Q1 2021 American Woodmark Corp Earnings Call
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Good day and welcome to the American Woodmark Corporation first quarter 2021 conference call.
Today's call is being recorded August 20, Fiveth 2020.
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 American Woodmark Dot 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.
We will begin the call by reading the company's Safe Harbor statement under the private Securities Litigation Reform Act of 1995.
All forward looking statements made by the company involved material risks and uncertainties and are subject to change based on factors that may be beyond the company's control.
Accordingly, the company's future performance and financial results may differ materially from those expressed or implied in any such forward looking statements.
Such factors include but are not limited to those described in the company's filings with the Securities and Exchange Commission and the annual report to shareholders.
The company does not undertake to publicly update or revise its forward looking statements, even even if experience or future changes make it clear that any projected results expressed or implied there and will not be realized.
I would now like to turn the call over to Paul join him Shack, Vice President and CFO. Please go ahead Sir.
Good morning, ladies and gentlemen, welcome to American Woodmark first fiscal quarter conference call. Thank you for taking the time to participate.
Joining me today, it's got color as President and CEO, Scott will begin with review of the quarter I will add additional details regarding our financial performance. After our comments, we'll be happy to answer your questions Scott.
Thank you Paul and thanks, everyone for joining us today for our first fiscal quarter warning earnings call.
No it would be that you and all of your loved ones remain saves really unprecedented times.
Our team did an exceptional job delivering results in the quarter. There were ahead of our expectations.
Before I get into the details of our performance on a first thing or extraordinary group of employees that allow the American woodmark to operate through this period is an essential supplier. Thank you all for making Uh huh.
As a reminder, during the month and but we experienced a two week disruption and our Mexico operations.
There's also led to disruptions in our stock kitchen, and Bath supply chains.
Focusing on recovery in those segments of our business.
Our first quarter sales were down, 8.7%, which was significantly better than what we imagined it started the quarter in alignment with our revised outlook issued in the company Okay.
Within new construction of business declined 4.8% versus prior year.
I Timberlake direct business composite all our fragrance Pts business continued cost negatively.
Most of our national builders are optimistic for the remainder of the calendar year.
Due to their most recent months sales activities and they are projected to this containing the starts and completions for the remainder fiscal year 21.
Builders have also expressed concern about capacity the manufacturing trade base to keep up with demand for the balance of the year, which could impact the delays.
Looking at our remodel business, which includes our home center and independent dealers distributor business revenue was down 11.4% prior year.
Within this our home center business were down 12.5%.
A major remodel platform has been the most impacted by the family and when down over 20%.
Our stock business was down low single digits, we focused on recovering to lease lost production due to our Mexican closures were challenged or labor recruiting attention.
Our frameworks offering continued to grow high single digits.
Our incoming order rates for the into platform did improve throughout the quarter, which should yield it better fiscal second quarter.
With regards to our dealer distributor business, we were down 7.6% for the quarter.
As with home centers consumer demands improved with dealers and distributors reporting elevated consumer and order of interest.
Adjusted EBITDA margins were 14.6% for the quarter.
EPS of 97 cents and adjusted EPS of $1.66.
The overall market uncertainty continues to impact our balance sheet and we remain focused on capital preservation.
Our cash balance increased from $97.1 million $228.1 billion at the end of the first fiscal quarter.
The company had access to an additional $93.6 million under its revolving credit facility.
We made no debt payments in the quarter maintain net leverage the 2.1 times adjusted EBITDA.
I believe the company is well positioned to take advantage of the favorable housing environment.
Customers are spending more time no.
Consumers have additional discretionary funds to spend now and existing home sales and single family starts improving.
Going forward, our focus will be to take advantage of these trends also managing our cash expenses domestically and levels.
You must permanently improve efficiencies across our footprint, while investing wise in the future.
Investments when they will be made product technology and labor.
Our marketing team has some exciting product launches scheduled this year alone when needed discontinuances that will allow us to refreshing simplify airlines.
Technology investments, we've made the financing Kevin functions, allowing us to operate as one company and become less efficient.
Investments in labor, such as wages retention absenteeism programs will be needed to meet our customers' needs.
