Q4 2025 American Woodmark Corp Earnings Call

Operator: Good day and welcome to the American Woodmark Corporation fourth fiscal quarter 2025 conference call. Today's call is being recorded May 29th, 2025. 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.

Good day and welcome to the American would Mark Corporation fourth fiscal quarter 2025 Conference call. Today's call is being recorded May 29, 2025. During this call. The company may discuss certain non-GAAP financial measures included in our earnings release such as.

Adjusted net income adjusted EBITDA, adjusted EBITDA margin free cash flow net leverage and adjusted EPS per diluted share the earnings release, which can be found on our website American woodwork. Dotcom includes definitions of each of these non-GAAP financial measures the company's rationale for their usage.

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

And a reconciliation of these non-GAAP financial measures to the most comparable GAAP financial measures.

We also use our website to publish other information that may be important to investors such as investor presentations, we will begin the call by reading the company's Safe Harbor statement under the private Securities Litigation Reform Act of 1995.

Operator: 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 statements.

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 statements such factors include but are not limit.

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 its forward-looking statements, even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized.

Did you those described in the company's filings with the Securities and Exchange Commission and the annual report to shareholders. The company does not undertake to publicly update or revise its forward looking statements, even if experience or future changes make it clear that any projected results expressed or implied therein will not be real.

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Operator: If you require operator assistance, please press star then zero.

Speaker Change: If you require operator assistance. Please press Star then zero I would now like to turn the call over to Paul Joakim check Senior Vice President and CFO. Please go ahead Sir.

Paul Joachimczyk: I would now like to turn the call over to Paul Joachimczyk, Senior Vice President and CFO. Please go ahead, sir.

Scott Culbreth: Good morning and welcome to American Woodmark's fourth fiscal quarter conference call. Thank you for taking the time today to participate. Joining me is Scott Culbreth, President and CEO. Scott will begin with a review of the quarter, and I'll add additional details regarding our financial performance. After our comments, we'll be happy to answer your questions. Scott? Thank you, Paul. And thanks to everyone for joining us today for our fourth fiscal quarter earnings report. Our teams delivered net sales of $400.4 million, representing a decline of 11.7% versus the prior year. Demand for our products in the new construction and remodel market were weaker than expected as uncertainty regarding tariff policies and declining consumer confidence slowed foot traffic with builders.

Speaker Change: Good morning, and welcome to American <unk> fourth fiscal quarter Conference call.

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

Scott: Our teams delivered net sales of $404 million, representing a decline of 11, 7% versus the prior year.

Scott: Demand for our products in the new construction and remodel market were weaker than expected as uncertainty regarding tariff policies and declining consumer confidence slowed foot traffic with builders and retailers.

Scott Culbreth: The National Association of Realtors recently reported that existing home sales fell 0.5% month-over-month to a seasonally adjusted rate of $4 million in April 2011. Year over year, sales have declined 2%. The pent-up demand for housing continues to grow, and a reduction in mortgage interest rates could increase demand for housing in our province. For the quarter, all channels reported low double-digit decline. Within our home center business, the stock kitchen category performed better than our overall business with a low single digit negative column versus the prior year. This is a result of share gains and the value of our offer.

Scott: The National Association of Realtors recently reported that existing home sales fell 0.5% month over month to a seasonally adjusted rate of $4 million in April 2025.

Scott: Year over year sales have declined 2%.

Scott: Pent up demand for housing continues to grow and a reduction in mortgage interest rates could increase demand for housing in our products.

Scott: For the quarter, all channels reported low double digit declines.

Scott: Within our home center business, the stock kitchen category performed better than our overall business with a low single digit negative comp versus the prior year.

Scott: This is a result of share gains in the value of our offering.

Scott Culbreth: Our pro business was a positive comp for the quarter with offsets in bath and store. Single-family housing starts continue to experience negative costs versus prior year from January to April. The NAHB Housing Market Index fell to 34 in May, below April and expectations both at 40. This marks the lowest level since November 2020. As homebuilders continue to be impacted by high mortgage rates, weaker consumer confidence, and policy-related issues. For our new construction direct business, our team has delivered growth in the Northeast and Southeast markets, but this was more than offset by double-digit declines in Florida, Texas, and the South.

Scott: Our pro business was a positive comp for the quarter with offsets in Bath and storage.

Scott: Single family housing starts continued to experienced negative comps versus prior year from January to April.

Scott: The N a H B housing market index fell to 34 and May below April and expectations. Both at 40.

Scott: This marks the lowest level since November 2023.

Scott: As homebuilders continue to be impacted by high mortgage rates weaker consumer confidence and policy related uncertainty.

Scott: For our new construction direct business, our teams delivered growth in the northeast and southeast markets, but this was more than offset by double digit declines in Florida, Texas and the southwest.

Scott Culbreth: We continue to see a rotation down in our made-to-order new construction. resulting in unfavorable mixed impact. Our adjusted EBITDA results were $47.1 million, or 11.8% for the quarter. reported EPS was $1.71 and adjusted EPS was $1.62. Our cash balance was $48.2 million at the end of the fourth quarter. And the company has access to an additional $314.2 million under its revolving credit. Leverage was at 1.56 times adjusted EBITDA, and the company repurchased 417,000 shares in the quarter. The company purchased 1.17 million shares, or approximately 7.5% of shares outstanding, for $96.7 million during fiscal 2025, consistent with our capital allocation methodology.

Scott: We continue to see a rotation down or made order new construction offering resulting in unfavorable mix impact of the business.

Scott: Our adjusted EBITDA results were $47 $1 million or 11, 8% for the quarter.

Scott: Reported EPS was $1 71, and adjusted EPS was $1 61.

