Q2 2023 MasterBrand Inc Earnings Call
Welcome to Master brands second quarter 2023 earnings Conference call.
During the Companys prepared remarks, all participants will be in a listen only mode. Following management's closing remarks haulers are invited to participate in a question and answer session. Please note that this conference call is being recorded I would now like to turn the call over to Fern Park, Vice President of Investor Relations and corporate communications.
Thank you and good afternoon. We appreciate you joining us for today's call with me on the call today are Dave Banyard, President and Chief Executive Officer, and Andy Simon Executive Vice President and Chief Financial Officer.
We issued a press release earlier this afternoon disclosing our second quarter 2023 financial results.
If you do not have this document is available on our investors section of our website at Master brand Dot com.
I want to remind you that this call will include forward looking statements in either our prepared remarks for the associated question and answer session.
Each forward looking statements contained in this call is based on current expectations and market outlook and are subject to certain risks and uncertainties that may cause actual results to differ materially from those currently anticipated.
Additional information regarding these factors appears in the section entitled forward looking statements in the press release, we issued today.
More information about risks can be found in our filings with the Securities and Exchange Commission.
Including.
Under the heading risk factors in our full year 2022 Form 10-K.
And our first quarter 2023 Form 10-Q, which are available at SEC Gov and at Master brand Dot Com.
The forward looking statements in this call speak only as of today and the company does not undertake any obligation to update or revise any of these statements except as required by law.
Today's discussion includes certain non-GAAP financial measures.
Please refer to the reconciliation tables, which are in the press release issued earlier. This afternoon and are also available at SEC Gov, and Master brand Dot com.
Our prepared remarks today, we won't see a business update from Dave followed by a discussion of our second quarter 2020 through financial results from Andy along with our current 2023 financial all.
Finally, Dave will make some closing remarks before we host a question and answer session.
With that let me turn the call over to Dave.
Thanks, Darren good afternoon, everyone and thank you for joining us here today on our second quarter 2023 earnings Conference call.
Astra brand delivered a quarter of strong financial performance.
Net sales in the second quarter were in line with our expectations as lower volumes from softer end market demand were partially offset by higher average selling price.
Despite the sales decline, we delivered flat adjusted EBITDA year over year.
Adjusted EBITDA in the second quarter of 2023, it was $106 3 million compared to $106 $8 million in the second quarter of 2022.
Our ability to preserve adjusted EBITDA dollars on lower sales drove adjusted EBITDA margin considerably higher than last year with 281 basis points of year over year margin expansion.
This was also higher than our internal estimates going into the quarter as our teams continued to execute at a high level.
We also made great improvements in working capital and delivered strong free cash flow within the quarter.
Our supply chain efforts are in full swing and we are ahead of plan on our inventory reductions from last year's investments.
This along with improvements in accounts receivable helped us generate free cash flow of $123 $4 million in the second quarter of 2023.
And 82% increase over the same period last year.
Our strong free cash flow is allowing us to continue to invest in the business paying down debt and return value to shareholders at the same time.
One method of returning value to shareholders is through our previously announced share repurchase program, which we began executing on this quarter.
These financial results are only possible because of the teams consistent execution.
Our focus on utilizing the established tools as the master brand way is allowing us to repeatedly achieve or exceed our operational targets and make meaningful progress on our strategic initiatives aligned to grow lead through lean and tech enabled.
Today I'd like to share some more details on how those initiatives helped deliver such an outstanding quarter.
Some of the investments we've made in the quarter that we believe will drive growth in future periods.
Before I do that I'd like to provide you with a brief update on what we saw in our end markets during the second quarter.
If you remember at the time of our last earnings call our customers to serve the new construction market, we're performing better than anticipated.
This strength continued through the quarter as builders benefited from a pause in interest rate hikes, and historically low inventory levels of existing homes for sale.
Our flexible manufacturing network enabled us to service this sequential increase in demand from builders, particularly production builders, helping drive our second quarter financial performance.
