Q4 2024 American Woodmark Corporation Earnings Call

Operator: Good day, and welcome to the American Woodmark Corporation 4th Fiscal Quarter 2024 conference call. Today's call is being recorded on May 23rd, 2024.

Good day and welcome to the American Widmark Corporation fourth fiscal quarter, 'twenty 'twenty four conference call.

Today's call is being recorded may 23rd 2024.

Operator: During this call, the company may discuss certain non-GAAP financial measures included in our earnings release, such as adjusted net income, adjusted EBITDA, adjusted EBITDA margin, free cash flow, net leverage, and adjusted EPS per diluted share. The earnings release, which can be found on our website, AmericanWoodmark.com, includes definitions of each of these non-GAAP financial measures, the company's rationale for their usage, and a reconciliation of these non-GAAP financial measures to the most comparable GAAP financial measures.

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.

Earnings release, which can be found on our website American woodmac Dot com includes definitions of each of these non-GAAP financial measures the company's rationale for their usage and a reconciliation of these non-GAAP financial measures to the most comparable GAAP financial measures.

Operator: We also use our website to publish other information that may be important to investors, such as investor presentations. We will begin the call by reading the company's Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995. All forward-looking statements made by the company involve material risks and uncertainties and are subject to change based on factors that may be beyond the company's control. Accordingly, the company's future performance and financial results may differ materially from those expressed or implied in any such forward-looking statement.

We also use our website to publish other information that may be important to investors such as investor presentations.

We will begin the call by reading the Companys Safe Harbor statement under the private Securities Litigation Reform Act of 1995, all forward looking statements made by the company involve material risks and uncertainties and are subject to change based on factors that maybe beyond the companys control.

Accordingly, the company's future performance and financial results may differ materially from those expressed or implied in any such forward looking statements.

Operator: Such factors include, but are not limited to, those described in the company's filings with the Securities and Exchange Commission and the annual report to shareholders. The company does not undertake to publicly update or revise any forward-looking statements, even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized. I would now like to turn the call over to Paul Joachimczyk, Senior Vice President and CFO. Please go ahead, sir.

Such factors include but are not limited to those described in the company's filings with the Securities and Exchange Commission and the annual report to shareholders. The company does not undertake to publicly update or revise any forward looking statements, even if experience or future changes make it clear that any projected rents.

<unk> expressed or implied therein will not be realized.

Speaker Change: I would now like to turn the call over to Paul Joe him check Senior Vice President and CFO. Please go ahead Sir.

Paul Joachimczyk: Good afternoon, and welcome to American Woodmark's fourth fiscal quarter conference call. Thank you for taking the time today to participate.

Speaker Change: Good afternoon, and welcome to American with March 4th fiscal quarter Conference call.

Speaker Change: Thank you for taking the time today to participate.

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

Speaker Change: Joining me is Scott <unk>, President and CEO.

Speaker Change: Scott will begin with a review of the quarter and I'll add additional details regarding our financial performance.

Scott: After our comments, we'll be happy to answer your questions Scott.

Scott Kallroth: Thank you, Paul, and thanks to everyone for joining us today for our fourth fiscal quarter earnings call. Our teams delivered net sales of $453.3 million, representing a decline of 5.8% versus the prior year. However, this was better than the range provided during last quarter's call.

Scott: Thank you Paul and thanks to everyone for joining us today for our fourth fiscal quarter earnings call.

Paul: Our teams delivered net sales of $453 $3 million, representing a decline of five 8% versus the prior year.

Paul: This was better than the range provided during last quarter's call.

Scott Kallroth: Within new construction, our net sales declined 1.5% versus the prior year. However, we continue to see improving demand with our customers, consistent with year-over-year growth in single-family housing start-ups. We remain strategically aligned with 19 of the top 20 national builders.

Paul: Within new construction, our net sales declined one 5% versus prior year.

Paul: We continue to see improving demand with our customers consistent with year over year growth in single family housing starts.

Paul: We remain strategically aligned with 19 of the top 20 National builders key regional builders with our best in class direct service model, we plan to continue to grow our share with new and existing customers and benefit from the share gains are partners are realizing in the marketplace.

Scott Kallroth: Key regional builders With our best-in-class direct service model, we plan to continue to grow our share with new and existing customers and benefit from the share gains our partners are realizing in the market. We see momentum in all markets as builders' confidence is increasing, and their strategy to buy down rates is driving demand. Looking at the remodel, which includes our home center and independent dealer and distributor business, revenue declined 8.6% versus the prior year. Within this, our home-centered business was down 10% versus the prior year. Demand trends remain under pressure due to lower in-store traffic rates and consumers choosing smaller size projects.

Paul: We see momentum in all markets as builders confidence is increasing and our strategy to buy down rates is driving demand.

Looking at remodel, which includes our home center and independent dealer and distributor businesses revenue declined eight 6% versus the prior year.

Paul: Within this our home center business was down 10% versus the prior year.

Paul: Demand trends remain under pressure due to lower in store traffic rates and consumers choosing smaller size projects.

Scott Kallroth: With regard to our dealer distributor business, we were down 5% versus the prior. Our adjusted EBITDA results were $54.7 million, or 12.1% for the quarter. Reported EPS was $1.69, and adjusted EPS was $1.70. Operational excellence efforts continue to drive progress across the inter, but we're offsetting the quarter by one-time costs associated with the start-up of our Monterey and Hamlet facilities. Our cash balance was $87.4 million at the end of the fourth fiscal quarter. The company has access to an additional $322.9 million under its revolving credit facility. Leverage was at 1.14 times adjusted EBITDA, and the company repurchased 171,000 shares in the process.

Paul: With regards to our dealer distributor business, we were down 5% versus the prior year.

Paul: Our adjusted EBITDA results were $54 7 million or 12, 1% for the quarter.

Paul: Reported EPS was $1 69, and adjusted EPS was $1 70.

Paul: Operational excellence efforts continue to drive progress across the enterprise, but were offset in the quarter by one time costs associated with the startup of our Monterey in hamlet facilities.

