JELD-WEN Holding Inc (JELD) 2021 Q1 法說會逐字稿

Hello, and thank you for standing by, and welcome to JELD-WEN First Quarter 2021 Earnings Conference Call. (Operator Instructions) Please be advised that today's call is being recorded.

I would now like to turn the call over to Chris Teachout, Director of Investor Relations. Please go ahead.

Thank you. Good morning, everyone. We issued our earnings press release this morning and posted a slide presentation to the Investor Relations portion of our website, which we'll be referencing during this call. I'm joined today by Gary Michel, our CEO; and John Linker, our CFO.

Before we begin, I would like to remind everyone that during this call we will make certain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to a variety of risks and uncertainties, including those set forth in our earnings release and provided in our forms 10-K and 10-Q filed with the SEC. JELD-WEN does not undertake any duty to update forward-looking statements, including the guidance we are providing, with respect to certain expectations for future results or statements regarding the expected outcome on the pending litigation.

Additionally, during today's call, we will discuss non-GAAP measures which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. A reconciliation of these non-GAAP measures to their most directly comparable financial measure calculated under GAAP can be found in our earnings release and in the appendix to this presentation.

I would now like to turn the call over to Gary.

Thanks, Chris. Good morning, everyone, and thank you for joining us today. This morning, we're going to focus on just a few things. First, our multifaceted growth platform with a successful track record of earnings growth, compounding cash flow and capital deployment. Second, our well-defined strategy and business operating system that are driving transformation and delivering profitable organic growth. And third, how these, coupled with the market and operating momentum coming into this year, delivered great first quarter results.

Please turn to Page 4. On our last call, we discussed how we are executing a disciplined plan to accelerate organic growth, expand margin and improve cash flow while allocating capital to optimize shareholder returns and have been creating a premier performance culture as a competitive advantage. The underpinning of our strategy deployment is our business operating system, the JELD-WEN Excellence Model. JEM, as we call it, is the systematic way that our people work within the company to deliver our strategy globally. This holistic approach is anchored in the very essence of a lean problem-solving culture, the practice of continuous improvement, development and respect for people and the identification and elimination of waste. We've made great progress across each of these strategic growth drivers, and we are seeing consistent outperformance in the areas where JEM has been deployed. The combination of commercial strategies, delivering innovative products and services, and a differentiated and superior customer experience, coupled with operational excellence, is delivering growth and margin expansion.

Please turn to Page 5. Our North America team used JEM demand planning tools to effectively manage supply chain and labor requirements in the value stream and significantly reduced windows' lead times to under 6 weeks, while competitive lead times are currently stretching to as much as 24 weeks. The operational stability and best lead times in the market are delivering profitable growth and a superior customer experience.

And our German team applied JEM to produce industry-leading delivery opportunities as well. In this new program, we provide our expansive designs and configurations of interior doors and door frames with industry-leading lead times of 15 days and, in some cases, within 9 days. The value stream focus on cycle time reduction delivers an unmatched experience for our customers and delivers growth.

In both cases, we are improving customer service and overall satisfaction and increasing effective capacity.

One more operations example with commercial implications is the redesign of a West Coast U.S. plant to add capacity. Using JEM value stream and production planning tools, our new operational design is intended to add capacity and industry-leading service levels with a 70% reduction in inventory, increasing inventory turns by 2x and delivering more than 40% productivity with just the first stages deployed.

The continuous improvement, problem-solving mindset applied to customer and channel partner opportunities is the essence of our premier performing culture, and it's easy to see how applying these principles across the enterprise should continue to deliver standout performance going forward.

As John will detail in a few minutes, in addition to our strong track record of earnings improvement through JEM, by using these tools consistently across our operations to eliminate waste, we have also built a multiyear track record of working capital improvement and high cash flow conversion.

Identifying commercial opportunities to meet customer unmet needs has led to several innovative product introductions. In Australasia, we launched the Elements door collection, a range of architectural entrance doors inspired by regional influences and customer desires for style and sustainability. Designed to be produced in our new Cirebon, Indonesia operations, the Elements collection features solid construction and stylish design from sustainably sourced timbers and oak veneer, aligning with JELD-WEN's commitment to innovation and sustainability.

In addition to the sustainable content in the Elements product itself, the Cirebon production facility, where this product line is made, was designed with sustainability and energy efficiency in mind. For example, the Cirebon facility uses only recycled rainwater to meet the needs of the plant's operations. And since commissioning in 2019, we have operated completely without ground water or municipal water.

Another exciting offering is the new smart entrance door offerings in Europe. Initially launched for the hospitality industry, these door systems boast embedded capabilities to produce security and safety through keyless, hands-free entry using the guest's smartphone with central and remote management. Future enhancements and expansion of our smart entrance portfolio will provide new innovative solutions to our commercial and residential customers worldwide.

These are just a few examples of the progress that we've made in deploying our operational and commercial strategies across the enterprise, and we're excited about the results.

Please turn to Page 6. Our first quarter performance is a direct result of this ongoing focus and consistent execution of our commercial and operational strategies over many quarters and years. Core revenue grew 6.4% versus last year with strong performance in all 3 segments as a result of volume growth and price. Volumes accelerated sequentially from the fourth quarter, and this momentum continued as the first quarter progressed. We are entering the second quarter with strong backlogs and good visibility to near-term demand in all 3 of our segments.

First quarter adjusted EBITDA increased 31.4%, delivering our fourth consecutive quarter of margin expansion. Cash performance was also healthy as we continued to achieve high cash conversion and compound this cash flow over time through disciplined capital allocation.

