JELD-WEN Holding, Inc.

If you'd like to ask a question during this time, press star, followed by the number one on your telephone keypad. If you'd like to withdraw your question, press star one again. I would now like to turn the call over to Christopher Teachout, Director, Investor Relations. Please go ahead.

Thank you. Good morning, everyone. We issued our earnings press release this morning and posted a slide presentation to the Investor Relations portion of our website, which we will be referencing during this call. I'm joined today by Gary Mischel, Chair and CEO, and David Guernsey, Acting CFO. Before we begin, I would like to remind everyone that during this call, we will make certain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to a variety of risks and uncertainties, including those set forth in our earnings release and provided in our forms 10-K and 10-Q filed with the SEC. GELDWIN does not undertake any duty to update forward-looking statements, including the guidance we are providing with respect to certain expectations for future results. Additionally, during today's call, we will discuss non-GAAP measures which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation. or as a substitute for results prepared in accordance with GAAP. A reconciliation of these non-GAAP measures to the most directly comparable financial measure calculated under GAAP can be found in our earnings release and in the appendix to this presentation. I would now like to turn the call over to Gary. Thanks, Chris. Good morning, everyone, and thank you for joining us. I'll start this morning by thanking our global associates and especially those in Europe for their continued commitment and dedication to serving customers during this challenging time. Our thoughts are with those that are impacted by the war in Ukraine. Our local teams are providing direct support and we have been actively recruiting refugees in our European operations. Together with the generosity of our associates, Geldwin has already contributed more than $50,000 to the American Red Cross in support of humanitarian effort in the region, a true testament to our values-driven culture. Turning to the first quarter results, we delivered another quarter of core revenue growth, our seventh in a row, driven by solid end market demand, strong price realization, and progress on our key initiatives. That said, a significant step up in inflation relative to our expectations at the start of the quarter, exacerbated by the war in Ukraine, had a significant impact on results. Absent these extraordinary inflationary impacts, we would have achieved the high end of our expected range for the quarter. We're pulling all levers to mitigate these pressures and deliver our financial commitment for 2022 and beyond. In addition to price action, we are executing initiatives to enhance margins, including expanding the rationalization and modernization programs to reduce fixed costs, focusing on consolidating our footprint and improving technology and facilities to improve labor efficiency and throughput, minimizing raw material consumption through value-added, value-engineered product design, and continuing to partner with suppliers to provide the best quality, cost, and availability for our operations and customers. While global inflationary pressures continue, we remain encouraged by the favorable underlying demand fundamentals across most of our primary and markets. We are confident that the initiatives we have deployed to drive profitable growth and margin expansion will benefit us through the balance of this year. I will share more detail on these initiatives shortly. We remain laser-focused on leading the industry with customer-centric solutions and delivering on our 2022 and long-term financial commitment. Please turn to page four as I share a few highlights from the first quarter. Q1 net revenues increased 7.2%, driven by a 10% increase in core revenue, with all three segments contributing to core revenue growth. As I mentioned a moment ago, this marks the seventh consecutive quarter of consolidated core revenue growth. As we continue to deliver innovative and margin-accretive new products and improve service to our customers, we've realized higher pricing, And we expect to maintain this price due to differentiated customer service, product solutions, and market leading position. Adjusted EBITDA for the quarter decreased 18% to $80.2 million. While pricing actions offset raw material and freight inflation, Russia's invasion of Ukraine and the subsequent sanctions on many Russian exports led to greater volatility and higher than anticipated prices on a number of key inputs, including energy, metals, logs, and millwork. In North America, core revenue grew 13%, largely due to price increases and continued solid demand for products in both residential, new construction, and repair and remodel, or R&R activity. Strong end market demand drove increased orders throughout the quarter, resulting in both a sequential and year-over-year increase in backlog, our highest backlog since the start of the pandemic. We executed on a variety of material cost reduction initiatives, including resourcing, substitution, value-added, value-engineered, or DADE projects, and also enacted cost controls aimed at alleviating the impact of inflation. We realize the benefits from these initiatives in the quarter and expect to realize most of the savings from these and others currently underway