Scott: Our cash balance was $48 $2 million at the end of the fourth fiscal quarter and the company has access to an additional $314 $2 million under its revolving credit facility.

Scott: Leverages at 1.56 times adjusted EBITDA in the company repurchased 417000 shares in the quarter.

Scott: The company purchased 1.17 million shares or approximately 757, 5% of shares outstanding for $96 $7 million during fiscal 2025, consistent with our capital allocation methodology.

Scott Culbreth: Demand trends are expected to remain challenging, and our outlook for fiscal year 2026 ranges from low single-digit declines to low single-digit increases in net sales for the full fiscal year. We expect to outperform market growth rates but have widened our outlook due to uncertainty related to tariffs when net sales decline is expected throughout the first half of the Adjusted EBITDA expectations range from $175 million to $290 million. based on current tariff policies in place at the end of the business day, May 28. Longer term, our belief remains that as mortgage rates, mortgage interest rates decline, consumer confidence increases, existing home sales increase, and the potential for higher-ticket home projects increase.

Scott: Demand trends are expected to remain challenging and our outlook for fiscal year 2026 ranges from low single digit declines to low single digit increases in net sales for the full fiscal year.

Scott: We expect to outperform market growth rates, but have widened our outlook due to uncertainty related to tariffs when net net sales declines expected throughout the first half of the fiscal year.

Scott: Adjusted EBITDA expectations range from 175 million to $200 million based on current tariff policies in place at the end of the business day May 28.

Scott: Longer term, our belief remains that as mortgage rates mortgage interest rates decline.

Scott: Consumer confidence increases existing home sales increase and the potential for higher ticket home projects increases.

Scott Culbreth: Mortgage interest rate relief and consumer confidence increases will also benefit the single family new construction business as more consumers enter the home buying market. We have the products and platforms to win, and this will serve as a tailwind for our business.

Scott: Mortgage interest rate relief in consumer confidence increases will also benefit the single family new construction business as more consumers enter the home buying market.

Scott: The products and platforms to win and this will serve as a tailwind for our business.

Scott Culbreth: Our team continues to execute our strategy that has three main pillars, growth, digital transformation, and platform design, with a number of key accomplishments over the past fiscal year that I would like to highlight. Under growth, our teams navigated a challenging macroeconomic environment marked by low housing resale activity, high interest rates and increased Despite these headwinds, we delivered on product innovation, capacity investments, and channel Over 30% of made-to-order sales came from products lost in the last three years. Facility expansions in Monterey, Mexico and Hamlet, North Carolina enhanced our major stock capability. We accelerated a low-skew, high-value product offering for pros and expanded it.

Scott: Our team continues to execute our strategy that has three main pillars growth.

Scott: Digital transformation and platform design with a number of key accomplishments over the past year that I would like to highlight.

Scott: Undergrowth.

Scott: Our teams navigated a challenging macroeconomic environment marked by low housing resale activity high interest rates and increased input cost.

Scott: Despite these headwinds we delivered on product innovation capacity investments in channel expansion.

Scott: Over 30% of Meda water sales came from products launched in the last three years.

Scott: Facility expansions in Monterrey, Mexico in hamlet, North Carolina enhanced our major stock capabilities.

Scott: We accelerated a low SKU high value product offering for pros and expanded nationally.

Scott Culbreth: We also transitioned independent distributor customers to our new brand, 1951 Cabin. Looking forward, we're focused on expanding our internal sales team. enabling home delivery for baths. in assuring we have the right products and platforms to support.

Scott: We also transitioned independent distributor customers to our new brand 1951 cabinetry.

Scott: Looking forward, we're focused on expanding our internal sales teams.

Scott: Enabling home delivery for Bath.

Scott: And ensuring that the right products and platforms to support continued growth.

Scott Culbreth: Under digital transformation, we advanced our efforts with a focus on building an agile, scalable IT foundation to support future innovation. We executed our ERP cloud strategy with our Anaheim made-to-stock facility going live in early May of fiscal 2026 and are now planning for our East Coast made-to-stock facility. We improved our cybersecurity readiness through enhanced detection and will be further enhancing our recovery. Key investments were made in video, infographics, search engine optimization, and interactive tools that have improved performance across digital channels and positioned us to deliver best-in-class content, especially for home center partners and independent dealers.

Scott: Under digital transformation, we advanced our efforts with a focus on building an agile scalable foundation to support future innovation, we executed our ERP cloud strategy with her Anaheim made the stock facility going live in early May of fiscal 2026 and are now planning for our east coast made stock facilities.

Scott: We improved our cyber security readiness through enhanced detection and will be further enhancing our recovery systems key.

Scott: Key investments were made in video Infographics search engine optimization interactive tools that had improved performance across digital channels and positioned us to deliver best in class content, especially for home Center partners and independent dealers.

Scott Culbreth: Under platform design, we advanced our strategy by executing improvement plans at our Monterey, Mexico, and Hamlet, North Carolina sites, establishing them as manufacturing centers of excellence. We initiated a footprint optimization across our network, including the closure of our Orange, Virginia facility to streamline operations and improve response. These efforts address cost efficiency, asset modernization, and supply chain resilience while enhancing service to the new construction and repair model. We also remain responsive to the evolving tariff environment and are focused on continuous improvement in plant operations through standardization automation projects targeting our mill component in the supply chain.

Scott: Under platform design, we advanced our strategy executing improvement plans at our Monterrey, Mexico in hamlet North Carolina sites, establishing them as manufacturers manufacturing centers of excellence.

Scott: We initiated footprint optimization across our network, including the closure of our Orange, Virginia facility to streamline operations and improve responsiveness.

Scott: These efforts address cost efficiency asset modernization and supply chain resilience, while enhancing service to the new construction and repair and remodel market.

