Q2 2024 American Woodmark Corp Earnings Call
Speaker 1: Good day everyone and welcome to the American Woodmark Corporation. Second, fiscal quarter 2024 cup.
Good day, everyone and welcome to the American <unk> Corporation second fiscal quarter of 2024 conference call.
Speaker 1: Today's call is being recorded November 30th, 2023.
Today's call is being recorded November 30th 2023.
Speaker 1: 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.
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.
Free cash flow net leverage and adjusted EPS per diluted share.
Speaker 1: Yearnings release, which can be found on our website, americanwoodmarks.com, includes definitions of each of these non-GAAP financial measures, companies rational for their usage, and the reconciliation of these non-GAAP financial measures to the most comparable GAAP financial measures.
The earnings release, which can be found on our website American woodmac won't 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.
Speaker 1: We also use our website to publish other information that may be important to investors, but that is investor presentation.
We also use our website to publish other information that may be important to investors such as investor presentations.
Speaker 1: We'll begin the call by reading the company's safe harbor statement under the Private Security Religations Reform Act of 1995.
We will begin the call by reading the company's Safe Harbor statement under the private Securities Litigation Reform Act of 1995.
Speaker 1: All four are looking statements made by the company involving material risks and uncertainties and our subject to change based on factors that may be beyond the company's control.
All forward looking statements made by the company involving material risks and uncertainties and are subject to change based on factors that maybe beyond the companys control.
Speaker 1: Accordingly, the company's future performance in financial results made different materially from those expressed or implied under any Under any such foreign looking statement
Accordingly, the company's future performance and financial results may differ materially from those expressed or implied under any under any such forward looking statements.
Speaker 1: Let's factors include that are not limited to those described in the company's filing with the Securities and Exchange Commission and the annual report to shareholder.
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.
Speaker 1: Companies does not undertake to publicly update or revise its forward-looking statement. Even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized.
The company does not undertake.
Publicly update or revise its forward looking statements, even if experience or future changes make it clear that any projected results expressed or implied there and will not be realized.
Speaker 1: I now would turn the floor over to Paul, J. Hinchette, in your Vice President and CFO . We go ahead, sir.
I'd now like to turn the floor over to Paul to Inkjet Senior Vice President and CFO. Please go ahead Sir.
Speaker 2: Good afternoon and welcome to American Woodmarks, second fiscal quarter conference call. Thank you all for taking the time to date to participate.
Good afternoon, and welcome to American would March 2nd fiscal quarter Conference call. Thank.
Thank you all for taking the time today to participate.
Speaker 2: Joining me is Scott Culbreath, President and CEO .
Joining me is Scott Culbreth, President and CEO.
Speaker 2: Scott will begin with the review of the quarter and I'll add additional details regarding our financial performance. After our comments.
Scott will begin with a review of the quarter and I'll add additional details regarding our financial performance after.
After our comments, we'll be happy to answer your questions.
Speaker 3: Thank you, Paul, and thanks to everyone for joining us today for our second fiscal quarter earnings call.
Thank you Paul and thanks to everyone for joining us today for our second fiscal quarter earnings call.
Speaker 3: Our team delivered net sales of $473.9 million, representing a decline of 15.6% versus the prior year.
Our teams delivered net sales of $473 9 million representing.
Representing a decline of 15, 6% versus the prior year.
Speaker 3: Within new construction, our business declined 11.1% versus priority.
Within new construction of our business declined 11, 1% versus prior year.
Speaker 3: macroeconomic factors, including interest rates and housing affordability, continues to account for the slowdown in new constructs.
Macroeconomic factors, including interest rates and housing affordability continues to account for the slowdown in new construction.
Speaker 3: These short-term factors are being partially mitigated by builders through rate-by-downs and shifts to ready to move at homes and build a ramp.
The short term factors are being partially mitigated by the builders through rate buy downs and shifts to ready to move in homes and build to rent homes.
Speaker 3: We are strategically aligned with 19 of the top 20 national builders and key regional.
We are strategically aligned with 19 of the top 20 national builders and key regional builders.
Speaker 3: With our best in class direct service model, we plan to continue to grow our share with new and existing customers and take advantage of the share gains our partners are realizing in the market.
With our best in class direct service model, we plan to continue to grow our share with new and existing customers and take advantage of the share gains are partners, you're realizing in the marketplace.
Speaker 3: Looking at a remodel, which includes our home center and independent deal and distributor businesses, revenue declined 18.8%.
Looking at remodel, which includes our home center and independent dealer and distributor businesses revenue declined 18, 8% versus the prior year.
Speaker 3: Within this, our home center business was down 18.3% versus prior.
Within this our home center business was down 18, 3% versus prior year.
Speaker 3: Demand trends decline due to lower in-store traffic rates and consumers choosing smaller size products.
Demand trends declined due to lower in store traffic rates and consumers choosing smaller size projects.
Speaker 3: with regards to our dealer distributor business, we were down 20% versus the prior.
With regards to our dealer distributor business, we were down 20% versus the prior year.
Speaker 3: Our Justodibidine increased 7% to 72.3 million dollars or 15.3% for the course.
