American Woodmark Corporation

Q2 2022 Earnings Conference Call


spk_0: the day and welcome to the american would more cooperation second fiscal quarter two thousand twenty two conference call today's called is being recorded november twenty third two thousand twenty one during this call the company may discuss certain i get financial measures including included in our earnings release such as adjusted net income adjusted ebitda adjusted ebitda margin free cash flow that leverage and just a dps print omitted show where the earnings release which can be found on our website american would mark dot com includes definitions of each of these non get financial measures the company's rationale for the usage and reconciliation of is non get financial measures to the most comparable get financial measures he also use our website to publish other information that we make that may be important investors such as investor presentations you will begin the call by winning the company safe harbor statement under the private securities litigation reform act of nineteen and inside all for the statements made by the company involved material risks and uncertainties and are subject to change based on factors that may be beyond the companies control accordingly the company's future performance in financial results may differ materially knows expressed or implied in any such for looking statements such factors include but are not limited to those describing the company stalins what the securities and exchange commission and the a new report to shareholders the company does not undertake to publicly update or revise it's whole looking statements even if experience a future changes make it clear that any project a result expressed or implied baron one not be realized i would not to tell her call over the power to him shaq vice president and cfl please go ahead sir
spk_1: good morning ladies and gentlemen and welcome to america let march second escape or a conference call thank you for taking the time to participate during a me today it's got congress president and ceo got will begin with radio the corner and i'll add additional details regarding our financial performance at our comments will be happy to answer questions gop they keep all the thanks everyone for joining us today for a second fiscal quarter earnings call a change could change the navigator challenging labour logistics and supply chain and arm second quarter sales were up one percent of demand continue to outpace production across all platforms the ability to manage to me an angel much of that two factors labor and materials elderly material shortages would unfold and time and efficiency lofty the substitutions made can you production international shipping container challenge is also persist with higher rate and longer delivery times more congestion backlog increases slow it still represents an increase versus the popular going forward production levels increase andronikou the sales over the next two quarters our teams of can do enough to production capability capacity the outsourcing staffing additions productivity improvements the new construction or business or seven point one percent versus prior year from border guard is expected to continue across or markets capacity the manufacturing trade based keep up with man and rising prices kushner teacher bill rage and these factors continue to increase with a psychopath we're monitoring watch the bourne identity card account for i can count girl the consumer price index will decrease six point two percent over the past twelve months interest rate trans am declining consumer sentiment which had been card inflationary concerns looking at a not a business which includes your home center and been a dealer distributed this issue of revenue with down two point seven percent per year but then there's your answer business without three point five percent this was expected you to retailer stocking approaching the prayer and time the one a premiership shipments with major challenges cross platform i started a business performed well as pro and the i live in a hundred positive thoughts with regards to our director doesn't screw up on four percent for the quarter i just to be the dallas thirty forty dollars will be the damage to shit on a chef for the court reporter dps it was actually just dps executive chef this result of sort of our expectations for the cooler his way to constrain our ability to increase production quickly plan a we experienced zero point eight million dollars in it now costs related to investors particleboard manufacture foreclosure attraction or tension efforts of positively about or maybe your disability and read initiated mean faction several simply shelves we were idled over the summer below before this after several much of the klein october production rates and the the as well as she said job similar increasing output from i start businesses was in october as well a fortune feels secure park board supply for these girls to the working for you or just it's costs associated with a shipment but the market we expect local infrastructure mile to go for the remainder that fiscal year we'll continue take advantage of discrepancy the short term production the man in that the market a backlog will allow us to maintain a higher production model we will include margins just for your twenty two a shirt last quarter the they're announcing additional crashing actions and those are now complete after realizing gotten three million dollars an impact and first quarter of fiscal from eternity for pricing and an aggregate patch and fourteen million dollars in the second quarter