Well year on year demand for new construction is still down overall, we're encouraged by the trajectory of this end market and research recent builder commentary.
The repair and remodel market, which we serve through our dealer and retail customers have become more dynamic.
The U S retail channel was largely in line with our expectations in the first quarter, we saw slightly greater sequential Pos declined in the second quarter than anticipated.
We expect this demand to remain soft for the balance of 2023.
As we have previously discussed we worked very closely with our retail partners to manage inventory reductions and appropriately level set our production to accommodate their needs, allowing us to preserve margins as demand slows.
Our business with U S dealer customers improved sequentially as expected in line with normal seasonality. However.
However, we are hearing from our dealer network at the end consumer is getting multiple quotes before doing a remodel wind project and being more thoughtful with their budget.
This focus on cost is driving some trade downs.
As people look to give up features to achieve a desired price points.
As we've discussed before our breadth of product offering from premium to stock allows us to work with all our customers and we can shift between product lines to find the right solution for them at their various price points.
This presents a headwind to net sales and adjusted EBITDA dollars, but our adjusted EBITDA margins are relatively unaffected by shifts in product categories.
Well, we don't often talk about the Canadian market given its relatively small size compared to the U S. We have seen both the new construction and repair and remodel markets in this region underperformed our expectations.
We are taking actions to address the softening demand, but we expect this portion of our business to continue to be weaker in the second half of 2023.
I'm balanced new construction seems to be trending a little better and repair and remodel is trending a little worse than our prior expectations.
Regardless of these end market shifts we remain confident in our ability to continue to drive our strategic transformation forward.
As I mentioned earlier, our second quarter is largely a result of our continued operational excellence. This includes both continuous improvement efforts and our strategic initiatives.
Our aligned to grow initiatives, specifically, our supply chain work had a meaningful impact on our second quarter financial performance.
Our tech enabled initiative is already benefiting the organization and a rapid execution is enabling us to increase the number of projects launched and accelerate other projects already in progress.
There's a lot of exciting work underway, so I'll spend a little time discussing both of these areas further.
For those of you remember our Investor day, you'll recall that we discussed our supply chain as a near term opportunity for our wind to grow initiatives.
Our ability to consolidate and improve the efficiency of our supply chain with limited by the complexity in our product offering and manufacturing processes.
As we implemented our common box initiatives and deploy standard processes across the plants organizing our extended supply chain and realizing the full benefits of our scale became a possibility.
Given the supply chain challenges faced during COVID-19, our ability to make changes was limited.
Now in 2023, we've been able to focus on our supply chain optimization.
We are realizing the benefits of these efforts earlier than expected, which helped support our strong margin performance in the second quarter.
Well, it's still in its early stages, our tech enabled initiatives is already improving operations and contributing to our financial performance.
As a reminder, the goal of this initiative is to simplify and modernize our technology Foundation to drive better insights and outcomes for the business.
This can be on the plant floor in the back office or customer facing.
I mentioned in a prior call we've been implementing RFID technology across our facilities.
RFID tags help improved inventory tracking and accuracy.
Automated tracking has allowed us to save on labor as individuals that previously spent time tracking parts have now been reallocated to other more value added areas. Additionally.
Additionally, the improved inventory accuracy has allowed us to control working capital more tightly.
Our improved technology Foundation goes beyond the plant floor and to the back office as we look to get near real time analytics across the company.
We continue to enhance our data lake to support this effort we recently.
Consolidated another facility onto a common ERP platform.
The process was seamless as our digital and technology function did a great job partnering with operations to get this done.
Adding manufacturing customer consumer and pricing analytics to our data Lake strengthens our technology architecture and increases our ability to act with speed and agility.
Those are some examples of how our tech enabled initiatives supporting the business today.
But we are also investing in additional technology to improve the overall buying experience for our customers.
We've accelerated investment in new tech platforms that improve our connection with our channel and expect to roll. These improvements out late this year or early 2024.
The tools of the Master brand way are deeply embedded in this initiative.
