JELD-WEN Holding, Inc. (JELD) Q2 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reveals a challenging financial situation with declining revenues, high leverage, and negligible free cash flow. Despite plans for improvement, the immediate outlook remains weak. The Q&A section highlights concerns about financial leverage and lack of clarity on strategic actions. The company's market cap suggests moderate stock price sensitivity, but the overall sentiment is negative due to financial underperformance and uncertainties.
Key Financial Performance
Revenue $824 million, representing a 16% decline year-over-year. Approximately 13% of this decline was due to lower core revenues, reflecting anticipated volume reductions across both North America and Europe segments, with the remainder from the court-ordered divestiture of the Towanda operation.
Adjusted EBITDA $39 million, a decrease of $46 million compared to the prior year. This was mainly driven by significantly lower volumes and slightly unfavorable mix, resulting in an adjusted EBITDA margin of 4.7%.
Free Cash Flow Negligible free cash flow in the quarter compared to $12 million in the second quarter of 2024. The year-over-year decline was primarily driven by lower EBITDA.
Net Debt Leverage Ratio Increased to 5.7x, driven by lower sales volume and corresponding lower EBITDA, despite no increase in debt levels.
North America Segment Revenue $556 million, representing a 22% decline compared to the prior year. Core revenues decreased by 15%, primarily driven by lower volumes.
North America Segment Adjusted EBITDA $35 million compared to $76 million in the same quarter last year. This decrease reflects the negative impact of lower volumes and slightly unfavorable price cost dynamics.
Europe Segment Revenue $268 million, down 2.7% year-over-year. Volumes were weak, but the weak dollar and selected price increases mostly offset the sales impact from volume declines.
Europe Segment Adjusted EBITDA $17 million, a decline of $3 million from the prior year, resulting in an adjusted EBITDA margin of 6.4%.
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Operating Highlights
Cost Reductions: Achieved significant fixed cost reductions and operational efficiencies through transformation initiatives and cost actions.
Facility Optimization: Transitioned Coppell, Texas facility into a raw materials warehouse and closed facilities in Grinnell, Iowa and Chiloquin, Oregon to streamline operations and reduce costs.
Automation Investments: Invested in automation, including ramping up the automated production line at the Garland, Texas door facility, leading to improved efficiency and cost savings.
Service Level Improvements: Focused on improving service levels, reducing lead times, and enhancing on-time delivery performance.
Capital Structure Evaluation: Evaluating options to improve capital structure, including potential divestitures of non-core assets and European operations.
Transformation Benefits: Targeting $150 million in transformation benefits for 2025, with a mix of carryover from 2024 and new initiatives.
Market Positioning: Rebuilding customer partnerships and improving service reliability to regain market share and prepare for future growth.
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Risk or Challenges
Soft demand and volume pressures: Demand remained soft across all product categories and end markets, leading to volume pressures and operational inefficiencies.
Cost pressures and inflation: Significant cost pressures from labor, material inflation, and tariffs are creating negative price-cost dynamics, impacting profitability.
High leverage ratio: Net debt leverage ratio increased to 5.7x, exceeding the targeted range, driven by lower EBITDA and sales volumes.
Operational inefficiencies: Lower volumes have created inefficiencies across the manufacturing network, further weighing on productivity and EBITDA performance.
Court-ordered divestiture impact: The divestiture of the Towanda operation negatively impacted revenue and EBITDA, with additional challenges from inventory adjustments.
Interest rate and affordability challenges: Elevated interest rates and affordability issues are contributing to continued market softness and customer hesitation.
Competitive pricing pressures: Increased competition and customer reluctance to accept price increases are impacting pricing strategies and margins.
Tariff exposure: Annualized tariff impact estimated at $40 million, with $17 million expected to affect 2025 financial results, despite mitigation efforts.
Productivity headwinds: Operational inefficiencies and reduced manufacturing throughput are contributing to productivity challenges.
Free cash flow decline: Free cash flow turned negative, primarily due to lower EBITDA and continued investment in transformation initiatives.
Excess capacity in operations: Excess capacity in parts of the business is leading to inefficiencies and the need for footprint optimization.
Automation and underinvestment: Past underinvestment in automation has contributed to operational complexity, though current efforts are underway to modernize.
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Guidance & Outlook
Full Year Revenue Guidance: The company expects full year revenue to be between $3.2 billion to $3.4 billion, with core revenue expected to decline between 4% and 9%.
Full Year Adjusted EBITDA Guidance: Adjusted EBITDA is expected to be between $170 million to $200 million, reflecting negative price/cost relationships and continued productivity pressure from lower volumes.
Transformation Benefits: The company expects $100 million of in-year transformation benefits, with half being carryover from last year and the remainder from new initiatives in 2025.
Capital Expenditures (CapEx): The company plans to spend $150 million in CapEx for transformation benefits in 2025 but may significantly reduce CapEx in 2026 if market softness persists.
Free Cash Flow: Free cash flow is projected to be a use of approximately $150 million for the full year.
Leverage and Capital Structure: The company is evaluating options to improve its capital structure and reduce leverage, including potential divestitures of non-core assets and assessing the long-term ownership of European operations. A detailed plan is expected by the end of the year.
Market Recovery and Strategic Positioning: The company is preparing for improved volumes when the market recovers and is focused on actions to strengthen its business for long-term success.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:Can you provide more details on the efforts to optimize the network and the implications for near-term margins?
