Q4 2021 American Woodmark Corp Earnings Call
[music].
Good day and welcome to the American would Mark Corporation fourth fiscal quarter 2021 Conference call. Today's call is being recorded may 27th 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. These earnings the earnings release, which can be found on our website American would mark Dot com.
Includes definitions of each of these non-GAAP financial measures the company's rationale for their usage and 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.
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 on the Companys involve material risks and uncertainties and are subject to change based on 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 and such.
Looking statements such factors include but are not limited to those described and the company's filings with the Securities and Exchange Commission and the annual report to shareholders. The company's does not put does not undertake to publicly update or revise it forward looking statements, even if the experience or future changes make it clear that any projected <unk>.
<unk> expressed or implied there and will not be realized.
And now I would like to turn the call over to Paul Joe him check Vice President and CFO. Please go ahead Sir.
Good morning, ladies and gentlemen, and welcome to American <unk> fourth fiscal quarter Conference call.
Thank you for taking the time to participate today and.
Joining me today is Scott Culbreth, President and CEO and.
Scott will begin with a review of the quarter and I'll add additional details regarding our financial performance. After our comments, we'll be happy to answer your questions Scott.
Paul and thanks to everyone for joining us today for our fourth fiscal quarter earnings call.
Hope that you and your loved ones continue to remain safe as the country begins to reopen.
<unk> did an exceptional job and delivering sales growth and a quarter, but our margins continue to be pressured by material logistics and labor inflation. We also incurred some additional cost and the quarter for approximately $1.6 million that were not EBITDA adjustments related to our new debt issuance and inventory adjustments obsolescence.
Pricing actions had been announced and will deliver margin improvement and the first half of our fiscal year 2022.
Proactively working to keep our employees safe has been critical throughout the pandemic and our efforts are now focused on vaccine availability and access our teams are held on site events and a number of locations across our network and we continue to see increasing rates of vaccination among our employees.
Our fourth quarter sales were up 18, 6%.
Demand once again continue to outpace production and the quarter across all platforms.
Our ability to match demand continues to be limited by 2 factors.
Labor and material availability.
Labor was impacted by the ability to attract and retain employees as the American rescue plan and negatively impact would be available pool and employees.
Reported manufacturing job openings soared to 706000 in March and new record.
Material shortages led to unplanned downtime and efficiency loss and substitution from made when available and continued production.
Backlog increased across our made to order platform with incoming order rates over 20% plus.
As a reminder, we level load our production on the made to order platform.
I mentioned last quarter that our incoming order rates across both the new construction and remodel businesses exceeded shipments for the quarter and and our teams are inky, increasing production levels, which will drive incremental sales and our fourth fiscal quarter as we improved backlog levels.
Incoming orders again exceeded shipments and our fourth fiscal quarter, and we did not make progress as planned and reducing backlog.
Backlog increased over 20%.
As a result production levels and continue to increase and drive incremental sales and the next few quarters.
Our teams will continue to invest and production capability via outsourcing staffing additions and productivity improvements.
Within new construction, our business grew 13, 2% versus prior year.
And our Timberlake direct business Comped positive high teens, while our Frameless Pcs business comp negatively.
Last quarter I share that we've stabilized the tcs business and would return to low or mid single digit growth in fiscal Q4.
Our incoming order rate did in fact deliver growth the material availability limited our ability to produce and we fell short of prior year shipments by approximately $1 million.
However, overall backlog grew from the prior quarter by a larger amount.
Strong order growth is expected to continue across our markets.
Capacity and the manufacturing and trade base to keep up with demand and rising prices could flow future build rates and these factors have already increased and build cycle time.
We are monitoring lot supply and community count growth closely.
Some builders have begun to put sales cast in place and markets to allow production to catch up and with these backlogs.
Looking at our remodel business, which includes our home center and independent dealer and distributor businesses revenue was up 22, 1% to prior year.
Within this our home center business was up 24, 6%.
Our made to order remodel business continue to improve with 25 per cent.
Comps are.
Our stock business performed well with pro and DIY demand increase with comps of 25% plus as well.