I don't believe there's one single issue impacting our efforts. It is a number of factors Karabakh he masks schooling decisions for families et cetera.
Some programs will be short term and nature with other long term, but there will be an impactful fiscal Q2 margins for these investments.
We will also be expanding our warehousing capability in Texas to allow for additional stock production.
Demand remains strong in this category in additional warehouse will allow us to better manage overall staffing levels across the platform.
Finally, before closing I wanted to address a common question I've received over the past six weeks from employees customers and shareholders.
Is the vision strategy changes from American Woodmark.
The answer is been clear that are 2025 isn't has been set along with our strategy and our focus is now and execution.
Tactics that will allow us to achieve revision may change and that would be true regardless of the leader do organization.
Culture connection and focus has been key things I've emphasized that team and I'm confident we're making progress.
I'll now turn the call back over to offer additional details on the financial results for the quarter.
Thank you Scott.
Financial headlines for the quarter.
Net sales were $390 million, representing a decrease of 8.7% over the same period last year.
Adjusted net income was 28.2 million or $1.66 per diluted share in the current fiscal year versus 36.1 million or $2 in 13 cents per diluted share last year.
Adjusted net income was negatively impacted by lower sales due to covert 19 de leveraging of our fixed costs and a decline efficiency.
Additionally, we incurred restructuring charges related to the closure of our humbled manufacturing facility for 1.8 million in corporate actions for 1.7 million.
These were partially offset by an unrealized gain on a foreign exchange for contracts of 1.3 million.
Adjusted EBITDA was 57 million or 14.6% to net sales compared to 69.6 million or 16.3% of net sales for the same quarter of the prior fiscal year.
The new construction market remains strong during the first quarter fiscal 2021, recognizing a 60 to 90 day lag between stark and Kevin installation.
The overall market activity in single family homes was down 9.4% for the financial first quarter.
New construction net sales decreased 4.8% for the quarter Timberlake direct business Comped positively and was offset by pricing mix and negative comps in our Frameless business.
The remodel business felt the impacts of states limiting access to people's homes to install chemists versus are good construction business, which was deemed essential.
The combined home center and independent dealer distributor channel net sales decreased 11.4% for the quarter with home centers, decreasing 12.5% and dealer distributor decreasing 7.6%.
The company's gross profit margin for the first quarter fiscal year 2021 was 20.5% of met sales versus 22.1% reported in the same quarter of last year.
Gross margins in the first quarter of the current fiscal year was negatively impacted by lower sales volumes due to cover 90 de leveraging of our fixed costs and declining efficiency.
One of our focus elements is keeping our employee safe during these unprecedented times.
Total operating expenses were 12.8% of net sales in the first quarter fiscal 2021, compared with 11.47% of net sales for the same period in fiscal 2020.
Selling and marketing expenses were 5.1% of net sales in the first quarter fiscal 2021, compared with 4.8% of net sales for the same period in fiscal 2020.
The ratio increased as a result of higher display and incentive costs combined with the deleverage from lower sales in the first quarter fiscal 2021.
General administrative expenses were 7.7% of net sales in the first quarter fiscal 2021, compared with 6.9% of net sales for the same period fiscal 2020.
The increase in the ratio was primarily driven by the de leverage from lower sales higher incentive costs and severance that was not part of restructuring.
Free cash flow totaled 32.2 million for the current fiscal year compared to 56 million in the prior year.
The decrease was primarily due to changes in our operating cash flows specifically lower net income and cash outflows from customer receivables and inventories.
Net leverage was 2.1 times adjusted EBITDA at the end of our first fiscal quarter as a result of our increasing cash balance in stable deposition.
The company chose not to pay down any of its term loan facility during this quarter.
As a reminder, there are no term loan debt maturities due until December 2022.
Echoing what Scott said earlier, we are continuing to make an investment back into the company around products technology and labor.
To help balance the macro economic impacts Recoded 19, and position the company for future growth.
Starting with our workforce, we continue to invest in our workforce to drive long term employment satisfaction and meet our customer needs.
Focusing on technology.
The company will start the journey to standardize the financing procurement processes.
And systems to help drive further improvements and efficiencies.
