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01/09 22:10
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reveals declining financial metrics, including a drop in net sales, EBITDA, and gross profit. The company faces cost pressures from tariffs and inflation, impacting margins. Although there is a merger plan, integration risks and uncertain market conditions pose challenges. The Q&A section highlights concerns about pricing impact on demand and lack of clear guidance, further contributing to negative sentiment. With a market cap of $1.87 billion, the stock is likely to react negatively, falling in the -2% to -8% range over the next two weeks.
Net Sales $699 million, a 3% decrease compared to the same period last year. The decline was due to mid- to high single-digit end market contraction, partially offset by pricing actions and share gains in distributor and builder channels.
Adjusted EBITDA $91 million compared to $105 million in the third quarter of last year, representing a 13% margin and a 160 basis point decline year-over-year. The decline was due to lower volume, fixed cost absorption, and tariffs, partially offset by continuous improvement efforts and pricing improvements.
Free Cash Flow $40 million compared to $65 million in the same period last year. The decrease was driven by lower net cash provided by operating activities and higher capital expenditures related to the integration of Supreme.
Gross Profit $218.2 million, down 8.3% from $238 million in the same period last year. Gross profit margin was 31.2%, down 190 basis points year-over-year due to lower volumes, fixed cost leverage, and tariffs, partially offset by pricing improvements and integration synergies.
SG&A Expenses $167.5 million, up 0.7% compared to $166.3 million in the same period last year. SG&A as a percentage of net sales increased 81 basis points year-over-year due to investments in strategic initiatives, offset by lower commission and freight costs.
Net Income $18.1 million compared to $29.1 million in the same period last year. Net income margin was 2.6% compared to 4.1% in the prior year, impacted by lower gross profit and lower income tax expense.
Adjusted EBITDA Margin 13%, a decline of 160 basis points year-over-year due to market-related volume declines, leverage challenges, and tariffs, partially offset by continuous improvement savings and pricing actions.
Diluted Earnings Per Share $0.14 in the third quarter of 2025 compared to $0.22 in the third quarter of 2024. Adjusted diluted earnings per share were $0.33 compared to $0.40 in the prior year period.
Net Debt $839.3 million, resulting in a net debt to adjusted EBITDA leverage ratio of 2.5x. This was in line with expectations but impacted by deal-related cash outflow.
Supreme integration: Significant progress made on integration initiatives, driving cost efficiencies and positioning for revenue synergies as the market returns.
New product offerings: Mid-tier semi-custom products performed well, benefiting from consumers trading down from premium offerings.
New construction market: Sales outperformed the broader market due to strong product portfolio, reliable service, and effective supply chain coordination.
Repair and remodel market: Demand remained choppy, with mid-tier semi-custom products showing stronger performance amid affordability pressures.
Canadian market: Performance was down mid-single digits, consistent with market trends, due to housing affordability challenges.
Operational efficiencies: Continuous improvement programs exceeded plan, driving measurable savings and partially offsetting volume-related headwinds.
Technology investments: Deployment of centralized order management system and infrastructure modernization enhanced productivity and operational durability.
Las Vegas facility: Start-up completed, realigning operational footprint to better serve the Western regional market.
American Woodmark merger: Progressing as expected, with integration planning underway and expected $90 million in run rate cost synergies by year 3 post-close.
Tariff mitigation strategy: Comprehensive strategy in place to offset new Section 232 tariffs through pricing, sourcing, and operational adjustments.
Demand Environment: Persistently challenging demand environment with mid- to high single-digit end market contraction. Soft demand in retail and dealer channels, particularly in stock cabinetry, and choppy demand in repair and remodel markets due to elevated project costs, low home turnover, and low consumer sentiment.
Tariffs: Introduction of Section 232 tariffs on lumber and wood products, including a 25% tariff on kitchen cabinets and vanities, set to increase to 50% in 2026. These tariffs introduce incremental costs and potential indirect impacts on consumer demand and housing affordability.