And our Frameless offering did experienced negative comps for the quarter was our Texas operations were down several days due to the winter storm.
Backlog grew and how do we shift we haven't experienced double digit comps.
With regards to our dealer distributor business, we were up 13, 4% for the quarter.
Demand has remained strong with dealers and distributors across both the remodel and new construction channel, especially within the value stock segment.
Our adjusted EBITDA was $47.2 million with EBITDA margins at 10% for the quarter reported EPS of <unk> 17, and adjusted EPS of $1.28.
Our cash balance was $91.1 million at the end of the fourth fiscal quarter and the company has access to an additional $236 million under its new revolving credit facility.
Our teams and restructured our debt providing increased flexibility and a significant reduction in interest expense during the quarter.
We also repurchased $20 million of approximately 200000 shares of stock and the quarter.
Net leverage was 193 times adjusted EBITDA.
Regarding fiscal 2022, the new construction and remodel markets are projected to remain strong and we anticipate growth to continue.
We are positioned to take advantage of the strong market as consumers investing their homes and existing home sales and single family starts remain strong.
That supply and interest rates and overall price appreciation and new construction may impact demand and early calendar year 2022, the long term growth remained solid.
Cost of goods sold inflation expectations include an additional approximately 2.5% to 3% from material logistics on top of what was relaunched in fiscal year 'twenty 1.
We will be able to recover inflation via price increases, but note. There is a lag between the current inflation and realized pricing.
We'll be closely monitoring ongoing inflation case additional pricing actions needed.
Looking further into the future, we have finalized and communicated internally on our strategy and it's linked to the company vision.
We firmly believe we can accelerate growth beyond the market rates with incremental investment and Resourcing and the following areas.
Digital online capabilities.
Expanding our online offering, adding a plus content for those skus.
And building, our digital marketing team and simplifying the buying experience.
Launching the low SKU high low SKU count high value opening price point cabinet line for our dealer network regionally and and expanding nationally across channels.
And northeast region and began taking orders from this new product on may 24th.
Growing our frameless business, and southern California, and Phoenix and by continuing to grow our origins by Timberlake line and new construction.
We have also identified several key enablers that will be our focus over the next 5 years and help support our 2025 vision.
This enables a customer experience platform design talent and ESG.
Customer experience is a key differentiator, we must exceed our customer expectations with respect to packaging damages overall star ratings and response time.
Consistent lead times are also required and we believe we can leverage all of these attributes to gain share including growing our presence with pros.
Our platform design must meet the needs of our commercial programs, which includes capacity improving our supply chain resiliency and lowering our overall cost.
Talent needs will require us to hire additional resources as we grow develop the right skill sets to meet our needs for growth and remain competitive with pay and benefits.
With respect to ESG efforts, we will continue our commitment to our employees communities and other stakeholders with additional focus commitment and investments to build a stronger company for the future.
We will begin enhancing our disclosures and this year's proxy and updates will be made to our website later this year.
As part of this work we've reset our long term goal for EBITDA margins to a range of 14% to 15%.
Growth will drive leverage of our fixed cost and will offset normal inflation.
Over the long term pricing should offset material and logistics inflation.
Incremental investments that are underway will lead to efficiency gains.
Our primary concern that negatively impacts our margin expectations as overall labor availability and labor wages.
I believe we are and an extended period of labor shortages and increasing costs will be an issue for our industry.
Free cash flow generation will remain strong, allowing us to further reduce our debt investing the business and repurchase shares.
As a reminder, we have reduced our overall net position since the acquisition by over $300 million.
And our net leverage has fallen from approximately 3 times adjusted EBITDA at a $1.93.
Due to that deleveraging, we were able to restructure our debt, which reduces our overall interest expense by roughly $12 million per year and positively impacts EPS by approximately <unk> 50 per share.
Finally, our board authorized $100 million per share repurchases earlier. This week is additional support for the long term potential for the company.
And investor relation deck will be posted on our website next week summarizing this work.
In closing I am proud of our employees for what they have accomplished this fiscal year and I look forward to all of their contributions in fiscal year 'twenty 2.
