American Woodmark (US:AMWD)2021-08-31 20:09Financial Data and Key Metrics Changes - Net sales for the first fiscal quarter were $443 million, representing a 13.5% increase year-over-year, including $3 million from price increases [16][18] - Adjusted EBITDA was $32.1 million, with EBITDA margins at 7.3%, down from 14.5% in the same quarter last year [19] - Net income decreased to $3 million or $0.18 per diluted share, compared to $16.1 million or $0.94 per diluted share in the prior year [18][19] - Gross profit margin was 12.1%, down from 20.4% year-over-year, impacted by increased healthcare costs and inflation in material and logistics [19][20] Business Line Data and Key Metrics Changes - New construction sales increased by 8.5% year-over-year, with Timberlake direct business showing positive growth in units [10][16] - The remodel business, including home center and independent dealer/distributor channels, saw revenue up 17.1%, with home centers increasing by 20.3% [11][16] - Backlog increased significantly due to labor traction and retention issues, impacting production capabilities [9][10] Market Data and Key Metrics Changes - The overall market for new construction saw single-family home starts up 47.6% year-over-year, while completions increased by 4.7% [17] - Demand in both remodel and new construction channels remains strong, particularly in the value segment [11][12] Company Strategy and Development Direction - The company plans to continue investing in production capabilities, outsourcing staffing additions, and productivity improvements to meet demand [9][12] - A focus on digital online capabilities and customer experience enhancements is part of the long-term strategy [15][44] - The company is executing a new cloud-based ERP system expected to go live in February 2022, aimed at improving operational efficiency [41][42] Management's Comments on Operating Environment and Future Outlook - Management noted that inflationary pressures from materials and logistics are expected to continue, with a lag in realizing price increases [12][18] - The company anticipates sequential margin improvement over the next three quarters, with the fourth quarter expected to show the highest margins of the fiscal year [22][59] - There is optimism regarding labor availability as stimulus payments end, potentially improving employment levels [37][40] Other Important Information - Free cash flow was negative at $8.1 million for the quarter, a decrease from positive free cash flows of $32.2 million in the prior year [21] - The company paid down $29.1 million of total debt during the quarter and repurchased $25 million worth of shares [21] Q&A Session Summary Question: Pricing secured in the quarter - Management acknowledged that the $3 million in pricing was below expectations due to an increasing backlog, impacting realization [26][27] Question: Sales expectations for the full year - Management indicated that pricing will be meaningful for the full year, with expectations for $25 million in price improvement in the second half [34][35] Question: Transportation costs and hardwood pricing - Management reported ongoing high transportation costs and no relief in hardwood prices, with significant increases in import transportation rates [30][31] Question: Backlogs by channel - Management noted that backlogs are elevated across all channels, with no significant differentiation impacting margins [50][51] Question: Sequential margin improvement - Management expects sequential margin improvement of 50 to 100 basis points in the next two quarters, with a more significant improvement in Q4 [59]