Lastly related to our products and investments will leave needs to refresh our current product lines concurrently we will be removing targeted products that no longer fit the current market trends.
Due to the impacts of Kevin 19, and the evolving macroeconomic uncertainty in the current remodeling and homebuilding environment. We are unable to provide a full fiscal year 2021 outlook.
Shifting our focus on to the second quarter fiscal 2021, we expect low to mid single digit net sales growth versus the prior year.
This growth rate is very dependent upon overall industry economic growth trends and consumer behaviors.
Margins will be challenged with increases in labor and product launch costs.
We expect adjusted EBITDA margins for the second quarter fiscal 2021 to dig decrease versus prior year results and be less impacted and our first quarter of the fiscal 2021 EBIT of drop in comparison to the prior year.
The company has taken actions to improve its cash position and as of July 30, Onest 2020, we had $128.1 million of cash on hand, and access to 93.6 million of additional availability under its revolver.
Liquidity and margin management, our priorities for our teams.
In closing I want to thank all the employees that make it happen every day, while maintaining a safe work environment. During these unprecedented times I'm amazed at what the team has been able to accomplished during the increasing demands and challenges that the business faces daily I look forward to continue to execute the company's tweedbank vision and strategy.
This concludes our prepared remarks, we'll be happy to answer any questions you have at this time.
We will now begin the question and answer session.
To ask a question you May press Star then one your telephone keypad.
If you are using a speakerphone please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then too.
At this time, we will pause momentarily to assemble our roster.
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Our first question comes from Garik Shmois away with loop capital. Please go ahead.
Hi, Thank you I'm just first off can you provide a little more color, perhaps quantify some of the investments around labor technology products that you called out here just wondering is the cost headwinds.
You anticipate into the second quarter.
Is that going to be limited to Twoq numbers are expected to be some follow through through the balance in the fiscal year.
Yes, so a couple of comments on maybe the long term nature of things first and then we'll step back and talk about Q2, so specifically around product launches our product launch when does tend to be in our fiscal Q2 Q3 period. So we'll see some launch activity in both of those periods with respect to the wages as my remarks are open.
The remarks address there'll be an aspect of that that I think we'll be more onetime in nature, specifically around some retention programs in the quarter.
But elements overall wage increases in S&P approach absenteeism programs I think is something that could continue as we go forward.
Well, we'll get the warehouse up and running towards the ended the quarter, but we believe we've got incremental revenue to be able to offset mitigated the costs associated with that so you got a little bit of startup around that I kind of what all that down and say, you're probably looking at a 100 basis points that headwinds inside Q2.
Okay. Thank you all my follow up questions actually just on your sales outlook the low to mid single digit growth can you put.
Perhaps breakout how you see the new construction versus the repair remodel piece within the guidance.
Yes, as I said I won't have exact percentages to break that down but when you look at each of the end markets are builders are obviously very optimistic based on how they just wrapped up most recent months and you've seen the starts data as well.
Improving significantly over the last two months. So we expect that continue as we go forward to be really strong for our business our stock platform. Both in the kitchen and Bath space continues to perform very well, we think that will be strong inside the home centers are NCR platform. However, the special order business I think it's going to continue to lag we did see an improving trend and.
In order rates throughout our first quarter. So I think that will help us into the second quarter, but I think we'll still continue to be challenged there and then with respect to dealers and distributors, we've seen recruitment trends.
In that particular space as well so we when we take all that together that gives us a bit of a wide range I do recognize you know low to mid instead of a wide range, but some of the variables our ability to actually be able to recruit retain individuals to be able to meet demand is one of the factors that will determine how much we actually will ship inside the quarter.
Okay. I guess my follow up question on back to my last question would be just with respect to some of the labor bottlenecks.
Is there a concern that not just on this quarter, but would you anticipate somebody's potential bottlenecks to continue is a bit higher long term.
So I think the specifically around to the items that address the care that obviously, that's is still a bit and flux.
Initial 600 dollar weekly payment stomped, obviously, the president has asked for the 400 I think theres down is still the only state. This actually executed in started making payments specifically around that that's a factor will see exactly how that plays out here near term and medium term. He is going to be something will help US you know that he is an impact when you're.