Scott: We also remain responsive to the evolving tariff environment and are focused on continuous improvement and plant operations through standardization automation projects targeting our mill component and assembly processes.

Scott Culbreth: In closing, I couldn't be prouder of what this team accomplished in fiscal 2025 and I look forward to their continuing contributions during fiscal year 2026.

Scott: In closing I couldn't be prouder with his team accomplished in fiscal 2025, and I look forward to their continuing contributions during fiscal year 2026.

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

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

Paul Joachimczyk: Thank you, Scott. I will first talk about our fourth fiscal quarter results, then transition to our full year performance and close with our outlook for fiscal year 2026. Net sales were $400.4 million, representing a decrease of $52.9 million, or 11.7% versus prior year. Remodel net sales, which combines home centers and independent dealer and distributors, decreased 10.4% for the fourth quarter versus prior year, with both home centers and dealer distributors decreasing 10% and 11% respectively. New construction net sales decreased 13.4% for the quarter compared to last year. Our gross profit margin for the fourth quarter of fiscal year 2025 decreased 160 basis points to 17% of net sales versus 18.6% reported in the same period last year.

Speaker Change: Thank you Scott.

Speaker Change: I will first talk about our fourth fiscal quarter results, then transition to our full year performance and close with our outlook for fiscal year 2026.

Speaker Change: Net sales were $400 4 million, representing a decrease of $52 9 million or 11, 7% versus prior year.

Speaker Change: Remodel net sales, which combines home centers and independent dealer and distributors decreased 10, 4% for the fourth quarter versus prior year with both home centers and dealer distributors, decreasing 10% and 11% respectively.

Speaker Change: New construction net sales decreased 13, 4% for the quarter compared to last year.

Speaker Change: Our gross profit margin for the fourth quarter of fiscal year, 2025 decreased 160 basis points to 17% of net sales versus 18, 6% reported in the same period last year.

Paul Joachimczyk: This decrease was a result of fixed cost to leverage and increases in depreciation expense and product input costs. These were partially offset by our operational improvements in our manufacturing operations. Total operating expenses excluding any restructuring charges for the fourth quarter of fiscal year 2025 were 8.9% of net sales versus 10.1% for the same period last year. The 120 basis point decrease is due to decreases in our incentives and profit sharing and a lower spending across all functions. Adjusted net income was $24,000,000 or $1.61 per diluted share in the fourth quarter of fiscal year 2025 versus $28.2 million or $1.78 per diluted share last year.

Speaker Change: This decrease was a result of fixed cost deleverage and increases in depreciation expense and product input costs.

Speaker Change: Were partially offset by our operational improvements in our manufacturing operations.

Speaker Change: Total operating expenses, excluding any restructuring charges for the fourth quarter of fiscal year 2025, or eight 9% of net sales versus 10, 1% for the same period last year.

Speaker Change: The 120 basis point decrease is due to decreases in our incentives in profit sharing and a lower spending across all functions.

Speaker Change: Adjusted net income was $24 million or $1 61 per diluted share in the fourth quarter of fiscal year 2025 versus $28 2 million or $1 78 per diluted share last year.

Paul Joachimczyk: Adjusted EBITDA for the fourth quarter of fiscal year 2025 was $47.1 million or 11.8% of net sales versus $54.7 million or 12.1% of net sales reported in the same period last year, representing a 30 basis point decline year-over-year.

Speaker Change: Adjusted EBITDA for the fourth quarter of fiscal year, 2025 was $47 1 million or 11, 8% of net sales versus $54 7 million or 12, 1% of net sales reported in the same period last year, representing a 30 basis point decline year over year.

Paul Joachimczyk: our full year performance. Net sales were $1.7 billion, representing a decrease of $138 million, or 7.5%. The combined home center and independent dealer distributor net sales decreased 9.2% for the fiscal year, with home centers decreasing 9.3% and dealer distributors decreasing 8.9%. New construction net sales decreased 5.1% for the fiscal year compared to the prior year. The company's gross profit margin for the fiscal year was 17.9% of net sales versus 20.4% reported last year. representing a 250 basis point decline. During the fiscal year, we faced lower volumes due to macroeconomic events, which caused fixed cost de-leverage, combined with rising input costs, which was partially offset by operational enhancements and controlled For more information visit www.fema.gov Total operating expenses, excluding any restructuring charges, were approximately 9.5% of net sales in the current fiscal year, compared with 11.7% of net sales for the prior fiscal year.

Speaker Change: Our full year performance net sales were $1 7 billion, representing a decrease of $138 million or seven 5%.

Speaker Change: Our combined home center and independent dealer distributor net sales decreased nine 2% for the fiscal year with home centers, decreasing nine 3% and dealer distributors decreasing eight 9%.

Speaker Change: New construction net sales decreased five 1% for the fiscal year compared to the prior year.

Speaker Change: The company's gross profit margin for the fiscal year was 17, 9% of net sales versus 24% reported last year.

Speaker Change: Representing a 250 basis point decline.

Speaker Change: During the fiscal year, we face lower volumes due to macroeconomic events, which caused fixed cost deleverage combined with rising input costs, which was partially offset by operational enhancements and controlled spending.

Speaker Change: Total operating expenses, excluding any restructuring charges were approximately approximately 95% of net sales in the current fiscal year compared with 11, 7% of net sales for the prior fiscal year.

Paul Joachimczyk: The 220 basis point decrease was due to deal amortization that ended last fiscal year Q3, combined with decreases in incentives, profit sharing, and controlled spending across all functions, offset by increases in our digital transformation spend Scott described earlier. Adjusted net income for fiscal year 2025 was $105.5 million, down $34.4 million due to lower sales which caused fixed costs to deleverage, as well as higher input costs. These were partially offset by improvements in our operations and decreases in our incentive and profit share. Adjusted EBITDA for fiscal year 2025 was $208.6 million, or 12.2% of net sales, compared to $252.8 million, or 13.7% of net sales for the prior fiscal year, representing 150 basis point decline year-over-year.