Our adjusted EBITDA increased 7% to $72 3 million or 15, 3% for the quarter.
Speaker 3: Report of EPS was $1.85 and adjusted EPS for $2.36.
Reported EPS was $1 85, and adjusted EPS of $2 36.
Speaker 3: The improvement performance is due to product mix and improved efficiencies in the manufacturing platforms. Our team continues to draw
The improvement performance is due to product mix and improved efficiencies in our manufacturing platforms.
Our team continues to drive operational excellence in our plants.
Speaker 3: cash balance was 96.4 million dollars at the end of the second phase.
Our cash balance was $96 $4 million at the end of the second fiscal quarter and the company has access to an additional $323 $2 million under its revolving credit facility.
Speaker 3: And the company has access to an additional $323.2 million under its revolving credit.
Speaker 3: Leverage was reduced to 1.05 times adjusted EBITDA, and the company repurchased 394,000 shares in the quarter.
Leverage is reduced to one five times adjusted EBITDA in the company repurchased 394000 shares in the quarter.
Speaker 3: Our board is authorizing new $125 million share repurchase program that replaces our current authorization that only had $22.9 million remaining.
Our board has authorized a new $125 million share repurchase program that replaces our current authorization that only had $22 $9 million remaining.
Speaker 3: Our outlook for fiscal year 24 remains unchanged with our expectation for sales at a low double digit decline.
Our outlook for fiscal year 'twenty four remains unchanged with our expectations for sales at a low double digit decline.
Speaker 3: Due to the strong fiscal, second quarter performance are adjusted to EBITDA expectations increasing to a range of $235 million to $250 million. Our team continues to execute against our strategy that has three main...
Due to the strong fiscal second quarter performance, our adjusted EBITDA expectations, increasing to a range of 235 million to $250 million.
Our team continues to execute against our strategy that has three main pillars.
Growth.
Digital transformation and platform design.
Speaker 3: Grocery benefit from an upcoming launch of the low-scu high-value offering in the home centers, card and pros. In a new brand, this is...
Growth will benefit from an upcoming launch of a low SKU a value offering in the home centers charging pros.
And a new brand to serve our distribution customers.
Speaker 3: Digital transformation efforts over the last fiscal quarter include the final planning of the R.P. for Monterey. Go live next.
Digital transformation efforts over the last fiscal quarter include the final planning of ERP for Monterrey go live next quarter in.
Speaker 3: and website enhancements for a home center business for the market.
And website enhancements for our home center business, who will launch in February.
Speaker 3: In addition, we completed the implementation of our CRM sales solution across the new construction channels field sales organizers.
In addition, we completed the implementation of our CRM sales solution across the new construction channels field sales organization and we initiated the planning for the next phase of work, which includes the CRM service module supporting our customer care organization and new construction service Center operations.
Speaker 3: And we initiated the planning for the next phase of work, which includes the CRM service module supporting our customer care organization and new construction service center operations.
Speaker 3: Platform design work continues with Occupy, Monterey, Mexico in November , and Hamlet North Carolina in December .
Platform design work continues with occupancy in Monterrey, Mexico in November in hamlet North Carolina in December.
Speaker 3: We will continue infrastructure and equipment installations in the coming months, as well as training and hiring new teammates to support the initial run.
We will continue infrastructure and equipment installations in the coming months as well as training and hiring new teammates to support the initial ramp plan.
Speaker 3: As a reminder, this expansion will deliver additional capacity in our stock kitchen and bath cabinetry products.
As a reminder, this expansion will deliver additional capacity in our stock kitchen, and Bath cabinetry product lines.
Speaker 3: In closing, I'm proud of what this team accomplished in the second fiscal quarter and look forward to their continuing contributions during fiscal year 24.
In closing I'm proud of what the team accomplished in the second fiscal quarter and look forward to continuing contributions during fiscal year 'twenty four.
Speaker 3: I'm now turning the call back over to Paul for additional details and I'll look to the answer results in the quarter.
I'll now turn the call back over to Paul for additional details on our financial results for the quarter.
Thank you Scott.
Speaker 2: Reviewing our second quarter results for fiscal year 2020.
View, our second quarter results for fiscal year 2024.
Speaker 2: Net sales were 473.9 million, representing a decrease of 87.6 million, or 15.6% versus a priori.
Net sales were $473 9 million, representing a decrease of $87 6 million or 15, 6% versus the prior year.
Speaker 2: Remodeled net fails, which combines home centers and independent dealers and distributors, decreased 18.8% for the second quarter of her spry.
Remodel net sales, which combines home centers and independent dealers and distributors decreased 18, 8% for the second quarter versus prior year.
Speaker 2: with both home centers and dealer distributors decreasing 18.3% and 20% respectively.
With both home centers and dealers distributors, decreasing 18, 3% and 20% respectively.
Speaker 2: New construction net sales decreased 11.1% for the quarter compared to the last.
New construction net sales decreased 11, 1% for the quarter compared to last year.