Having to where masking the facility and it's difficult work. So our folks are really attacks from that perspective, so as the heat mitigate I think thats an opportunity that will improve as we get into the fall and winter months.
Great appreciate the health and best of luck.
Yes. Thank you.
The next question is from Truman Patterson with Wells Fargo. Please go ahead.
Hi, Good morning, guys. Thanks for taking my questions.
First one just wanted to follow the hey.
First just wanted to follow up on the new Raz portion of your business you all have heavy exposure there.
How is your backlog log looking and could you just help us with the cadence of the new Reds revenue trend.
If you look to calendar to Q starts they were bit softer.
But now we're hearing builder orders are very exceptional over the summer months. So anyway, you can help us kind of walk through that over the next several quarters would be really appreciated.
Yes, I'm not going to lean in on a couple of quarters worth that data treatment, but certainly we can talk about what the trends and then since the start of the fiscal year and just as a reminder, on new construction year, we lag two to three months after starts it so inside our most recent fiscal quarter of course, we were feeling the impact of really most of the closures and shutdown.
That were experienced back in March and April.
Now as we've seen new construction demand increase starts increase ended June and into July.
We are three months from that will start to see the benefit associated with those particular order. So it'll start to help mid end of our Q2, and then really play a bit more of a role inside our Q3.
Okay. Okay asked another way have you seen that construction cycle extend past that kind of two to three months. When you recognize revenue or is that still been pretty consistent.
It's still been pretty consistent for us.
Okay. Okay.
And so speaking of costs not on the SGN, a or employee side, but you know softwood lumber futures were up 125% year over year, but it actually looks like hardwood prices might be down year over year recently based on the data we look at all I know that they're different products.
Different uses et cetera, but can you just give us an update.
Whether you think hardwood costs are going to remain a tailwind for you all going forward or whether pricing will start to creep towards software Jim.
Yes, just as a reminder, we really don't procuring unit softwood lumber as you highlighted there specifically, we're only going to be securing the hardwood lumber, yes, we've seen those prices really mitigated flattish to down slightly I think now for a couple of quarters.
We don't have anything is telling us there's going to be upward pressure or downward pressure against that going forward. So we're currently still assuming kind of a model a flattish prices in that space.
Okay. Thank you appreciate it.
The next question is from Stephen Ramsey with Thompson Research. Please go ahead.
Hi, Good morning, maybe just to start with any regional color.
On Q2 demand and how it involved in maybe.
You know with some color on states that saw increases.
In cases during that timeframe.
Yeah, Hey, good morning, Stephen So you mentioned Q2, but I think maybe you're wondering a bit more about higher Q1 revenue trend played out across new construction.
Specifically in that we talked about our Pts business being challenged that is predominantly southern California. When you look at our Timberlake direct business, which was up in units for the quarter. When you break that apart really strong results in the southeast at Atlanta as well as.
The southwest in Texas, where we had a bit of a challenge was in northern California in the northeast.
And if you reflect back earlier in side, what would have been our fiscal first quarter. Those were some of the states there were a bit more restricted.
With some of their.
With that particular procedures around code, so that lined up pretty well from that standpoint.
Great and then.
In mid May have missed this in the commentary, but would be curious to hear more on.
Promotional activity in the retail channel given given strong demand and retailers broadly.
Being less promotional wondering how banks laid out.
Cabinets and maybe how you see that impacting the second quarter.
Sure Yes in you didn't Miss anything we actually did have prepared comments on that which is a positive that means is fairly.
Fairly neutral so from our perspective, you know promos essentially in the retail space were flat to slightly lower for the most recent period and currently our thought as that's going to continue in the future quarter, we're not seeing anything that would tell us anything different.
Great and then lastly from me maybe can you clarify on the prominent launches that are upcoming is that going to be on the stock side of things or a different price points, it and maybe how your how you're thinking about.
Those products strategically what customer segment, you're going after.
Yes, so thats a great question Stephen So most of my comments were specifically around the MTO platform, where we do have a number of new colors endorsed Albert will be introduced and then we need to do some pruning in that particular product space as well.