Speaker Change: The 220 basis point decrease was due to deal amortization that ended last fiscal year Q3, combined with decreases in incentives profit sharing and control spending across all functions offset by increases in our digital transformation spend Scott described earlier.

Speaker Change: Adjusted net income for fiscal year, 2025 was $105 5 million down $34 4 million due to lower sales, which caused the fixed cost deleverage as well as higher input costs.

Speaker Change: These were partially offset by improvements in our operations and decreases in our incentive and profit sharing expenses.

Speaker Change: Adjusted EBITDA for fiscal year, 2025 was $208 6 million or 12, 2% of net sales compared to $252 8 million or 13, 7% of net sales for the prior fiscal year, representing a 150 basis point decline year over year.

Paul Joachimczyk: Despite facing volume headwinds the entire fiscal year, our teams have continued to improve our operational efficiencies and control overall spending. These savings are partially offset by increases in our material and our transportation costs. Free cash flow totaled a positive $65.7 million for the current fiscal year to date, compared to $138.5 million in the prior year. The approximate $73 million decrease was primarily due to lower net income and changes in our operating cash flows, specifically higher inventory and lower accrued balance. Net leverage was 1.56 times adjusted EBITDA at the end of the fourth quarter of fiscal year 2025, representing a 0.42 times increase from the 1.14 times of last year.

Speaker Change: Despite facing volume headwinds the entire fiscal year. Our teams have continued to improve our operational efficiencies and control overall spending. These savings are partially offset by increases in our material and our transportation costs.

Speaker Change: Free cash flow totaled a positive $65 7 million for the current fiscal year to date compared to $138 5 million in the prior year.

Speaker Change: The approximate $73 million decrease was primarily due to lower net income and changes in our operating cash flows specifically higher inventory and lower accrued balances.

Speaker Change: Net leverage was 156 times adjusted EBITDA at the end of the fourth quarter of fiscal year 2025, representing a 0.42 times increase from the 114 times of last year.

Paul Joachimczyk: As of April 30, 2025, the company had $48.2 million in cash, plus access to $314.2 million of additional availability under its revolving facility.

Speaker Change: As of April 30th 2025, the company had $48 2 million in cash plus access to $314 2 million of additional availability under its revolving facility.

Paul Joachimczyk: Under the current share repurchase program. The company purchased 96.7 million, or 1.17 million, shares during fiscal year, representing about 7.5% of outstanding shares being retired. We have $117.8 million of shared purchase authorization remaining as of April 30, 2000.

Speaker Change: Under the current share repurchase program.

Speaker Change: The company purchased $96 7 million or 1.17 million shares during fiscal year <unk>.

Speaker Change: Presenting about seven 5% of outstanding shares being retired.

Speaker Change: We have $117 8 million of share repurchase authorization remaining as of April 32025.

Paul Joachimczyk: Our Outlook for Fiscal Year 2020. From a net sales perspective, we expect low single-digit declines to low single-digit increases in net sales for the full fiscal year. We do expect sales to increase in the back half of our fiscal year, with the first half being challenged by the current macroeconomic The change in net sales is highly dependent upon overall industry, economic growth trends, material constraints, labor impacts, interest rates, tariff rate changes, and consumer behaviors. Our projected adjusted EBITDA for fiscal year 2026 falls within the range of $175 million to $200 million, driven primarily by higher year-over-year SG&A costs.

Speaker Change: Our outlook for fiscal year 2026.

Speaker Change: From a net sales perspective, we expect low single digit declines to low single digit increases in net sales for the full fiscal year.

Speaker Change: We do expect sales to increase in the back half of our fiscal year with the first half being challenged by the current macroeconomic environment.

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

Speaker Change: Our projected adjusted EBITDA for fiscal year, 2026 falls within the range of 175 million to $200 million, driven primarily by higher year over year SG&A costs increases in our input cost and fixed cost inflationary items offset by our commitment to operational excellence and all.

Paul Joachimczyk: increases in our input costs and fixed cost inflationary. offset by our commitment to operational excellence and automation. both of which have been realizing efficiency gains across all of our While the current economic climate continues to put pressure on our sales, we will continue to be diligent in controlling our controllable costs and balancing our spending appropriately.

Speaker Change: Automation.

Speaker Change: Both of which have been realizing efficiency gains across all of our platforms.

Speaker Change: While the current economic climate continues to put pressure on our sales we will continue to be diligent in controlling our controllable costs and balancing our spending appropriately.

Paul Joachimczyk: Our capital allocation priorities for fiscal year 2026 will stay consistent with past practice. First, we will remain focused on investing back into the business by supporting our strategic pillars of digital transformation and platform design with investments in our ERP and our CRM platforms. investing in automation at all of our operating locations. Next, we will be opportunistic in our share repurchasing, and lastly, with our debt position at a leverage ratio we wanted to achieve, which is in the range of 1.5 to 2 turns, debt repayments will be deprioritized. Please note that we did enter into a new debt agreement and our interest expense will increase from the prior year by approximately $7 million annually.

Speaker Change: Our capital allocation priorities for fiscal year 2026, we'll stay consistent with past practices.

Speaker Change: First we will remain focused on investing back into the business by supporting our strategic pillars of digital transformation and platform design with investments in our ERP and our CRM platforms invest.

Speaker Change: Investing in automation at all of our operating locations.

Speaker Change: Next we will be opportunistic in our share repurchasing and lastly, with our debt position our leverage ratio. We wanted to achieve which is in the range of one and a half to two turns debt repayments will be de prioritized.