Speaker 2: Our gross profit margin for the second quarter fiscal year 2024 improved 420 base
Our gross profit margin for the second quarter of fiscal year, 2024 improved 420 basis points to 21, 8% of net sales versus 17, 6% reported in the same period last year.
Speaker 2: to 21.8% of net sales versus 17.6% report in the same period last year. First margin benefited from a favorable product mix and in the same period last year.
Gross margin benefited from a favorable product mix and sustained pricing matching inflationary cost impacts continued operational improvements in our manufacturing facilities and an increased ability in our supply chain.
Speaker 2: Total operating expenses, excluding any restructuring charges for the second quarter of fiscal year 2024, was 12.2% in net sales versus 10.1% for the same period last year.
Total operating expenses, excluding any restructuring charges for the second quarter fiscal year 2024 was 12, 2% of net sales versus 10, 1% for the same period last year.
Speaker 2: The 210 basis point increases due to increases in our incentives and profit to chairings for all employees.
210 basis point increase is due to increases in our incentives and profit sharing for all employees.
Speaker 2: The Jeff Zennett income was $38.8 million or $2.36 per deleted share in the second quarter of fiscal year 2024, versus $37.3 million or $2.24 cents per deleted share
Adjusted net income was $38 8 million or $2.36 per diluted share in the second quarter of fiscal year 2024 versus $37 3 million or $2 24 per diluted share last year.
Speaker 2: Adjusted EBITDA for the second quarter of fiscal year 2024 was 72.3 million or 15.3% of net sales versus 67.6 million or 12% of net sales are poured in the same period last.
Adjusted EBITDA for the second quarter of fiscal year, 2024 was $72 3 million or 15, 3% of net sales versus $67 6 million or 12% of net sales reported in the same period last year. This represents a 330 basis point improvement year over year.
Speaker 2: This represents a 330 basis point improvement year over year.
Speaker 2: Despite facing the year-to-date volume headwinds, our continued strong earnings performance this year is a direct result of the hard work and efforts our teams have put in to reestablish our operating efficiencies, stabilize our supply chain, and control spending in the SGNA function.
Despite facing a year to date volume headwinds our continued strong earnings performance. This year is a direct result of the hard work and efforts our teams have put in to reestablish our operating efficiencies.
Stabilize our supply chain and control spending in the SG&A functions.
Speaker 2: These earning gains are partially offset by increases in the sum compensation, profit sharing, and our digital transformation.
These earning gains are partially offset by increases in incentive compensation and profit sharing and our digital transformation costs.
Speaker 2: Very cashful, a total of the positive 109.9 million for the current fiscal year to date, compared to 44.4 million in the prior year.
Free cash flow totaled a positive $109 9 million for the current fiscal year to date compared to $44 4 million in the prior year.
Speaker 2: The 65.4 million increase was primarily due to changes in our operating cash flows, specifically higher net income and lower inventory, partially offset by our increased capital spending.
The $65 4 million increase was primarily due to changes in our operating cash flows specifically higher net income and lower inventory, partially offset by our increased capital expenditures.
Speaker 2: Net leverage was 1.05 times adjusted EBITDA at the end of the second quarter fiscal year 2024, representing a 1.18 times improvement from the 2.23 times as of last.
Net leverage was one five times adjusted EBITDA at the end of the second quarter fiscal year 2024, representing a one eight times improvement from the two to three times as of last year.
Speaker 2: As of October 31, 2023, the company had 96.4 million of cash and cash equivalents on hand, plus access to 323.2 million of additional availability under our revolving facility.
As of October 31, 2023, the company had $96 4 million of cash and cash equivalents on hand, plus access to $323 2 million of additional availability under our revolving facility.
Speaker 2: Under the current, current Sherry Purchase Program, the company purchased $30 million or $394,000 shares in the second quarter, representing about 2% of the outstanding shares being returned.
Under the current share repurchase program the company purchased $30 million or 394000 shares in the second quarter, representing about 2%.
Of the outstanding shares being retired.
Speaker 2: The board of directors has approved and authorized and the $125 million sharedelo??.
The board of directors has approved and authorized a new $125 million share repurchase plan.
Speaker 3: We are retiring the remaining $22.9 million on the old shared purchase authorization and rolling it into this new offer.
We are retiring the remaining $22 9 million on the old share repurchase authorization and rolling it into this new authorization.
Speaker 2: Our outlawed for fiscal year 2024 remains unchanged from the sales.
Our outlook for fiscal year 2024 remains unchanged from a sales perspective, and we continue to expect low double digit declines in net sales versus fiscal year 2023.
Speaker 2: and we continue to expect low double-digit declines in net sales versus fiscal year 2023.
Speaker 2: The change in net sales is highly dependent upon overall industry, economic growth trends, material constraints, labor impact, interest rates, and consumer behaviors.
The change in net sales is highly dependent upon overall industry economic growth trends material constraints labor impact interest rates and consumer behaviors.
Speaker 3: Given our strong performance for the first half of the year, we are increasing our adjusted EBITDA expectation for the full fiscal year of 2024 to a range of 235 million to 250 million.
Given our strong performance for the first half of the year, we are increasing our adjusted EBITDA expectation for the full fiscal year 2024 to a range of 235 million to $250 million.