Overall inside our stock business. We will also have some new launches, but it's just not a significant an outcome on the front tend to be able to launch those MTO you're dealing with.
Displays you're dealing with selling center doors is dealing with a lot of literature and material and thats, where so many incremental costs really come into play.
Great Thanks to the color.
Your next question is from David Macgregor with Longbow Research. Please go ahead.
Yes, good morning, everyone.
A couple of questions just first of all the investments that you're making can you just talk about paybacks expect to payback you mentioned some short term several long term. So I realize there's some variance there, but how should we be thinking about the payback to the PML.
And then secondly, if you're just talking about gross margins you had 160 basis points decline and you called it the de leverage.
Fixed assets and the reduced efficiencies but.
It sounds like price cost just in your response to previous question was relatively flat. So maybe just confirm that it and then the impact of mix I, just hoping you could kind of unpack that gross margin hundred 60 basis points. It give us an idea kind of the moving parts there. Thank you.
Yeah. Good morning, I'll, let Paul jump in here and then he'll talk specifically about some of the margin.
Earnings for the quarter with respect to investments.
Fortunately that solidly above so some are somewhat understates, our own and separately long term in nature.
Specifically when you look at things like launches as an example, so I'll just pick that one is my example, I'll walk through we're going to have some incremental cost inside the quarter to be able to set that material up to be able to sell but it's going to be many months later before you actually you're going to record a sale transaction for that so in one quarter you take the cost in future quarters, you actually get the revenue gain.
Associated with that with respect to efficiencies around our systems there'll be some upfront work necessary to get the tools and technology implemented once we do that we're expecting the efficiencies out of the gate to be able to help mitigate really to subscription cost associated with the cloud service in that space.
Other than that what I'll do the us Paul to just kind of jump and talk about margin pressures that we felt that a quarter.
Thank you Scott and David if we look at the quarter to sales were big factor. Those we have a large fixed costs portion across our manufacturing platforms and really as a sales go down that is it creates a de leverage event for us, but also just looking at kind of the workforce and Alcobra 19 in the challenges or that were out there. It did create some challenges to keep our employees safe during that period of.
Time, creating extra spacing extra discussing.
It just allowed for a decline in overall efficiency nothing material, but it does allow for a little bit of a change in up our impacts our margins.
Okay, and then start just two took back to your question for a moment.
There are any way to elaborate a little further on whether these launches.
Become more impactful to revenues margins or both.
With that.
The I'd say, both but it's principally going to be around revenue, we're looking for product styles and finishes it couldn't be more relevant to consumers taste. So as we launch colors or door styles that are more traffic for consumers and take somebody on down I would expect that to lead to a revenue gain which ultimately should lead to.
And enhance margin profile.
Great. Thanks very much.
The next question is from Julio Romero was still Sidoti. Please go ahead.
Hey, good morning.
You mentioned earlier that you saw an improving trend it made to order through the quarter can you maybe talk about the sequential trend do you have seen there from may through July and.
And maybe give us the run rate of what you've seen so far in August.
Yes.
A couple of our share Julio so overall inside the quarter. If you were to take that revenue. Our may revenue was down 20% plus so that was the most severe impact for us overall inside the fiscal quarter.
In June and July combined were down about 2%.
Two particular periods, we did see again, the incoming trend improvement MTO, we've seen new construction improve its going to set us up nicely inside our second quarter. As we go forward I don't really have a percentage to the coal for you specifically around say August or September, but at least back to Paul's remarks earlier about low single them.
Mid digit growth overall for the quarter.
Okay, that's helpful and I guess Oh.
You did note earlier, you know you've seen strength in kitchen, and Bath within the home home Center I guess in the past I think you've noted if you've seen kind of.
Single digit growth or double digit growth till I was hoping you could drive provide a little more.
Color there on what you're seeing.
Yes, so within the home center again really two books of business you guys are special order business overall, which for US was down pretty considerably inside the quarter in my prepared remark was when we were down over 20% in that space, our stock business, which is both kitchen and Bath was down low single digit.
Inside the period I can't tell you that we could have performed better there. If we were able to staff our lines appropriately and we could have got our production out of restart production up we would have had likely a low single digit growth rate overall for the for the quarter.