over the coming quarters. In Europe, core revenue grew 8% due to continued price momentum partly offset by softer than anticipated volume in certain markets due to geopolitical uncertainty and significant inflationary impacts stemming from the crisis in Ukraine. Some project business was pushed out into future quarters, and we experienced limited destocking by certain customers. In Australasia, core revenue increased 1% as accelerating price realization was largely offset by softer-than-forecast buying mix. Demand in Australia remains at record levels. However, continued builders' labor challenges, severe flooding in Queensland and New South Wales, and an increase in COVID-19-related absenteeism had a temporary impact on delivery timing and throughput. We expect these issues to alleviate in the second quarter. To conclude my comments on the quarter, we repurchased $40.2 million of our stock during Q1, or approximately 2% of shares outstanding. This follows the $323.7 million, or 11.5% of total shares outstanding that we purchased in 2021. We continue to believe that our shares represent a great investment for us, and an excellent use of cash. Please turn to page five. As we move into the second quarter, we continue to focus on carefully managing costs and making accretive investments to bolster the capabilities, service, and resources that matter most to our customers. Let me expand on some of the efforts we are pursuing to drive profitable revenue growth and margin expansion. Over the last few quarters, I've provided details on how we're accelerating the deployment of our business operating system, the Gelbin Excellence Model, or GEM, through transformation efforts in our 14 model value stream sites across the globe. I'd like to provide some details on new aspects of this transformation, the evolution of model sites to product lines, the addition of sites in Europe and Australasia, and the introduction of our first smart factory. As we've mentioned, GEM deployment enables us to improve throughput, maintain market leading lead times, and reduce per unit costs. To accelerate the pace of transformation, our approach to these model value streams is evolving from being site-specific to spanning full product lines. This approach allows us to roll out the findings of a single rapid improvement event, or RIE, to similar product lines at multiple facilities almost simultaneously. The additional efficiency we gained from this approach, plus the six sites we're adding in Europe and Australasia, will unlock approximately $100 million in additional revenue opportunity for Jelvin in 2022. We've also deployed new technology, including sensors and software, to our first smart factory, and we have plans to roll out this platform to two additional sites in the second quarter. This technology allows us to proactively identify issues and further optimize throughput by reducing unplanned downtime, minimizing stranded labor, and improving quality through standard work. We look forward to sharing the benefits of this new smart factory technology in the coming quarters. And as always, we continue to execute standard work process improvements across our remaining manufacturing sites. To provide some context on the magnitude of improvement we're seeing, three projects completed in the first quarter have driven throughput volume improvement between 77% and 92%. Customers see this as better lead time that they can rely on. In the past three years, we've achieved more than $100 million of savings from our footprint rationalization and modernization efforts, which have improved profitability and performance, increased throughput, delivery capability, and capacity. With additional projects underway and more in the pipeline, We believe we have considerable runway to generate continued meaningful cost savings and margin improvement. We've also kept a sharp focus on strategic sourcing to create more predictability and stability in our supply chain. Our philosophy at Jelwin is to manufacture where we sell and to source where we manufacture. This localized approach has helped us maintain self-sufficiency in key manufacturing processes and deliver quality products with industry-leading customer lead times. This gives us flexibility as we optimize the supply chain to manage the effects of inflationary markets through rapid resourcing and insourcing, substitution, and redesign decisions. Our reaching scale gives us purchasing power, and as a key customer for many of our suppliers, we're using this position to manage our material purchases more effectively. And we've continued to identify multiple sourcing locations that have allowed us to quickly pivot when we experience supply chain challenges in certain regions of the world. Another part of our strategy is helping our channel partners and customers solve their challenges by offering new and innovative products and services that add value to their business, helping to strengthen our position as a supplier of choice. For example, we're offering more pro-specific SKUs of pre-finished, pre-configured doors and integrated door systems to help reduce installation labor requirements. And we are piloting quick-shift programs in North America that focus on rationalized and skewed to deliver higher-volume, on-trend products that customers want, while enabling our production runs to be more efficient and reduce lead times. I also want to share a brief update of some of our key growth drivers this