American Woodmark Corporation Q4 FY2025 earnings call

• Growth: Navigated challenging macroeconomic environment, delivered product innovation, capacity investments, and channel expansion. Over 30% of made-to-order sales from products launched in the last three years. Facility expansions in Mexico and NC. Transitioned independent distributors to 1951 Cabinetry.
• Digital transformation: Advanced ERP cloud strategy, improved cybersecurity, invested in digital channels for better performance.
• Platform design: Executed improvement plans at Mexico and NC sites, closed Orange, VA facility to streamline operations, focused on cost efficiency and supply chain resilience.

Net sales for the fourth fiscal quarter were $400.4 million, a decline of 11.7% versus the prior year. Remodel net sales (combining home centers and independent dealer and distributors) decreased 10.4%, with new construction net sales down 13.4%. Gross profit margin for the fourth quarter of fiscal year 2025 decreased 160 basis points. For the full fiscal year 2025, net sales were $1.7 billion, a decrease of 7.5%, with gross profit margin at 17.9% versus 20.4% the prior year.

• Net sales for fiscal 2026 expected to be low single-digit declines to low single-digit increases, with first half challenged and second half expected to recover. - Adjusted EBITDA for fiscal 2026 projected to be $175 million to $200 million. - Capital allocation priorities: Invest in digital transformation and platform design, opportunistic share repurchasing, deprioritize debt repayments due to current leverage ratio.

• Uncertainty regarding tariff policies impacting demand and sales. - Macroeconomic factors like declining consumer confidence and low housing resale activity. - Input cost inflation including lumber, particle, plywood, etc. - Labor and transportation cost impacts.

Q: How much of an impact are tariffs expected to have, split between China and non-China tariffs, and how much headwind is expected to be offset in fiscal '26?

A: Outlook range significantly influenced by tariffs, with $20 million of cost assumed based on tariffs in place at end of May 28, 2025, and modeled recovery scenarios from 0% to 100% included in $175M-$200M adjusted EBITDA range.

Q: What drove the sequential improvement in gross margins?

A: Teams right-sized operations and footprint towards end of Q3 and start of Q4, leading to margin rebound in Q4.

Q: What's embedded for pricing at the midpoint of revenue guidance?

A: A host of scenarios including tariff impacts and inflation are embedded, with modeling of various recovery and inflation scenarios.

Q: How much savings are expected from the closure of the components facility?

A: Closure of the facility should yield about $5 million to $6 million of savings and benefits annually on an EBITDA perspective.

Q: What's the progress on automation gains and how it helps 2026 results?

A: Still in early innings of automation journey, with over $10 million spent in fiscal '25 on automation-related investments, realizing labor demand reduction benefits, and more projects teed up for '26 and beyond.