Understood and then.
I guess just last one from me as you know would you have any update on on Capex expectations for the year.
Yes, our capex expectations for Leo will remain unchanged will still be in a 2% to 2.5% range.
Great. Thanks very much.
Your next question is from Josh Chan with Baird. Please go ahead.
Hi, Good morning, Scott and Paul.
Just one of this morning I just wanted to ask about some of your mentality our approach to sort of the new construction cycle now.
I see we saw it slowed down, but then pretty rapid recovery. So are you thinking of the cycle as you know and new cycle, where you guys multiple years of growth and you're willing to invest ahead of that in the new construction side are you is still a little bit more tentative in terms of the trajectory and income and taking a wait and see approach there.
Yeah, I would still say wait and see it's been ever been pretty volatile for five months.
Overall for the for the business the economy, we've got an election coming up et cetera. So we'll see how things shake out near term feel good about where starts are feel good about what our builder contacts are telling us and customers and we're seeing the orders. There. So you will obviously investing that ensure that we can meet our customer needs in that space one.
Longer term, what do I think next year to year rate the outlook I think it's still too early to call that.
All right yeah that plant there.
And then on your margin comments, Scott about the headwind from sort of different items.
Would you expect there to be other factors that can off partially offset.
Some of those headwinds like volume leverage <unk> cost savings can be things like that to mitigate the impact of those headwinds in the second quarter.
Yeah, absolutely Josh the biggest when they're the you did already hit would be around volume. So if we can get our staffing at a level, we need we get the output that we need that's going to give us some incremental revenue, which will be nice leverage overall to try to help mitigate some of those headwinds.
Hi, great. Thanks for the color in a good luck in the quarter.
Thank you.
Again, if you have a question. Please press Star then one.
The next question is from Justin Spear with Zelman. Please go ahead.
Hi, Good morning, guys. Thank you.
But your questions one on the on the Frameless, Pts business, how much of our headwind to the new residential channel.
That piece of the business and what's the status there.
Yeah, so on that one specifically, let's let's talk about.
Kind of the status and our Pts business, serving both single family in multifamily just as reminder, just and that's really the only on a multifamily business we've got.
We've talked over the last couple of years around.
Is that a platform that we can expand and grow and having more meaningful presence in multifamily. We do have some challenges in that space around product price quite frankly the logistics.
We recently Recalibrated and charge that team to revisit what we think it's giving necessary to win and when I say data can be what's necessary to win just specifically in southern California. So that we recover some of the share loss, there or when more broadly outside of southern California in regions like Texas or maybe even the east coast. So we still got some.
Work to do in that space and when inside the quarter was pretty meaningful we were down.
Double digits and it was a meaningful headwind inside the space. It basically wiped out most of our new construction direct Timberlake business gains.
Excellent and then the next I guess I'd like line of questioning on the margin side and on that last year.
You had some one time incremental headwinds.
I don't think we're going to repeat I think for full year was close to 100 basis points. If memory serves me and then you also have the restructuring items that you.
You've already discussed last quarter, I guess, how does how about those offset or do they do those items, which partially offset the the incremental step up costs and the second quarter, a 100 bets that you mentioned.
Yes. So there really were three things that were inside that just any referencing your first as a restructuring actions that we took at the end of Q4 last fiscal year and in the first quarter of this year, obviously, that's opportunity for us and we've executed in those plans and that's that's a.
It's a benefit as we push forward last year issues that we had the early to I think you maybe you're thinking about one would have been the transition out of our Mira Loma facility into Riverside, where we had to move that Tcs production facility and that leads to incremental cost overall from a leased facility cost et cetera. So thats.
One that is still with us that doesn't really go away or mitigate the second was around Particleboard and just as a reminder, particle board last year, we pretty choppy because we had some quarters, where we were getting recovery against the actual cost incurred and then others, where we're feeling really the full negative impact associated with that I'll be honest I don't recall.
On the head exactly what that headwind was inside Q1 last year I don't think he was meaningful I think most of the impact came into the back half of our fiscal year on the Particleboard side I can tell you that we've seen additional capacity come online. There is another mill that looks like we'll be opening here shortly even in North Carolina. So we.
