American Woodmark Corporation (NASDAQ:AMWD) Q3 2023 Earnings Call Transcript

We’ve been able to bring some new product to that space as well. So, we talked about (ph) a couple of quarters ago that we launched in the Northeast. We’ve done that. We’re starting to look at expansion of that to other markets. And then other opportunities in categories such as bath that perhaps we can bring into the space.

Steven Ramsey: Okay. Excellent. Thank you.

Operator: And the next question is from Tim Wojs from Baird. Please go ahead.

Tim Wojs: Hey, guys. Good morning.

Scott Culbreth: Hey, good morning, Tim.

Tim Wojs: Maybe just — maybe more of a theoretical question, Scott or Paul. If you do see sales declines kind of start in the April quarter and then maybe continue into fiscal ’24, like what types of like volume decrementals would you normally expect to see on the sales decline kind of from a theoretical perspective? And then, I guess, what levers do you think are available to you internally to maybe offset some of that volume-based decremental?

Scott Culbreth: Sure. We’ve historically talked, and I know you’ve followed this for quite some time with a decremental gross margin of approximately 25%. And we’ve certainly had periods where we performed better than that and then also periods where we’ve performed worse than that. As we start our planning cycle, and just as a reminder, we’re just now doing that now to get our full budget and plan set for fiscal year ’24. As we start to do that work, we do think there’ll be pressure on the top side. As we think about our gross margin and EBITDA margin performance, we believe will perform better than the historical norm. I don’t have an exact number to deliver to you today, Tim, but that’s what we’re working through as we start to build out our budget plans, but we’ll be better than the 25% as we go into next year.

So, why, which is the other part of your question, what are the things that we have as levers? Well, we have a lot of great projects that we put in place this year, OpEx savings that will carry forward. And then we’ve got a robust deck of projects that we’ll continue to execute on as we shift into fiscal year ’24 that will drive savings. We’ve got the platform work that we mentioned as well. That will start to help us more towards the end of ’24, but set us up really nicely into ’25 as well.

Tim Wojs: Okay. Good. That’s good to hear. And then, I guess from your discussions with any of your builder customers or other channel partners, I mean, it doesn’t sound like there’s been any real push on price. But I mean, has there been any change to how they kind of think about mix as they think about future communities or kind of future shelf space?

Scott Culbreth: Nothing substantial around mix other than opportunities that we bring to the table where we can maybe put in Origins versus the core Timberlake offering. So that is our typical mix management offering that we’ll bring to a builder. And we certainly want to continue to drive Origin’s growth in the space. It’s a benefit for the builder as well as the enterprise. So, we’ve done mixed management by driving more and more Origins. We’ve not rolled back pricing, but there’s certainly a lot of price chatter in the marketplace to your point.

Tim Wojs: Okay. Good. And then, just the last piece on the facility expansions. I mean is there any sort of start-up costs or any sort of expenses that kind of run through the P&L over the next 12 to 18 months that would you just be aware of?