Earnings call transcript Q3 2023

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Operator

Good day, and welcome to the American Woodmark Corporation Third Fiscal Quarter 2023 Conference Call. Today's call is being recorded, February 28, 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.

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

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

Paul Joachimczyk

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

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

Scott Culbreth

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

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

as normalized made-to-order frame end calendar of the at Our backlog planned the year.

demand our in result, quarter. Recent softened trends, confident have forecast remodel, we In however, down remain within addition, around year a trends delivering holidays. the throughout and shared took as production and quarter the days several unscheduled full improved, last we

that summer fall. going January year. the improved. in slowed sales to optimistic our construction, decline last forward Order versus business and starts growth housing have new grew has are as prior Within XX.X% Builders single-family due began

prices, and with monitor interest confidence. We rates, trends continue household recent formations home consumer to

the the with our of fundamentals acknowledge existing built of new homes formations, will customers. in year 'XX. to short number be The grow occur share There remain deficit Opportunities but calendar remain of to we household slowdown in the falling strong. a continues long-term market and

at X.X% dealer prior center our which business this, and revenue businesses, year. declined the remodel, the versus year. X.X% center includes Within independent Looking versus down home home prior was and distributor our

Our prior digits was business digits down the kitchen versus in down with stock year. double bath stock made-to-order single

impacted business, bath stock customers. loss XX.X% retailer, we at promo up was with prior business efforts our regards prior by inventory versus were a to Our year. a the destocking dealer/distributor our With versus along at the year

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

X.XX Our as fiscal to debt cash during quarter, the end adjusted was reduced additional company credit $XXX.X has million the facility. down to million revolving the Leverage third quarter. million the was $XX.X company paid of access an the its at and under EBITDA $XX.X balance times in

short-term demand I a As two quarterly economic our slowdown prepared but positioned to to calls, will is win reductions, near-term A prior delivering portfolio profitability and that headwind, we difficult restore attract navigate demand more in commitment. to customers are earnings and we committed in shared present on were environment. a in and product the

Despite sales low of unchanged reflect remains maintaining low adjusted rate we comps to are from negative we for EBITDA the fiscal revenue with prior year. margins double-digit quarter sales continue the mid-single-digit in this outlook net expectation expected year full the as a in QX. headwind, Our growth double-digit fiscal

X% will believe the that X% view January demand, Investor cover Relations our deck grow in and updated margin to our next expansion in near-term financial platform slowdown over an The million. shared that performance CAGR moment. $XXX on a years. driver key appropriate, is Despite net released sales is the in we to five I in EBITDA over tied We a we adjusted will of then design little work

three digital that continues strategy against main pillars: our growth, Our transformation execute and to team has platform design.

several Growth launch from new styles. door in will two our at benefit new finishes upcoming summer

Digital and over efforts last implementation global next include transformation location for quarter planning. and operations, the planning manufacturing area of our fiscal the Monterrey design the efforts including ERP

two We summer. which the also live completed our the goes first build sprints phase this of in CRM project,

additional over as next Mexico the within dense Platform $XX expansion and efforts design that Monterrey, Hamlet, Automation will ground occurred our work years. five investments is kitchen North automation in product lines. stock and million in continue, for the over we have bath our deliver accelerating committed in capacity quarter in Carolina, cabinetry break and

the this I year accomplished closing, fiscal fiscal forward the their third and team In fourth am 'XX. during to fiscal contributions of proud in what quarter quarter look of

I the turn over results will the to now Paul for details financial additional call quarter. back the for on Paul?

Paul Joachimczyk

Scott. you, Thank

X.X% for Financial $X.X sales third XXXX an of our Net headlines for the year-to-date. quarter year-to-date, representing over million increase were And year. period same XX.X%. fiscal sales of representing the or the and last increase an quarter $XXX million, were billion, of year $XXX.X

$X.XX in $XX $XX.X and in driven $XX Year-to-date, $XX.X million year XXXX Adjusted million the $X.XX million to quarter in of was increases diluted largely to year, per Adjusted or by net increase. quarter net of share $X.X a adjusted operations. income or price per net versus last our share income improvements income million third increased due fiscal diluted the year third $XX for prior was year. million million fiscal compared representing XXXX our sales, higher

to $XX.X or year-over-year. prior in Adjusted Adjusted the million third same year-to-date EBITDA fiscal quarter XXX-basis EBITDA year, million representing quarter the an in net to sales of point compared improvement $XXX.X million year, was fiscal is for year sales for prior increase. million $XX representing XX.X% a or of the X.X% million compared net $XX.X XXXX of $XX.X the