Speaker 3: Increasing our expected outlook is due to our strong operational performance and execution. We have achieved in the first half of our fiscal year 2020.
The increase in our expected outlook is due to our strong operational performance and execution. We have achieved in the first half of our fiscal year 2024.
Speaker 2: Reitering our outlook from the past quarter, we are still on track for starting our new operational locations in Hamlet, North Carolina and Monterey, Mexico, this fiscal year.
Reiterating our outlook from the past quarter, we are still on track for starting a new operational locations in hamlet North Carolina to Monterrey, Mexico This fiscal year.
Speaker 2: This will negatively impact the results as we continue incurring the operational expenses without the offsetting full revenue performance of those locations.
This will negatively impact our results as we continue incurring the operational expenses without the offsetting full revenue performance of those locations.
Speaker 2: The total impact of these charges is approximately $8 million in the full fiscal year, 2000.
The total impact of these charges is approximately $8 million and the full fiscal year 2024.
Speaker 2: Our capital allocation priorities for fiscal year 2024 remain unchanged.
Our capital allocation priorities for fiscal year 2024 remain unchanged.
Speaker 2: We will first be focused on investing back into the business for the plant expansions in Monterey, Mexico and Hamlet, North Carolina.
We will first be focused on investing back into the business for the plant expansion in Monterrey, Mexico, and hamlet North Carolina.
Speaker 2: continuing our path forward in our digital transformation with investments in our ERP and CRM solutions, and investing in automation. Next.
Continuing our path forward in our digital transformation with investments in our ERP and CRM solutions and investing in automation.
Next we will continue our share repurchasing.
Speaker 2: And given our current definition, we will be deprioritizing paying down debt in fiscal year 2000.
And given our current debt position, we will be prioritizing paying down debt in fiscal year 2024.
Speaker 3: In closing, the business continues to build off the progress made throughout the process.
In closing the business continues to build lots of progress made throughout the past year. We fully expect these improvements to carry through the financials for the remainder of the fiscal year.
Speaker 2: We fully expect these improvements to carry through the financials through the remainder of the fiscal.
Speaker 2: This is a testament to the commitment, hard work, and efforts are employees of best in the company to achieve our results, and the direct alignment to the GDP strategy.
This is a testament to the commitment hard work and efforts of our employees invest in the company to achieve our results and the direct alignment to the GDP strategy.
Speaker 2: I'm grateful for what the teams have accomplished and thank all of our team members at a Merkel with Mark for their continued efforts. They are the ones who truly make it happen.
I am grateful for what the teams have accomplished and thank all of our team members in America will embark for their continued efforts there to the ones who truly make it happen daily.
Speaker 2: This concludes our prepared remarks. We'll be happy to answer any questions you have.
This concludes our prepared remarks, we'll be happy to answer any questions you have at this time.
Yeah.
Speaker 1: Please, in general, men at this time, we'll begin a question and answer session. Do ask a question you may press star and then one using a touch on telephone. So, withdraw your questions you may press star and two.
Ladies and gentlemen at this time well begin the question and answer session.
You ask a question you May press Star and then one using a touchtone telephone.
Withdraw your question you May press Star two.
Speaker 1: If you are using a speaker phone, we do ask that you please pick up your handset, prior to pressing the numbers to ensure the best sound quality.
If you are using a speaker phone would you ask that you. Please pick up your handset prior depressing the numbers to ensure the best sound quality.
Speaker 1: Once again that is star and then one, to join the question.
Once again that is star and then one to join the question queue.
Speaker 1: Our first question today comes from Gary Schmoing from Luke Capital. Please go ahead with your question.
Our first question today comes from.
From loop capital. Please go ahead with your questions.
Speaker 3: Oh, hi, thanks enough and congrats on the quarter. Within R&R, I was wondering if you could go into some more color and what you were seeing on both in stock and made to order categories.
Oh, hi, thanks, and congrats on the quarter.
Within our in our so I was wondering if you could go into some more color on what you were seeing on both.
Stock and made to order categories.
Speaker 3: Yeah, thanks, Eric. So specifically in R&R at the home center side, when you talk about in stock and NTO, we've seen negative trends in both categories, but NTO has been more severely impacted overall when you think about the price points. We've always said that we felt the stock category would be a bit more resilient in a slowdown, but even in this environment today, we are seeing unfavorable trends, but not to the degree we see in special.
Yes, thanks, Gary So specifically in R&R at the at the home Center side. When you talk about in stock in India, we've seen negative trends in both categories, but MTO has been more severely impacted overall when you think about the price points. We've always said that we felt the stock category would be a bit more resilient in a slowdown.
But even in this environment today, we are seeing unfavorable trends, but not to the degree we see in special order.
Speaker 3: Got it. I think you spoke to favorable mix. I think that was more related to R&R, but I think we were hearing from a competitor that they were seeing trade down effects more on the new construction side. Curious to see if you were seeing the same negative trade down pressures and just maybe speak to pricing trends more broadly.