Speaker Change: Please note that we did enter into a new debt agreement and our interest expense will increase from the prior year by approximately $7 million annually.

Paul Joachimczyk: The additional capital projects that were completed last year, our depreciation expense is increasing by approximately $11 million in fiscal year 2026.

Speaker Change: The additional capital projects that were completed last year, our depreciation expense is increasing by approximately $11 million in fiscal year 2026.

Paul Joachimczyk: In closing, our business continues to have the resilience to manage through a tough and persistent macroeconomic climate, and knows what action needs to be taken in order to position ourselves for the best growth possible. regardless of external factors. This past year was filled with uncertainty and our teams managed to create some great wins in automation and operational efficiency.

Speaker Change: In closing our business continues to have the resilience to manage through a tough and persistent macroeconomic climate and knows what action needs to be taken in order to position ourselves for the best growth possible.

Speaker Change: Regardless of external factors.

Speaker Change: This past year was filled with uncertainty and our teams managed to create some great wins in automation and operational efficiencies.

Paul Joachimczyk: I extend my heartfelt gratitude to every team member at American Woodmark. They are the driving force behind our daily accomplishments. They're the ones that make it happen daily.

Speaker Change: And then my heartfelt gratitude to every team member at American with Mark.

Speaker Change: They are the driving force behind our daily accomplishments.

Speaker Change: They're the ones that make it a habit daily.

Operator: This concludes our prepared remarks, and we'll be happy to answer any questions you have. 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 keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2.

Speaker Change: This concludes our prepared remarks, we'll be happy to answer any questions you have at this time.

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, if youre using a speakerphone. Please pick up your handset before pressing the keys.

Speaker Change: At any time. Your question has been addressed and you would like to withdraw. Your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.

Operator: At this time, we will pause momentarily to assemble our roster.

Trevor Allinson: The first question comes from Trevor Allinson with Wolf Research. Please go ahead. Hi, good morning. Thank you for taking my questions. The first one's on tariffs and what you've assumed in your guidance.

Speaker Change: Our first question comes from Trevor Allinson with Wolfe Research. Please go ahead.

Trevor Allinson: Hi, Good morning, Thank you for taking my questions.

Trevor Allinson: First one is on tariffs and what you've assumed in your full year guidance can you quantify for us how much of an impact youre expecting maybe split that between China and non China tariffs and then how much of that headwind are you expecting to fully offset.

Scott Culbreth: Can you quantify for us how much of an impact you're expecting, maybe split that between China and non-China tariffs, and then how much of that headwind are you expecting to fully offset in your fiscal 2016? Yeah, good morning, Trevor. So our outlook range was significantly influenced by tariffs and certainly the uncertainty associated with tariffs. There could be demand impacts that could have an impact on the outlook. And there could be delay in pricing to recover the incremental cost the business could take on. I'll tell you with last night's ruling from the United States Court of International Trade, that ruling could be favorable to our outlook, because the price cost delay risk would be removed from our outlook for the year.

Trevor Allinson: In your fiscal 'twenty guidance.

Trevor Allinson: Yeah. Good morning, Trevor So our outlook range was significantly influenced by tariffs and certainly the uncertainty associated with tariffs there could be demand impacts that could.

Trevor Allinson: Have an impact on the outlook and there could be delay in pricing to recover the incremental cost of business could take on I would tell you with last night's ruling from the United States Court of International trade.

Trevor Allinson: That ruling could be favorable to our outlook because of the price cost delay risks would be removed from our outlook for the year. The outlook. We just gave to you assumed the tariffs that were in place at the end of business yesterday and that will be roughly $20 million of cost for the business and then we had a variety of scenarios that we've modeled for recover.

Trevor Allinson: The outlook we just gave to you assumed the tariffs that were in place at the end of the business yesterday. And that would be roughly $20 million of cost for the business. And then we had a variety of scenarios that we've modeled for recovery from 0% to 100% and different time frames associated with that. So that's fully baked into the $175 million to $200 million range we just gave you. Okay, that makes a lot of sense. I appreciate all that color.

Trevor Allinson: From zero percent to 100% and different time frames associated with that so that's fully baked into the $175 million and $200 million range. We gave you.

Speaker Change: Okay makes a lot of sense I appreciate all that color and then the second one is more of a two parter on margins first on gross margins.

Scott Culbreth: And then the second one is more of a two-parter on margins. First, on gross margins, they stepped up about 200 basis points quarter over quarter. Just curious as to what drove that nice improvement sequentially.

Speaker Change: They stepped up about 200 basis points quarter over quarter, just curious as to what drove that nice improvement sequentially and then similarly G&A cost control was really good in the quarter at about $15 million should that be a good number that we should think of going forward keeping that lower at about $15 million or was there anything more one.

Scott Culbreth: And then, similarly, G&A, your cost control was really good in the quarter at about $15 million. Should that be a good number that we should think of going forward, keeping that lower at about $15 million, or was there anything more one-time-in-nature than seeing that in the quarter? With respect to gross margins, typically our Q3 timeframe would be one of the tougher margin quarters for us because of the holidays and just the overall slow season. As you recall, last quarter we talked about softer demand than we expected inside the quarter, and then our teams took actions towards the end of Q3, towards the beginning of Q4, to right-size our operations and our footprint.

Speaker Change: Time in nature that thing that in the quarter.

Speaker Change: Yeah with respect to gross margins typically are Q3 time frame would be one of the tougher margin quarters for us.

Speaker Change: Because of the holidays and just the overall slow season.