X.X% home dealer/distributors quarter. Looking at home net quarter The and decreasing in the XX.X%. fiscal independent and and centers distributor X.X% our sales center combined third dealer sales for increasing decreased the with

to increased year. quarter New third XX.X% prior the net sales construction in compared fiscal the

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

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

decline our returned in a separation and the part completions, to levels quarter. starts and backlog the within first normal Given starts large between this of

third improvement. The fiscal margin year versus XXX-basis company's sales year, by quarter sales for gross in labor same was the in by net and last the quarter of profit actions margin XX.X% current our XXXX operational third quarter fiscal compared the margin XX.X% a the gross of net point the in improvements, costs. offset pricing in of Year-to-date, representing of domestic of XX.X% logistic to and year-to-date XX.X% was year year. prior and increases positively impacted the Gross was reported

operating Total third for in the the same XXXX. were year sales of period fiscal sales XX.X% quarter of XXXX year net net of expenses fiscal compared XX.X% in with

quarter marketing and commission for third sales X.X% decreased in sales same leverage basis higher ratio were from fiscal net to expenses, Selling the lower decreased in year XXXX. from XXXX. sales with year period expenses in of fiscal net created XX The fiscal quarter net plan the year sales of third points spending of compared with the combined of resulting X.X% XXXX and

XXXX. fiscal for created the primarily the fiscal sales offset of increases The X% net compared profit were period net was of and higher sales. expenses in administrative same driven in the and by quarter third increase year sales ratio in incentives sharing, XXXX year leverage with General in partially by of from X.X%

was million capital fiscal $XX.X compared in the cash specifically Free totaled The lower the to due a primarily spending. year. in cash for flows, negative cash increase balances changes income, current lower receivable flow flow million our year higher a net $XXX.X to million positive accounts free $XX.X prior and operating in

fiscal EBITDA the fiscal times year quarter, adjusted X.XX of a at was times representing end times of third X.XX improvement XXXX. leverage end at from the Net X.XX the the the

current company had The cash year. of As of XX, cash paid the of hand, fiscal on $XX.X of company first down and nine the million million equivalents revolving additional to the under XXXX, January months facility. debt plus of access availability $XXX.X million $XX.X during the

XXXX. remainder the to focus our Shifting of

Our our decline. highly are behaviors. expected growth upon outlook rates The quarter economic mid-single-digit and expect dependent trends, in double-digit unchanged, sales year industry, versus rate low fiscal consumer and full fourth is remains net overall XXXX. be constraints, impact, material to sales growth this, our achieve interest rate year we growth To labor

Our for EBITDA year low margin double-digit remains EBITDA fiscal the XXXX percentages.

changing It environment. American dynamics and the achieve efforts in the is company great continued who the members macroeconomic and our and team hard daily. our team to work ones employees see are accomplished the happen commitment, the the for Woodmark efforts. make to all our has their thank react of at it what for grateful I'm results, They in invest to

answer to happy be We'll have remarks. this questions prepared our time. at concludes This any you

Operator

you. Thank

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

Adam Baumgarten

morning. Good everyone. Hey,

Scott Culbreth

good morning, Hey, Adam.

Adam Baumgarten

quarter, Just revenue can break price the overall? on the by growth volume down you and

Paul Joachimczyk

break don't it but in no that were is quarter. the And pricing. degree, maybe that level tell more can I I to there's of then, down down We activity importantly Adam, that clearly back units you been to think roll

Adam Baumgarten

think the Okay. as basket move and helpful. as how trends you're how out then, into input fiscal just Got that cost about we on seeing And maybe may we 'XX, forward? play it. That's today heading

Paul Joachimczyk

were costs? you sure make input question To that correctly, I heard asking about

Adam Baumgarten

Yes.

year? how that flows and So, what you you're today into next seeing through think