and our car sales i was with that the impact of by confirm be actions the increased over thirty five million dollars without fiscal or it over fifty million dollars in the for fiscal or additional effort will be plenty with an allocation few to improve productivity increase production levels sequential marginal previous forecast for each of the next few corners with our fiscal quarter pelican possibly bush's failure i king presented an exciting update of us to the last week to the beard the bought the borderlands very days without leadership team shape in a fantasy i focus areas have not changed when our president you and army and golf and we are working to accelerate he initially illustrating the business that's what we can you are go online capabilities and product we focus our resources on the neighbors a customer experience five for the giant talent and he has she ever even actually capable revenue growth and improving have to be but i margins backed are targeted fourteen fifteen percent in closing a proud of employees for what they've accomplished and charge they'd overcome our for the dirty can you carter be our phone call back over to offer different details on the financial little for the court craig you've got financial guidelines for the quarter net sales were four hundred and fifty three million increase about fourteen million a price representing an increase of one percent over the same period last year new construction that feels increase seven point one percent for the second fiscal quarter compared with the same period in the prior year kimberly direct business can't possibly for the quarter and the first half of fiscal year two thousand twenty two we continue to extremist groups or origins right related to the ongoing mixture of the kind towards more posts products in the market delays from the donor in your ability to receive our cabinets improves slightly with in the quarter however we continue to build a finished goods and good backlog higher than historical trends which is impacting elementary level a with that continues to grow as built the back on holders during the past two quarters primarily due to the just a off and supply constraints on the west coast you construction sales will above market completions during the second quarter it has got two thousand and eight you we're experiencing and ninety to one hundred and twenty day plush lag between start he can installation the overall market starts hm a family homes were up fourteen point eight percent for our fiscal second virginia completions during our second fiscal quarter we saw three point four percent increase your reader which for their support timing impacts the mughals experiencing and our country and any the construction channel that combined home center an independent dealer distributed channel nutshell decrease two point seven percent for a quarter with hometown or decreasing three point five percent independent killer industry are increasing zero point four percent for the gold we can dunk the new construction and return remodel markets we continue to see consumers focusing on larger investments which in their homes whether it is kitchens or bath we expect this trying to be expanded as the time to complete products have been impacted a web of supply chain and labour challenges in the building products space net income with two million or zero point one three per diluted share in the second quarter of fiscal year two thousand twenty two vs twenty three point one million or one dollar and thirty six cents per diluted share last year and then control the second quarter of fiscal two thousand twenty two decrease twenty one point one million due to the rapidly evolving inflationary pressures outpacing compressing actions taken across our channels give me increase backlog of products there's an inherent lag in realization that pricing actions that will you have executed to offset inflationary pressures we experienced lately fiscal two thousand twenty one and continued into fiscal two thousand twenty two adjusted even if for the second quarter of two thousand twenty two was dirty point eight billion or six point eight percent on that sales compared to sixty six point one million or forty point seven percent a nutshell for the think are the perfect a year the cubbies gross profit margin for the second quarter of the two thousand twenty two when eleven point four percent in that field vs twenty point two percent recording the same quarter last year gross margins in the second quarter of the current fiscal year was negatively impacted by the rapidly evolving inflation the real and majestic input costs combined with the labour challenges that impacted our production capabilities oh operating expenses were ten point two percent that fills in the second quarter of fiscal two doesn't like you compared with eleven point five percent a nutshell from same period has got two thousand and one song marketing expenses will flow point eight percent in that feels and the second quarter fifty two thousand twenty compared with hope when a person that flows from st louis in fiscal two thousand twenty one you know the ministry of expenses were five point four percent in filled with second quarter fiscal two that i do you compared with six consumer person that sells with the same period of fiscal two thousand and one decrease my ratios primarily driven by more important for the past and controlled setting in the second quarter of fiscal two thousand twenty two recap hold negative towards thirty seven point three million for the current fiscal year compared to positive for casual fifty seven point four million the