Speaker Change: As you recall last quarter, we talked about softer demand than we expected inside of the quarter and then our teams took actions towards the end of Q3 towards the beginning of Q4 to rightsize our operations in our footprint. So our teams completed those tasks and as a result, youre seeing that margin rebound inside Q4 overall.

Scott Culbreth: So our teams completed those tasks, and as a result, you're seeing that margin rebound inside Q4 overall.

Trevor Allinson: For SG&A, no, I wouldn't use the quarter alone as a baseline to carry forward. As Paul mentioned, you know, incentive comp is a big part of that story, and when we reset our plan for fiscal year 26, we do have a cost pickup or increase, if you will, year over year. Yep, makes sense. Appreciate all the color and good luck moving forward. Yeah, thanks Trevor.

Speaker Change: For SG&A no I wouldn't use the quarter alone as a baseline to carry forward as Paul mentioned incentive comp is a big part of that story.

Speaker Change: And when we reset our plan for fiscal year 'twenty six we do have a cost pick up or increase if you will year over year for incentives.

Speaker Change: Got it makes sense I appreciate all the color and good luck moving forward.

Speaker Change: Thanks Trevor.

Adam Baumgarten: The next question comes from Adam Baumgarten with Zalman, please go ahead. Hey guys, good morning. Just thinking about the revenue gap here. So we think about the midpoint of flat, what does that assume for each of your main end markets, R&R and new construction? Actually, Adam, it's pretty consistent. So our overall forecast rejection as we think about fiscal year 26, saw first half, better second half, recovery in both end markets. So not wildly different depending on the Okay, got it.

Speaker Change: The next question comes from Adam Baumgarten with Zelman. Please go ahead.

Adam Baumgarten: Hey, guys good morning.

Adam Baumgarten: Just thinking about the revenue guide here.

Adam Baumgarten: So we think about the midpoint of flat what does that assume for each of your main end markets R&R and new construction.

Adam Baumgarten: Actually Adam it's pretty consistent so our overall forecast rejection as we think about fiscal year 'twenty six soft first half better second half recovery in both end markets, so not wildly different depending on the channel.

Speaker Change: Okay got it and then just on the second half being better or are you seeing anything in the business today, maybe MAGE <unk>.

Scott Culbreth: And then just on the second half being better, are you seeing anything in the business today, maybe give you confidence that you could see a return to growth in the back half of fiscal 26? I'll just rely on the commentary we get from our partners. Certainly our home center partners messaged over the last couple of weeks their outlooks for the year. They reaffirmed their position for the full year, which certainly models a bit more of a recovery in the second half, and I think they did have some call-outs to some of the higher ticket discretionary performing better second half.

Adam Baumgarten: To give you confidence that you could see.

Adam Baumgarten: A return to growth in the back half of fiscal 'twenty six.

Adam Baumgarten: I'll just rely on the commentary we get from our partners is certainly our home Center partners Messaged over the last couple of weeks their outlooks for the for the year. They reaffirmed their position for the full year, which certainly models.

Adam Baumgarten: A bit more of a recovery in the second half and I think they did have some call outs to some of the higher ticket discretionary are performing better second half. So we would certainly have that same assumption as we think about new construction as we get through this summer and go into next year. The expectation is that market will perform better than the weak market that we saw in <unk>.

Scott Culbreth: So we would certainly have that same assumption as we think about new construction as we get through this summer and go into next year. The expectation is that market will perform better than the weak market that we saw in 2020. But I think it's too early to say there's clear data points at this point. Yep, understandable.

Adam Baumgarten: 25.

Adam Baumgarten: But I think it's too early to say I think it's too early to say theres clear data points at this at this stage.

Speaker Change: Yep, that's understandable and then just lastly on you mentioned negatives MTO mixing the homebuilder channel can you talk about how you're seeing pricing behavior, just given all the pushback, we're hearing about on all suppliers from the large homebuilders.

Scott Culbreth: And then just lastly, on you mentioned negative MTO mix in the homebuilder channel.

Scott Culbreth: Can you talk about how you're seeing pricing behave just given all the pushback we're hearing about on all suppliers from the large homebuilders? Yeah, pricing is held, but we've certainly seen some mixed impacts that we spoke about. So, in new construction specifically, you know, we go to market with that good, better, best approach, and we've seen a rotation from that best to better. I think I mentioned last quarter as well, kind of number of cabinets per home is also starting to show up. So, as builders are looking to take cost out of the home, one way to do that is to impact the design, and perhaps there's one or two less cabinets in the design.

Speaker Change: Yeah pricing is held but we've certainly seen some mix impacts that we spoke about so in new construction, specifically you would go to market with that good better best approach and we've seen a rotation from that best to better I think I mentioned last quarter as well kind of number of cabinets per home is also starting to show up so as builders are looking to take.

Speaker Change: Cost out of the home one way to do that is to.

Speaker Change: Impact of designing and perhaps there is one or two less cabinets in the design. So we see those impacts but no wholesale wholesale price impacts at this stage.

Scott Culbreth: So, we see those impacts, but no wholesale price impacts. Okay, good to hear. Thanks, guys.

Speaker Change: Okay cause here thanks, guys.

Speaker Change: Okay.

Garik Shmois: comes from Garik Shmois with Loop Capital. Please go ahead. Oh, hi, thanks. Um, just outside the tariff and tax, is there anything else that we should be thinking about on the cost side as it relates to the four year guys? I think the biggest piece is the tariff discussion. If you table tariffs, we do have some modeled commodity inflation as well as we go into the year, whether that's lumber, particle board, plywood, etc. So we do expect to see some inflationary impacts there along with labor, transportation. And we'll need to navigate that either with productivity offsets or pricing to be able to recover that as well.

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

Garik: Oh, hi, thanks.

Garik: Aside the tariffs and taxes or anything else that we should be thinking about on the cost side as it relates to our full year guidance.