Paul: Our cash balance was $87 4 million at the end of the fourth fiscal quarter.

Paul: The company has access to an additional $322 $9 million under its revolving credit facility.

Paul: Leverage was at one four times adjusted EBITDA in the company repurchased 171000 shares in the quarter.

Scott Kallroth: Our outlook for the industry in fiscal year 25 assumes the repair and remodel market will be down low to mid-single digit, and new construction to be up mid-Singleton. Our expectation is for the company's net sales to increase low single digits with growth in all channels. Adjusted EBITDA expectations range from $235 million to $255 million, as we continue to make investments near term in digital transformation for ERP and CRM expansion and platform design through automation along with additional engineering resources to execute those projects. Our view on financial performance over the next five years remains unchanged.

Our outlook for the industry in fiscal year 'twenty five assumes the repair remodel market will be down low to mid single digits in the new construction to be up mid single digits.

Paul: Our expectation is for the company's net sales to increase low single digits with growth in all channels.

Paul: Adjusted EBITDA expectations range from 235 million to $255 million as we can.

Paul: To make investments near term in digital transformation for ERP and CRM expansion and platform designed through automation, along with the additional engineering resources to execute those projects.

Paul: Our view of financial performance over the next five years remains unchanged.

Scott Kallroth: Despite a near-term slowdown in demand, we believe a 5-6% CAGR in net sales is appropriate and that we will grow adjusted evidata by over $350 million. We are currently ahead of our long-term goals with stronger EBITDA margin dollars realized in fiscal 2024. Our team continues to execute our strategy that has three main pillars, growth and the Digital Transformation Platform, with a number of key accomplishments over the past fiscal year I'd like to highlight. In growth, we launched a low skew, high value offering for the home centers earlier this calendar year targeting pros and expanded the program nationally for our dealer and distribution network. In addition, we launched a new brand to serve our distribution customers, the 1951 Cabinet.

Paul: Despite a near term slowdown in demand, we believe the 5% to 6% CAGR on net sales is appropriate.

Paul: We will grow adjusted EBITDA at over $350 million.

Paul: We are currently ahead of our long term goals with stronger EBITDA margin dollars realized in fiscal 2024.

Paul: Our team continues to execute our strategy has three main pillars.

Paul: Growth.

Paul: Digital transformation platform design with.

Paul Joachimczyk: In digital transformation, we launched our CRM sales solution in the fall across all our channels. We also went live at our new Monterey facility on our ERP cloud solution, and we've begun planning for the next implementation of our made-to-stock West Coast facilities, which will occur in fiscal 2025. Under platform design, we opened a new facility in Monterey, Mexico, and expanded our Hamlet, North Carolina, facility. These investments established a component operation in eastern Mexico and a stock and kitchen BASC Center of Excellence footprint for the eastern U.S. that delivers additional capacity.

Paul: With a number of key accomplishments over the past fiscal year I'd like to highlight.

Paul: Under growth, we launched a low SKU high value offering in the home centers earlier this calendar year targeting pros and expanded the program nationally for our dealer and distribution network and.

Paul: In addition, we launched a new brand to serve our distribution customers to $19 51 cabinetry.

Paul: Under digital transformation, we launched our CRM sales solution in the fall across all our channels.

Paul: We also went live at our new Monterrey facility on our ERP cloud solution and we've begun planning for the next implementation or maybe just talk west coast facilities, which will occur in fiscal 2025.

Paul: Under platform design, we opened a new facility in Monterrey, Mexico, and expanded our hamlet North Carolina facility.

Paul: These investments establish the component operation in Eastern Mexico, and the stock and kitchen, and Bath Center of excellence footprint for the Eastern U S that delivers additional capacity.

Paul Joachimczyk: Looking forward, growth is expected across all our channels in fiscal year 2015. We will leverage our upcoming summer launch to grow our core business, expand our distribution presence through our new distribution brain introduction, and win stock, bath, and kitchen opportunities to deliver this result. Digital transformation efforts will progress as the planning for the next phase of work continues for the CRM service modules, supporting our customer care organization and new construction service center operations, and ERP for our major stock facilities, which again will go live later this fiscal year, as previously noted.

Paul: Looking forward growth is expected across all our channels in fiscal year 'twenty five.

Paul: We will leverage our upcoming summer wants to grow our core <unk>.

Paul: Expand our distribution presence through our new distribution brain introduction, and when stock Bath and kitchen opportunities to deliver this result.

Paul: Digital transformation efforts will progress as the planning for the next phase of work continues for the CRM service modules supporting our customer care organization and New construction service Center operations and ERP for a major stock facilities, which again will go live later this fiscal year as previously noted.

Paul Joachimczyk: Platform design work will continue as we ramp up our Monterey, Mexico, and Hama, North Carolina facilities. Mill equipment continues to be installed on both sites and will continue to ramp up through the first half of the year. Automation efforts will also continue across our mill, component, and assembly operations. In closing, I couldn't be prouder of what this team accomplished in Fiscal 2024, and I look forward to their continuing contributions in Fiscal Year 25. I'll now turn the call back over to Paul for additional details on the financial results for the quarter.

Paul: Platform design work will continue as we ramp our Monterrey, Mexico in hamlet North Carolina facilities.

Paul: Mill equipment continues to be installed in those sites and we'll continue to ramp through the first half of the year.

Paul: Automation efforts will also continue across our mill component and assembly operations.

Paul: In closing I couldn't be prouder of what this team accomplished in fiscal 2024, and I'll look forward to their continuing contributions during fiscal year 'twenty five.

Speaker Change: I'll now turn the call back over to Paul for additional details on the financial results for the quarter.

Paul: Thank you Scott.

Paul Joachimczyk: I will first talk about our fourth quarter fiscal results and then transition to our full year performance. And finally, I will close out with our outlook for fiscal year 25. Net sales were $453.3 million, representing a decrease of $27.8 million, or 5.8% versus the prior year. Remodel net sales, which combines home centers and independent dealer and distributors, decreased 8.6% for the fourth quarter versus the prior year, with both home centers and dealer distributors decreasing 10% and 5%, respectively. New construction net sales decreased 1.5% for the quarter compared to last year.