We utilized cross functional agile teams through every phase of development and implementation, making sure that we have all the inputs needed to get the right technology in place.
Actual also helps us reduce waste in the process identifying barriers early and keeping the team focused on eliminating those barriers so that when a new technology is washed it works and adds value.
It's early days for us in our tech enabled initiatives, but are accelerating investment in these technologies will make them more robust and bring value to our customer center.
Based on our strong financial performance and our project pipeline supporting our strategic initiatives, we've decided to increase our investment spending for 2023.
Again, a lot of exciting work taking place across the company and a softer demand environment presents an ideal time to prepare for future growth.
With these investments as demand strengthens we believe we can grow in excess of the market as outlined in our long term targets.
Now before I hand, the call over to Andy I want to address another area of success in the quarter.
I'm pleased to say that in June Master brand published its inaugural environmental social and governance report.
I've said this on several occasions being a leader in the industry. It comes with an even greater responsibility to do what's right for all stakeholders.
We take this commitment seriously and I'm extremely pleased with our ESG efforts to date.
Along with the report we've launched an ESG page on our corporate website under the about US section of our homepage, where you can find the ESG report along with future updates on our ESG journey.
And this journey is continuing.
After publishing the report Master brand received notification that it was being recognized as one of America's safest companies by EHS Today magazine.
For over 20 years America's safest companies competition has sought to identify those characteristics that differentiate great safety programs from good ones. We're pleased to be recognized for our practices and procedures that exemplifies safety excellence and our industry leading safety record.
With that I'll hand, the call over to Andy for a closer review of our second quarter financials, and our revised 2023 outlook.
Thanks, Dave and good afternoon, everyone. It's great to be joining you here today I'll.
I'll begin with an overview of our second quarter financial results and then I'll discuss our updated 2023 outlook.
Second quarter net sales were $695 $1 million and 18, 8% decline compared to $855 $6 million in the same period last year and in line with our expectations.
The anticipated volume declines in the market were partially offset by higher net average selling price primarily attributable to previously implemented pricing actions.
As I discussed on our last call the second and third quarters of last year were particularly strong as we benefited from a higher than usual backlog.
We're in a period of more challenging year over year comparison.
Gross profit was $236 $2 million in the quarter down five 3% compared to $249 $6 million in the second quarter of last year. However, gross profit margin expanded 480 basis points year over year from 29, 2% to 34%.
This significant margin expansion was primarily due to our strong operational performance in particular, the supply chain portion of our aligned to grow strict strategic initiative is paying off and delivering ahead of schedule.
In addition, we are being extremely thoughtful and diligent as we take steps to manage our capacity in a dynamic environment and we are still benefiting from the restructuring actions, we took last year and in the first half of 2023.
Our restructuring related savings are tracking ahead year to date with an expected savings of over $5 million per quarter in 2023.
Also important to mentioned our second quarter performance include the insurance proceeds of $2 $2 million related to the tornado damage sustained at our Jackson, Georgia facility earlier in the year.
Selling general and administrative expenses were $141 $7 million $14, 6% lower compared to the same period last year.
I've previously discussed we were allocated a portion of fortune brands home and security costs in 2022, but that allocation is now gone.
Instead, we have standalone costs, but if you compare the impact of the two it is a net savings year over year in 2023.
You should expect increased SG&A spend in the second half of the year versus the first half as we continue to ramp up the pace of investment in our strategic initiatives I'll provide more color on this when I discuss outlook shortly.
We delivered net income of $51 $2 million in the second quarter compared to $49 million in the same period last year.
The 25, 2% year over year increase was driven by a $26 million asset impairment charge related to a trademark in the second quarter of 2022 that did not reoccur this year.
This was partially offset by second quarter 2023 interest expense of $17 $2 million related to debt necessary to fund the dividend of fortune brands at the time of the spin.
As a reminder, in 2022, we did not have any external debt assigned to our balance sheet and therefore, there was no external interest expense in our earnings during the prior year.