Economic Conditions: Housing affordability and buyer confidence remain constrained, impacting single-family housing starts and repair/remodel markets. Canadian market also faces challenges with elevated prices and limited resale inventory.
Integration and Merger Risks: Integration of Supreme and potential merger with American Woodmark pose execution risks, including achieving expected synergies and managing operational adjustments.
Cost Pressures: Lower volumes leading to unfavorable fixed cost leverage. Tariffs and inflationary pressures further impacting gross margins.
Supply Chain and Sourcing: Exposure to tariffs on imported materials and finished goods, with 15-20% of materials sourced from Asia and additional exposure to potential countervailing and antidumping duties on plywood.
Market Outlook: Demand across new construction and repair/remodel markets expected to remain subdued through 2026, with gradual improvement anticipated in late fiscal 2026 or early fiscal 2027.
New Construction Market Demand: Overall new construction end market demand is expected to be down mid-single digits on a full-year basis for 2025. Gradual improvement is anticipated in late fiscal 2026 or early fiscal 2027.
Repair and Remodel Market: The repair and remodel market is expected to be down mid- to high single digits for the full-year 2025. Demand is anticipated to remain subdued through next year, with gradual improvement expected in late fiscal 2026 or early fiscal 2027.
Canadian Market Demand: Full-year Canadian end market demand is expected to be down mid-single digits year-over-year for 2025.
Section 232 Tariffs Impact: The new Section 232 tariffs on lumber and wood products, including kitchen cabinets and vanities, are expected to introduce incremental costs. The company anticipates some phasing challenges in Q4 2025 and into full-year 2026 as mitigation initiatives are implemented. Net unmitigated exposure is estimated at $20 million to $25 million for Q4 2025.
Merger with American Woodmark: The merger is expected to close in early 2026. Approximately $90 million in run rate cost synergies are anticipated by the end of year 3 post-close, driven by procurement, overhead, and manufacturing network efficiencies.
Adjusted EBITDA Guidance: Full-year 2025 adjusted EBITDA is expected to range between $315 million and $335 million, representing an adjusted EBITDA margin of 11.5% to 12%.
Adjusted Diluted EPS Guidance: Full-year 2025 adjusted diluted earnings per share are expected to range between $1.01 and $1.13.
Free Cash Flow: Free cash flow for the full-year 2025 is expected to exceed net income, consistent with long-term objectives.
The selected topic was not discussed during the call.
The earnings call reveals declining financial metrics, including a drop in net sales, EBITDA, and gross profit. The company faces cost pressures from tariffs and inflation, impacting margins. Although there is a merger plan, integration risks and uncertain market conditions pose challenges. The Q&A section highlights concerns about pricing impact on demand and lack of clear guidance, further contributing to negative sentiment. With a market cap of $1.87 billion, the stock is likely to react negatively, falling in the -2% to -8% range over the next two weeks.
The earnings call reveals flat financial performance with declining margins and EPS, raising investor concerns. The Q&A highlights management's vague responses on cost synergies and market share, suggesting uncertainty. Despite merger synergies, the anticipated market decline and weak guidance overshadow potential benefits. The company's small-cap status amplifies these negative sentiments, likely resulting in a stock price drop.
The earnings call revealed mixed financial performance with declining margins and net income, despite a slight increase in net sales due to acquisitions. Concerns about tariffs, demand downturn, and unclear guidance responses further cloud the outlook. Although there is a share repurchase program, the financial health and market strategy raise concerns. Given the market cap, the stock is likely to react negatively, with a predicted movement of -2% to -8% over the next two weeks.
The earnings call reveals several negative indicators: declining margins, increased debt, workforce reductions, and negative free cash flow. While there is a share repurchase plan, the overall financial health appears pressured with higher costs and economic uncertainties. The Q&A section highlights management's vague responses about tariffs and cost-saving measures, adding to investor concerns. Despite some positive sales growth from an acquisition, the weak financial performance and uncertain market conditions suggest a negative stock price reaction, especially given the company's small-cap status.
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