A:The company is over the 50-yard line in optimizing the network but is slowing the pace of network consolidation in the back half of the year to preserve capital and limit service disruptions. They are on track to hit targets by 2026 or 2027, with $100 million in transformation benefits expected ($50 million from last year and $50 million this year).
Q:What are the challenges in realizing pricing and offsetting inflationary pressure?
A:The company aims to be price-cost neutral but is currently guiding to a slight negative with inflation above price. They have made selective price concessions to hold volumes in certain markets and implemented tariff surcharges. The market remains negative, but the rate of decline is slowing.
Q:What is the urgency and progress in addressing financial leverage in North America and Europe?
A:The company acknowledges a leverage ratio of 5.7x, above their target range, but has ample liquidity and no immediate time pressure. They are in the early stages of reviewing multiple options and plan to present a clear capital structure plan by the end of the year.
Q:What are the primary levers driving the improvement in profitability in the second half?
A:The company expects incremental EBITDA margins of over 60% in the second half, driven by volume lift (30% flow-through to EBITDA), footprint actions, short-term cost reductions, and transformation initiatives. Approximately $50 million of transformation benefits and $50 million of short-term actions are back-half loaded.
Q:Can you provide insights into the volume performance in North America and Europe during the quarter?
A:In Europe, volumes declined as expected, with residential down mid-single digits and commercial down slightly. In North America, mid-single-digit volume declines were observed, with 50% attributed to market conditions and 50% to share loss (e.g., Midwest retailer and Towanda divestiture). The rate of decline is slowing.
Q:What is the status of debt maturity and potential strategic actions in Europe?
A:The next debt maturity is in December 2026 ($400 million senior note). The company is evaluating whether they are the best long-term owner of European assets, considering operational improvements, market conditions, and the need for growth capital.
Q:How are windows performing relative to doors, and what is the impact of tariffs?
A:There is no significant difference in tariff impact between windows and doors. The mix down occurred in 2024, and no further significant mix down is observed in 2025. Both windows and doors are performing consistently.
Q:What are the volume and mix dynamics expected in the back half of the year?
A:The company expects stronger volumes in Q4 due to easier year-on-year comps and targeted growth initiatives. North America is expected to see low to mid-single-digit declines in new residential markets, with the rate of decline slowing.
Q:What specific actions are driving the step-up in the back half of the year?
A:The back half will see significant contributions from plant closures, reductions in force, and transformation initiatives. Approximately 2/3 of the $50 million cost mitigation actions will occur in the back half, along with incremental EBITDA from growth initiatives.
Q:Review of Unclear Management Responses
A:Management avoided providing direct answers or lacked clarity on the following: 1) Specific details on the multiple options being considered to address financial leverage. 2) Clear strategic direction for European assets, as they are still in the early stages of evaluation. 3) Detailed breakdown of the transformation and cost mitigation actions driving the back-half improvement.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Bank
Inc Research
Research Division
Texas
Tier
VP
action term
benefit action
capital structure
commitment
consistency
cost action
cost dynamic
cost pressure
court divestiture
decrease volume
dollar
end expectation
end plan
euro
expectation cost
exposure
focus environment
inefficiency
inventory
level leverage
line end
manufacturing
market Slide
material
maturity
mitigation
network productivity
option
order rate
pricing
priority
remainder
revolver
role
service
tariff
team
transformation cost
JELD Transcript
JELD-WEN Holding, Inc. (JELD) Q3 2025 Earnings Call Transcript
Unknown11-4
The earnings call reveals significant challenges: declining volumes, aggressive competitor pricing, and reduced EBITDA expectations. Although there are transformation initiatives and cost-saving measures, the market conditions remain weak, and guidance indicates ongoing struggles. The potential business sale is uncertain, and management's vague responses further amplify concerns. Given the market cap of $1.12 billion, the stock is likely to experience a negative reaction, falling between -2% to -8% over the next two weeks.
JELD-WEN Holding, Inc. (JELD) Q2 2025 Earnings Call Transcript
Unknown8-6
The earnings call reveals a challenging financial situation with declining revenues, high leverage, and negligible free cash flow. Despite plans for improvement, the immediate outlook remains weak. The Q&A section highlights concerns about financial leverage and lack of clarity on strategic actions. The company's market cap suggests moderate stock price sensitivity, but the overall sentiment is negative due to financial underperformance and uncertainties.
JELD-WEN Holding, Inc. (JELD) Q1 2025 Earnings Call Transcript
Unknown5-6
The earnings call reveals significant financial challenges, including a 19% revenue decline, increased net debt leverage, and negative cash flow. Despite cost reduction efforts, the guidance indicates further revenue declines and weak EBITDA improvements. The Q&A highlighted management's uncertainty in passing tariff costs to customers and muted seasonal growth expectations. The absence of a share repurchase program and unclear responses to key risks further dampen sentiment. Considering the small-cap market cap, these factors suggest a negative stock price movement of -2% to -8% over the next two weeks.
JELD-WEN Holding, Inc. (NYSE:JELD) Q4 2024 Earnings Call Transcript
Unknown2-19
The earnings call indicates a challenging financial landscape with declining revenues and EBITDA, increased debt leverage, and downward-revised guidance for 2024. Despite cost-saving initiatives and transformation projects, the weak financial performance and cautious outlook, especially in key markets like North America, suggest a negative sentiment. The Q&A highlights management's uncertainty in addressing cost challenges and inflation, further supporting a negative outlook. Given the small-cap status, the stock is likely to react more strongly to these negative factors, resulting in a predicted stock price movement of -2% to -8% over the next two weeks.
JELD Report
Frequently Asked Questions
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