I'll now turn the call back over to Paul for additional details on the financial results for the quarter.
Thank you Scott.
Financial headlines for the quarter net sales were 473 million, representing an increase of 18, 6% over the same period last year.
Adjusted net income was $21.8 million or $1.28 per diluted share and the current fiscal year versus $22.5 million or $1.33 per diluted share last year.
Adjusted net income for the fourth quarter of fiscal 2021 decreased <unk> 8 million due to higher material and logistics costs, which was partially offset by an increase and net sales.
Adjusted EBITDA for the fourth fiscal quarter was $47.2 million or 10% of net sales compared to $53.4 million or 13, 4% and net sales for the same quarter of the prior fiscal year.
Financial results for the fiscal year ended April.
Net sales for the current fiscal year were $1 billion $744 million, representing an increase of $93.7 million or 5.7% from the prior fiscal year.
Adjusted net income was $109 million or $6.40 per diluted share and the current fiscal year versus $111.8 million or $6.59 per diluted share for the prior fiscal year adjusted EBITDA for the current fiscal year was $223.2 million or 12, 8% and net.
Sales compared to $236 million or 14, 3% and net sales for the prior fiscal year.
Shifting to our sales channels for the quarter, the combined home center and independent dealer distributor channel net sales increased 22, 1% for the quarter with the home centers, increasing 24, 6% and dealer distributor increasing 13, 4%.
The remodel business continued showing strong signs of recovery and both are made to order and made the stock lines people remain confident about investing back into their homes and the quarter as demonstrated by the increased demand from the DIY and pro customers.
New construction net sales increased 13, 2% for the fourth fiscal quarter.
With Timberlake business Comping positively and units is there still a mixed shift occurring towards lower price products is our origin line continues to gain momentum and the market.
Our frameless business is recovering and has built a backlog of orders during the quarter due to the logistic and supply constraints on the west coast.
New construction sales channel match the market demand during the fourth quarter of fiscal 2021.
And while recognizing a 60 to 90 day lag between start and cabinet installation. The overall market starts and single family homes was up 15, 3% for the fiscal fourth quarter.
Looking at completions during our fourth fiscal quarter, we saw an 11% increase year over year, which further supports the timing impacts.
The company's gross profit margin for the fourth quarter of fiscal year 2021 was 15, 6% of net sales versus 18, 9% reported and the same quarter of last year.
Gross margins and the fourth quarter of the current fiscal year was negatively impacted by the continued higher material and logistics costs and charges related to obsolete inventory of $1.2 million. These costs were partially offset by the increase and the sales creating leverage of our fixed costs and our operating platforms.
Total operating expenses were 11% on net sales and the fourth quarter of fiscal 2021 compared to 12, 1% and net sales for the same period in fiscal 2020.
Selling and marketing expenses were 5.5% of net sales and the fourth quarter of fiscal 2021 compared to 5.3% and the net sales for the same period in fiscal 2020.
The ratio of net sales increased 20 basis points, resulting from the increased launch costs, partially offset by the leverage created from the higher sales and the fourth quarter of fiscal 2021.
General and administrative expenses were 5.5% and net sales and the fourth quarter of fiscal 2021, compared with 6.8% and net sales for the same period of fiscal 2020.
The decrease and the ratio was primarily driven by the leverage from higher sales and lower spending and the impacts of our actions taken and the first quarter of fiscal 2021.
Free cash flow totaled $105.4 million for the current fiscal year compared to $136.8 million and the prior year.
The decrease was primarily due to changes and our operating cash flows specifically higher customer receivables and inventory balances, which were partially offset by higher accounts payable and accrued expenses as a result of our increased sales demand.
Net leverage was 193 times adjusted EBITDA at the end of the fourth fiscal quarter. The company paid down $80 million of our term loan facility during the year and successfully restructured our debt position to take advantage of and lower interest rates. This will lead to roughly $12 million of annual savings.
During the fourth quarter of fiscal year, 2021, we repurchased $20 million and shares.
Shifting our focus to Q1 of fiscal year 2022, we expect mid to upper teen net sales growth versus fiscal year 2021.