We've seen stability in that particular space, so thats not continuing to be a challenge for us as we push forward.
So as you step back and look at very complex environment.
Jimmy inefficiencies with absenteeism and having to retain recruit talent.
Investments and growth, but with the channel Tailwinds that we see.
Recognizing you're looking for low to mid single digits, if that was the cascade into the balance for the year based on these as you see it today, just where does the how does that project for you towards that John mid teens EBITDA margin target I think you've espoused overtime. If it is that possible that's kind of environment.
I still think there's too many on an adjusted the Maintech and then specifically around fiscal year 21, certainly as you think about next calendar year and even beyond that certainly what we are driving towards in we've talked about that mid teens being in.
15.5% range for quite some time Weve headquarters, we've actually been able to demonstrate performance that material level. So thats, what we want to get back to.
Got some short term headwinds, we're going to get through that if the demand environment stays strong or it continues to improve as you were just alluding to that certainly sets it up to be easier path forward into the first part of next calendar year and we'll continue to work our teams from a productivity perspective, we'll get efficiencies in the program will get share winded cetera.
That will set us on a path to be able to get back those wells.
And then just one follow up on that this the import competition. They recognize the anti dumping duties were installed.
A while ago, but Chinese imports are really fall and but we've seen some offsets from other parts for the world just curious on what you're seeing there and if the game has changed in terms of pricing power in this new landscape X Chinese imports.
Yes, specifically on the important data the most recent information I saw Justin was through June.
And at that point in time at least on a year over year basis, a cumulative impact I think general down mid 60%.
Has been backfill somewhat Malaysia, and Vietnam is still in total down your 15% to 20% which is meaningful.
On that base of business, we believe that shows up in two places for us, it's showing up in the dealer distributor space, which already highlighted as being a bit more robust here as of late.
Then secondly is in the stock business and certainly we believe that's a benefit that's playing out across that platform in the home centers.
Thank you very much guys.
Once again, if you have a question. Please press Star then one.
The next question is a follow up from Truman Patterson with Wells Fargo. Please go ahead.
Hey, guys just a couple of follow ups here, Scott if I heard you correctly, you said retail promotional activity was flat to down year over year. All that's right can you. Just can you just give us a little bit of color as to what's happening you know wanting your.
Competitors sold their cabinets business are we seeing just a more rational environment or is it just some give back in costs from lower hardwood costs. I mean, what are you seeing there and what's driving it.
I guess I'll just answer that it's been a stable rational environment, we've done a really seen anything significantly from either competition or our customers that are driving significant changes versus prior year promotional cadence.
Okay got you.
And actually is a bit more positive than prior years pretty safe to say.
I'm, sorry could you repeat that I can quite hear the whole question.
Oh, yes.
Currently the shift is an improvement versus prior years correct.
No I would say our promotional cadence again was flat to slightly lower than the prior period. So let's let's just make it closer to flat I think is the appropriate answer.
Okay. Okay.
The reason from asking this or that you know the prior to we'll call. It two to three years seems like promotional activity was extremely high and even increasing and now it's actually flattish to maybe even down slightly so in my mind that would suggest an improvement right. Okay.
I agree with that.
Okay, Okay fair enough I'm on the our and our side.
Of the world of your business.
Just Claire just a little bit of clarity here has that continued to improve throughout the summer months.
And is it actually trending up year over year recently called July or August.
Specifically in our space our stock business again continues to perform quite well as they MTO area that then a bit more of a challenge and we did see incoming order rates improve throughout the quarter.
We expect that to be a better results in Q2, I don't know if I can commit that that's going to be a positive comp at this point in time.
And then on the dealer distributor space, we sought we've seen that trend improved as well I believe the April as of March April May time period, all three of those months in that space, we were down double digit and we've seen that come back quite nicely.
Even in July.
Okay.
Yes.
As I do not see as there is anyone else waiting to ask the question I would like to turn the line back over to Mr., Joe him checked for any closing comments. Please go ahead Sir.
Since there are no additional questions. This concludes our call.
Looking for taking the time to participate.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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