First talk about our fourth quarter fiscal results and then transition to our full year performance and finally close out with our outlook for fiscal year 'twenty five.

Paul: Net sales were $453 3 million, representing a decrease of $27 8 million or five 8% versus prior year.

Paul: Remodel net sales, which combines home centers and independent dealer and distributors decreased eight 6% for the fourth quarter versus prior year with both home centers and dealers distributors, decreasing 10% and 5% respectively.

Paul: New construction net sales decreased one 5% for the quarter compared to last year.

Paul Joachimczyk: Our gross profit margin for the fourth quarter of fiscal year 2024 decreased 150 basis points to 18.6% of net sales versus 20.1% reported in the same period last year. Gross margin was impacted by the one-time start-up costs for our Monterey and Hamlet locations, partially offset by our operational improvements in our manufacturing facilities, combined with the stability in our supply chain. Total operating expenses, excluding any restructuring charges, for the fourth quarter of fiscal year 2024 were 10.1% of net sales versus 11.8% for the same period last year.

Paul: Our gross profit margin for the fourth quarter of fiscal year 2024 decreased 150 basis points to 18, 6% of net sales versus 21% reported in the same period last year.

Paul: Gross margin was impacted by the onetime startup costs for our Monterey and hamlet locations, partially offset by our operational improvements in our manufacturing facilities combined with the stability in our supply chain.

Paul: Total operating expenses, excluding any restructuring charges for the fourth quarter of fiscal year 2024.

Or 10, 1% of net sales versus 11, 8% for the same period last year.

Paul Joachimczyk: The 170 basis point decrease is due to our deal cost amortization cost ending in December 2023, offset by increases in our incentives and profit sharing for all of our employees combined with our lower sales. Adjusted net income was $26.9 million, or $1.70 per diluted share, in the fourth quarter of fiscal year 2024, versus $37.1 million, or $2.21 per diluted share last year. Adjusted EBITDA for the first quarter of fiscal year 2024 was $54.7 million, or 12.1% of net sales, versus $65.3 million, or 13.6% of net sales, reported in the same period last year, representing a 150 basis point decline year over year.

Paul: The 170 basis point decrease is due to our deal costs amortization costs ending in December 2023.

Paul: Offset by increases in our incentives and profit sharing for all of our employees combined with our lower sales.

Paul: Adjusted net income was $26 9 million or $1 70 per diluted share in the fourth quarter of fiscal year 2024 versus $37 1 million or $2 21 per diluted share last year.

Paul: Adjusted EBITDA for the first quarter of fiscal year, 2024 was $54 7 million or 12, 1% of net sales versus $65 3 million or 13, 6% of net sales reported in the same period last year.

Paul: Representing a 150 basis point decline year over year.

Paul Joachimczyk: Our full-year performance, net sales were $1.8 billion, representing a decrease of $219 million, or 10.6%, aligning with our outlook from fiscal Q3 of a low double-digit decline. The combined home center and independent dealer distributor net sales decreased 12.6% for the fiscal year, with home centers decreasing 13.9% and dealer distributors decreasing 9.1%. New construction net sales decreased 7.7% for the fiscal year compared to the prior year.

Paul: Our full year performance net sales were $1 8 billion, representing a decrease of $219 million or 10, 6%.

Paul: Aligning with our outlook from fiscal Q3 of the low double digit declines.

Paul: The combined home center and independent dealer distributor net sales decreased 12, 6% for the fiscal year with home centers, decreasing 13, 9% and dealer distributors decreasing nine one.

Paul: New construction net sales decreased seven 7% for the fiscal year compared to the prior year.

Paul Joachimczyk: The company's gross profit margin for fiscal year was 20.4% of net sales versus 17.3% reported last year, representing a 310 basis point improvement. In the first half of the year, we observed improved leverage of our fixed cost base to higher volume. Additionally, operational enhancements and better alignment of input costs matching pricing contributed to this positive trend. However, during the second half of the year, we faced our one-time start-up cost along with lower volume.

Paul: The company's gross profit margin for fiscal year was 24% of net sales versus 17, 3% reported last year.

Paul: Representing a 310 basis point improvement.

Paul: In the first half of the year, we observed improved leverage of our fixed cost base due to the higher volumes.

Paul: Additionally, operational enhancements and better alignment of input costs matching pricing contributed to this positive trend.

Paul: However, during the second half of the year, we faced our onetime startup cost alongside with lower volumes.

Paul Joachimczyk: Total operating expenses, exclusive of any restructuring charges, were 11.7% of net sales in the current fiscal year, compared with 10.6% of net sales in the prior fiscal year. The 110 basis point increase was due to increases in our incentives and digital spend, de-leverage created from the lower sales, offset by reduced spending across our SG&A team. Adjusted net income for fiscal year 2024 increased $11.6 million due to improvements in our operations, offset by increases in our incentives and profit sharing.

Total operating expenses exclusive of any restructuring charges were 11, 7% of net sales in the current fiscal year compared with 10, 6% of net sales in the prior fiscal year.

Paul: The 110 basis point increase was due to increases in our incentives and digital spend deleverage created from the lower sales offset by reduced spending across our SG&A functions.

Paul: Adjusted net income for fiscal year, 2024 increased $11 6 million due to improvements in our operations offset by increases in our incentives and profit sharing expenses.

Paul Joachimczyk: Adjusted EBITDA for fiscal year 2024 was $252.8 million, or 13.7% of net sales, compared to $240.4 million, or 11.6% of net sales for the prior fiscal year, representing a 210 basis point improvement year-over-year, achieving the high end of our expected range. Despite facing year-to-date volume headwinds, our continued strong earnings performance this year is a direct result of all the hard work and effort our team has put into reestablishing and maintaining our operating efficiency.

Paul: Adjusted EBITDA for fiscal year, 2024 was $252 8 million or 13, 7% of net sales.