The growth rate is highly dependent upon overall industry economic growth trends material constraints labor impacts and consumer behaviors, including the impact of the ever changing COVID-19 environment.
And our price increases will take effect at various stages throughout fiscal 2022 with pricing being realized first and our dealer distributor channels, followed by the new construction and then our home centers.
Given the pressures we've previously mentioned our outlook is that our adjusted EBIT margins for Q1 fiscal year 2022 will improve sequentially from Q4 fiscal year 2021.
We will continue arent, our investment back into the business by increasing our capital investment rate to approximately 4% of net sales. These investments will range from the continuation of our ERP journey to get on the cloud did.
Digital investments and our customer experience and reinvesting in our manufacturing facilities to help reduce labor dependencies, and improved quality and increase capacity.
This will impact our normal expectation on free cash flow for the fiscal year.
Strong strong free cash flow remains a core strength of the company and we.
We are choosing to make these additional investments into our core business to enhance our margins and the future and returned to our long range EBIT target of 14% to 15%.
In addition, the board approved a new $100 million share repurchase program, which will replace the original $50 million share repurchase program that had 30 million remaining.
We are continuously investing back into the business.
She and the King the impressive top line growth of the company recognizing all the sacrifices and additional efforts our team members have put in this entire fiscal year I'm continually impressed and grateful for what the teams have accomplished and want to thank all of our team members that are what American would mark for their continued efforts there.
They are the ones, who make it happen daily.
This concludes our prepared remarks, we'll be happy to answer any questions you have at this time.
And we will now begin the question and answer session to ask a question you May Press Star then 1 on you touched on and phone.
If youre using a speakerphone please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then 2 and.
And at this time, we'll pause momentarily to assemble the roster.
Our first question today will come from Truman Patterson with Wolfe Research. Please go ahead.
Hi, This is Trevor allinson on for Chairman and thank you for taking my question.
First can you just bridge the year over year decline and gross margins for us and a quarter, you mentioned raw material inflation and logistical inflation and wage inflation and just hoping you could maybe bucket out each of those.
Different categories, there and maybe rank order them for US and then also maybe some benefit from leverage and acquire.
Yes, I don't want to break it out and to that level of detail, but certainly can tell you that the material inflation is by far and away. The number 1 challenge that we face I would put freight and secondary and then I'll put labor third.
The way I would I would perhaps.
Look at the quarter and think about inflation and pricing is if we had on our pricing actions fully in place, we can realize and inside the quarter and what might that have done to our EBITDA margin and I would say, we would have likely finished and the 13% to 14% range without that but that's the stack ranking and I'll give you on the elements.
Okay got it. Thank you for that and then jumping over to pricing then you've mentioned and you expect that to start flowing through.
And <unk> can you give us an idea of what kind of pricing and you think you might be able to realize and why and then maybe throughout the full year for your fiscal 2022.
I will just say that we're going to our expectation is to get pricing to offset and both the material logistics inflation within the year I think it's going to take us the first half to be able to fully accomplish that and that assumes the baseline doesn't keep moving we've continued to see increasing inflation that was predominantly the factor and set our fourth quarter and why we didn't.
Meat.
And our outlook that we have provided to the marketplace. So I think theres going to be multiple actions that will be taken as an enterprise. So our first round.
Complete and we will start to realize that and some channels today.
Others, it'll be a little bit further out and we actually start to recoup those dollars with new orders coming in so by the end of the second quarter I would expect that to be complete, but we may be dealing with a second round at that point in time.
Okay got it and then just really quickly.
Jumping back to raw material inflation.
Just give us an idea for how that trended from your fiscal <unk> to <unk>.
And would you say it accelerated from Q3 to Q4.
Okay got it thank you very much.
And our next question will come from Garik <unk> with loop capital. Please go ahead.
Oh, hi, Thanks, just to follow up on the margin question.
Fair to assume that margins will continue to be.
Depressed and the first half of the year and then by the time you get the pricing actions is it reasonable to expect margin expansion.
Year on year, and the second half of the year or.
Is there just too many moving parts at this point to make that call.
