American Woodmark Corporation (NASDAQ:AMWD) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reveals several negative indicators: declining net sales, reduced gross profit margins, and increased leverage ratios. Despite some operational efficiency improvements, the Q&A section highlights management's inability to provide clear guidance on revenue projections and pricing strategies, raising concerns about future growth. The market's uncertainty regarding tariffs and the company's weak revenue guidance further contribute to a negative sentiment. Given the small-cap nature of the stock, these factors are likely to result in a market reaction of -2% to -8% over the next two weeks.
Key Financial Performance
Net Sales $400.4 million, a decline of 11.7% year-over-year due to weaker demand in new construction and remodel markets, influenced by uncertainty regarding tariff policies and declining consumer confidence.
Adjusted EBITDA $47.1 million or 11.8% of net sales, down from $54.7 million or 12.1% year-over-year, representing a 30 basis point decline due to fixed cost deleverage and rising input costs.
Gross Profit Margin 17% of net sales, decreased by 160 basis points from 18.6% year-over-year, attributed to fixed cost deleverage, increased depreciation expense, and higher product input costs.
Adjusted Net Income $24 million or $1.61 per diluted share, down from $28.2 million or $1.78 per diluted share year-over-year, reflecting lower sales and fixed cost deleverage.
Total Operating Expenses 8.9% of net sales, down from 10.1% year-over-year, a decrease of 120 basis points due to lower incentives and profit sharing, along with reduced spending across all functions.
Free Cash Flow $65.7 million, a decrease of approximately $73 million from $138.5 million in the prior year, primarily due to lower net income and changes in operating cash flows.
Net Leverage 1.56x adjusted EBITDA, an increase of 0.42x from 1.14x year-over-year, indicating a higher leverage position.
Share Repurchase $96.7 million or 1.17 million shares repurchased during fiscal 2025, representing about 7.5% of outstanding shares.
Gross Profit Margin for Fiscal Year 17.9% of net sales, down 250 basis points from 20.4% year-over-year, due to lower volumes and rising input costs.
Adjusted EBITDA for Fiscal Year $208.6 million or 12.2% of net sales, down from $252.8 million or 13.7% year-over-year, representing a 150 basis point decline due to volume headwinds and increased material costs.
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Operating Highlights
Product Innovation: Despite headwinds, the company delivered on product innovation, with over 30% of made-to-order sales coming from products launched in the last three years.
New Brand Transition: Transitioned independent distributor customers to the new brand, 1951 Cabinetry.
Low SKU High-Value Offering: Accelerated a low SKU high-value product offering for Pros and expanded it nationally.
Market Performance: Net sales of $400.4 million, a decline of 11.7% year-over-year, attributed to weaker demand in new construction and remodel markets.
Geographic Performance: Growth in Northeast and Southeast markets for new construction, offset by declines in Florida, Texas, and the Southwest.
Sales Outlook: Expect low single-digit declines to low single-digit increases in net sales for fiscal year 2026, with challenges in the first half.
Operational Improvements: Operational enhancements and controlled spending helped mitigate some impacts of rising input costs.
Facility Expansions: Facility expansions in Monterrey, Mexico, and Hamilton, North Carolina, enhanced made-to-stock capabilities.
Footprint Optimization: Initiated footprint optimization, including the closure of the Orange, Virginia facility to streamline operations.
Strategic Pillars: Focused on growth, digital transformation, and platform design as key strategic pillars.
ERP Cloud Strategy: Executed ERP cloud strategy with the Anaheim made-to-stock facility going live in early May 2026.
Share Repurchase Program: Repurchased 1.17 million shares for $96.7 million during fiscal 2025, representing about 7.5% of outstanding shares.
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Risk or Challenges
Sales Decline: Net sales decreased by 11.7% year-over-year, attributed to weaker demand in new construction and remodel markets due to uncertainty regarding tariff policies and declining consumer confidence.
Housing Market Challenges: Existing home sales fell 0.5% month-over-month, with a year-over-year decline of 2%. High mortgage rates and low consumer confidence are impacting homebuilder activity.
Tariff Uncertainty: Ongoing uncertainty related to tariff policies is expected to affect net sales, particularly in the first half of fiscal year 2026.
Input Cost Increases: Rising input costs and fixed cost deleverage have negatively impacted gross profit margins, which decreased from 20.4% to 17.9% year-over-year.
Economic Factors: The overall economic environment, including material constraints, labor impacts, interest rates, and consumer behaviors, is expected to influence sales trends.
Debt and Interest Expense: The company anticipates an increase in interest expense by approximately $7 million annually due to a new debt agreement.
Depreciation Expense: Depreciation expense is projected to increase by approximately $11 million in fiscal year 2026 due to completed capital projects.
Operational Challenges: Despite operational improvements, the company faces challenges from lower sales volumes and increased material and transportation costs.
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Guidance & Outlook
Growth Strategy: Focus on product innovation, capacity investments, and channel expansion despite macroeconomic challenges.
Digital Transformation: Advancing IT foundation, executing ERP cloud strategy, and enhancing cybersecurity readiness.
Platform Design: Improving manufacturing centers of excellence and optimizing operational footprint.
Share Repurchase: Repurchased 1.17 million shares for $96.7 million during fiscal 2025.
Net Sales Outlook: Expect low single-digit declines to low single-digit increases in net sales for fiscal year 2026.
Adjusted EBITDA Projection: Projected adjusted EBITDA for fiscal year 2026 is between $175 million and $200 million.
Capital Allocation Priorities: Focus on investing in digital transformation and platform design, opportunistic share repurchases, and deprioritizing debt repayments.
Interest Expense Increase: Interest expense expected to increase by approximately $7 million annually due to new debt agreement.