Paul Joachimczyk

in now right down the labor transportation cost think hardwood then, that is certainly, forward But prices, have slowdown not I particleboard, of year paint. other seeing still come purchases show elevated for commodity lumber we're prices calendar like purchase remainder on And seeing we to don't species, What several plywood, on to slowdown think are be Yes. into all. and pressure 'XX. not as there'll started things a likely I domestic a continue

Adam Baumgarten

one for X% well X.X% think good should you seems as that And and pretty Got Is that out trending year. that just Or a range for pushed below year? that next range level intact? range on it. last the the a we about like talked to CapEx. then Okay. still is bit, just it's for me, It to

Paul Joachimczyk

outlook of is manufacturing, FY when and turn kind suppressed. we range year, to I'll capital due 'XX back the but definitely it, Adam, we'll year do call on to, And annual that we is historical suppliers going equipment Yes, this you our call. normal out we'll for forward, primarily for say, and give our -- full levels, constraints pushed

And, Adam, of not projects. great it's a lack

capacity has a overall cost has market to the get projects to difficult. or proved meet host initial team and the ability the whole tight safety timelines just is to It's fantastic either of Our improve suppliers positions. or the

to a lot So, those push. of projects continue

Adam Baumgarten

Got of it. Best luck. Makes sense.

Paul Joachimczyk

you, Thank Adam.

Scott Culbreth

Thanks.

Operator

Loop Garik next go Capital. is Please the from And Shmois question from ahead.

Garik Shmois

EBITDA? impact wondering my just back taken that had could Hi. here normalized quarter, And I'm right the to production if quantify now? question today. is much Thanks levels for more how you that you downtime taking the did

Paul Joachimczyk

I have call. necessarily didn't a quarter number don't that quarter want that, we value I going tell expect Garik. when the earnings in the days Yes. perspective have the to of gave to into down we I'd that just our you last attribute to

that We demand. that do force staffing fully timeframe, targeted days at wound a it, due chose out the and having softening in to some into Unfortunately, the was levels. reductions we schedule. let with of end attrition up then January Then through the January. take holidays we we adjust to our to to take the accomplish didn't of So get change the initially as

have overall stage, force us. in we with So, labor our the plans now at we have that of front demand rightsized and production this

Garik Shmois

to a remarks. wanted made with my the I prepared in Great. follow-up Okay. you to ask respect comment question

your recent are that Or some out Is said well? of to you seeing coming as related that just channel? in trends orders commentary improved. an the of You improvement have builder the

Scott Culbreth

be both. It would

So, we that marketplace. see same certainly, the see from the you commentary

So, from obviously improve we're those prior we monthly a seen were where then monitoring basis, weekly, incoming seeing trends and order mid that. they also our quarter. daily, on we've are But trends

Garik Shmois

Great. Thanks I'll pass And that. it for on.

Operator

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

Steven Ramsey

quarter, sell-out on bit you that to Hi, impact? maybe kind talk retail how the color the decline. there's decline good unfolded if of to add wanted morning. the Can any about I of sell-in, learn more the a cadence that's little Maybe And on through year-to-date?

Scott Culbreth

back say the January in improve most start overall. things just trends where is And would I got November, were unfavorable the we to we as December. timeframe into then saw

Steven Ramsey

about been sequentially inventories, can Is And how declined but since continue? the Great. talk quarter on being Or was much finished had company were purchasing? of that which of then, there? to how that XXXX, this less expected And delivered, involved quarter. fourth of was whatever that factors much other you goods increasing

Scott Culbreth

end that stock [indiscernible] refocusing back be efforts COVID, to of there is in kind and of time. that really was are of up inventories, more on so we Steven, during Yes. just inventories all our just-in-case

start and lead stabilize and our seeing period. throughout to everything suppliers' the are times We normalize

is something our for that balances around us well. inventory capital be out making will continue on working say is that, as that that to So hyper-focused plays we're there, and just internally going sure you'd trend our stabilize are and levels the

And your raw, it's where and about are our WIP to question focused from, goods. on coming teams finished

at So, to opportunities to we're improve areas flow. all find looking cash

Steven Ramsey

a share success segment, other your Okay. and next Helpful. term And And talk then, that dealer/distributor months? one growth long share you channel, the and of slowing you in quick then, environment can for in the near on outsized over what driving XX gaining segment term, you about talk an gaining such this one one year-to-date in share, market long term. way? kind one thinking on the about what's lowest Can potentially segment, see