Paul: Compared to $244 million or 11, 6% of net sales for the prior fiscal year, representing a 210 basis point improvement year over year.

Paul: Achieving the high end of our expected range.

Paul: Despite facing year to date volume headwinds our continued strong earnings performance. This year is a direct result of all the hard work and efforts our team have put into reestablishing and maintaining our operating efficiencies stabilizing our supply chain and controlling our overall spending.

Paul Joachimczyk: Stabilizing Our Supply Chain and Controlling Our Overall Spend. These earnings gains are partially offset by increases in incentive compensation, profit sharing, and digital transformation. Free cash flow totaled a positive $138.5 million for the current fiscal year compared to $153.5 million in the prior year.

Paul: These earnings gains are partially offset by increases in incentive compensation and profit sharing and digital transformation costs.

Paul: Free cash flow totaled a positive $138 5 million for the current fiscal year.

Paul: Compared to $153 5 million in the prior year.

Paul Joachimczyk: The $15 million decrease is primarily due to increased capital expenditures offset by changes in our operating cash flows, specifically lower inventory and an increased accrued balance. Net leverage was 1.14 times adjusted EBITDA at the end of the fourth quarter of Fiscal Year 2024, representing a 0.23 times improvement from the 1.37 times as of last year. As of April 30, 2024, the company had $87.4 million in cash, plus access to $322.9 million of additional availability under its revolving facility.

Paul: The $15 million decrease was primarily due to increased capital expenditures offset by changes in our operating cash flows specifically lower inventory and an increase in accrued balances.

Paul: Net leverage was one four times adjusted EBITDA at the end of the fourth quarter of fiscal year 2024, representing a zero point.

Paul: Two three times improvement from the 137 times as of last year.

Paul: As of April 32024, the company had $87 4 million in cash plus access to $322 9 million of additional availability under its revolving facility.

Paul Joachimczyk: Under the current share repurchase program, the company purchased 15.9 million, or 171,000 shares, in the fourth quarter, representing about 1.1% of outstanding shares being retired. For the full year, we have repurchased 87.7 million of the company's common shares, representing 7.1%, and have 89.5 million of share repurchase authorization remaining. Our outlook for fiscal year 2025, from a net sales perspective, we expect to grow across all channels, with the total company experiencing low single-digit increases versus fiscal year 2024. However, the change in net sales is highly dependent upon the overall industry, economic growth trends, material constraints, labor impacts, interest rates, and consumer behavior.

Paul: Under the current <unk> share repurchase program. The company purchased $15 9 million or 171000 shares in the fourth quarter, representing about one 1% of outstanding shares being retired.

Paul: For the full year, we have repurchased $87 $7 million of the company's common shares representing seven 1% and have $89 5 million of share repurchase authorization remaining.

Paul: Our outlook for fiscal year 2025 from a net sales perspective, we expect to grow across all channels.

Paul: With the total company being low single digit increases versus fiscal year 2024.

Paul: The change in net sales is highly dependent upon overall industry economic growth trends material constraints labor impacts interest rates and consumer behaviors.

Paul Joachimczyk: Our projected EBITDA margin for FY 2025 falls within the $235 million to $255 million range, driven primarily by higher year-over-year fixed operating costs based on our decisions to increase capacity with our new facilities in anticipation of longer-term volume growth. Our commitment to operational excellence, automation, and continuous improvement positions us well for maintaining competitive margins. Our long-term expectations remain unchanged, with a 5-6% sales compounded annual growth rate and EBITDA growth exceeding $350 million by fiscal year 2028.

Paul: Our projected EBITDA margin for fiscal year, 2025 falls within the 235 million to $255 million range.

Paul: Driven primarily by higher year over year fixed operating cost base on our decisions to increase capacity with our new facilities.

Paul: In anticipation of longer term volume growth.

Paul: Our commitment to operational excellence.

Paul: Automation and continuous improvement positions us well for maintaining competitive margins.

Paul: Our long term expectations remain unchanged with a 5% to 6% sales compounded annual growth rate and EBITDA growth exceeding $350 million by fiscal year 2028.

Paul Joachimczyk: Our capital allocation priorities for fiscal year 2025 will first be focused on investing back into the business by continuing our path of our digital transformation with investments in ERP and CRM and investing in Automation. Next, we will be opportunistic in our share repurchasing, and lastly, with our debt position at a leverage ratio we wanted to achieve, debt repayments will be deprioritized. One additional item for earnings calls in fiscal year 2025: we will be adjusting the timing of the call to be prior to trading hours and will occur at 8:30 a.m. Eastern Standard Time.

Paul: Our capital allocation priorities for fiscal year 2025, we will first be focused on investing back into the business by continuing our path of our digital transformation with investments in ERP and CRM and.

Paul: And investing in automation.

Paul: Next we will be opportunistic in our share repurchasing and lastly, with our debt position at a leverage ratio. We wanted to achieve that paint repayments will be de prioritize.

Paul: One additional item for our earnings calls in fiscal year 2025.

Paul: We will be adjusting the timing of the call to be prior to the trading hours and we will occur at 830, a M. Eastern standard time.

Paul Joachimczyk: In closing, our business continues to capitalize on the strides achieved over the past year. We anticipate that these enhancements will positively impact our financials through the next fiscal year. This success stands as testament to the unwavering commitment, diligence, and contributions of our dedicated employees, all in alignment with our GDP strategy. I extend my heartfelt gratitude to every team member at American Woodmark. They are the driving force behind our daily accomplishments, and they are the ones who make it happen. This concludes our prepared remarks, and we'll be happy to answer any questions you have.

Paul: In closing our business continues to capitalize on the strides achieved over the past year.

Paul: We anticipate that these enhancements will positively impact our financials through the next fiscal year.

Paul: This success stands as a testament to the unwavering commitment diligence and contributions of our dedicated employees all in alignment with our GDP strategy.

Paul: I extend my heartfelt gratitude to every team member at American water Mark they are the driving.

Paul: The driving force behind our daily accomplishments.