Garik: I think the biggest piece is the tariff discussion if you table tariffs, we do have some modeled commodity inflation as well as we go into the year, whether thats lumber particle board plywood et cetera. So we do expect to see some inflationary impacts there along with you know labor transportation and won't need to NAV.

Garik: Gate that either with productivity offsets where pricing to be able to recover that as well.

Garik Shmois: Okay, thanks.

Garik: Okay. Thanks.

Garik Shmois: And follow-up question is just on the closure of the components facility that you talked about last quarter. I think you said it was going to be a bigger impact for fiscal 26. I'm not sure if you're able to quantify the potential savings from that. Yeah, so Garik, the closure of that facility should yield about five to $6 million of savings and benefits for us on an even a perspective each year annually going Got it. Thank you very much.

Speaker Change: Follow up questions just on the closure of the proponents facility that you talked about last quarter. I think you said it was going to get bigger.

Garik: <unk> for fiscal 'twenty, six I'm not sure if you're able to quantify the potential savings from that action.

Garik: Yeah, so gary but closer to that facility should yield about $5 million to $6 million of savings and benefits for us on an EBIT perspective, each year annually going forward here.

Garik: Got it thank you very much.

Steven Ramsey: The next question comes from Steven Ramsey with Thompson Research Group. Please go ahead. Hi, good morning. I wanted to follow up on the Outlook and the planning process to build that Outlook in the prior months. Clearly a very dynamic environment, but with the tariffs dampening that Outlook, I guess what I'm trying to get at, would you expect there to be growth next year or on the flat to high side of the Outlook if tariffs were not maybe as severe and dampening? Your Outlook on demand or pricing?

Steven Ramsey: The next question comes from Steven Ramsey with Thompson Research Group. Please go ahead.

Steven Ramsey: Hi, Good morning wanted to follow up on the outlook and the planning process to build that outlook in the prior months clearly a very dynamic environment, but with the tariffs.

Steven Ramsey: Dampening that outlook I guess, what I'm trying to get at would you expect there to be growth next year or two.

Steven Ramsey: The flat to high side of the outlook.

Steven Ramsey: If tariffs work, we're not maybe as severe and dampening a dampening your outlook on demand or pricing.

Scott Culbreth: I think for us, our view has been that the second half of our fiscal year, which of course pivots into the first part of calendar year 2026, we need to remove uncertainty. And there's a lot of things that you can articulate as being uncertain at this point in time. Tariffs is one of the biggest ones. So I think removing the uncertainty is what's important. Certainly if they go to zero, that's helpful, and you've got to think that leads to a rebound in consumer confidence, and perhaps consumers are more willing to spend on their home or perhaps make a transition and move from a particular home to a new home, which creates an opportunity for us to sell our product.

Steven Ramsey: I think for US our view has been that the second half of our fiscal year, which of course pivots into the first part of calendar year 2026, we need to remove uncertainty and theres a lot of things that you can.

Steven Ramsey: Articulate as being uncertain at this point in time tariffs is one of the biggest ones. So I think removing the uncertainty is what's important certainly if they go to zero that's helpful and you've got to think that.

Steven Ramsey: It leads to a rebound in consumer confidence and perhaps.

Steven Ramsey: <unk> are more willing to spend on their home or perhaps make a transition to move from from particular point particular home to our new home, which creates an opportunity for us to sell our products. So that theoretically should be a positive even if there is some base tariff amount again I think removing uncertainty is what's important when we <unk>.

Scott Culbreth: So that theoretically should be a positive. Even if there is some base tariff amount, again, I think removing the uncertainty is what's important. When we have day-to-day changes and impacts, to your point around having to do a model and a forecast and project, it is challenging. So removing the uncertainty, I think, is the key. And then if you can get those down to zero and it's a non-impact, of course, I think that's great news for our business and industry.

Steven Ramsey: Day to day changes and impacts to your point around having to do a model and a forecast projected it is challenging so removing the uncertainty I think is the key and then if you can get those down to zero and its a non impact of course, I think that's great news for our business and industry.

Scott Culbreth: Okay, that's helpful. And maybe kind of a similar line of thought for a bigger R&R recovery to happen, particularly in the big ticket in the cabinet space. How much refi or HELOC rebound do you think needs to happen to support that? I don't think it's as much about refi as it is about existing home sales. So, you know, we've seen a considerable slide the last couple of years. You know, the data point I shared, roughly $4 million. You know, the base case was that was worth $5 million for the core time frame that we looked at sort of coming out of COVID.

Speaker Change: Okay. That's helpful and maybe kind of a similar line of thought for a bigger R&R recovery to happen, particularly in the big ticket and the cabinet space, how much refi or HELOC rebound do you think needs to happen to support that.

Steven Ramsey: I don't think it's as much about refis. It is about existing home sales. So we've seen a considerable slide the last couple of years, you know the data point I shared roughly $4 million.

Speaker Change: The base case, it was that was north of 5 million for the core.

Speaker Change: <unk> frame that we looked at sort of come in coming out of Covid.

Scott Culbreth: I think that type of rebound is what we're shooting for and is what we need. Interest rates certainly can help that, but I don't think it's a refinance conversation. I think it's a velocity of activity with home sales. Okay, that's helpful.

Speaker Change: I think that type of rebound is what we're shooting for is what we need.

Speaker Change: Interest rates, certainly can help that but I don't think its a refinance conversation I think it's the velocity of activity with home sales.

Speaker Change: Okay. That's helpful. And then last quick one for me the automation gains in investments.