Diluted earnings per share were <unk> 39 in the second quarter, an increase from our pro forma diluted earnings per share of 32 cents in the second quarter last year.
Please note that prior year pro forma diluted earnings per share is calculated using 128 million shares outstanding is under U S. GAAP. It is assumed that there were no dilutive equity instruments prior to separation as there were no equity awards at the M. D C outstanding.
We held adjusted EBITDA flat at $106 $3 million compared to $106 $8 million in the same period last year, despite significantly lower volumes.
Adjusted EBITDA margin expanded 281 basis points to 15, 3% compared to 12, 5% in the comparable period of the prior year due to very strong gross margin performance, along with savings from our continuous improvement and strategic initiatives and restructuring actions.
We delivered very strong margin performance this quarter and we will continue to methodically execute on pricing strategies supply chain improvements cost controls and continuous improvement initiatives throughout the back half of the year, while also accelerating the pace of our business investments.
We calculate adjusted EBITDA by removing the impact of nonoperational results and special items from EBITDA. Our definition of adjusted EBITDA includes estimated net cost savings as a standalone company and excludes separation costs restructuring charges and restructuring related items.
The impairment charges and defined benefit actuarial gains and losses.
Turning to the balance sheet, we ended the second quarter with $110 $2 million of cash on hand, and $410 $9 million of liquidity available on our revolver.
Net debt at the quarter end was $705 million.
Resulting in a net debt to adjusted EBITDA leverage ratio of one seven times down from two times at the end of the first quarter of 2023, our second successive quarterly reduction.
Our balance sheet remains strong with the financial flexibility to invest in the business for growth.
Operating cash flow was $194 million for the six months ended June 25, 2023, compared to $76 $1 million in the comparable period last year.
This significant year on year improvement in operating cash flow reflects the execution of our working capital improvement plan as well as terrific operational performance.
We expect our working capital to continue to decrease as the year progresses.
Capital expenditures for the six months ended June 25, 2023 were $11 $4 million, we now expect to spend $50 million to $55 million in 2020 three with the majority of cash outflows scheduled for the second half of the year.
Our projects are on track. However, we believe our capital spending will be lower than prior guidance due in general to project costs being favorable to our original estimates.
Free cash flow was $182 $6 million for the six months ended June 25, 2023 compared to $54 million in the comparable period last year.
This is a $128 6 million dollar improvement year over year.
We continue to expect free cash flow in excess of net income for 2023.
Finally, as you know I may nine we announced the authorization of a stock repurchase program under which we may repurchase up to $50 million of master bad common stock during the quarter, we repurchased 404858 shares of our common stock under this program at a cost of approximately.
<unk> $4.4 million or an average of $10 89 per share.
Turning to our outlook.
We remain optimistic about the increased demand we've seen from our customers servicing the new construction market and expect this trend to continue through the balance of the year.
But those customers servicing the repair and remodel market, we anticipate weaker conditions will persist in 2023.
Additionally, we believe the entirety of the Canadian market will be weaker in 2023, given this backdrop, we expect net sales in the second half of 2023 to be down mid teens year over year.
We expect normal seasonality in the remainder of the year as we've previously stated, but it's important to note that we have an extra week in the fourth quarter based on our normal 445 fiscal calendar.
From an adjusted.
And EBIT standpoint, we plan to build on the strong momentum we developed in the first half of 2023.
The teams are better than anticipated progress on continuous improvement and strategic initiatives gives us the confidence to accelerate our investment spending and position the company for future growth.
Our original 2023 outlook called for strategic investments of $10 million to $15 million for the full year.
It's roughly $6 million spent in the first half of 2023, we now plan to spend $10 million to $15 million in the second half of the year, bringing our estimated full year 2023 investment spend to $16 million to $21 million.
Based on our strong operational performance in this revised investment spending we are raising our adjusted EBITDA outlook range to $345 million to $365 million, a $25 million increase at the midpoint compared to our prior outlook.
