American Woodmark Corporation

Good day and welcome to the American Woodmark Corporation first fiscal quarter 2024 conference call. Today's call is being recorded August 29, 2023. 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 and the company's rationale for their usage and a reconciliation of these non-GAAP 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 statements. 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. I would now like to turn the call over to Paul Jochemczyk, Senior Vice President and CFO. Please go ahead, sir.

Good afternoon, and welcome to American Woodmark's first 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.

Thank you, Paul, and thanks to everyone for joining us today for our first fiscal quarter earnings call. Our teams delivered net sales of $498.3 million, representing a decline of 8.2% versus the prior year. Within new construction, our business declined 6.4% versus prior year. Builders continue to buy down rates to drive sales and are shifting to a ready-to-move-in build strategy. Cancellations are holding in more historic norms in the 14% to 16% range. The long-term fundamentals of the market remain strong, and there continues to be a deficit in the number of homes built falling short of household formations. We plan to continue to grow our share with new and existing customers. Looking at remodel, which includes our home center and independent dealer and distributor businesses, revenue declined 9.5% versus the prior year. Within this, our home center business was down 12.8% versus the prior year. Demand trends have slowed for our made-to-order and stock kitchen business due to lower in-store traffic rates, and consumers are choosing smaller-sized projects. Our stock bath business was positively impacted by a promo versus the prior year, but that was more than offset by inventory destocking efforts at our customers. With regards to our dealer distributor business, we were up 0.1% versus the prior year. Incoming order trends improved at the end of the prior fiscal quarter, allowing for stronger shipments in the fiscal first quarter. Our adjusted EBITDA increased 33% to $75.2 million, or 15.1% for the quarter. Reported EPS was $2.28, and adjusted EPS was $2.78. The improvement performance is due to pricing, better matching inflationary impacts, mix, and improved efficiencies in the manufacturing platforms. our ops team continues to drive excellence in our plans. Our cash balance was $89.7 million at the end of the first fiscal quarter, and the company has access to an additional $323.2 million under its revolving credit facility. Leverage was reduced to 1.09 times adjusted EBITDA, and the company repurchased 328,000 shares in the quarter. Our outlook for fiscal year 24 assumed market declines in both new construction and repair and model, And our view has not changed, but we do view repair and model demand as softer versus our original outlook, with slightly better demand in new construction. Our expectation for sales remains unchanged with a low double-digit decline. Due to the strong fiscal first quarter performance, our adjusted EBITDA expectation is increasing to a range of $225 million to $245 million. Our team continues to execute against our strategy that has three main pillars, growth, digital transformation, and platform design. Growth is benefiting from our summer launch that included several new finishes and new door styles and enhancements to our internal organization accessories within our made-to-order platform. Digital transformation efforts over the last fiscal quarter include the conclusion of our global design workshops for the next implementation area of ERP in Monterey Go Live. Our CRM tool went live in August across through Model Channel and will be followed by the new Construction Channel in September. Platform design work is accelerating, with over 70% of the wall panels installed in Monterey, Mexico, and all of the wall panels are installed in Hamlet, North Carolina. We expect both sites to be under roof in the next 60 days. As a reminder, this expansion will deliver additional capacity in our stock kitchen and bath cabinetry product lines. In closing, I'm proud of what our team has accomplished in the first fiscal quarter, and I look forward to their continuing contributions during fiscal year 24. I will now turn the call back over to Paul for additional details on the financial results for the quarter.