American Woodmark Corporation

Good day, and welcome to the American Woodmark Corporation fourth fiscal quarter 2025 conference call. Today's call is being recorded May 29, 2025. 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 for 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 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. If you require operator assistance, please press star then zero. I would now like to turn the call over to Paul Johimchak, Senior Vice President and CFO. Please go ahead, sir.

Good morning, 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 team delivered net sales of $400.4 million, representing a decline of 11.7% versus the prior year. Demand for our products in the new construction and remodel market were weaker than expected as uncertainty regarding tariff policies and declining consumer confidence slowed foot traffic with builders and retailers. The National Association of Realtors recently reported that existing home sales fell 0.5% month over month to a seasonally adjusted rate of 4 million in April 2025. Year-over-year, sales have declined 2 percent. Pent-up demand for housing continues to grow, and a reduction in mortgage interest rates could increase demand for housing and our products. For the quarter, all channels reported low double-digit declines. Within our home center business, the stock kitchen category performed better than our overall business, with a low single-digit negative comp versus the prior year. This is a result of share gains and the value of our offering. Our pro business was a positive comp for the quarter, with offsets in bath and storage. Single-family housing starts continue to experience negative costs versus prior year from January to April. The NAHB housing market index fell to 34 in May, below April, and expectations both at 40. This marks the lowest level since November 2023, as homebuilders continue to be impacted by high mortgage rates, weaker consumer confidence, and policy-related uncertainty. For our new construction direct business, Our teams delivered growth in the Northeast and Southeast markets, but this was more than offset by double-digit declines in Florida, Texas, and the Southwest. We continue to see a rotation down in our made-to-order new construction offering, resulting in unfavorable mixed impact on the business. Our adjusted EBITDA results were $47.1 million, or 11.8% for the quarter. Reported EPS was $1.71, and adjusted EPS was $1.61. Our cash balance was $48.2 million at the end of the fourth fiscal quarter, and the company has access to an additional $314.2 million under its revolving credit facility. Leverage was at 1.56 times adjusted EBITDA, and the company repurchased 417,000 shares in the quarter. The company purchased 1.17 million shares, or approximately 7.5% of shares outstanding for $96.7 million during fiscal 2025, consistent with our capital allocation methodology. Demand trends are expected to remain challenging, and our outlook for fiscal year 2026 ranges from low single-digit declines to low single-digit increases in net sales for the full fiscal year. We expect to outperform market growth rates, but have widened our outlook due to uncertainty related to tariffs when net sales declines expected throughout the first half of the fiscal year. Adjusted EBITDA expectations range from $175 million to $200 million based on current tariff policies in place at the end of the business day, May 28th. Longer term, our belief remains that as mortgage rates, mortgage interest rates decline, consumer confidence increases, existing home sales increase, and the potential for higher ticket home projects increases. Mortgage interest rate relief and consumer confidence increases will also benefit the single family new construction business as more consumers enter the home buying market. We have the products and platforms to win, and this will serve as a tailwind for our business. 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 that I would like to highlight. Under growth, our team's navigated a challenging macroeconomic environment marked by low housing resale activity, high interest rates, and increased input costs. Despite these headwinds, we delivered on product innovation, capacity investments, and channel expansion. Over 30% of made-to-order sales came from products lost in the last three years. Facility expansions in Monterey, Mexico, and Hamlet, North Carolina enhanced our made-to-stock capabilities. We accelerated a low-skew, high-value product offering for pros and expanded it nationally. We also transitioned independent distributor customers to our new brand, 1951 Cabinetry. Looking forward, we're focused on expanding our internal sales teams, enabling home delivery for bath, and assuring we have the right products and platforms to support continued growth. Under digital transformation, we advanced our efforts with a focus on building an agile, scalable IT foundation to support future innovation. We executed our ERP cloud strategy with our Anaheim made-to-stock facility going live in early May of fiscal 2026 and are now planning for our East Coast made-to-stock facilities. We improved our cybersecurity readiness through enhanced detection and will be further enhancing our recovery systems. Key investments were made in video, infographics, search engine optimization, interactive tools, that have improved performance across digital channels and positioned us to deliver best-in-class content, especially for home center partners and independent dealers. Under platform design, we advanced our strategy by executing improvement plans at our Monterey, Mexico, and Hamlet, North Carolina sites, establishing them as manufacturing centers of excellence. We initiated footprint optimization across our network, including the closure of our Orange, Virginia facility, to streamline operations and improve responsiveness. These efforts address cost efficiency, asset modernization, and supply chain resilience while enhancing service to the new construction and repair model market. We also remain responsive to the evolving tariff environment and are focused on continuous improvement in plant operations through standardization automation projects targeting our mill, component, and assembly processes. In closing, I couldn't be prouder of what this team accomplished in fiscal 2025, and I look forward to their continuing contributions during fiscal year 2026. I'll now turn the call back over to Paul for additional details on the financial results for the quarter.