polio the decrease was primarily due to changes in auburn cashflows specifically lowered net income higher in belgium and will recruit expenses argument for about bounces have gone around materials and effort to build additional fifty thought of can be critical components that leverage was three point zero two time for just a regular at the end of the second fiscal quarter for the fiscal year the company paid down making point seven billion of net debt and when repurchase twenty five million or three hundred thousand shares the company's cash position as of october thirty first two thousand twenty one was a know your cash on hand and access to two hundred and thirty three million of additional the ability and or revolver in fiscal two thousand and twenty two or first half performance impacted aroma allies free casual for the fiscal year we plan to continue on investment back and revisionist i make any of her outlook on our capital investment rate of approximately three point five percent of nutshell for the for fiscal year we expect the for your fiscal two thousand twenty two fails to be hide single digit growth over the prior fiscal year the growth rate is highly dependent upon overall industry economic growth trends material or just figured like the constraints as was consumed behaviors that can be impacted by the ever changing coded making environment margins will continue to be challenging the next three quarters did it continue the fortunately logistics and legal challenges however our expectation is that margins one improve sequentially for the remainder of year approaching actions will be fully realized by the for fiscal quarter of representing fifteen a partial total pricey a breed across all filthy animals that were repeat with inertia and fiscal policy that point you get a leg on pricing realization it takes on average three to six months to realize price increases to for ya upset cost impact or inflationary pressures the try the fireplace and could pose a future with to felt outlook as a macro economic factor for me an unstable in closing a tremendous phone store team members or company to deliver the extra effort to make it happen and the challenging environment
spk_0: this concludes are prepared remarks would be happy to answer any questions you have this time thank you will now begin the question and answer session to ask the question you may prefer star than one on your telephone keypad if you're using the speakerphone please pick up your hands of before question the keys to enjoy your question please press store to at this time pause momentarily to symbol our roster
spk_1: and the first question will come from gear schmalz a week capital please go ahead oh hi thanks for i pick my question of on your high single digit sales growth outlook for the you're correct me if i'm wrong that up from the guide last quarter i think it was better high single digits and if so what the incremental differences that duffy additional pricing you're putting through or and maybe to speak more broadly to your level of confidence or that guy just given that some of the boy had once you've experienced yeah to support our last quarter we did guide made the high single digit discovery eyes like games could be high single digits and we did our guide and is out there and are out what may be due to the confirm pricing action guy with a complete and then and are confident and the production abilities and are out there okay thank you and i love football question is just around the volume are in the quarter and are occupied video will report hover on your how much of the impact was the labour or shortfall how much was some of the supply chain headwinds a huge height of particle board both are you're prepared remarks and or obese ah in and how much about was just the extended lag between starch and cabinet installations
spk_0: i really would literally any of the sales in this to our estimates for the last we made our distributed primarily to labour shortfall and i got into the good job of overcoming those material on availability challenges when you finish the job period the by far and away the biggest impact would be the label shortfall
spk_1: okay an image of the follow up them on the label peace or you just given the actual that you've been taking at a point now where your labor is where it needs to be or i get how much more do you need a labour to be the man it's unclear how much will have to embarrassed to keep you need to see labour our what i'll take you back is my early march machine and agreement so actions are starting to work we've seen and improve improve on or production levels as a result of that we need to continue to make progress on that for these two had open positions across platforms that will seek the phil whether that will become a to current wage rates are just a wage drapes at all have our inability to find that for you
spk_0: okay
spk_2: thank you and i have the honest
spk_3: like a very
spk_2: and the next question will come from stephen ramsey will thompson research group please go ahead i could morning of on the two three
spk_1: margin thinking about that the kind of the new bridge in the queue for work
spk_2: pricing coming through kid can you explain that the messaging around the embedded pricing it's in the backlog if that is playing out in a different way than what you discussed in the in the prior call in if so what is driving the changes their the no rule change and have a backlog is in be consumed what has changed it second round of pricing now been confirmed in starting to build inside the back on she did the key point he wanted a highlighters incremental pricing i photo pricing will be realized in the corners you're over thirty five million to three over