Scott Culbreth

with Yes, start particular latter that question. the of maybe part

where the So, as position most underrepresented a you noted, that's we're share from standpoint.

we didn't and distributor continue we ago gains both sell launched We Waypoint until again, have we XX dealer believe to brand. can the a So share channel. space product drive the even the years dealer in line into to

will, expect as the that to you company We over-index go if forward. average, we

So, continue we in gain that space. to want share to

We've have Why offering with their think do in to to are some bring we been that? value construction play, can their that space serve that product new And really we a dealers price quality marketplace. We distributors It's that? bring to able many about the we or customers. new well. do as we and the remodel excited why think a good done either

And that quarters in that We've talked the So, launched bath we as perhaps markets. of that. bring We're categories into expansion starting of can ago couple other in opportunities look Northeast. (ph) about other [simple space. to that at trends] a to we we then such done the

Steven Ramsey

you. Thank Excellent. Okay.

Operator

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

Tim Wojs

Good morning. guys. Hey,

Scott Culbreth

Tim. morning, good Hey,

Tim Wojs

Maybe theoretical just of a question, Scott maybe Paul. -- more or

And you a of quarter perspective? then, to on do of to If of continue the kind decline volume April you and guess, like then declines from available are offset kind decrementals normally would you see do sales that some internally you maybe see theoretical sales I the types think in what of maybe fiscal 'XX, like start what to decremental? levers volume-based into expect

Scott Culbreth

I time we've margin we that of for and some gross with and And then talked, XX%. a know worse historically this We've certainly where decremental periods Sure. you've periods we've approximately followed than that. quite had performed than where performed also better

fiscal and As and full that we're 'XX. we now set planning doing for start reminder, our just now a get budget to cycle, year plan our just as

we As we work, on side. be start top do that do think to there'll pressure the

through number be historical we'll we that's as margin our as about perform we think an into margin than performance, the go budget year. working have but and to we next don't will we we're better EBITDA XX% build out Tim, exact plans, than As better our the gross believe to but to what today, I norm. you deliver start

shift the will of 'XX us as we That nicely into well. mentioned platform help as towards into on the but up that of then a have that So, a execute savings which this deck your is as other to to well. part end 'XX, why, continue And robust really of question, are we the forward. savings. will Well, drive as great the lot projects projects carry more We've we of set we'll have things us OpEx we've that we we put start got levers? that will that year, place fiscal got that year work in what 'XX

Tim Wojs

then, Okay. channel your from shelf kind price. But like any good guess hear. of been mix think your any there's on And communities sound they how kind Good. has future think discussions push I of doesn't real change of I builder or they customers with about or future there mean, to it other about That's I as space? partners, any mean, been to

Scott Culbreth

in Nothing the where versus Timberlake mix the maybe table we Origins put offering. we around core bring than can that substantial other opportunities to

So in that It's as And to the for benefit as the a certainly mix is bring drive that our continue a builder offering space. the to we'll we growth well want to management typical builder. enterprise. Origin's

more back management done rolled lot we've not in mixed driving pricing, the So, by We've there's more Origins. certainly marketplace your a and to chatter price but of point.

Tim Wojs

costs would be I then, mean is next or start-up XX Okay. just through Good. just And expansions. sort any of you sort P&L facility expenses that XX any on of aware the that of piece run the last months kind to the over there of? the

Scott Culbreth

some startup for now. 'XX better the of work year right again fiscal sight. as we Again, our ready. finalize we There'll starting we'll be shouldn't work. And that, to starting will -- do we're I the a have to start use definitely to finalizing line inside budget but have operations Paul, finalize just that actually expenses get as we're on process

don't current costs, expense expect we'll start-up in those the some next year. to exposure have those and to any the fiscal year. certainly, of impact As really But fiscal

Tim Wojs

Okay. Thanks on rest Well, guys. the for Good. color. good year, luck of the the

Scott Culbreth

Thanks. right. All

Paul Joachimczyk

Tim. Thanks,

Operator

Please from [Operator ahead. go Instructions] from Collin question Your Verron is next Jefferies.