Got it. Thank you spoke to a favorable mix I think that was more related to R&R, but I think we're hearing from a competitor that they were seeing trade down effect more on the new construction side curious to see if you were you were seeing the same negative trade down pressures.
Just maybe speak to pricing trends more broadly.
Speaker 3: So yeah, we're not seeing that same trend. We've also not got the high end of the price continuum. So we're not selling custom or high end in my custom product to trade out against. In the value space that we then, we've seen very much of maintenance mode and some positive mix depending on the customer and the product category. Looking on the price data database our herb chart
So yes, we're not seeing that same trend.
We've also not got the high end of the price continuum. So we're not selling custom or high end semi custom product that trade down against in the value space that we than we've seen.
Very much a maintenance mode and some positive mix depending on the customer.
The product category.
Got it thanks for that best of luck I'll pass it on.
Thanks.
Speaker 1: Our next question comes from Stephen Ramsey from Thompson Research Group. Please go ahead with your question.
Our next question comes from Steven Ramsey from Thompson Research Group. Please go ahead with your question.
Speaker 4: Good evening, maybe to start with on the raised even a guidance. A very strong first half. Can you clarify if any of that is the second half outlook being any better?
Good evening, maybe to start with on the raised EBITDA guidance, a very strong first half can you clarify if any of that is the second half outlook being.
Being any better.
Speaker 2: I guess Stephen, I guess maybe rephrase your question about the second half outlooking better.
Yes, Stephen I guess, maybe rephrase your question about the second half outlook being better.
Speaker 4: Sure, on the even of guidance being raised, was that solely the first half or does the second half of the year have anything to do with that?
Sure on the EBIT guidance being raised was that solely the first half or does the second half of the year has anything to do with that.
Speaker 3: Yeah, it's primarily the first half performance that we've seen, because there's still so much uncertainty as we think about the second half from a demand profile standpoint. And as we've signaled over the past couple of quarters, we do have those startup costs that Paul referenced. Roughly 8 million that fell back half loaded from operating.
It's primarily the first half performance that we've seen because there's still so much uncertainty as we think about the second half from a demand profile standpoint and.
And as we've signaled over the past couple of quarters, we do have those startup costs that Paul referenced.
$8 million that is all back half loaded from Monterrey in hamlet.
Speaker 4: Okay, helpful, helpful. And then if you think about stocking levels by channel and customer type, do you feel that they're at a healthy level or do you think given the slowdown broadly?
Okay helpful. Helpful. And then if you think about stocking levels.
By channel and customer type do you feel that they are at a healthy level or do you think given the slowdown.
Broadly and.
Speaker 4: And a big ticket, do you think that some customer channel partners have taken stock down to low?
And then big ticket do you think that some customer channel partners have taken stock down too low.
Speaker 3: So yeah, just as a reminder, the vast majority of our portfolio is not stocked at a retailer, or at a builder or at a dealer. So you really are only talking about our stock kitchen and bath business that sits inside the home centers. Now over the last couple of quarters, we've had some discussion around some of these stocking that had occurred that was impacting the business.
So yes, just as a reminder, the vast majority of our portfolio was not stocked at a retailer or a builder or at a dealer. So you really are only talking about our stock kitchen and bath business that sits in the inside of the home centers over the last couple of quarters, we've had some discussion around.
<unk> some destocking that had occurred that was impacting the business I feel we're roughly behind that.
Speaker 3: I feel we're roughly behind that. There's always some opportunities to get any better in store positions, and we continue to pursue those with the retailers, but nothing of significance that I would highlight in that space. Okay.
There is always some opportunities to get in.
In store positions and we continue to pursue those with the retailers, but nothing of significance that I would highlight that space.
Okay helpful. Thank you.
Speaker 5: And our next question comes from McLaren Hayes from the Element and Associate. We go ahead with your question. Hey, good evening guys. I'm was curious if you could talk a little bit about input costs and how they're trending at this point.
And our next question comes from Mclaren Hayes from Zelman and Associates. Please go ahead with your question.
Hey, good evening guys.
I was curious if you could talk a little bit about input costs and how they are trending at this point.
Speaker 3: Yes, certainly. When you think about the raw materials that we're purchasing, those have stabilized, so that's a positive. On the flip side, we do continue to see upper pressure in the labor markets, as well as domestic transportation.
Yes, certainly when you think about the raw materials that we're purchasing those have stabilized. So that's that's a positive.
On the flip side, we do continue to see upward pressure in the labor markets.
As well as domestic transportation.
Speaker 5: and has any of that relief, I guess, on the Hardwood lumber side?
And has any of that relief.
I guess on the hardwood lumber side.
Speaker 5: for any discussion around pricing rollbacks across any of your three channels.
Further discussion around pricing rollbacks across any of your three channels.
Speaker 3: Certainly, we wouldn't use the term rollbacks. When we talk about pricing, we do monitor those input costs, and we do have some arrangements that are tied to those particular indices. But our general philosophy and approach and discussion that we've shared even in this call of the last couple of quarters is that any pricing reductions would have to be driven by deflation first.
I certainly wouldn't use the term rollbacks when we talk about pricing, we do monitor those input cost and we do have some arrangements that are tied to.