On this updated range, we now expect adjusted EBITDA margins of roughly 12.5% to 13% for 2023. This revised 2023 outlook reflects our ability to maintain or expand adjusted EBITDA margins year on year, even in a softer environment.
This outlook does not contemplate any additional insurance proceeds related to the tornado damage sustained at our Jackson, Georgia facility earlier in the year.
We have reduced our expected 2023 interest expense to be $65 million to $70 million and maintained our anticipated 2023 tax rate of approximately 26%.
Established tools and principles from our business system. The Master brand way have helped the team deliver strong performance in the first half of 'twenty 'twenty. Three we are confident that we can extend this performance through the remainder of the year and position the company to achieve its long term financial targets discussed at our Investor day last year and with that I'd like to turn the call back to Dave.
Thanks, Andy.
Rob we're very pleased with our second quarter performance the team's ability to maintain adjusted EBITDA dollars on declining sales and deliver outstanding adjusted EBITDA margin expansion is a testament to the strength of the master brand way and our culture.
This culture is driving our continuous improvement and strategic initiatives forward at an exceptional pace.
The momentum we developed in the first half of 2023 gives us confidence to raise our adjusted EBITDA outlook for the full year and accelerate our investment spending.
Lastly, I would just like to thank our more than 13000 associates at Master brand for their hard work and dedication.
I'll open up the call to Q&A.
Okay.
Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
You May press Star two if you would like to remove your question from the queue.
Participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.
Our first question comes from Adam Baumgarten with Zelman Associates. Please proceed with your question.
Hey, good afternoon nice quarter guys.
I guess, maybe starting on pricing how should we think about the impact of price in the back half of the year do you still expect it to be positive and are you seeing any pricing pressure at this point across any of the channels.
Yes, Thanks Adam.
The way I'd describe the pricing environment. Today is it's we're kind of back to normal pricing environment.
We have not raised price this year, nor do we feel that we need to and so there's a couple of different aspects that I'll talk to you about the current what normal looks like so first off we do have some contracts with some largest customers that are index based and so those are going to move with the indexes as they go and so we're seeing that.
As material costs do come down we're seeing some of those come down a bit but I think I also go back we'd move.
There is a lot of talk in the market of people wanting a lower cost for their project and so we spent a lot of time working with customers across all different parts of the market to get them into the right configuration.
Think of it as value engineering, if you will from the from the designer standpoint, so using the breadth of our portfolio to move folks into the right price point that that suits their needs at the time.
And then beyond that you know I'd say, a normal pricing environment for cabinets. As you know has some promotions in it I think we use that sparingly, but we use it in cases, where we think we need to for larger projects and things like that but so generally I'd say in summary, it's a normal.
Price environment sort of akin to the way it was before COVID-19 and the inflation.
Got it that's helpful. And then just thinking about that value engineering in the spectrum of products that you guys offered and able to kind of get all the price points do you have a sense for in the quarter or at least how much the trade down you mentioned impacted just top line declines.
I don't think we really have a number to give you a its definitely a factor it plays into the year over year revenue numbers, but again it was.
In the second quarter was in line, obviously I think we hit the revenue number that we thought we would and I think for the full year.
It's not material of a change for us, but it does affect.
Material in the sense that it's not going to be much different than what we anticipated at the beginning of the year. So I think it is.
Year over year, it will have an impact, but I think from our expectations and how were planning the year it's immaterial.
Okay got it and then just lastly for me just on the you mentioned are consolidating.
Facility onto your ERP system, how many more facilities do you still have that you can get those benefits from.
Yeah, I mean, I kind of look at the the ERP I.
To some extent a hazard to bring it up because it's so it seems like such a pedestrian.
Thing to talk about when you're talking about technology today, but.
But we do have a number of facilities.
It's rough order of magnitude about.
I would say.
Six more that need to have modernization put in but really the key to that is that that allows us to bring the data into a more unified picture for the company and this is not a.
Lock stock and barrel redo the ERP system. This is upgrading to.
To the latest version or a different system, but then none of these are very large projects, where we are.