year. We recently announced the production launch of our new AuraLine composite windows and patio doors in North America. This launch addresses the rapidly growing demand for products that are design focused, energy efficient, and sustainably sourced with a high degree of recycled content. An estimated 40% of dealers today don't have a composite window in their product lineup. So we're excited about the opportunity to provide them with this next-generation, energy-efficient composite product. Pre-orders for OroLine have been strong. Shipments will commence in the second quarter, and we expect rapid expansion through 2022 for this margin-accretive product line. Additionally, our exterior fiberglass doors continue to be a growth driver for us. We've added new door and skin capacity in our North Wilkesboro facility that help drive customer conversions. leading to growth above 20% and share gains for Jeldon. In a few weeks, we're bringing additional capacity online in our West Coast facility and expect to see continued growth and share gains this year. And we continue to broaden and deepen our relationships with multifamily and commercial customers throughout our BPI quality windows business. Since the expansion of our new East Coast facility in Statesville, North Carolina, in the fourth quarter, we secured seven new projects in 2022 with one of the largest multifamily builders in the United States and expect to secure incremental business with new customers as the year progresses. We expect these unique growth drivers and continued positive housing demand to accelerate top-line growth, while the steps we're taking to get ahead of inflation will deliver margin expansion and improve profitability in the back half of 2022. Now I'll hand it over to David to give more detail on the financials. Thank you, Gary. Good morning, everyone. I'll begin on page seven with our consolidated first quarter results. Q1 marks our seventh consecutive quarter of core revenue growth. Net revenue increased 7% to $1.2 billion, driven by 10% core revenue growth, partially offset by 3% adverse foreign exchange impact. Core revenue increased from a sequential and year-over-year improvement in pricing, partly offset by lower volume mix. Adjusted EBITDA decreased 18% to $80.2 million, driven by significant increases to input costs. Adjusted EBITDA margin compressed 210 basis points, Net loss per share and adjusted EPS were $0.01 and $0.16, respectively, compared to EPS and adjusted EPS of $0.25 and $0.27 a year ago. Page 8 provides a detailed breakdown of our revenue drivers for the first quarter. We delivered another quarter of strong core revenue growth with positive core growth in each segment. Pricing increased sequentially as we executed additional price increases to mitigate the impact of inflation. Price realization was strongest in North America at 14%, followed by Europe at 11%, while Australasia increased 6%. Volume mix decreased 2% in the quarter, driven primarily by slower backlog conversion in Australasia and softer demand in Europe, as well as having one less selling day in the quarter. Please turn to page 9, which shows the magnitude of raw material and freight inflation over the past four quarters and the price increases we've instituted to mitigate the effects. While material and freight inflation is greater than expected, we successfully offset the impact with price. Inflation is further moderated through our sourcing partnerships and value engineering initiatives. We expect price costs to become a tailwind as we move through the year. Moving to page 10, you can see our segment highlights for the first quarter. Core revenue growth in North America is 13%, primarily driven by strong price realization, while volume mix was a slight headwind. Revenue growth accelerated through the quarter, driven by strong pricing and positive volume mix contributions in both February and March. GEM actions and improved labor productivity drove meaningful improvement in throughput through the first quarter, with weekly volumes in March up high single digits compared to the fourth quarter, setting the stage for future growth. Order rates remain strong, particularly with our traditional channels, which increased roughly 40% over the last year due to strength in residential new construction. Adjusted EBITDA margin in North America decreased 320 basis points, primarily due to higher input costs, including raw material, freight, labor, and energy, as well as startup costs for new capacity. North America fully covered raw material and freight inflation with price on a dollar basis, but the impact has diluted the margin rate. Europe revenue increased 8%, 1% including the impact of foreign exchange. Another quarter of strong price realization drove poor revenue growth, partially offset by lower than anticipated volume mix. Our order book remains strong, particularly in Central Europe, However, inflation pressures and a general uncertainty related to Russia's invasion of Ukraine impacted demand in other markets. Europe adjusted EVDA margins and decreased 450 basis points. Again, pricing improved year-over-year and sequentially. However, the deleveraged impact of lower volumes due to market uncertainty, delays in higher-margin project work, and inflation pressures, particularly for energy, metals, and labor, were considerable margin headwinds. Australasia revenue increased 1% in local currency, declining 5.2% FX adjusted. Borders remained very