Release Date: May 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Net sales of $453.3 million, a decline of 5.8%, but better than the previous quarter's guidance.
- Strategic alignment with 19 of the top 20 national builders, indicating strong industry relationships.
- Adjusted EBITDA of $54.7 million or 12.1% for the quarter, showing operational efficiency.
- Cash balance of $87.4 million with access to an additional $322.9 million under its revolving credit facility.
- Repurchased 171,000 shares in the quarter, indicating confidence in the company's future.
Negative Points
- Net sales declined by 5.8% year-over-year, indicating a challenging market environment.
- Revenue from the remodel segment, including home centers and independent dealers, declined by 8.6%.
- Gross profit margin decreased by 150 basis points to 18.6% due to one-time startup costs.
- Adjusted net income decreased to $26.9 million or $1.70 per diluted share from $37.1 million or $2.21 per diluted share last year.
- Free cash flow decreased to $138.5 million from $153.5 million in the prior year, primarily due to increased capital expenditures.
Q & A Highlights
Q: Can you help us with the expected revenue cadence through the four quarters going forward?
A: We don't provide quarterly guidance, focusing instead on the full-year outlook. We expect the second half to be stronger than the first half, consistent with our customer base and peer set. (Scott Culbreth, President and CEO)
Q: How has your outlook changed over the past few months regarding new construction and R&R activity?
A: Our outlook has remained consistent since our budget process in January-February. We expect stronger growth in new construction and a softer performance in repair and remodel, with some improvement in the back half of the year. (Scott Culbreth, President and CEO)
Q: Can you provide more color on the decrease in EBITDA margin despite low single-digit sales growth?
A: The margin decrease is due to investments in capacity, ERP implementation, and engineering resources for automation. These are strategic choices to support long-term growth despite near-term costs. (Scott Culbreth, President and CEO)
Q: Any changes in pricing and promotional activities?
A: No significant changes in pricing and promotional activities, which have remained consistent year over year. (Scott Culbreth, President and CEO)
Q: Can you provide more perspective on the improving demand environment?
A: The optimism is primarily tied to new construction, with increased starts translating to order demand. We expect a strong summer following the spring selling season. (Scott Culbreth, President and CEO)
Q: Have you seen expected wins in the stock category already?
A: We have added capacity and are now more aggressive in the marketplace. Our commercial teams are working to gain share in both stock bath and kitchen categories. (Scott Culbreth, President and CEO)
Q: What is your appetite for M&A?
A: Acquisitions are not a priority, but we will evaluate assets as they become available. Recent transactions did not fit strategically, primarily due to product line differences. (Scott Culbreth, President and CEO)
Q: Once the ERP system is live out West, will everything be on one system?
A: This is the start of our manufacturing footprint integration. We began with finance and procurement and are now moving into manufacturing. It’s a multi-year journey to get all systems on one integrated platform. (Scott Culbreth, President and CEO)
Q: What are the long-term benefits of the ERP system?
A: The ERP system will provide efficiencies across the business, better reporting, and decision-making, leading to improved margins, labor efficiency, and working capital benefits. (Scott Culbreth, President and CEO)
Q: How are you thinking about price and raw material costs in fiscal '25?
A: No significant changes; most actions are tied to inflation indices. We will adjust prices based on justified deflation. (Scott Culbreth, President and CEO)
Q: Have you seen a mix down in bigger ticket categories?
A: We have seen some mix down in new construction but not significantly in repair and remodel. This could be beneficial as it rotates into value price points where we participate. (Scott Culbreth, President and CEO)
Q: Have smaller homes or jobs impacted the number of cabinets per job?
A: Smaller homes have not significantly impacted cabinet count. Consumers still seek ample storage and feature-rich spaces, maintaining cabinet demand. (Scott Culbreth, President and CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