Collin Verron

see headwinds retail point, are Woodmark in from forward you at your good this the retail think you American do quarter. do retail morning. you're seeing headwinds you believe Can retail help prepared mentioned remarks, destocking taking the In you Thank I in And questions. for quantify think levels some dynamic? in Or in channel Good destocking inventory some going my the channel? sales the could for channel this a in you you the spot? the customers' that additional

Scott Culbreth

loss was category, current really, prior. year We to Yes. inside and stock quarter. promo the two prepared we again, points had the the bath had In realized a specific that pretty the remarks, that

gave looked that headwind saw us the a overall levels And key quarter. retailers. as reduce we to by then, inventory So at efforts we the

movement back seen levels, those building in particular inventory is the we're next in have getting back We XX feedback days. the not to XX yet that is substantial but likely

and So, data back POS. optimal to drive we retailers, to in that believe, drive to look continue levels the below stores in at would us we're inventory that shows category we the and

Collin Verron

costs then Great. that EBITDA efficiencies of increased those you growth strong saw improvement look you called then, the Can guys from incremental like margin help through That's the And and you in quarter. helpful guys us sort walk some of margin the price in really was color. how out? much what

Scott Culbreth

of able just a labor prepared more is a to when Price, been challenges, I'll do go effective the also we quarters efficiency of our done really dealing to volume teams and stabilizing operating that, process. as have the entire the part And obviously, back has last remarks. the but the offset job challenges, to two of with operating contributor key better years and we're the footprint. throughout much we been took the drive efficiencies have couple challenges, And inflation, spent important. inflation we actions

been a that's key the us quarter in as contributor So well. for

Collin Verron

the Good Okay. quarter. on next Thank luck you.

Scott Culbreth

Thanks, Collin.

Operator

question from Julio Instructions] from The is Romero [Operator next go Sidoti. Please ahead.

Unidentified Analyst

Good is time. for morning. Julio [indiscernible] for on Romero. your Thank you This

Scott Culbreth

morning. Good

Unidentified Analyst

builders? My the Good macro question been on price from have first you current morning. environment, approached is, given

Scott Culbreth

taken pricing, Yes. we've no We've been asked action. about but

Unidentified Analyst

the in January Thank exit what you. And channel? by rate was

Scott Culbreth

I'm restate could the sorry, you question?

Unidentified Analyst

was exit the channel? in by What rate January

Scott Culbreth

question. understand I'm I sure the the asking I you're not rate. exit me believe quite

Unidentified Analyst

goes is guess month -- month, say, asking I if go GBPXX. you if GBPXX. let's like, like up something Right. lose lose let's The say this next I'm way you you the you

was I'm exit like So asking what that's rate. what an

I upward guess, trending it I is downward, or don't So, know?

Scott Culbreth

Yes.

the demand, about typically rates. we use is terminology incoming order when think we talk the I Stefan,

quarter. start that definitely to saw back saw seen rate order questions throughout decreasing rebound, the a that January the We then in sustain. to we've earlier incoming we and So space,

we've So, an rate order incoming recently. improving seen

Unidentified Analyst

last right. for Thank you your me. about talk All one you. efficiency And initiatives? Can the operating

Scott Culbreth

we're sure what the rightsized Sure. on focused I our to demand. is mean going be we've to operations making

attrition again, force activities in quarter. had the and reduction we some efforts So inside

out cost the Our it on where taking of teams regardless are is. process focused of

could be So manufacturing that could related. related. be could logistics It be It transportation materials driven.

force automation. And able been less for we turnover be enterprise to to continue investments for benefit we're easier our as And employees. in benefit the able able huge makes which target retain work the to the make a We more such effectively. the also and but want track to drives well. equipment enterprise, demand to inside that, that the labor, reduce as labor having the to has If for just the do we're quarter to

Unidentified Analyst

questions. Thank you so much for taking my

Scott Culbreth

you. thank Yes,

Operator

gentlemen, at I waiting and ask see there nobody Ladies time, to questions. the else this is

to Please to for like back I'd sir. Joachimczyk turn go So, closing ahead, any Mr. the comments. over call

Paul Joachimczyk

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

Operator

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

may You now lines. disconnect your

American Woodmark (AMWD) 28 Feb 232023 Q3 Earnings call transcript