Paul: And they are the ones, who make it happen daily.

Paul: This concludes our prepared remarks, and we will be happy to answer any questions you have at this time.

Operator: We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the key. To withdraw your question, you may press star, then 2. Today's first question comes from Steven Ramsey with Thompson Research. Please go ahead. Thank you.

Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.

Speaker Change: If youre using a speakerphone please pick up your handset before pressing the keys to withdraw your question you May Press Star then two.

Speaker Change: Today's first question comes from Steven Ramsey with Thompson Research Group. Please go ahead.

Brian Biros: Hey, good morning. This is actually Brian Byroson on behalf of Steven.

Speaker Change: Hey, Good morning. This is actually Brian Biros on for Steven Thank you for taking my questions.

Scott Kallroth: Thank you for taking my question. Yeah, good afternoon, starting afternoon. Maybe to start with on the revenue guidance. Can you help us with the kind of expected cadence through the four quarters going forward, kind of given the comps that are out there and how you see the different channels kind of ramping throughout the year?

Speaker Change: Yes, good afternoon.

Speaker Change: Good afternoon, maybe to start with on the revenue guidance can you just help us with the kind of expected cadence through the four quarters going forward kind of given the comps that are out there and how you see the different channels kind of ramping throughout the year.

Scott Kallroth: So we don't really want to get into a situation where we're providing quarterly guidance. We stopped doing that several years ago, so our focus is on the full year outlook that Paul and I have already previously shared. I would tell you that the second half we do expect to be stronger than the first half, which I think is pretty consistent with what we've seen from our customer base as well as our peer set.

Speaker Change: So we don't really want to get into a situation, where we're providing quarterly guidance. We stopped doing that several years ago. So our focus is on the full year outlook that Paul and I have already previously shared I would tell you that the second half we do expect to be stronger than the first half, which I think is pretty consistent with what you've seen from our customer base as well as our peer set.

Speaker Change: That's helpful at least Directionally I think.

Scott Kallroth: Thank you. And maybe, just higher level, I guess, can you maybe touch on how your outlook has changed over the past few months, even internally, kind of just in regards to new construction, R&R activity, kind of given where rates are, how filters are reacting, you mentioned buying down rates and all. The industry is in flux and changing almost every day. How you're currently seeing it versus maybe how you were thinking about three months ago would help kind of directionally gauge where we're going. Thank you. Chairperson, to your point, you can't.

Speaker Change: And maybe just.

Speaker Change: Higher level I guess can you maybe touch on how your outlook has changed over the past few months, even internally and just in regards to new construction R&R activity kind of given where rates are.

Speaker Change: Builders are reacting you mentioned buying down rates and all of that.

Speaker Change: Industry influx and changing almost every day, so I guess just.

Speaker Change: You are currently seeing it versus maybe how youre thinking about three months ago and help kind of directionally gauge wherever gallon. Thank you.

Scott Kallroth: Sure, to your point, you can't get too caught up in the day-to-day data points and swing too far in one direction versus the other. We start our budget process back in the January-February timeframe, ultimately trying to wrap that up in the April timeframe, and take it to our board of directors in May for approval. I would tell you that our outlook from a sales perspective and our expectations from a channel view really haven't changed in that same timeframe.

Sure to your point, you can't get too caught up in the day to day.

Speaker Change: Data points and swing too far one direction versus the other we start our budget process back in the January February timeframe, ultimately try to wrap that up in the April timeframe and take it to our board of directors in May for approval I would tell you that our outlook from a sales perspective and our.

Patients from our channel view really havent altered inside that same timeframe, it's held pretty consistently our viewpoint on each we think we will see stronger growth in new construction, that's been pretty consistent as a message and a theme repair remodel has certainly been softer.

Scott Kallroth: It's held pretty consistently our viewpoint on each. We think we'll see stronger growth in new construction. That's been pretty consistent as a message and a theme. Repair and remodel has certainly been softer, and we expect that to perform a little bit better in the back half of the year.

And we expect that to perform a little bit better in the back half of the year.

Speaker Change: Thank you.

Operator: Thank you. The next question comes from Garik Shmois with Loop Capital. Please go ahead.

Speaker Change: Thank you. The next question comes from Garik <unk> with loop capital. Please go ahead.

Zack Lee Pacheco: Good afternoon. It's actually Zach Pacheco on for Garik.

Speaker Change: Good afternoon, its actions at the checkout on for Gary Thanks for taking my question.

Paul Joachimczyk: Thanks for taking my question. I guess to start on the four-year guide, you guys are talking about a lower EBITDA margin despite low single-digit sales growth. So I was wondering, could you provide any more color on this decrease in the margin? I know you mentioned the tech and digital initiatives, so I guess really, how much are these costs impacting fiscal 25?

Speaker Change: To start on the full year guide you guys are talking a lower EBITDA margin despite.

Gary: Low single digit sales growth. So I was wondering could you provide any more color on this decrease in the margin I know you mentioned the tech and digital initiatives. So I guess really how much of these costs impacting fiscal 'twenty five.

Paul Joachimczyk: Sure, we can go into a little bit more depth there. So, taking a step back, looking at fiscal year 2024, let's recognize that we did experience a sales decline of almost $220 million, yet we did grow EBITDA in that fiscal year by 5% to almost $253 million. I'll pause there and say I am proud of this team's execution in delivering on that result when it was such a difficult demand environment. As we start to look in 2025, we've, of course, said that we expect to grow in each channel.

Speaker Change: Sure we can go into a little bit more depth there so.

Speaker Change: Just taking a step back looking at fiscal year 2024, and whats recognize we did experience a sales decline of almost $220 million. Yes, we did grow EBITDA in that fiscal year about 5% almost $253 million I'll pause here and say I am proud of this team's execution and delivering on that result, when it was such a difficult demand environment as we started to look in 'twenty.

Speaker Change: Five we are of course said that we expect to grow in each channel.

Paul Joachimczyk: Despite doing that, we don't think there's a significant impact overall on our profitability. Now, why would that be? That's due to choices we're actively making to continue to invest in the future of our business. Here are a couple of examples of that.

