Release Date: August 27, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- American Woodmark Corp (AMWD, Financial) reported adjusted EBITDA of $62.9 million, representing 13.7% of net sales.
- The company has a strong cash balance of $89.3 million and access to an additional $322.9 million under its revolving credit facility.
- Operational excellence efforts continue to drive progress across the enterprise, despite lower volumes.
- The company repurchased 271,000 shares in the quarter, demonstrating confidence in its long-term value.
- Digital transformation and automation efforts are progressing, with significant investments in ERP and CRM systems.
Negative Points
- Net sales declined by 7.9% year-over-year, falling short of expectations due to weaker demand in the remodel channel.
- Gross profit as a percentage of net sales decreased by 180 basis points to 20.2%, impacted by lower sales volumes and increased input costs.
- The repair and remodel market is expected to be down mid-single-digits, with larger discretionary projects projected to decline by high-single-digits.
- Adjusted net income decreased to $29.6 million or $1.89 per diluted share, down from $46.2 million or $2.78 per diluted share last year.
- Free cash flow decreased significantly to $29.4 million from $72.5 million in the prior year, primarily due to higher inventory levels.
Q & A Highlights
Q: Could you give some color on how revenue trended by channel in the fiscal first quarter?
A: For new construction, we were up single-digits and for repair remodel down double-digits. β M. Scott Culbreth, President, Chief Executive Officer, Director
Q: How do you expect revenue to trend over the next three quarters given the updated outlook for the year?
A: We prefer to provide a full-year basis outlook due to uncertainty over the next couple of quarters with potential rate cuts. We feel confident in the full-year projection provided. β M. Scott Culbreth, President, Chief Executive Officer, Director
Q: Can you provide an update on input costs and pricing?
A: Pricing actions will vary by channel. We have been active in dealer channels and have announced a price increase there. The timing of price increases in other channels will depend on input costs and previous price adjustments. β M. Scott Culbreth, President, Chief Executive Officer, Director
Q: What is underpinning your new construction outlook given the recent slowdown in housing starts?
A: We exceeded our original planning expectations for the first fiscal quarter and feel good about the second quarter. However, we expect softer cabinet installations in the back half due to declining starts. Interest rate cuts could drive incremental demand in new construction, but this will likely impact mid-calendar year '25. β M. Scott Culbreth, President, Chief Executive Officer, Director
Q: How do you expect the repair and remodel market to react to potential interest rate cuts?
A: It will take a couple of rate reductions and a lag effect before consumers gain confidence and engage in projects. This will likely set us up for a stronger fiscal year '26. β M. Scott Culbreth, President, Chief Executive Officer, Director
Q: How are you managing EBITDA margins despite slower sales?
A: We are taking pricing actions as necessary and focusing on operational efficiencies across manufacturing, service platforms, and SG&A spending. Our goal is to manage EBITDA to the provided range. β Paul Joachimczyk, Senior Vice President, Chief Financial Officer
Q: Can you provide more color on the awards in stock kitchen and bath and their financial impact?
A: These awards are included in our full-year outlook. They represent roughly $30 million in net annualized business and are starting to ship in the current quarter. β M. Scott Culbreth, President, Chief Executive Officer, Director
Q: What are you assuming for input cost inflation in your full-year EBITDA guidance?
A: We have seen impacts in lumber and particleboard, with labor being an ongoing cost increase. These trends are modeled in our outlook, and we have built-in pricing to offset these costs. β Paul Joachimczyk, Senior Vice President, Chief Financial Officer
Q: How are you planning to be more aggressive with new capacity to win market share?
A: We are focusing on sharing our capabilities and ensuring the market understands our capacity to serve demand. We have invested in capacity to be ready for demand when it returns, allowing our teams to be more aggressive in the marketplace. β M. Scott Culbreth, President, Chief Executive Officer, Director
Q: What feedback are you getting from channel partners and dealers about the R&R environment?
A: The feedback indicates that consumers are holding back due to interest rates and macroeconomic factors, but there is no structural reduction in demand. We expect demand to return as consumer confidence improves. β M. Scott Culbreth, President, Chief Executive Officer, Director
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