Taking massive amounts of resources to do them. So I think that generally speaking we saw roadmap of things to go do that as part of some of the things that we're accelerating but I think to me ERP is kind of get it done and move on it. It just helps us with the data seeing certain parts of the business, but a little more clarity than we've seen in the past and being able to react.
So we have workarounds for that today, obviously, but it just makes things more efficient the more you do that.
Okay got it thanks best of luck.
Thanks, Adam.
Our next question comes from Garik <unk> with loop capital markets. Please proceed with your question.
Oh, hi, Thank you congrats on the quarter wanted to ask first just with respect to the margin walk for the second half of the year.
You had a very strong first half.
Sorry go ahead.
Outlook implies some sequential deceleration just wondering if you can go into some detail as to what you're seeing in some of the drivers sequentially could you did call out increasing investments relative to before.
Before are you seeing any any other changes whether it's with respect to mix or were costs or anything else that would speak to the first half second half move and Mark Yeah sure I'll give you some maybe highlights and if Andy wants to fill in if I Miss anything but generally speaking.
Let's start with the top line the revenue will be smaller as we go so third quarter will be slightly less than second quarter fourth quarter typically has the lowest or the first and fourth quarter are typically lower so there's a revenue volume impact on overall profit ability we are increasing our invest.
As we said I think significantly from what we had anticipated before is I think we can afford to do that and I like the I like the list of projects that we have and this is accelerating certain ones of those.
And then we do you know the fourth quarter is always for some first quarter always have a lot of holidays in them and they're really inefficient times to be running the plants and so you do see an impact on that and it's one of those where you know if I were you to ask the question well don't you guys have a very flexible networks do but you don't flex for one week Christmas holidays.
You kind of just absorb that so you'll see that if you look back through history, you will see that we have this kind of pattern to our profitability through the year.
Last year third quarter was the strongest this year I think second quarter will be the strongest we're going to have a little bit of that dynamic just from some inefficiencies around how you run the plants based on the timing of the year.
And so forth and is there anything I missed on that that's exactly it's a cyclicality and then the strategic initiative investments.
Understood no that's not.
Helpful.
Wanted to follow up just on the R&R side of the equation that you send the consumers are being more selective in a bit more budget conscious.
Outside of the the trade down Youre seeing right now are you seeing it.
Any change in.
It's project size or an increase in cancellations by chance.
Yeah, I wouldn't think cancellations no I think the dynamic is it's an odd one at this time of year I think you've seen this in the press to I mean people are spending more on their vacations. This year and that's probably dollars. We're competing with so what's interesting about it is you see more activity of people interested in <unk>.
Doing their kitchens, they're just not pulling the trigger on it right now so I think.
That gives us pause I don't think its a long term problem I think it's people are either building up their budgets to go do it or they're they're dreaming, a little bit now and eventually we anticipate that they're going to want to do the kitchen at some point or the bathroom. So I think there's just a bit of a distraction for the consumer and I think the consumers.
Also a bit in a wait and see mode. I mean, you see.
People setting up accounts for home equity loans, but they're not taking the money out things like that and so those are kind of.
The kinds of things, we're seeing and I think if you talk to our dealer network I'd say they'd say that traffic is down and that people are shopping around a bit more.
So it may just be that the lag of people thinking about their kitchens, they're waiting a little longer to do it and so we got a little bit of an air pocket in the actual order book because of that.
Again, as we look at the market, but we think we're going to kind of be right in line with where we thought for the year in terms of revenue. It's just it's going to come from different different parts of the market. The builder market is stronger than when we talked in the last quarterly.
Yeah builder, we were questioning what's going to happen towards the tail end of the year. We're more confident today that builders are going to continue to build it and they brought starts up and so forth. So I think we're trading one for the other but yeah R&R in general was a little tepid at the moment, but.
Again, I think the long term fundamentals are good for us and so I'm not too worried about it.
Understood last question just on the on the new construction side can you remind us what the lag is at this point between housing starts and when you tend to.