Speaker Change: Despite doing that we don't think theres a significant impact overall on our profitability now why would that be that's due to choices, we're actively making to continue to invest in the future of our business. A couple of examples of that we've certainly added capacity on the east coast for our stock Bath and kitchen business and our commercial teams are out there working to gain that.

Paul Joachimczyk: We've certainly added capacity on the East Coast for our stock, bath, and kitchen. And our commercial teams are out there working to gain that share back and utilize it for that. That, of course, takes time, and we'll have to bear those incremental fixed costs for that capacity until it's utilized. We're also making a choice to implement ERP in our West Coast operations. There are clearly costs associated with such a decision.

Speaker Change: Share back and utilize the capacity.

Speaker Change: That of course takes time.

Speaker Change: I'll have to bear those incremental fixed costs for that capacity until it's utilized we're also making a choice to implement ERP and our west coast operations Theres cost clearly that are associated with such a decision there'll be some inefficiencies. After go live will have hyper care as well to be able to manage any issues that come our way.

Paul Joachimczyk: There'll be some inefficiencies after go live, but we'll have hypercare as well to be able to manage any issues that come up. We view those costs as investments, right? To get our company on one. We also chose to invest in engineering research to help us drive our automation efforts across our facilities, which is going to help reduce the demand for labor in future periods.

Speaker Change: We view those costs as investments right to get our company on one operating platform. We also chose to invest in engineering resources.

Speaker Change: US drive our automation efforts across our facilities, which is going to help reduce the demand for labor.

Speaker Change: In future periods. So those are main contributors I guess the final thought I would share is the <unk>.

Paul Joachimczyk: So those are the main contributors. I guess the final thought I would share is the prior question around uncertainty. There's still a lot of uncertainty in the market, day-to-day. There's also an upcoming election which may have an impact on us. That election occurs in the middle of our fiscal year as opposed to many other calendar year companies. So all those variables together led us to the Outlook Guide around EBITDA.

Speaker Change: Higher question around uncertainty, there's still a lot of uncertainty in the marketplace.

Speaker Change: Day to day at times. There is also an impending election, which may have an impact on our economy that election occurs in the middle of our fiscal year as opposed to many other calendar year company. So all of those variables together led us to the outlook guide around EBITDA.

Scott Kallroth: Awesome. That's great, Collin. I really appreciate it. And then maybe one more on just pricing and promotion. Any change you're seeing here that you can speak on? Thanks.

Speaker Change: Awesome, that's great color I really appreciate it and then maybe one more on just pricing and promotion any change youre seeing here that you can speak on.

Scott Kallroth: Yeah, no real change in that space, which has been a positive. So, promotional activity and cadence, repair, and model were pretty consistent for us year over year.

Speaker Change: Yes, no real change in that space, which has been a positive so promotional activity and cadence repair remodel was pretty consistent for us year over year.

Zack Lee Pacheco: Okay, that makes sense. I'll pass it on. Thanks.

Speaker Change: Okay makes sense I'll pass it on thanks.

Speaker Change: Okay. Thank you.

Operator: Thank you. As a reminder, to ask a question, you may press star, then 1. The next question comes from Collin Verron with Jefferies. Please go ahead.

Speaker Change: Thank you.

Speaker Change: As a reminder to ask a question you May Press Star then one the next question comes from Colin <unk> with Jefferies. Please go ahead.

Collin Andrew Verron: Thanks for taking my questions. I guess I just want to start. You called out that the demand environment is beginning to improve. Can you just provide a little bit more color and perspective on what you saw within the quarter that drives that optimism? Did you see sales trends sort of pick up within the quarter ahead of what you would normally see seasonally? And any comment as to how those continued into May?

Colin: Hi, yes, thanks for taking my questions I guess I'm just wondering are you called out the <unk>.

Collin Andrew Verron: <unk> environment was beginning to improve can you just provide a little bit more color and perspective on what you saw within the quarter that drives that optimism did you see sales trend sort of pick up within the quarter ahead of what you would normally see seasonally.

Collin Andrew Verron: And any comment as to like how those continued into may.

Scott Kallroth: Yeah, the bulk of that comment is going to be tied to new construction, Collin, as you look back and think about the starts activity that began to pick up year on year, even at the end of the calendar year, continuing into the first part of this year, recognizing the delay for us as to when the cabinets actually go into the home as opposed to the actual start. We would typically expect to see a strong summer coming out of that spring selling season. So we've seen that activity pick up. You see it in the start data as translating to order demand in our new construction.

Speaker Change: Yes, the bulk of that comment is going to be tied to new construction column as you look back and think about the starts activity that began to pick up year on year, even at the end of the calendar year continuing into the first part of this year recognizing the delay for us as to when the cabinets actually go into the home as opposed to the actual start we would typically expect.

Speaker Change: To see a strong summer coming out of that.

Speaker Change: Spring selling season, so we've seen that activity pickup you've seen in the starts data is translating to order demand in our new construction business.

Scott Kallroth: That's helpful, Collar. And I think you talked about some expected wins in the stock category. Have you seen those wins already, or is that something you're expecting because of your product introductions? Just curious as to what was driving that comment.

Speaker Change: Okay. That's helpful color.

Speaker Change: Can you talk about some expected wins in the sock category have you seen those wins already or is that something you are expecting because your product introductions, just curious as to what was driving that comment.

Scott Kallroth: Yeah, I would go back over the last couple of years, coming into the COVID cycle where demand was so high, and we were limited in our ability to actually meet all of the demand in the marketplace, whether it was a function of supplier challenges or labor challenges, etc. We wanted to get past that and add some capacity to our network. So that's what led to the project last year to put that capacity in play.

Speaker Change: Yes, I would go back over the last couple of years coming into the end of the Covid cycle, where demand was so high and we were limited in our ability to actually be able to achieve all of the demand in the marketplace, whether it was a function of supplier challenges or labor challenges et cetera, we wanted to get pass.