Depreciation Expense Increase: Depreciation expense expected to increase by approximately $11 million in fiscal year 2026.
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Shareholder Return Plan
Share Repurchase Program: The Company repurchased 1.17 million shares or approximately 7.5% of shares outstanding for $96.7 million during fiscal 2025.
Remaining Share Repurchase Authorization: As of April 30, 2025, the Company has $117.8 million of share repurchase authorization remaining.
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Key Q&A
Q:Can you quantify for us, how much of an impact you’re expecting maybe split that between China and non-China tariffs?
A:The outlook we just gave to you assumed the tariffs that were in place at the end of business yesterday, and that would be roughly $20 million of cost for the business.
Q:What drove the nice improvement in gross margins sequentially?
A:Our teams took actions towards the end of Q3, towards the beginning of Q4 to right size our operations and our footprint. So, our teams completed those tasks. And as a result, you’re seeing that margin rebound inside Q4 overall.
Q:Should we think of G&A at about $15 million going forward?
A:No, I wouldn’t use the quarter alone as a baseline to carry forward.
Q:What does the revenue guidance assume for each of your main end markets?
A:Our overall forecast projection is consistent, with a better second half recovery in both end markets.
Q:Are you seeing anything in the business today that gives you confidence for a return to growth in the back half of fiscal ’26?
A:I’ll just rely on the commentary we get from our partners.
Q:Can you talk about how you’re seeing pricing behave given the pushback from large homebuilders?
A:Pricing has held, but we’ve certainly seen some mix impacts.
Q:Is there anything else we should be thinking about on the cost side as it relates to the full year guidance?
A:The biggest piece is the tariff discussion.
Q:Can you quantify the potential savings from the closure of the components facility?
A:The closure of that facility should yield about $5 million to $6 million of savings and benefits for us on an EBITDA perspective each year.
Q:Would you expect there to be growth next year if tariffs were not as severe?
A:Removing the uncertainty is what’s important.
Q:How much refi or HELOC rebound do you think needs to happen for a bigger R&R recovery?
A:I don’t think it’s as much about refis. It is about existing home sales.
Q:Can you put some context around the progress on automation gains and investments?
A:We’re still in the early innings of that.
Q:What’s embedded for pricing at the midpoint of the guidance for revenue?
A:I don’t want to give you an exact number.
Q:Is there a scenario where pricing and productivity can offset inflation?
A:It’s going to depend on the degree of inflation that we see.
Q:Is the gap between single-family completions and builder direct sales going to be a persistent headwind?
A:I don’t have any perspective from our builders on future quarters.
Q:Review of Unclear Management Responses
A:Management avoided giving a direct answer on the exact number for pricing embedded in the revenue guidance and did not provide clarity on whether the gap between single-family completions and builder direct sales will be a persistent headwind.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Anaheim stock
Association REALTORS
Cabinetry sale
Carolina site
Demand product
ERP cloud
East Coast
Florida Texas
Instructions Senior
Leverage share
Mexico stock
Monterrey Mexico
NAHB housing
Northeast Southeast
Pro comp
Pros distributor
Transcript day
comment NAHB
demand housing
digit decline
environment
expansion order
facility expansion
input headwind
investment
mortgage interest
offering Pro
offering Pros
optimization
order sale
product platform
rate mortgage
result Instructions
site manufacturing
start comment
tariff policy
today sale
uncertainty tariff
value
year facility
AMWD Transcript
American Woodmark Corporation (NASDAQ:AMWD) Q4 2025 Earnings Call Transcript
Unknown5-30
The earnings call reveals several negative indicators: declining net sales, reduced gross profit margins, and increased leverage ratios. Despite some operational efficiency improvements, the Q&A section highlights management's inability to provide clear guidance on revenue projections and pricing strategies, raising concerns about future growth. The market's uncertainty regarding tariffs and the company's weak revenue guidance further contribute to a negative sentiment. Given the small-cap nature of the stock, these factors are likely to result in a market reaction of -2% to -8% over the next two weeks.
Earnings call transcript: American Woodmark Q4 2025 earnings beat estimates
Unknown5-29
The company reported declines in revenue, gross profit margin, and adjusted EBITDA, with increased debt levels and leverage ratio. The Q&A revealed concerns about tariffs, cost pressures, and vague guidance on pricing and inflation impacts. Despite some operational improvements, the overall sentiment is negative due to financial declines and uncertainties. As a small-cap stock, the market is likely to react negatively to these factors, predicting a stock price movement of -2% to -8% over the next two weeks.
American Woodmark Corporation (AMWD) Q4 2025 Earnings Call Transcript
Unknown5-29
The earnings call reveals declining financial performance, with significant drops in net sales, gross profit margins, and adjusted EBITDA. Despite a share repurchase program, the negative financial metrics and increased leverage ratio outweigh positive aspects. The Q&A section highlights concerns about tariffs, inflation, and unclear future guidance. The market cap indicates a small-cap stock, suggesting strong reactions to earnings. Given the weak financial results, negative guidance, and management's evasive responses, a negative sentiment is warranted, predicting a stock price decline of -2% to -8% over the next two weeks.
American Woodmark Corporation (AMWD) Q3 2025 Earnings Call Transcript
Unknown2-27
The earnings call reveals several negative factors: a significant decline in net sales and adjusted EBITDA, increased leverage, and reduced free cash flow. The market strategy and financial health are concerning due to high interest rates and supply chain risks. Although there is a share repurchase program, the overall financial performance is weak, and management's lack of clarity in the Q&A adds uncertainty. Given the company's small-cap status, these issues are likely to result in a stock price decline of -2% to -8% over the next two weeks.
AMWD Report
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