So,

balance of months end used to for the the is inventories completions our really in inventories focused perspective. and regards be see So to on that you'll growth. quarter they some that But for grow goods to out channels is are the that the backlog did couldn't material our spike sheet sheet raw work their all-in-all, see due coming just you'll some our bolster in the is there, to take balance that up. effectively down our future finished builder complete of up the for to going There inventory in

Steven Ramsey

make improvement understand, one show and customers? XXXX. to to do season compare order then ratio And I get sure improvement how to better QX that and And seasonally be take as a maybe for are backlogs currently, you they of -- any last are from the orders shipment time busy maybe a in Excellent. where the there entering you additional, in this now you're cancellations slower position the is one into more can me period, to

Paul Joachimczyk

cancellations. material no that part, in last the change not take We're a to seeing be I'll factor. Yes,

highs, elevated, my remarks, prior seen slower Specifically growth we've at quarter backlog, couple all-time but much around the mentioned grew rate of quarters. than it of in I inside as the is we're still it was in they what the at

We start will chewing that as go into we backlog forward.

start winter lead So as period to your to months an we to our ability this naturally forward. into to production levels get and chew want communicate you back remodel, to over increase the have to point, going the that time have backlog times and be around typically able slower will

Operator

will Zelman. ahead. question next from Baumgarten go from the be And Adam Please

Adam Baumgarten

Thanks you is the release and XQ. dig you it into cited Could quarter on out pushed last or is in call, that question. that my timing forward for that taking into promotional pulled the

some Just color would that on more helpful? be

Scott Culbreth

it this in -- was, inside period the inside it Last heavy period. ship year year QX the more of was heavier a it's the ship QX and

Adam Baumgarten

on then talked price the takes to the That's just, helpful time about call, it trying last and you execute increases. these to compress

I time think in was it any sure we as think can there for couple it will of some these I'm progress about the target, that take and you've negotiations made future. your maybe of a months,

Scott Culbreth

us timing that So, as we channels the around the that we take and in is in. expectation up compress That target we forward. to you're need did two guidance go the pricing seeing why

ever able out future. from work to to there. going continue third try achieve were we learnings a to even take required Should be will the goals we be our So, fourth increase to in or tighter forward, and that

Adam Baumgarten

trends it cut Is a -- of is cost And margin through raised labor combined continuation by in the with kind your of us pricing maybe a you from walk some confidence that perspective, to or gives a year-end. improvement the confidence? cost current shortages then and expansion just there returning

Scott Culbreth

So in of margin the second when year. what standpoint is half about expect lever a we pricing the to a the obviously, from think huge you improvement see

second I in hiring as slow. to but going think It's certainly have as the seen be be late. pace of to in think but here to the of won't It's half, moderated severe not late. half. we first seems going to inside zero I inflation improvement is of the don't efforts say that it's not experienced going We've inflation to as there it's as more the

trend for either do So our related in second or will that some finally, expectation is year. saving benefit some related to the product capital continue. that we new projects then have to the And half start of see

all of drive So factors the combined those sequential for expectation margin a improvement.

Operator

next [Operator The go from question will Please Jefferies. ahead. from come Collin Verron Instructions]

Collin Verron

the in And quantify if you second to fiscal what for headwind the on experienced could improvement November about have and for from you seen fiscal fiscal can the help to in fiscal wondering of hoping margin that questions. I can XQ improvement, my And magnitude margin sequential thank that in quarter. seen just XQ guys relative taking what you guys far you just you was I'm -- XQ? cost so the you then think guide us you've

Scott Culbreth

So, am of unfortunately, give not to going you those. a lot I

next with provide many last again around that range unknowns. just the specifically fourth will value on expectations around and sequential over improvement, the reiterate want quarter don't to are few the margin on there or prior comping a positively so because question, versus improvement quarters the margin I year. I So, a specific precision