spk_1: fifty men and key for the as usual we do expect sequential margin and putting an the just over the duty over the next two corners okay okay help for it and then on the balance sheet can you comment with with cash being lower than normal the receivable still elevated as well as payable if it's something that unwind naturally as the backlog burns off it and maybe can go into a little more detail how much the inventory is the finish good you discuss how much of it is in transit inventories being elevated are other factors contribute after going out on packers and want a little different ways that are out there for the receiver balances there's no issues i make a new girls color collection drink or at really have the with the timing of the increase fails as we get more price for the channels are getting crucial else their her she balances will naturally girl as we will kind of korean war operational on can
spk_2: usually business really the the drain on are working capitalism related or even for balances there's a couple factors i played into that and wanted his timing of shipments i'm coming in from the international ports and eighties and then just containers being stuck airport so we've actually pre paid for a lot of him and horrible we also made a conscious choice as an organization you stock up on key components for those raw materials for the spike the your theater balance sheet really is focused and our while material growth there is some fish good gym atari that the girl due to the builder channels and are out there he regards for the summer the inventories of they couldn't take for completions for the end of the corner for their perspective but on all your for
spk_1: he or balance sheet going to be effectively use to both drop in inventories be complete in our backlog in the future much coming up excellent and then last one for me to make sure i understand a backlogs currently how do they compare to he won and now that you're entering baby a seasonally slower period it is just the time or you can improve met a show improvement in the shipment to order ratio and be a better position to take orders as you get the be defeated of twenty twenty two it and maybe one mortgage or are there any cancellations from customers
spk_4: yeah take a life partner no material changing cancellation fee when not seeing that be a factor as typically around the backlog it is elevated would all time highs is making our mods made this film who are in the corner but it was a much slower rate of growth and what we've seen in the phone political college
spk_0: are we will start chewing you know that back long as we go forward says or production levels increase in your point you have this naturally flower time period typically around model
spk_5: the winter months will have an ability to start that you know that backlog and get back to the because we want to be able to communicate going forward a chore thank you
spk_1: thank you and the next question will be from out of baumgarten from gentlemen please go ahead
spk_5: i got affecting my question did you dig into that promotional timing
spk_1: that you cited in a release on the call it is that that for forward last quarter is it pushed out into three cute some some more power and they'll be helpful last year was it was heavier ship inside the in a kikuyu period an issue it's more the heavy shit i'm sad acutely period
spk_5: okay got it the top four and then just can you talked about last call trying to compress the time it takes to execute your price increases at your target i'm sure it will take time as it was a couple months' any progress you've made their and from the negotiations that that we can maybe think about for the future
spk_1: can we did compress the timing in the in the two channels you will need to target than that is why you're seeing as take up the the guy in internet vacation around pricey michigan forward so we are able to achieve our goals sure a third or fourth increase or to be required going old you continue the pig learning for man and try to work there didn't need and even tighter in the future got it and then just a walker to your comprehension and returning a margin expansion by year end is it a continuation of current cost trans and and labor shortages or their cut some kind of improvement from costs perspective combined with the with the race pricing that that gives you the conference
spk_6: so issued that the pricing is a huge level you think about what we expect to see from the margin the previous game on the second half of the year i think the patient inflation is going slow it's not gone to the road and it certainly seems to have moderated as of late not to say there will be more information the second half but i don't think it
spk_7: kinda disappears we experience inside the first am we've seen improvement in the hiring efforts are huge leaps and while expectations for that from the continue and then finally we do have you say projects either capital related article i did it will start me she should benefit in say they have a new the all of those factors combined
spk_0: i done the expectation for sponsor margin improvement
spk_8: gotta think lot yeah thank you
spk_1: and again if you have a question please chris dodd and one the next question will come from cohen and come jeffries please go ahead the more you know and for taking my questions are showing you could if you're wondering if you can quantify the head when that you guys current fiscal two pew and just what you've seen so far in november relative to what you rather see in the fiscal second quarter and then just on a guide for sequential margin improve make you help with think about the magnitude of that margin improvement from fiscal to cute to fiscal three que