Speaker Change: That and add some capacity to our network. So that's what led to the project last year to put that capacity in play until we had that we were not very aggressive in the marketplace. When trying to take share now that we have the capacity we're being much more aggressive in our commercial teams are out there working to gain share in both of those categories for our business.

Scott Kallroth: Until we had that, we were not very aggressive in the marketplace, trying to take share. Now that we have the capacity, we're being much more aggressive, and our commercial teams are out there working to gain share in both of those categories for our business.

Scott Kallroth: Great, that's a really helpful call. And I guess my last one, there was a transaction in the space that was recently announced. Can you just talk about your regrets and appetite for M&A? I know you didn't list it on your capital allocation priorities, so I guess just any commentary on M&A for American Woodmark Corp. Sure, it's a great question.

Speaker Change: Great. That's really helpful color and I guess my last one there was a transaction in the space that was recently announced can you just talk about your guys' appetite for M&A I know you didn't let's say on your capital allocation priorities. So I guess just any commentary on M&A.

Speaker Change: For American with Mark.

Collin Andrew Verron: Great, thank you, and good luck!

Scott Kallroth: Sure, it's a great question. You know, our strategic focus over the last few years has certainly been focused around organic growth, and that continues throughout the strategic plan and cycle that we've even got out on our IR deck over the next five years. I'll tell you acquisitions are not a priority, but with that said, we're going to look at assets as they become available. In the particular case you're mentioning, we didn't see a strategic fit, primarily around the product line. The dealer channel aspect of that business was interesting, but the price points are well outside the range in which we participate, and just not a fit overall.

Speaker Change: Sure. It's a great question, our strategic focus over the last few years has been certainly focused around organic growth and that continues throughout the strategic plan and cycle that we've even got out in our IR deck over the next five years I'll tell Ya acquisitions are not a priority, but with that said, we're going to look at assets as they become available in that particular case.

Speaker Change: Youre mentioning we didn't see a strategic fit primarily around the product line. The dealer channel aspect of that business was interesting, but the price points are well outside the range in which we participate and just not a fit overall.

Speaker Change: Great. Thank you and good luck.

Speaker Change: Thank you.

Operator: Thank you. The next question is from Tim Weiss with Baird. Please go ahead.

Speaker Change: Thank you. The next question is from Tim Weiss with Baird. Please go ahead.

Timothy Ronald Wojs: Hey, good afternoon, guys. Maybe just start, Scott, on the ERP piece. Is that, once you get that live out west, is everything kind of... on one system after that? I guess this is kind of the last piece, or they're kind of more conversions on the

Speaker Change: Hey, good afternoon guys.

Speaker Change: Maybe just start Scott.

The ERP piece is that once you get that live out west is everything kind of.

Speaker Change: On one system after that I guess this is kind of the last piece are there kind of more convergence will need to do.

Scott Kallroth: That's a fantastic question, Tim. So I would tell you this is the start from a manufacturing standpoint. If you were to go back a couple of years ago when we first started down this journey, we focused on finance and procurement. So that was the first area that we tackled. Now we're moving into the manufacturing footprint. We had a great opportunity with the opening of our facility in Monterey to treat that basically as a pilot. So we went live on the solution in Monterey. It was a much lower risk.

Scott: That's a fantastic question, Tim So I would tell you. This is the start from a manufacturing standpoint. If you were to go back a couple of years ago. When we first started down. This journey, we turned on financing procurement. So that was the first area that we tackled.

Scott: Now, we're moving into the manufacturing footprint, we had a great opportunity with the opening of our facility in Monterrey to treat that basically as a pilot.

Scott: So we went live on the solution in Monterey It was much lower risk.

Scott Kallroth: Our team has been in the planning phase all of this calendar year. It'll continue as we go forward, and we'll hit those West Coast operations next. We will then have a sequence beyond that and beyond that to cycle through the remaining operations, and it's a multi-year journey. So we're at the start as opposed to the end when it comes to that.

Scott: Our team has been in the planning phase.

Scott: All of this calendar year. It will continue as we go forward and we will hit those West Coast operations. Next we will then have a sequence beyond that and beyond that to cycle through the remaining operations and it's a multiyear journey. So we are at the start as opposed to the and when it comes to that effort.

Timothy Ronald Wojs: Okay, okay, I got you. And then, from a long-term perspective, like what would the benefits be that you guys don't have today? Is it just the ability to kind of seamlessly push stuff between plants?

Speaker Change: Okay. Okay, I Gotcha, and then I guess from a long term perspective of what would the benefits be that you guys don't have today.

Speaker Change: The ability to kind of seamlessly pushed off between plants.

Scott Kallroth: I would actually say that it should be efficiencies in every aspect of our business because of the complexities we have in still having multiple platforms across different businesses, you know, post-acquisition. So allowing us to get all of those systems onto one integrated system, having those be up-to-date, better reporting, and better information should lead to better decision-making.

Speaker Change: Yes, I would actually say it should be efficiencies in every aspect of our business because of the complexities we have on still having multiple platforms across different businesses post acquisition, so, allowing us to get all of those systems onto one integrated system, having those be up to date better reporting better <unk>.

Formation should lead to better decision, making you could translate that into margin you can translate that into labor efficiency et cetera. Those are the types of areas. We expect to see benefits inclusive of balance sheet. When it comes to forecasting and SIOP and how much inventory we're holding in the network. We would expect some cash flow working cap and capital benefits as well.

Scott Kallroth: You could translate that into margin, you can translate that into labor efficiency, etc. Those are the types of areas we expect to see benefits, inclusive of the balance sheet. When it comes to forecasting and SIOP and how much inventory we're holding in the network, we would expect some cash flow working capital benefits as well.

Timothy Ronald Wojs: Okay, okay, and then I guess explicitly it doesn't sound like it's having much of an impact, but how are you guys kind of thinking about price and kind of raw material costs and fiscal 25?

Speaker Change: Okay, Okay, Great and then I guess explicitly.

Speaker Change: Don't like it it's much of an impact, but how are you guys kind of thinking about price and raw material costs in fiscal 'twenty five.