$XX granularity any realize major nothing in nothing to out reference did around, at just that that, would provide specifically the year you our fiscal and beyond around again million inflation call that today. point pricing call to time. more over I'll to inflation inside want for don't of exact specifically number, and question have of out that amount is second don't we quarter, this I I we this specifically that its report So,

Collin Verron

those understood. shortages and your from to what just XQ not if just really ability And sense and can looked type headwinds, issues current the labor you you're this then seeing? can perspective, like chain just did or ceiling a of Okay, have us fiscal supply just you that give about talk volume given environment shipments those could have a increase is of you the given in sales

Scott Culbreth

certainly Yes, I the $XX inside million quarter. topline of think million another was $XX possible to

this first wouldn't -- challenges have our some you quarter, If our is means of in the of the is by half the ceiling. no fiscal

production continue We drive will revenue increase quarter's our absence in levels have incremental expectations across to of all platforms, the which of continue to to future price. see

my our comment expect we're not to in We full They're and efficiencies not and at assembly ramp time, started then this idle those earlier, summer. over it back time takes we in at train reference ramp at at and So we had the obviously platform get this point peak so were if made-to-order cells the time, hire improvement. up. that, on point to then continued you

Operator

question from next Our Chan ahead. from go Instructions] Josh Please comes Baird. [Operator

Josh Chan

customers terms your even? potential you price the pricing you like something the because of Is about channels, you the pretty comments that of price kind how were happen? possibly how the Could give And they any down think this. then increases us to So are also encouraging. impact in between of expect trading distributes color pretty of do

Scott Culbreth

is So, channel. pricing I'd itself, on based on fairly the even say

have don't that anything different materially result. I specifically call to was out So,

we're we're of doing is really pushback time from to the time discussions a what hearing a On lot we've What lead not pricing, is side, seen opposed job. a lead the standpoint barrier. getting on customer is price

time, more So area why of pricing, is is extended so that if and times a so be not job, which our it may back getting to willing on increasing production the an lead be our focused consumers than seems average. you've levels historical down got to lead proceed to focus we're on

Josh Chan

cash flow, thinking what the you how trying that in Scott. service Right, first -- on that recognizing in makes half are compared happened sense. cash the about to then the second to flow half? Thanks, customers, And you're on the

Scott Culbreth

happening the to our will challenges half some -- stockpiling cash like better international Asia the back for hoping overseas containers and and are logistical get our we Josh, up timing Yes, improve that those of things that won't in the of capital to and free for year flows due the that inventories we're will holidays of be due purposes.

However, to critical keep customers happy. have we make key we'll some to doing, still that keep our inventory those on-hand need choices components overall

Paul Joachimczyk

first higher second than in And net substantially the half. in income half be will the

Operator

and And Please line Julio will on open, Sidoti from is ahead. the from go next your is your your Company. question be perhaps Julio Romero line muted end.

Julio Romero

Thanks very Thanks there. for the have? talk substitution in Can any the questions I much. efforts particle MDF you believe just safety is to currently past to in guys. you use able products or board. plywood, taking were you the for substitute color those And any of stock additional

Paul Joachimczyk

now Yes, efficiency to really challenges require a so what's what standpoint to across and run plywood, our or size, types inside size as quantities. mentioned, from board; really substitution not right different we particle optimal so the what's it's of the that shut particle board mass of in MDF the in opposed you factories market the available

substitution the creates in a we're of seeing inefficiencies which challenge, So -- substitute that's factory. more where

Julio Romero

granularity know, guess earlier you talked I month? and additional by your to additional off there, how any what compress compress done efforts much any And about I you've just granularity week have you time or pricing may that as on shaved -- to

Scott Culbreth

to disclose specifically that. Nothing around

Operator

you. thank And

Mr. back a do the go see is that not like for waiting line any Please I Joachimczyk closing ask anyone comments. sir. ahead, question, I turn As over to would to else to there

Paul Joachimczyk

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

Operator

today's sir. conference for concluded. And Thank has you attending you, now presentation. The thank

now may disconnect. You

American Woodmark (AMWD) 23 Nov 212022 Q2 Earnings call transcript