American Woodmark Corporation

Good day and welcome to the American Woodmark Corporation fourth fiscal quarter 2024 conference call. Today's call is being recorded May 23rd, 2024. 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 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 any 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 Johymchak. Senior Vice President and CFO. Please go ahead, sir.

Good afternoon, 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 call. Our teams delivered net sales of $453.3 million, representing a decline of 5.8% versus the prior year. This was better than the range provided during last quarter's call. Within new construction, our net sales declined 1.5% versus prior year. We continue to see improving demand with our customers, consistent with year-over-year growth and single-family housing starts. We remain strategically aligned with 19 of the top 20 national builders, key regional builders with our best-in-class direct service model. We plan to continue to grow our share with new and existing customers and benefit from the share gains our partners are realizing in the marketplace. We see momentum in all markets as builders' confidence is increasing and their strategy to buy down rates is driving demand. Looking at remodel, which includes our home center and independent dealer and distributor businesses, revenue declined 8.6% versus the prior year. Within this, our home center business was down 10% versus the prior year. Demand trends remain under pressure due to lower in-store traffic rates and consumers choosing smaller size projects. With regards to our dealer distributor business, we were down 5% versus the prior year. Our adjusted EBITDA results were $54.7 million or 12.1% for the quarter. Reported EPS was $1.69, and adjusted EPS was $1.70. Operational excellence efforts continue to drive progress across the enterprise, but we're offset in the quarter by one-time costs associated with the startup of our Monterey and Hamlet facilities. Our cash balance was $87.4 million at the end of the fourth fiscal quarter, and the company has access to an additional $322.9 million under its revolving credit facilities. Leverage was at 1.14 times adjusted EBITDA, and the company repurchased 171,000 shares in the quarter. Our outlook for the industry in fiscal year 25 assumes the repair and remodel market will be down low to mid-single digits and the new construction to be up mid-single digits. Our expectation is for the company's net sales to increase low single digits with growth in all channels. Adjusted EBITDA expectations range from $235 million to $255 million as we continue to make investments near-term in digital transformation for ERP and CRM expansion and platform design through automation along with additional engineering resources to execute those projects. Our view on financial performance over the next five years remains unchanged. Despite a near-term slowdown in demand, we believe a 5% to 6% CAGR in net sales is appropriate and that we will grow adjusted EBITDA to over $350 million. We are currently ahead of our long-term goals with stronger EBITDA margin dollars realized in fiscal 2024. 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, I'd like to highlight. Under growth, we launched a low-skew, high-value offering in the home centers earlier this calendar year targeting pros and expanded the program nationally for our dealer and distribution network. In addition, we launched a new brand to serve our distribution customers in 1951 cabinetry. Under digital transformation, we launched our CRN sales solution in the fall across all our channels. We also went live at our new Monterey facility on our ERP cloud solution, and we've begun planning for the next implementation of our made-to-stock West Coast facilities, which will occur in fiscal 2025. Under platform design, we opened a new facility in Monterey, Mexico, and expanded our Hamlet, North Carolina facility. These investments established a component operation in eastern Mexico and a stock and kitchen bath center of excellence footprint for the eastern U.S. that delivers additional capacity. Looking forward, growth is expected across all our channels in fiscal year 25. We will leverage our upcoming summer launch to grow our core, expand our distribution presence through our new distribution brain introduction, and win stock bath and kitchen opportunities to deliver this result. Digital transformation efforts will progress as the planning for the next phase of work continues for the CRM service modules, supporting our customer care organization and new construction service center operations, and ERP for our made-to-stock facilities, which again will go live later this fiscal year as previously noted. Platform design work will continue as we ramp our Monterey, Mexico, and Hamlet, North Carolina facilities. Mill equipment continues to be installed in both sites and will continue to ramp through the first half of the year. Automation efforts will also continue across our mill component and assembly operations. In closing, I couldn't be prouder of what this team accomplished in fiscal 2024, and I look forward to their continuing contributions during fiscal year 25. I'll now turn the call back over to Paul for additional details on the financial results for the quarter.