Yes. It continues to come down you know builders still are carrying an excess backlog of <unk>.
Looks like inside of the second quarter, and what would you anticipate to flow through inventory as as in full coffees for Ya.
Yeah, I'd say, we're not gonna, we don't quantify specifically in our material cost and.
In general as it is about half of.
50 per cent of sales that's about the best I can give you.
Just to be sorry, 50 per cent of cost of sales. Thanks, Andy the in terms of inventory.
I'll I'll take the moments here to say that the supply chain organization within mass oriented an amazing job in the first half of this year and as you know we invested in inventory last year in the first half and it did an amazing job of working through that much quicker than we expected yac's strong cash flow that we have in it.
Quarter, and so I think we're in a position now where our inventory is getting closer to normal it's not all the way there yet, but our inventory costs are on balance with where what we're paying for new incoming inventory. So I think we're past the bubble. If you will of what was more expensive inventory in terms of the the total cost differ.
<unk>, we're certainly not back to prior to inflation type costs for for material, but.
Cereal sequentially has continued to come down.
Okay and then the other question I wanted to ask was.
How do you view growth relative to the market in in the updated 2023 view I know there was there was an issue of working down backlog that that money. The waters. There and then can you talk about how the buckets of incremental investment that you're pulling forward or are linked to accelerating growth.
Going forward relative to the market yeah, absolutely. So I think we still have them that backlog periods still to work through it was not you know it wasn't done by the end of the second quarter last year. So we you know third quarter in particular is going to be.
A big chunk of that backlog is not there. So comparing Q3 Q3 of last year is going to be the biggest decline of the year.
In terms of the market I'd say this year, we're probably on par with the market.
If you take that backlog portion out.
And really the work that we're doing on these growth initiatives is probably more centered on 2024. Some of these are customer and consumer facing type initiatives and we're not we don't have that completed yet and so until they're completed they're really not going to generate.
Any kind of outsize growth, but we're excited about them and you know beyond that there's the norm what I'd call the normal going and winning chair by selling the value proposition. We think is a strong one and we're continuing to do that every day. So I think with a large bill their customers with our large retailers were out there everyday trying to wind chair and and I think we've.
Been success.
Successful at that those types of wins tend to take a little longer to come into the P&L.
When you change a big program over but our goal with the grocery <unk> growth initiatives is to grow across all parts of the business and so some of them.
Take time, because when you when it takes time to change over and some of them take time, because the initiatives that you're building.
To get that growth take time to develop but that's why we think it's prudent for us to spend more money. This year to go after that so we're really ready to go in 2024.
Great and then I think in the first quarter you had highlighted some restocking of the wholesale channel facing buller customers that benefit in revenue in the quarter was there any moving pieces around that in the second quarter, maybe did richert and Ricker continued didn't continue.
Yeah, I think maybe if I remember correctly it might be the flip of that and it's been that we we serve a number of our building builder customers through and distribution network and I think they were destocking through that period. So there was a.
Was Q4 and.
And big into Q1, so I think that's sort of the opposite of perhaps failure.
Portraying at here so I'd.
I'd say no we're kind of out of that mode. Now we're in what I'd say as houses get started we get the order within a couple of months and then we deliver it within a couple of weeks so.
So what I'd say is a normal pace for the new construction market in terms of.
Our orders and delivered.
Okay, great. Thank you.
Thank you.
That's all the questions we have today I'll hand, the call over the phone call us again.
Thank you operator, and thank you everyone for joining US we appreciate your interest and look forward to speaking in the future. This concludes our call.
[laughter] fruit today's conference. He may disconnect. Your lines at this time. Thank you for your participation.
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Oh.
Uh-huh.
[music].
Uh-huh.
[music].
Uh-huh.
[music].
Uh-huh.
[music].
Oh.
Uh-huh.
[music].
Mhm.
[music].
Okay.
[music].
Mhm.
[music].
[music].
[music].
Uh-huh.
[music].
[music].