Yeah, I think there's too many moving parts per day to go ahead and make that commitment for the second half. That's why we didn't provide the full year outlook and Paul walk through expectations around our first fiscal quarter I think there's just too much uncertainty around labor material availability and shortages as well as the transportation challenges and you've already talked about so at this point and timing of thesis though.
I think is sound and it's going to take US a couple of quarters to recover.
Things are stable and an expectation of obviously a trajectory of improving margin trends and the second half as expected.
Okay.
For that and then.
This might be tough to answer as well, but just given the backlog.
Is exceeding your production capabilities and recognizing you're investing.
And new capacity.
If you could speak to maybe how wall and do you think it might take for your production to be able to catch up to backlogs or is this going to be a.
A challenge I guess, a good problem to have but a challenge for the balance of the year.
Yeah, we often tell ourselves it's a good good problem to have but it is a problem. Nonetheless, so what can we do to be able to mitigate and offset that I think 6 months ago. We thought we'd be passed with at this point and time and now we're looking forward 6 months out and saying, we're still going to be challenged over the next couple of quarters. So I don't know yet if we see a significant improvement.
And backlog and the second half of our fiscal year.
And then as we're modeling things today certainly the first couple of quarters. Its been continue to be challenging. So it will all depend on what the demand environment situation looks like throughout the next few quarters as well as our ability to gain and the labor needed gain and material needed and be able to increase production levels.
Okay. Thanks, and then my last question here, just with the increase in the Capex and the growth initiatives.
Could you just speak to.
What kind of payback or what kind of opportunities you're looking at you touched upon digital a little bit and some other initiatives, but any more color as to.
And what the.
The growth outlook beyond this year is looking like given the step up on Capex.
Yes, so maybe let's peel that apart into a couple of different questions..1 that you had and there is the outlook maybe longer term.
Youll see that in the Investor relations deck that will release next week, we'll give you a perspective over the next 5 years from sort of a sales <unk>.
EBITDA standpoint, and you think Inc.
In mid.
To a high single digit growth around both of those particular components. So that was 1 of the questions.
I think you had wedged in there.
With respect and apologize I forgot the second 1 you have to get 2 or 3 that was weighted and there.
And I'm, sorry that was the other 1 net capital so with respect to capital we have our core capital that we put back into our manufacturing facilities and that's typically been and the 2 to 2.5% range. Yes, we have a payback and modeling that we drive off of that at times, there could be a strategic investment that maybe doesn't.
Pass the threshold, we may choose to pursue but we're very much focused on positive NPV strong payback.
Our cycle type investments and we will model inside our planning both the capital spend as well as the savings expectations that comes with that.
Overall, the the other area from a capital standpoint would just be sort of displays and selling centers.
Having our product available and the outlets to consumers can look at that.
And that can be lumpy. So as you do new launches and you have to spend the dollars to put that into the store.
The sales that you generate for that and can be a bit of a lag. So that that's sort of a different dynamic there. The next big bucket I would pick is around digital and so we've talked over the last I think 3 calls around our investments and and ERP solution also and Salesforce Dot com. So similarly, you make the investment.
And make the conversion and put the systems in place and then you do model and expectation of efficiencies and the back side of that as you go forward. So the way I would frame and as we do have a bit of an investment cycle around some of those choices as the company, but it is setting us up for longer term potential both growth from a sales standpoint, as well as growth from.
On a margin standpoint.
Got it okay. Thanks, again and best of luck.
Chuck.
Okay.
And our next question will come from Cowen and <unk> with Jefferies. Please go ahead.
Hi, guys. Thanks for taking my question.
On your prepared remarks, you called out that Youre investing and production to media and constraints can you just dive a little bit more into these initiatives such as the outsourcing how cooking and they'll ramp up and.
Margin impact on the near term and over the long term.
Yes, so specifically around outsourcing that's activity that's underway as we speak we've been working on that for the past few quarters that will provide some relief for more of our component and dementia and facilities over the next several months so that'll be in place with respect to capacity and it depends on where youre at and.
The manufacturing processes and so it does vary where the capacity bottlenecks might.