Scott Kallroth: Yeah, really no change from our message over the last couple of quarters. Most of our actions in that space were tied to inflation and indices, and if we've seen things move down and it's appropriate and justified, we'll have conversations with accounts around that. But it's got to be in check and in balance with deflation.

Yeah really no change from our message over the last couple of quarters.

Speaker Change: Most of our actions in that space, we're tied to inflation and indices and if we've seen things move down and it's appropriate and justified we will have conversations with accounts around that but it's got to be in check and imbalance with deflation.

Timothy Ronald Wojs: Okay, okay. And then I guess the last one just, you know, we've heard instances across the space about mixed down, especially in bigger ticket categories. I guess, given kind of your price points and kind of position in the marketplace, first, do you see mixed down? And then second, could that technically be a benefit for you guys if that's happening?

Speaker Change: Okay. Okay, and then I guess the last one just we've heard instances across the space about mix down.

Speaker Change: Especially in bigger ticket categories.

Speaker Change: I guess, just given kind of your <unk>.

Speaker Change: Price points and kind of position in the marketplace. I guess first do you see mix down and then second is that could that technically would be a benefit for you guys if thats happening.

Scott Kallroth: So I'll start with the end conclusion. There should be a benefit because that's rotation down into the value price points in which we participate. Right. So we've not seen the level of mix degradation that you're highlighting, perhaps from other players in building products. Within our business, though, what I would call out specifically is our new construction business overall and what we offer there. We have our Timberlake brand, and then we have an Origins by Timberlake brand as well.

Speaker Change: So I'll start with the in conclusion, there should be a benefit because its rotation down into the value price points in which we participate right. So we've not seen the level of <unk>.

Speaker Change: Mix degradation that youre, highlighting perhaps from other players in building products within our business, though what I would callout, specifically you think about our new construction business overall and what we offer there we have our Timberlake brand and then we haven't origins by Timberlake brand as well, we do see builders, making choices to move up.

Scott Kallroth: We do see builders making choices to move out of Timberlake into Origins. That was part of the acquisition strategy that we put in place over six years ago. So we expected that to come. And we're seeing some of that. What is the result?

Speaker Change: Out of Timberlake into origins that was part of the acquisition strategy that we put in place over six years ago. So we expected that to come. So we're seeing some of that what is the result, well the cabinet price per box will be lower but the margin percentage should be acceptable or better. So we are seeing a little bit of that impact.

Scott Kallroth: Well, the cabinet price per box will be lower, but the margin percentage should be acceptable or better. So we are seeing a little bit of that impact on the top line equation for us. And also, the other one I'd mention is even inside our new construction business, there is a good, better, best strategy. Most of that business has always been in the middle and the better. We had a little bit sitting up top in the best category.

Speaker Change: Topline equation for us and also the other one I'd mention is even inside our new construction business. There is a good better best strategy.

Speaker Change: Most of that business has always been in the middle and the better we had a little bit sitting on top of the best category. We've seen that start to move down a little bit as builders are making choice around price points of their offerings. So a little bit in new construction, but we really haven't seen much in repair remodel when it comes to mix next question.

Scott Kallroth: We've seen that start to move down a little bit as builders are making choices around price points that they're offering. So a little bit in new construction, but we really haven't seen much in repair and models when it comes to construction, next deck.

Timothy Ronald Wojs: Okay, I lied, I have one more. Just on content, I mean, have you seen with smaller homes or smaller jobs, I mean, have you seen a big impact on like the the number of cabinets or the content per job or has cabinet, have cabinets been kind of

Speaker Change: Okay.

Speaker Change: One more.

Speaker Change: Just on content I mean have you seen with smaller homes or smaller jobs. I mean have you seen a big impact on like the number of cabinets with the content per job or his cabinet have cabinet has been kind of.

Speaker Change: On a spare thats the right word but.

Speaker Change: Is that kind of been not a big deal for you guys, Yes, thats not really been a big deal for us even though the homes are going smaller we're still okay with cabinet count typically builders as well as consumers who are trying to protect that kitchen space. So theres still looking for a nice area and plenty of storage, even if the kitchen was to shrink.

Scott Kallroth: Yeah, that's not really been a big deal for us. Even though the homes are going smaller, we're still okay with the cabinet count. Typically, builders as well as consumers are trying to protect that kitchen space, so they're still looking for, you know, a nice area and plenty of storage. Even if the kitchen was to shrink, what we're also seeing is a lot of consumers are maybe wanting a small house, but feature-rich. So now you may have cabinets that are showing up in a laundry room. You might have a mud drop room when you come in off the garage. So we've still been pretty, you know, pretty comfortable with the overall cabinet count for us.

Speaker Change: What we're also seeing is a lot of consumers are maybe wanting a small house, but feature rich. So now you may have cabinets that are showing up in the laundry room, you may have them drop room, when you're coming off the garage. So we've still been pretty pretty comfortable with the overall cabinet count per home.

Timothy Ronald Wojs: Okay, okay, great. Well, good luck this year, guys. See you next week.

Speaker Change: Okay, Okay, great well good luck on that you guys see you next week.

Speaker Change: Thank you I appreciate it.

Operator: Thank you. Once again, if you would like to ask a question, you may press star, then one. As I do not see anyone else in line to ask a question, I would like to turn the call back over to Mr. Joachimczyk for closing remarks.

Scott Kallroth: Great, thank you. I appreciate it. Thank you.

Speaker Change: Thank you once again, if you would like to ask a question you May Press Star then one.

Speaker Change: As I do not see any more.

Speaker Change: Any anyone else in line to ask a question I would like to turn the call back over to Mr. Joe <unk> for closing remarks.

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

Speaker Change: Since there are no additional questions. This concludes our call. Thank you all for taking the time to participate.

Operator: The conference is now concluded. Thank you for your participation. You may now disconnect your line.

Speaker Change: The conference has now concluded.

Speaker Change: You for your participation you may now disconnect your line.

Operator: ???

Speaker Change: Okay.

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