Those particular indices.
But our general philosophy and approach and discussion that we've shared even in this call over the last couple of quarters is that any pricing reductions would have to be driven by deflation first.
Speaker 3: but also there being evaluation of the profitability of that particular channel customer because we've got to continue to deliver on our long-term profitability goals. So I'll just say that we're always having conversations around price and there's continue to be ongoing with our customers.
But also there'll be an evaluation of the profitability of that particular channel and customer because we've got to continue to deliver on our long term profitability goals. So I'll, just say that we're always having conversations around pricing is continuing to be ongoing with our customers.
Speaker 5: Okay, thanks. And I guess one last one. Could you just elaborate a bit on some of those website changes you alluded to in the Home Center channel?
Okay. Thanks, and I guess, one last one could you just elaborate a bit on some of those website changes you alluded to in the home Center channel.
Speaker 3: Yeah, it's basically just a risk in and a refresh, more relevant content, as well as ways to drive consumers through the purchase journey that ultimately help to drive them into the store to ultimately make a purchase decision.
Yes, it's basically just a re skin and a refresh.
More relevant content as well as.
Ways to drive consumers through the purchase journey that ultimately helps drive them into the store to ultimately make a make a purchase decision.
Awesome well thank you.
Speaker 1: Our next question comes from Julio Romero from Sedaudi Company. Please be able to question.
Our next question comes from Julio Romero from Sidoti and company. Please go ahead with your question.
Speaker 6: Thanks, hey, good afternoon. Can you maybe just take a little bit more into the operational efficiency and the stabilization of the supply chain and how much more runaway you have for each of those?
Thanks, Hey, good afternoon can you, maybe just take a little bit more into the operational efficiencies and the stabilization of the supply chain and how much more runway you have for each of those.
Speaker 3: I think on the supply chain stability, that's pretty much secured in which we've kind of laughed at. We've had a couple of quarters of that performance being very strong. So we're not seeing the disruption that we were experiencing in the last couple of years. I would say that we always have ongoing opportunity in the operations time. We talk about operational excellence.
I think on the supply chain stability, that's pretty much secured in which we've kind of lapped that so we've had a couple of quarters of that performance being very strong. So we're not seeing the disruption that we're experiencing over the last couple of years.
I would say that we always have ongoing opportunity in the operation side, we talk about operational excellence across the business not just in the manufacturing facilities, but all of our functional cost.
Speaker 3: across the business, not just in the manufacturing facilities, but all of our functional costs.
Speaker 3: areas and we'll continue to drive projects to take cost out of those particular areas as we go forward.
Areas and we will continue to drive projects to take cost out of those particular areas as we go forward.
Speaker 6: Okay, really helpful there. And then I guess, you know, in the second quarter, you had a very tough year where you're comparable on the volume side. Just how would you have us think about third quarter and the fourth quarter is the year where you're conscious, get a little bit easier from a volume perspective?
Okay really helpful. There and then I guess.
In the second quarter, you had a very tough year over year comparable on the volume side, just how would you have us think about third quarter and the fourth quarter as the year over year comps get a little bit easier from a volume perspective.
Speaker 3: Yeah, I think Q3 is unfortunately going to be fairly similar to Q2. We've now got a soft-to-demand environment that you're obviously seeing in the marketplace. We will put a couple of extra down days in around the holidays as well. But as we push into Q4, we think the columns do start to improve at this time. Still think they're likely negative, but not nearly to the rate we've seen in Q2 and Q3.
I think Q3 is unfortunately going to be fairly similar to Q2.
Now got a softer demand environment that youre, obviously seeing in the marketplace. We will put a couple of extra down days around the holidays as well, but as we push into Q4, we think the comps do start to improve at this time I still think theyre likely negative, but not nearly to the rate we've seen in Q2 and Q3.
Very helpful. I appreciate the questions.
Speaker 1: Our next question comes from Kim Blues from Bear. Please go ahead with your question.
Our next question comes from Tim <unk>.
Luiz from Baird. Please go ahead with your question.
Speaker 7: Hey guys, good afternoon. Hey, good afternoon. Nice job. Maybe just the first one, Scott, just how, when you look, when you talk to your builder customers, where do you feel like, you know, in terms of affordability, they are in kind of adjusting kind of score footage and home sizes. And, you know, if it trends lower to try to create a more affordable product, I mean, how does that kind of impact would mark, if at all?
Hey, guys good afternoon.
Afternoon.
Sure.
Maybe just the first one Scott just how when you look when you're talking to your builder customers.
Where do you feel like you know in terms of affordability they are.
And kind of adjusting kind of square footage in home sizes and.
If it trended lower to try to create a more affordable product I mean, how does that kind of impact would mark if at all.
Speaker 3: Yeah, so the first thing I've remarked on is, what are we seeing hearing from the builder customers around price points and then what's bringing interest rates into that discussion? The pricing has not really been the bigger challenge. Interest rates have been the higher priority. So many builders have done body-on strategies to keep those rates and a sub-firever or just north of five rate to keep folks interested in going into the home.
