American Woodmark Corporation

Good day and welcome to the American Woodmark Corporation first fiscal quarter 2023 conference call. Today's call is being recorded August 30th, 2022. During this call, the company may discuss certain non-GAAP financial measures included in our earnings release, such as adjusted net income, adjusted EBITDA, adjusted EBITDA margin, free cash flow, net leverage, and adjusted EPS per diluted share. The earnings release, which can be found on our website, americanwoodmark.com, includes definitions of each of these non-GAAP financial measures, the company's rationale for their usage, and a reconciliation of these non-GAAP financial measures to the most comparable GAAP financial measures. We also use our website to publish other information that may be important to investors, such as investor presentations. We will begin the call by reading the company's safe harbor statement under the Private Securities Litigation Reform Act of 1995. All forward-looking statements made by the company involve material risks and uncertainties and are subject to change based on factors that may be beyond the company's control. Accordingly, the company's future performance and financial results may differ materially from those expressed or implied in any such forward-looking statement. Such factors include that 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. I would now like to turn the conference over to Paul Johimchik, Senior Vice President and CFO. Please go ahead.

Good morning, ladies and gentlemen, and welcome to America with Mark's first fiscal quarter conference call. Thank you for taking the time today to participate. Joining me today is Scott Culberth, 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 first fiscal quarter earnings call. Our team delivered net sales of $542.9 million, a growth of 22.7%. Our made-to-order backlog, represented by days of production, decreased in the quarter as production levels improved and exceeded our incoming order rate. We expect our backlog to normalize by the end of the calendar year. Our stock platform remains challenged with staffing levels, and we saw a decline in units versus the prior year. Our operations team continues to work on actions that we will execute this fall to increase production capacity of stock kitchen and bath, including footprint adjustments for relocation and addition of production sales. Within new construction, our business grew 27.2% versus prior year. Strong order growth remained across our markets as builders worked to complete homes in their backlog. We are monitoring recent trends with interest rates, home price increases, and declining single-family housing starts. We still believe in the long-term fundamentals of the market, but the deficit of homes built falls short of household formations And then a slowdown would be relatively short-lived. Our teams will continue to pursue opportunities to grow our share. Looking at our remodel business, which includes our home center and independent deal and distributor businesses, revenue grew 19.6% versus the prior year. Within this, our home center business was up 15.3%. With regards to our deal and distributor business, we were up 36% for the quarter. Our adjusted EBITDA increased 76% to $56.5 million, or 10.4% for the quarter. Reported EPS was $1.21, and adjusted EPS was $1.71. The improvement performance is due to pricing better matching inflationary impacts, mixed and improved efficiencies in the manufacturing platforms. Our cash balance was $33.7 million at the end of the first fiscal quarter, and the company has access to an additional $239.4 million under its revolving credit facility. We paid down $20.6 million in debt and leveraged reduced to $2.8 million. For the remainder of fiscal year 23, we expect slowing incoming order rates to impact the second half of the year along with the recent declines in single-family starts. We will continue to reduce our backlog throughout the calendar year and improve in-stock rates with our retail partners. Price realization will contribute meaningfully year-over-year and we estimate a mid-teens growth rate in net sales. We are prepared to navigate short-term demand reductions, and our product portfolio is positioned to win and attract customers in a more difficult economic environment. Cost of goods sold and inflation expectations for fiscal year 23 remained at approximately 7.5% for materials and logistics on top of what was realized in fiscal year 22. We expect low double-digit adjusted EBITDA margins for the fiscal year. I've noted in the past few calls that our teams are committed to restoring profitability. We are well on our way in delivering on that commitment and continue to execute against our strategy that has three main pillars, growth, digital transformation, and platform design. Growth from our most recent summer launch of four new finishes and several new door styles has been received positively by the marketplace. Digital transformation efforts over the last fiscal quarter include the launch of our ERP optimization teams, and our planning efforts for the next implementation area and our manufacturing operations. We also officially kicked off our CRM project last month. Platform design work continues as we activated the warehouse management solution tool in our Texas DC and began producing stock bath products in additional locations to increase capacity. In closing, I'm proud of what this team accomplished in the first fiscal quarter and look forward to all of their contributions in fiscal year 23. I will now turn the call back over to Paul for additional details on the financial results for the quarter.