spk_8: so unfortunately i'm going to give you a lotta knows a show on the on the last question specifically around you a precision arrange around the margin unproven i don't want to provide a specific you on that that isn't and names will just reiterate sequential margin a breathing expectations of the next three calls and again with a fourth
spk_1: cool a and possibly worse for and we don't want to provide any more greenery beyond that are specifically in our fiscal second quarter the exact amount of inflation i don't have that to call out for you today i'll just go off and surprisingly again that we didn't realize of over fourteen million dollars and nothing specifically to poor the sheer around they did inflation and member nothing that i would call specifically around at this point on okay understand and then you can you can do percent of what health kind of look like of you did not add a labor and supply chain issued and just given the current headwinds can you just talk about your building to increase shipments and as type environment or on his the fiscal to queue really the healing from i perspective just given it a shortage of the you're saying
spk_9: yeah i think another candidate fifteen million dollars of top line was certainly possible inside a quarter of i do and have some of the challenges in the first half of the of the fiscal quarter is by no means is our is are feeling
spk_0: we have expectations to continue see production levels increase across all platforms which are consuming job incremental revenue in future quarters absence of the price so we're not a peek at this point in time if you reference my comment earlier your we had a family cells and i made aware platform they were idol over the summer we started to reimpose back up there not a fool ramp at this point time it takes time to actually hire and train in and get efficiency on out to reach back into meeting improvement
spk_10: great thank you
spk_11: and once again if you have a question please press start than one
spk_12: our next question comes from josh chan compared please go ahead
spk_1: ag warning have gotten paul a couple just morning and so you're importing comments are pretty encouraging i could you give us any color in terms of how the price kind of distributed between the channels that a pretty even and then also how do you think about the potential impact of of customers possibly trading down because of the price increases by that doesn't mean you expect to happen he also on out the pricing themselves luxurious fairly even based on on channel four and i think specifically the call out it was materially different result
spk_10: on a customer side
spk_11: what we seen is really lean times when discussion supposed to pricing when i didn't have a lot of pushback from a pricey employing on are doing your job will repairs reply is a barrier so if you're getting in the league on consumers may not be warned the to pursue the job so that that seems to be more focused area it is on pricing which is why we're so focused on it
spk_1: reaching our production levels and getting we plans back down to a historical average right that makes things god and then on the on under cash for recognizing that you're you're trying to be of service customers how how are you thinking about castle in there and a second half
spk_11: and compared to what happened in the first half
spk_13: get our josh are cashflows will get better in the back half of the year due to the timing of will be scott calling him and due to the asia holidays are happening overseas and we're hoping that the logistical challenges for the international trainers and things like that will improve in a free up some of our capital for those purposes or
spk_0: we still need to help from on hand inventory to keep keep rogue components doing will make those choices the keep our overall customers happy and net income will be substantially are the second half and art style right right that makes sense of thank you think about for the color and i have have good thanksgiving
spk_14: get laid off you too and the next question will be from houllier romero considering company please go ahead
spk_1: do you live with it and brilliant one is needed on your end oh
spk_15: thanks very much thanks for taking the question the guys can you talk to substitution efforts or particle board i believe in the past you were able to use mtf yeah for plywood
spk_14: just any additional clear and is any of those substitution product in the safety stocky currently have
spk_1: because it it it it's not really a substitution across the different types of the would you make imply word india in particle board really william shot or war right now with the the challenges of sized so what's the optimal size will be required to lunch other factors and efficiently seen only as opposed to what's available in the market them
spk_14: mass quantities so that were rushing in one the substitution says she's cheating scandal and which treats inefficiencies inside the factory
spk_0: got it and i guess
spk_1: any additional granularity after an hour earlier on a you talk about your efforts to to compress pricing and and what you've done they're just any additional granularity on and how much time you may have shaved off on the that compressed bye bye week or month
spk_0: nothing specifically disclosure oh man

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