Specifically, we have some flat stock capacity investments that we're making that will be able to get us out of outsourcing. So we actually bring some product back in house to be able to supply to our assembly operations.
And I think about our assembly facility quite frankly, and it's not a machining capacity and our investment and equipment capacity question.
Typically more focused on labor and can we identify and capture enough labor to be able to run the sales and the operations. We've got so it varies depending on where we are and and the.
Overall manufacturing platforms, and it's different from make to order versus we made the stock.
We have a process we run through our materials team, where we perform analysis from sensitivity work around overall capacity. What we think the next 5 years demand looks like from that we build a plan and it's a multiyear plan on where we're going to attack those bottlenecks and we're employing that strategy on all of our platforms today.
Yeah.
Great. That's very helpful color and then you highlighted some supply chain issues in your prepared remarks can you dive a little bit more into where you are seeing some of those pinch points and when you start to see.
And when you start when do you believe you think it will start to improve.
Yes, Colin this is Paul.
<unk> changed constraints really exist and really and the lumber space. That's out there you've got limited resources around the hard wood supply woods and particle board, you're seeing glu shortages across there with the Texas issues over there.
Really it's across a multitude of areas, we expect those kind of constraints and you'd be lifted up by half kind of halfway through the year to be a realistic that's out there, but now that is assuming that we kind of returned to some state abnormal there could be things that could still interrupted as well too.
Our sourcing team believes and the next couple of quarters of continued to be challenging.
Our suppliers have the same challenges we have that we just highlighted and train for you alright, so labor availability and and they've got challenges and being able to supply the parts they need to be able to produce the product that were purchasing from them as well.
Alright, Thank you and good luck.
Thanks.
And our next question will come from Steven Ramsey with Thompson Research Group. Please go ahead.
Hi, good morning.
And maybe.
Think about the delta between dealer distributor growth being a good bit less and home center growth.
What is driving this delta and do you anticipate disclosing.
And in the next couple of quarters.
Yes, I think that I think there's just been significantly more strength inside the home center around pro.
And we've seen growth on that stock platform as well as our made to order platform.
Exceeded our expectations here in the near term so why would that be happening I think post COVID-19.
Let me step back and talk pre Covid. So pre Covid I believe there was an assumption that the home centers might struggle and gaining new customers, especially younger customers into their stores, especially when you think about going and doing a kitchen and Bath project I believe post COVID-19, what we've seen is debt.
Paradigm has shifted and been adjusted and we've seen consumers flocked back to the home centers of all ages and we're seeing those consumers that were sort of a question mark pursue those jobs now and the home centers.
The Big question and I think for the for the home Center and going forward is there ability to hang on to that consumer as things start to normalize the economy starts to open back up we sort of get past some of the Covid challenges had so I think that's been a factor and you've seen that overall, if you follow up either of the of the home centers you've seen the strong.
And Pos growth and that they've highlighted over the last 4 quarters.
<unk> gained some share in the marketplace and the real question is can they maintain that going forward specifically around dealer distributor, we still feel really good about that sector for our business of course, it's less and 15% of our total footprint. So we want to continue to drive disproportionate growth into that space and have that be a bigger percentage of and mix.
Overall for the organization, but I don't see anything that's driving any big behavioral differences other than just pushed back and the home centers over this last year.
Okay, Great and then maybe to follow on I'm not sure if I missed this discussed already but.
As retailers kind of start to hit the tougher comps mark yet demand being good or are you seeing any.
Discounting pressures and ramp back up.
Seemed like that had eased in the past.
Year or so during the during the pandemic.
Yeah, I'd say, we're still on the same place.
Slightly lower than the most recent periods.
I'm, an advocate and it should be lower.
The demand environment is very strong.
Not just American woodlark, but most manufacturers are struggling and being able to match. The overall demand. So why promote heavily or even at all in that environment. I think is a question worth asking and challenging but we've continued to see that down year over year.
Okay, great. Thank you.
And our next question will come from Justin Speer with Zelman. Please go ahead.
And I appreciate it guys.
