Bill Christensen: Alright. You’re welcome.
Operator: Your next question is from the line of Jeffrey Stevenson with Loop. Please go ahead.
Jeffrey Stevenson: Hi. Thanks for taking my questions today. So, could you provide any more color on how North America volumes trended throughout the quarter and whether volume declines accelerated as the quarter progressed from the challenging R&R demand fundamentals you cited today?
Bill Christensen: Yes. So, I would say, if we just try and keep it at a macro level here, Jeffrey. As we said, the anticipated reload in Q2 has been a lot softer than expected. This is, I would call it, unusual just because a lot of our retail partners look to load their inventory for a late spring and summer build season, we are not seeing that. I would say, that’s the main difference as we look out. Clearly, the commercial projects are significantly weaker than we had initially anticipated, but those are push-outs typically linked to interest rates that are staying high and project owners are waiting because they feel, at least a lot of them feel that they could wait and get better financing in the future on these projects.
So, we are seeing significant delays. It’s a smaller piece of our business still is relevant if you combine kind of our multifamily, which is the VPI business that we have spoken about and a lot of stuff that we are doing in Canada, which is project related that we kind of put into this bucket. So, I would say in general, it’s the R&R business and the headwind that is significantly, say, worse than expected. But outside of that, there is nothing unusual and I think we will just keep it at that level, it’s probably more appropriate.
Jeffrey Stevenson: Okay. Definitely understood. Then we have heard that mid-end window and door categories are under the most pressure since the low end is benefiting from production builder growth and the hiring construction activity is holding in okay. Would you agree with that, Bill, and could you talk maybe more about your outlook for better and best products?
Bill Christensen: Well, I would – yes, I wouldn’t necessarily confirm that the higher end is okay. I would say that we also are seeing headwinds at the higher end. If you think about wood windows, you think about our LaCantina business, which is aluminum systems going into very high-end homes, there is clearly weakness. I would throw that in of kind of the project type of weakness we are seeing. So, this is down double digit, even more in certain areas. So, clearly, I would say, the high end is weak. And if it’s weak now, it’s going to stay weak for a while until the starts recover and product is being built in. Clearly, the low end is moving. We have talked about we are mixing well on interior doors. We are underrepresented on our windows business. So, I would say the high-end weak projects also commercial, very weak, low-end moving, great growth on doors, challenged on windows based on us being underrepresented in that segment.
Jeffrey Stevenson: Understood. Thank you.
Bill Christensen: You’re welcome.
Operator: Your next question comes from the line of Steven Ramsey with Thompson Research Group. Please go ahead.
Brian Biros: Hi. Good morning. It’s actually Brian Biros on for Steven. Thanks for taking my questions.
Bill Christensen: Hi Brian.
Julie Albrecht: Hi Brian.
Brian Biros: Good morning. On the outlook again, maybe just – can you just touch a little bit more on maybe the specific data points you see out there to adjust the guidance. I know you talked a lot about it on this call, but I only ask because most of it really seems macro-driven. And it’s kind of been interesting to see which companies this quarter are adjusting guidance or not when the impacts kind of seem more broad-based across the industry and not necessarily company specific. So, just curious what you saw that you need to adjust guidance when others might not?
Bill Christensen: Yes. So, I would say it’s not only macro. Let me just call your attention to our portfolio pruning, which we had called out. So, there is two things. Number one, we are stepping out of our Auraline composite window business, but we are also pruning additional lines within our windows portfolio because we were unhappy with the level of profit that these areas were delivering. You rolled that all up, call it, between $50 million and $100 million of top line headwind this year. So, that’s the one bucket. I think macro, I would say, we have talked a lot about the macro headwinds that exist. Clearly, we are – we have a pretty solid position in the R&R segment, which has not yet rebounded as we had expected in Q2, and that’s what we already see.
So, we want to make sure we are being as transparent as possible with the capital market and calling it as we see it. This is not going to be a straight line recovery. It’s very choppy. I think everyone would agree with that in the market. But in addition, which I think is an important point, we are taking some sales out of our P&L because we don’t like the quality. And clearly, we have got to adapt our cost structure, which we are already doing to it. But on the back side, when the rebound occurs, we will have a much better package of product that we are selling into the market. And that’s why we are making these decisions now, even though it’s a tough market to be calling off sales in a down environment.
Brian Biros: That’s very helpful. Maybe thinking back when the recovery happens maybe into ‘25, I know it’s a faraway away. A lot can happen until then, but just trying to think how some of the automation or the self-help margin improvement projects you guys have that will play out into 2025, if volumes do come back, kind of giving you the added tailwind of kind of the volume leverage on top of the initiatives benefits on their own. I don’t know if there is any thoughts there on how impactful that could be to margins on that outlook? Thank you.