Yes. So the first thing I would remark on is what are we seeing hearing from the builder customers around price points, and then whats bring interest rates into that discussion.
Pricing has not really been the bigger challenge the interest rates had been the higher priority. So many builders have done by down strategies to keep those rates in the sub five or just north of five rate to keep folks interested in going into the homes I do think there'll be a rotation down in home size and folks are starting to come.
Speaker 3: I do think there will be a rotation down in home size and folks are starting to model that. We experienced that a couple of years ago. That was part of our strategy as you recall when we did the acquisition. It allowed us to bring origins to bear and be a product offering to take in those homes from a price point standpoint.
Model of that.
We experienced that a couple of years ago that was part of our strategy as you recall when we did the acquisition that allowed us to bring origins to bear and be a product offering of taken those homes from a price point standpoint, I guess, when I step back and think about homes, though as they do get specced smaller.
Speaker 3: I guess when I step back and think about homes though as they do get spec smaller, the most important space typically defined in those homes is the
The most important space typically defined in those homes is the kitchen and usually those spaces are protected so I don't im.
Speaker 3: and usually those spaces are protected. So I'm not alarmed or worried that trends would be unfavorable for the amount of cabinetry we would sell into a kitchen.
Im not alarmed or worried that trends would be unfavorable for the amount of cabinetry, we would sell into a kitchen space, where you may have some impacts as perhaps a mudroom gets dropped off space is taken out but there is certainly still going to be a bathroom bathroom space theres still an opportunity to bring product into those areas.
Speaker 3: where you may have some impacts is perhaps a mudroom gets dropped off as space is taken out. But there's certainly still going to be a bathroom bathroom space just still on our Virginia Brain product into this.
Speaker 7: Okay, okay, that's really helpful. And then on the, kind of the wallet share opportunity.
Okay. Okay, that's really helpful.
Then on the.
Kind of a wallet share opportunity.
Speaker 7: Where do you, I know you're not going to tell us like, you know, what exactly it is, but I mean, maybe just how much runway could there be from a lawlet's share perspective with some of your top kind of national regional.
Where do you I know youre not going to tell us.
What exactly it is but I mean, maybe just how much runway could there be from a wallet share perspective, with some of your top kind of national and regional builders.
Speaker 3: Yeah, so it's a difficult question to answer because it is very much regional market-specific. So there's gonna be some markets where we're pretty mature with our partners and have a very high share position. So it's definitely gonna be a maintain and maybe target some regionals in that space. And then we've got some markets where we think there's a much more sizable opportunity to go get share with players. So if we target those particular markets and go after those particular accounts, Yeah, socheck.com in terms of cooperation with the community.
Yes.
It's a difficult question to answer because it is very much regional and market specific so theres going to be some markets, where we're pretty mature with our partners and have a very high share position.
So it's definitely going to be a maintain and maybe target some regionals in that space.
And then we've got some markets, where we think there is a much more sizeable opportunity to go get share with players. So we target those particular markets and go after those particular accounts.
Sure I can add a lot more detail beyond that.
Speaker 7: Yeah, no, but there still are opportunities. I mean, it's kind of a point for wallet share to improve.
No, but there still are opportunities I mean, it's kind of a point for wallet share to improve.
Speaker 7: Yeah, okay. And then maybe just the last one, kind of first half, you guys did about 15% evitama region.
Absolutely.
Okay, and then maybe just the last one.
Kind of first half.
You guys did about 15% EBITA margin.
Speaker 7: You know, I, you know, there's a little bit of variability here, but, but in the back half it's going to be something that's maybe closer to 12.
Yes, there's a little bit of variability here, but in the back half of it is going to be something thats may be closer to 12.
Speaker 7: I know that you get 8 million from the start-up, so it's about a hundred bases, boy.
I know that you get 8 million from the start ups, that's about 100 basis points Janney.
Speaker 7: January , seasonally, waker, like, is there anything else just to call out, you know, why there would be that kind of maybe step down first half to second half, you know, outside of those kind of discrete items.
January is seasonally weaker like is there anything else just to call out.
Why there would be that time that maybe stepped down first half the second half.
Those kind of discrete items.
Speaker 3: Yeah, the three things we talked about last quarter and be the same items that we'd hit this quarter, you hit on two of them. So monitoring Hamlet, we've already discussed the 8 million in the back half. Certainly softer to me in environment as we think about back half. And then Miracicle was the only mention. So some of our fixed costs, you do move our timeline on that as the August September time frame. So we'll roll through some incremental costs for that. But nothing substantial outside of those three areas.
There are three things, we talked about last quarter and be the same items that we'd hit this quarter you hit on two of them. So monitoring hamlet and we've already discussed the 8 million in the back half.
Certainly a softer demand environment as we think about back half.
And then Mir cycle was the only mentioned to some of our fixed cost do move our timeline on that is the August September.
Timeframe, so we'll roll through some incremental cost for that but nothing substantial outside of those three areas.
Speaker 7: Okay, very good. Good luck on the rest of your guests. Thank you for the tunnel.