1 question from me is how we should think about maybe gross margin and EBITDA margin for for this fiscal quarter for fiscal 'twenty 2.
Is your comment on that pro forma 13% to 14% EBITDA on <unk>, if you'd have you'd have that pricing and a hand from for the whole quarter that suggesting that you'll be in that range for the first quarter.
I think back to the earlier question, we got from 1 of the earlier analyst is not ready yet to make a call adjusted on a full year I think there is still so much uncertainty that that would be unfair.
At this point and timing of Paul gave you a perspective on what we think the first quarter. It looks like with certainly framed up the first half is going to be the price recapture period.
And then there should be and improve and the second half assuming things normalize and I think there's too many questions still today.
Well I guess I mean, I guess, what I'm trying to get it you have that price on hand, I guess, you I guess and implies like roughly I don't know, what the percentages, but maybe 3 or 4% pricing for.
For the full year, if you would have or for the full quarter. If you'd had that you would be you would be at that and that.
Low teens kind of range.
For the quarter is that stuff that Mike.
Question is does that are already in hand or is that something thats and motion still.
The pricing is in hand for 2 of our 3 channels and then third channel, we're very close to having that complete and when you think about the longer term the issue would be if inflation and accelerates pick a period. The next 90 days well then we have to go back and go through another pricing action and so you always have this lag that you are chasing and a couple of our channel. So that's why.
Hesitation to commit to that second half number.
Alright, and alright, and I know, it's tough to kind of glean right now, but I know that when we look at the import data and others, but some allegations of summit legal circumvention, particularly pointing.
And I wanted to competitors pointing in Malaysia.
And as potentially doing some and.
Legal things is that something you guys are paying attention to and let's say that there is maybe a case, how does that affect dynamics and the industry and potentially pricing power if at all for you.
Yeah. So we do closely monitor this we have and executive from our team that sits on the case you may and is very close to the various trade case issues and topics we've not felt.
<unk> pressure, that's creating any concerns for us from a share standpoint with respect to the imports and then some of the domestic challenges. If you will from an inflationary standpoint, so I don't yet see concerns and there the notion and circumvention, yes in place and I know there are some.
Some filing specifically around that to pursue and investigate.
Mentioned, Malaysia, and I think.
Now and sometimes comes up in that particular discussion as well. So we do closely monitor it and there is some of the.
Some of the anti dumping and countervailing duties do come up for with view. This year, so theres sort of an annual review cycle.
Don't expect a change, but it is and process and we will closely monitor that as well.
Okay, and then lastly on your on your 2025 ish and I know you talked a little bit maybe alluded to some of the capex investments.
But how should we think about the P&L investments and some of those strategies that may be ongoing and and.
And if <unk>.
Comparisons that are going to be really tough on the coming quarters, and we look out maybe a year or more.
If things start to unwind and maybe go the other way where there may be some difficult comparisons would you be able to ratchet back on that spend.
So I think to your question is if we if we started to get into a difficult cycle can we manage our SG&A spending and I would say, yes, we've historically demonstrated the ability to do that if things happen and there is somewhat outside of our control we can't manage the and the pricing conversation. We've had we've got the ability to flex up or down and.
And both of those cases.
Thanks, guys, and just and I can add a little bit to that too you can look at our SG&A spend and how much we've leveraged year over year. It is an area of kind of extreme focus we do have the ability to flex there as well and that is something Scott mentioned, we monitor very closely and have the ability to really control that spend and that's the way it goes out.
Perfect. Thank you guys.
Okay.
And our next question will come from Josh Chan with Baird. Please go ahead.
Hi, Good morning, Scott and Paul.
Hey, good morning, good morning, Yeah, Thanks for breaking out there and question impact So I guess.
Or are you thinking about completely offsetting that and inflation headwind with just price for you is it a combination of price and productivity and just wanted to get the color.
Yes, it's always a combination of both of those Josh.
Okay. So price is only.
Component and offsetting some of the inflation and how youre thinking about it.
And when I, when I think about the buckets and the material and freight I'm expecting that they will be via price labor that becomes more typically a productivity conversation and such.
And on water price conversation.
Okay Alright.