Scott Culbreth: And then the last quick one for me, the automation gains and investments that you continue to work on, can you put some context around the progress there and how it's helping 2026 results? And then pulling up, what inning would you say the company is in on the automation investment journey? Yeah, we're still in the early innings of that, so let's call them in the first three innings of that particular process. We saw a pretty sizable uptick in what we would identify as automation-related investments inside fiscal year 25, so north of $10 million of spend. That goes from small projects to large projects, and many of those had benefits that reduced the demand for labor in our operations.

Speaker Change: If you continue to work on can you put some context around the progress there and how it's helping 2026 results and then pulling up what inning would you say the company has been on the automation investment Jeremy Yes.

Speaker Change: Yeah, we're still are in the early innings of that so let's call them in the first three innings of that particular process.

Speaker Change: We saw a pretty sizable uptick in what we would identify as the automation related investments inside fiscal year 'twenty fives, so north of $10 million of spend that goes from small projects to large projects and many of those had benefits that reduce the demand for labor in our operations. So we'll fully realize that.

Scott Culbreth: So, we'll fully realize that as we go into fiscal year 26, and we've got some great projects teed up that we're working on now that will impact the business in 26 and 27.

Speaker Change: As we go into fiscal year, 'twenty, six and we've got some great projects teed up that we're working on now but will impact the business in 2006 and beyond.

Scott Culbreth: Okay, thank you.

Speaker Change: Okay. Thank you.

Operator: Again, if you have a question, please press star then 1.

Speaker Change: Again, if you have a question. Please press Star then one for.

Tim Weiss: The next question comes from Tim Weiss with Baird, please go ahead. Hey, guys. Good. Good morning. Morning.

Speaker Change: The next question comes from Tim Weiss with Baird. Please go ahead.

Tim Weiss: Hey, guys. Good morning, good morning.

Scott Culbreth: I guess just what's embedded for pricing at the midpoint, and I guess the ends of the guidance for revenue. Again, I don't want to give you an exact number, Tim. I just want to highlight there's a host of scenarios that go into that particular data set. I've already mentioned upwards of $20 million of tariff impacts, and we modeled all types of scenarios, again, from zero to 100% from a recovery standpoint to give you that range.

Tim Weiss: I guess, just whats embedded for pricing at the midpoint.

Tim Weiss: And I guess the ends of the guidance for revenue.

Tim Weiss: Again, I don't want to give you an exact number Tim I just wanted to highlight there was a there's a host of scenarios that go into that particular dataset I've already mentioned the upwards of $20 million of tariff impacts and we modeled all types of scenarios again from from zero to 100% from a recovery standpoint to give you that range.

Scott Culbreth: Do you have a scenario where pricing and productivity are able to offset the inflation, or is that net going to be a headwind for Woodmark in 2026? It's going to depend on the degree of inflation that we see. I think you've always heard us speak to this and seen us demonstrate in the past that over time we're able to recover for commodity inflation. What we sometimes deal with is that lag effect because of the process we have to go through for most of our customers to justify and then actually start to realize the price.

Tim Weiss: Okay.

Speaker Change: Do you have.

Tim Weiss: A scenario where.

Tim Weiss: Pricing is being able to kind of offset the pricing and productivity were able to offset the inflation or is that going to be a headwind for wood market and 26, it's going to depend on the degree of inflation that we see I think you've always heard us speak to this and seen as demonstrated in the past that over time, we're able to recover for commodity inflation.

Tim Weiss: What we sometimes deal with is that lag effect because of the process. We have to go through for most of our customers to justify and then actually start to realize the price. So there could be some lag effects that hit fiscal year 'twenty six and that's built into the to the outlook that you've you've seen.

Scott Culbreth: So there could be some lag effects that hit fiscal year 26, and that's built into the outlook that you've... Okay.

Scott Culbreth: And then I guess the gap between single family completions and then just what you're seeing in the builder direct sales, I mean, that's widened over the last couple of quarters. So it sounds like it's more mixed in kind of cabinet count versus share per se. But I guess based on what you're hearing from builders, is that something that's going to kind of anniversary in a couple quarters?

Tim Weiss: Okay.

Tim Weiss: Then I guess the the.

Tim Weiss: The gap between.

Speaker Change: Yeah, I'll take I guess single family completions, and then just what you're seeing in the in the builder direct sales I mean, that's widened over the last couple of quarters.

Speaker Change: So it sounds like it's more mix and kind of.

Speaker Change: Cabinet count versus versus share per se, but I guess based on what youre hearing from builders is that something that's going to kind of anniversary in a couple of quarters or do you think that's going to be a.

Scott Culbreth: Or do you think that's going to be a persistent headwind to the builder business for the foreseeable future. Yeah, I don't have any perspective from our builders on future, future quarters and what their thoughts are on that. But you nailed it specifically on what we see happening today. It's been more of a mix effect as well as cabinet count, impacting that and driving that gap that you're seeing. Okay. Sounds good. Good luck on your guys.

Speaker Change: Persistent headwind to the builder business for the foreseeable future.

Speaker Change: Yes, I don't have any perspective from our builders on future future quarters, and what their thoughts are on that but you nailed it specifically on what we see happening today, it's been more of a mix effect as well as cabinet count impacting that and driving that gap that youre seeing.

Speaker Change: Okay. Okay sounds good good luck on the you guys.

Scott Culbreth: Thank you.

Speaker Change: Thank you.

Paul Joachimczyk: As I do not see that there is anyone else waiting to ask a question, I would like to turn the line over to Mr. Joachimczyk for any closing comments. Please go ahead, sir.

Speaker Change: As I do not see that there are any one as.

Speaker Change: Anyone else waiting to ask a question I would like to turn the line over to Mr. <unk> for any closing comments. Please go ahead Sir.

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

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

Operator: The conference has now concluded. Thank you for attending today's presentation.

Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Operator: You may now disconnect.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Yeah.