Bill Christensen: Yes. You’re welcome, Brian. So, I think number one, that should be pretty significant because we are doing a couple of things. I mean we are taking cost out of the structure, but we really feel that based on some of the changes that we are making, which include automation and some efficiency projects, we will be able to deliver at or above the expected volumes that we have in the next couple of years with the infrastructure that we will then have in place. So, there is a pretty significant upside. We are talking a lot about decremental margins based on the current macro reality, but you flip that around on the upside and you are talking 25% to 30% lift on additional sales, which we will be pushing through the existing infrastructure.
So, we really are moving towards that future state, again, with a focus on making sure we like the quality of sales that we have in our portfolio. We are making the tough decisions to adapt the cost structure, but also to weed out the product portfolios that we don’t like and that we need to take action on. And so these things are kind of, I would say, accumulating in this year. If we talk about the projects in our pipeline, as I referenced to Phil’s question, we have still 700 initiatives that we are working through. And a lot of these are really focused on making sure the strength of the foundation for the recovery is very solid. Just a view on recovery, clearly, our view is that things should get better in ‘25 in North America and definitely, Europe is going to be challenged in ‘25.
And I think that’s the very high level based on how we see the market and where things are. It’s going to be, I think better in ‘25 for North America, still challenged in Europe.
Brian Biros: Got it. Thank you very much.
Bill Christensen: You’re welcome.
Operator: [Operator Instructions] Our next question is from the line of Matthew Bouley with Barclays. Please go ahead.
Matthew Bouley: Good morning everyone. Thanks for taking the questions. Sticking on the topic of the pruning, I guess is it realistic to think that the portfolio as it stands now is sort of the starting lineup that you want to go with, or if we are in kind of a choppier end market backdrop for an extended period here, is there a potential that there could be additional to come as you sort of review all your product lines? Thank you.
Bill Christensen: Yes, Matt. So, thanks for the questions. So, we are definitely not at, I would call, a future state today. We still have work to do. And there is two things that we are looking at. Number one is we are assessing our cost to serve and making sure we are doing our homework. So, we are as efficient as we can be meeting our customers’ needs around quality and delivery, but at the same time, we are also assessing what is the quality of that sales mix in today’s cost to serve environment, but also in the future state. And if we don’t see a clear path to profit, like with Auraline, we are going to be making the tough decisions and we are going to be stopping this. And I think this is one of the things where the organization is starting to realize that the accountability is critical.
And if we set up a business plan and I would suggest that there still is an overconfidence in our culture at JELD-WEN, we need to hold ourselves accountable. And if we don’t have a plan to correct assuming we are missing, we need to get there or we are going to make the tough decisions. So – and I would suggest this is new for the organization. These are tough decisions, but required based on us not delivering the results that we committed to. And this is, I think a strong signal of where we want to take this organization and that we are willing to take our medicine on some of these areas where we really haven’t delivered as we said we should have. And we want to make sure it’s very visible, Matt, to the capital market, so everyone knows exactly what we are doing, why we are doing it.
And so we can kind of continue. I would suggest our view of being very open and transparent about what we need to do and hey, calling ourselves off-sides if we don’t hit our targets, but making the tough decisions.
Matthew Bouley: Got it. Okay. Thanks for that Bill. Second one, on the topic of price cost. I know you don’t want to get into specifics on the individual product lines. But in terms of calling it neutral for the year, I mean clearly, price was negative in North America in the first quarter. You mentioned you are still seeing inflation in several areas. So, was price-cost positive in Q1? And is the expectation that it would kind of drift a little lower through the year, or just any kind of color on – or any additional detail, I guess on what would keep price-cost neutral given these moving pieces? Thank you.
Julie Albrecht: Yes, sure. Yes, our price-cost was just slightly negative in the first quarter, like $2 million. So, I think plus or minus a little bit, we call that neutral. So, I would say, generally speaking, and Bill has already mentioned, I mean we clearly continue to see inflation, specifically in areas like labor and benefits, really as we expected. And then again, puts and takes around material costs and transportation, etcetera, in both of our regions. So, again, in this environment, our goal is to be raising price appropriately to cover inflation and our costs. And so I think like you see in the first quarter, I mean North America was slightly negative, Europe was slightly positive on the top line for price. Net-net, there was just a very minor negative impact year-over-year to EBITDA. And again, that’s what we are really working towards as we move through the year.
Matthew Bouley: Alright. Thanks Julie. Thanks Bill. Good luck.
Bill Christensen: Thanks Matt.
Operator: Your next question is from the line of Mike Dahl with RBC Capital Markets. Please go ahead.
Mike Dahl: Good morning. Thanks for taking my questions.
Bill Christensen: Hey Mike.