And then just on the timing of those price actions you talked about having 2 out of the 3 channels and hand.
Does the price start and the beginning of the fiscal year and Q1 or are you kind of gradually and realizing that.
We go on for the 3 channels that debt.
Yeah, so you're gradually realize it as you go throughout the quarter.
Okay, Alright, and and so I guess.
So on the on the.
On margins, you mentioned that 3 to 400 basis points of headwind that you saw in Q4 with.
No price.
Does that mean that we cut slightly into that headwind as we go into Q1, and then cut more into that and Q2 and hopefully you're.
You're at parity, but by the second half.
Is that the right way to read between the lines there.
Yes, that's the right way to think about it and I don't know yet.
And I haven't stated parity yet and the second half I know, we've talked a lot about the second half a day, but but certainly as you think about Q1 and Q2 the way you framed that correct.
Okay. Okay. That's fair. Thanks, alright, thanks for the time and good luck and.
Yeah.
Alright, thanks, guys.
And our next question will come from Julio Romero with Sidoti. Please go ahead.
Yeah.
Hey, good morning, Scott Good morning, Paul.
Good morning.
So I guess most of my questions have been have been asked here, but maybe if I could talk about some other subjects here on the new repurchase authorization.
The $100 million you did you announced and authorization is not inclusive of the $20 million of repurchases you did in Q4 is that correct.
Cash and it really is the way to think of it as we had the original $50 million authorized that was out there we used $20 million of that 50 that left us $30 million remaining on that expired that whole share repurchase debt is out there and then issued a new $100 million share repurchase authorization for its and effect going forward.
Got it and.
And I assume what you did and the fourth quarter in terms of repurchases kind of sets you up to offset any dilution over the next couple of years or so so I guess just given the new $100 million authorization is the inference that you are going to be more opportunistic or even more aggressive and repurchases and you have been in the past or just how to think about that.
Yes.
We really will be opportunistic and the way that we look at it and approach. It we want to make sure that we give our best return back to our shareholders and Archie and investors that are out there and so that would be the standard that we would take on a go forward basis. We do 1 offset we do want to manage dilution. There. So each year, we want to have that and place and then beyond that it's more of an opportunistic play.
Got it but the $20 million, you did and the fourth quarter.
Is it fair to say that kind of.
Takes care of any dilutive impacts over the next 2.
And 2 years.
Okay.
Think of that more of the prior deletion looking back because we hadn't done any repurchases throughout the year. So just going forward and stock grants are issued et cetera, and we want to make sure we're offsetting that affect each year and the future.
Okay got it and just switching gears to some of your cash flow commentary.
And 1 thing that kind of stuck out to me was the receivables I think on a dog.
Basis, It was flat sequentially.
Just any additional commentary regarding the receivables I know last quarter. You mentioned you expected some improvement on that and maybe how to think about.
Your dsos to try and in fiscal 'twenty 2.
Yes, good question.
Think about the accounts receivable a lot of it has to do with timing from some of our bigger customers and we actually get those payments out there none of our customers are at risk range any default or bad debt reserves or do you actually came down a little bit and some of our channels and so really strong position. It just really has to do with the timing on when we actually collected the cash at the end of the year.
Got it and I mean.
Do you think your DSO is kind of.
<unk> stay at the current.
Level. They are now or are they they revert towards fiscal 2020.
DSO range, just thinking about fiscal 'twenty, 2 and how that should trend.
Yes.
Actually it really is a little bit more complicated around that too because each of our channels have a different DSO target. That's out there and then as the shale flex up or down and those channels with Dsos will move a little bit thats there.
So holistically, we don't see any issues.
We are putting pressure on our teams to actually increase or improve our DSO targets always.
But really it's highly volatile with the mix of our customers there and each of our channels.
Got it I appreciate the commentary on on the mix that makes sense.
Thanks very much.
Yes. Thanks.
And as I see no. There are no further questions I would like to turn the conference back over to Mr. Joe him check for any closing remarks.
Okay.
Since there are no additional questions. This concludes our call. Thank you all for taking the time to participate today.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.
Okay.
[music].