Okay. Okay very good good luck on the rest of your guys. Thank you for the time.
Thanks, Tim.
Speaker 1: Once again, if you would like to ask a question, please press star and then one. So, withdraw your questions you may press star in two.
Once again, if you would like to ask a question. Please press star and then one to withdraw your question you May Press Star two.
Speaker 1: Our next question comes from Colin Zaren from Jeffries. Go ahead with your question.
Our next question comes from Colin Marin from Jefferies. Please go ahead with your question.
Speaker 8: Hi, good afternoon guys, thank you for taking my question. I guess she's building off of that last question on the incremental cost that you're going to see in the back half of this year. I guess any color is how long you expect those startup costs to linger into figure fiscal year 25. Should we be expecting to see some margin impression, I guess, in the first half of the year from these strong 15% margins going forward because of those cost stain inhibits.
Hi, Good afternoon, guys. Thank you for taking my question.
I guess just building off of that last question on the incremental cost that youre going to see in the back half of this year I guess any color as to how long you expect those start up costs to linger.
To figure fiscal year 'twenty, five should we be expecting to see some margin compression I guess in the first half of the year from these strong 15% margins.
Going forward because of the cost staying in the business.
Speaker 3: So we're not yet ready to start providing an outlook specifically on our fiscal year 25, but I think you've hit the key point there. We are going to have a ramp period. We're not going to open those factories and then all of a sudden you're going to be full overnight. So there's going to be a ramp period. I can't disclose necessarily how long I'm going to take us to fill that, but there will be some continued pressures we're going to be early part of.
So we're not yet ready to start providing an outlook specifically on our fiscal year 'twenty five, but I think you've been.
Hit the key point there we are going to have a ramp period, we're not going to open their factories and then all of a sudden you're going to be full overnight, so theres going to be a ramp period.
I can't disclose necessarily how long it will take us to fill that but there will be some continued pressure as we go into the early part of 'twenty five.
Speaker 8: Great. And I don't know if you're gonna be willing to comment on this either, but I guess some of the larger builders are still fairly optimistic around their ability for volumes in 2024, calendar year 2024. I guess any early read as to how you guys are feeling about the full year 2024, given the strength in what the builders are saying, and then any color about what you're feeling for the repair and remodel market.
Great and then I don't know if you can.
Comment on this either but I guess some of the larger builders are still fairly optimistic around their ability for volumes in 2020 for calendar year 2024.
Any early read as to how you guys are feeling about the full year 2024.
Given the strength of <unk>.
What the builders are saying and then any color about what youre feeling for the repair and remodel market.
More broadly.
Speaker 3: On the builder side, what we're seeing and hearing is a pretty wide range of expectations. There are some analysts projecting low single digit growth in Stards.
Yeah on the builder side, what we're seeing and hearing is a pretty tight range of expectations, either some analysts projecting low single digit growth in starts for calendar year 'twenty four and we have some builders that are pretty bullish and then others that are that are concerned. We haven't started our official kind of budget cycle process will start.
Speaker 3: for calendar year 24, and we have some builders that are pretty bullish and then others that are concerned. We haven't started our official kind of budget cycle process. We'll start that at the beginning at 24, and I'll give us a better perspective, but there does seem to be some energy to perhaps some slight growth as we move in the 24. I think we're models going to continue to be under pressure. We've certainly heard from the home centers in the last couple of weeks.
At the beginning of 'twenty, four and then I'll give us a better perspective, but there does seem to be some energy to perhaps some slight growth as we move into 'twenty. Four I think remodel is going to continue to be under pressure.
Certainly heard from the home centers in the last couple of weeks their overall results.
Speaker 3: There are overall results and their outlook of kind of mid-single digits down our category at both of the retailers certainly performing worse than that as they've messaged over the last couple of quarters. I think we'll continue to be challenged there and then was it time to continue to monitor new construction? I think every builder will tell you, now's not the best time to ask as we go through the winter months, but as we get into the spring selling season, that'll dictate how the back half of 24 looks.
Our outlook of kind of mid single digits down our category.
Both of the retailers certainly performing worse than that as we've messaged over the last couple of quarters. So I think we'll continue to be challenged there.
And then we'll just have to continue to monitor new construction I think every builder will tell you now is not the best time to ask as we go through the winter months, but as we get into the spring selling season that will dictate how the back half of 'twenty four looks.
Great I appreciate the color and good luck going forward.
Thanks.
Speaker 1: And at this time, as I do not see that there is anyone else waiting to ask a question, I'd like to turn the floor back over to Mr. Jhimcheck or any closing comments.
And at this time as I do not see that there is anyone else waiting to ask a question I'd like to turn the floor back over to Mr. Jay M check for any closing comments.
Speaker 2: Thank you again for joining us today. That does conclude our conference. We thank you all for your participation.
Thank you again for joining us today that does conclude our conference. We thank you all for your participation.
Speaker 1: and ladies and gentlemen with that will conclude today's conference call and presentation. We thank you for joining. You may now disconnect your line.
And ladies and gentlemen, with that we'll conclude today's conference call and presentation. We thank you for joining you may now disconnect your lines.