healthy, reflecting our strong market position and continued solid demand for new housing. Volumes, however, were temporarily impacted by severe flooding along the eastern seaboard and from a spike in COVID-19-related absenteeism. Pricing stepped up meaningfully both year on year and sequentially as we implemented additional actions to mitigate the impact of inflation. Australasia adjusted EBITDA margin decreased 170 basis points in the first quarter, primarily due to the deleverage impact of lower volumes. Please turn to page 11. Operating cash flow used during the first quarter was 186.9 million compared to 64.9 million last year. The increase in operating cash flow used in operations was primarily due to high working capital needs driven by inflationary impacts on the balance sheet and lower net income. We expect improved cash flow conversion this year as inventory investments convert to revenue and ultimately to cash. Our balance sheet and liquidity remain in a solid position. We ended the quarter with total cash and liquidity of $265.6 million and $584.7 million respectively. net debt leverage increased two 3.5 times from 2.8 times at year end primarily due to the temporary impact of inflation on our cash flow and from utilizing our sizable cash position we purchased 40.2 million of our shares or about two percent of the total shares outstanding our net leverage starter remains at two times to 2.5 times and we expect to make considerable progress towards this goal for growth and margin expansion this year and accelerating cash conversion. We'll continue deploying our cash in a disciplined, returns-focused manner and compounding the returns on that cash over time. Looking forward, we remain confident in our full-year outlook. Income cost inflation will continue to have some negative impact with Q2, and we expect extended market uncertainty in Europe. However, pricing actions have been announced in all of our markets and realization will accelerate through Q2 and the balance of the year. Additionally, we have meaningful ongoing initiatives in place to drive growth and additional margin expansion as we progress towards our 2025 financial goals. With that, I'll turn it back over to Gary who will provide our closing comments. Thank you, David. Before we discuss the market outlook, I would like to provide an update on the divestiture process for our wood fiber building products business in Tawanda, Pennsylvania. As we share the third quarter of 2021, the court appointed a special master to oversee the divestiture process. In February, the special master issued a report that identified multiple acceptable bids and recommended that one of the bidders no longer be considered a viable contender due to antitrust concerns. As part of that process, the court asked the Department of Justice for its views on the special master's recommendation, which is expected to be delivered later this month. We continue to work with the special master and his advisors to identify a buyer and close the transaction. While timing is uncertain, we are well prepared to navigate each possible outcome and remain focused on ensuring a fair and orderly transition for associates and customers while delivering value for our stakeholders. Please turn to page 13 and our market growth outlook. In North America, we continue to expect strong demand for both residential new construction and R&R activity. This demand is driven by favorable demographics, healthy consumer spending, and high personal saving levels, record home equity, and an aging housing stock. We recognize potential affordability challenges may create a temporary lull in demand during the second half of the year, but we believe the tailwind to demand, including migration and move-up, will be more powerful and durable and long-lasting. For Europe, Russia's invasion of Ukraine has created uncertainty in the near term. However, our operations are in many of Europe's strongest economies, and we expect activity to accelerate once there is greater clarity on the duration of the war in Ukraine. And in Australasia, demand for new residential homes remains robust as the country's housing market continues its recovery from a multi-year recession. We expect housing demand and fundamentals, including record low interest rates and significant pent-up demand, to remain supportive, and we expect demand for our products to remain strong throughout the remainder of the year. Please turn to page 14. While we've experienced extraordinary global headwinds in the past two years, we remain acutely focused on the aspects of the business that are under our control. We are well-positioned to capitalize on favorable housing market trends by realizing internal productivity improvements from our initiatives, offsetting inflationary impacts through price realization, and launching new innovative growth products that are margin-accretive. As we look ahead, the work we have done over the past few quarters has positioned GELWIN to be successful in any market environment, and we remain committed to our outlook for the year. We are confident that our efforts to provide a differentiated customer experience and industry-leading capabilities will drive long-term value for all of our stakeholders. Thank you for joining us today. David and I will now be happy to take your questions.

Thank you. At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. Your first question comes from Matthew Boulay from Barclays. Please go ahead.