In the quarter, we repurchased approximately 810,000 shares and built a robust pipeline of M&A opportunities. John will give more detail on the quarter in a few minutes.

Please turn to Page 7. JELD-WEN has embodied the spirit of possibility since 1960 when our founders purchased a small mill in Oregon, that they would build over time to a global building products leader. They remained inspired to deliver high-quality products and to make a difference to people and the places they called home.

In just a few weeks, we will publish our inaugural environmental, social and governance report, detailing the framework for thoughtful, strategic initiatives that will increase the benefits we're able to offer our customers, associates, suppliers, investors and the communities where we work and live. In developing this report, we evaluated guidance from the Sustainability Accounting Standards Board regarding key topics that are relevant to our industry, and we conducted a materiality assessment to prioritize ESG topics that we believe are most important to JELD-WEN's stakeholders.

We have always been conscious of waste and sustainability within our facilities. It's good business to reuse as much material as we can and mitigate our waste streams in order to save costs.

We've also been committed to meeting high standards for energy efficiency in our facilities and for our customers through the products we design and manufacture. We're a long-time Energy Star leader, and JELD-WEN products, which are critical products for energy-efficient building design, meet or exceed local, regional and national efficiency standards worldwide.

Our expanding ESG commitment is essential to achieving the exponentially larger impact we know is possible. Our report will outline our work and the path forward relating to sustainable supply chain and circular economy, energy-efficient and sustainable product portfolios, innovation and research, diversity and inclusion, health and safety, transparency and governance. We look forward to sharing our ESG journey and commitments with you as part of our Investor Day on May 18.

Please turn to Page 8. Yesterday, at our annual meeting, shareholders elected 3 new directors to the board. These new directors increase board independence, bring rich business experience in their own right and, coupled with our existing directors, an even greater diversity of viewpoint to support the execution of our strategy. We welcome Tracey, Cynt and Dave as we say thank you and farewell to Stormy Byorum as she retires. Her dedicated and meaningful service over many years is greatly appreciated by the board and our associates.

Now I'll turn it over to John Linker to provide additional detail on our first quarter results.

Thanks, Gary, and good morning, everyone. I'll start on Page 10. Our first quarter financial results demonstrate the power of our multifaceted growth platform and extend our consistent track record of execution, with meaningful improvements in revenue, margin expansion and cash flow. This strong performance is a direct result of investing in our strategic growth drivers over multiple quarters and the ongoing momentum of JEM.

First quarter net revenue increased 11.6% to $1.1 billion. The increase was driven primarily by a 6% increase in core revenue as well as a favorable impact from foreign exchange. Notably, all 3 segments delivered core revenue growth with broad-based volume growth and improvements in pricing. Volume accelerated sequentially from the fourth quarter and through the first quarter as well.

Gross profit margin expanded 140 basis points benefiting from pricing realization, operating leverage and increased volume, structural cost reduction programs and productivity from JEM initiatives.

Reflecting the strong operational performance, adjusted EBITDA increased 31.4% year-over-year, with core margin expansion of 160 basis points, which excludes the impact of foreign exchange and any recent acquisitions. This is our fourth consecutive quarter of core margin expansion, demonstrating the consistency of our execution.

Page 11 provides detail of our revenue drivers for the first quarter. I'll highlight pricing realization of 4% and volume/mix growth of 2% for a combined core growth of 6%. Taking into account that our first quarter accounting calendar had fewer shipping days than last year, the reported 2% growth in volume/mix normalized for shipping days would have been approximately 5% to 6%. Total core growth normalized for the impact of shipping days was approximately 9% to 10%.

Please move to Page 12, where I'll take you through the segment performance in more detail. Net revenue in North America for the first quarter increased 9.0%, driven by pricing, volume growth and improvements in mix. Demand and book-to-bill remains quite healthy, positioning us to deliver accelerated revenue growth in 2021.

North America core adjusted EBITDA margin expanded 420 basis points to 12.5%, driven by pricing, productivity and operating leverage. The margin improvement was nicely distributed across all major product lines.

While there are many examples of stellar performance in our North America segment this quarter, I'd like to highlight the strong improvements demonstrated by our North America Windows business. Revenue increased in the low teens percent and margin expanded over 200 basis points, but more importantly, this performance was accomplished while maintaining industry-leading lead times, as Gary already noted.

Europe revenue increased 13.9% overall and 4% excluding the impact of foreign exchange. Both pricing and volume improved versus prior year with North Europe and France leading the revenue growth for the segment. For the seventh consecutive quarter, Europe delivered core margin improvement with an increase of 30 basis points year-over-year from strong productivity and pricing.

One of the highlights in the quarter from Europe was the productivity realized in our U.K. operations directly as a result of the deployment of JEM. In one of our largest facilities in the U.K., we conducted multiple rapid improvement and kaizen events in the first quarter, resulting in significant increases in quality and cycle time as well as productivity savings. In addition to strong cost productivity in the quarter, our team also built a pipeline of future productivity projects to drive ongoing margin expansion and also took pricing actions as a result of material inflation and to further enhance the returns profile of the U.K. business.

Australasia revenue in the quarter increased 19.2% overall and 2% in local currency versus prior year. Volume benefited from accelerating housing demand and the government stimulus homebuilder program. The Australia housing market is showing strong demand. Therefore, we expect further growth from this segment as 2021 progresses.

As a result of this improved revenue performance, our Australasia segment delivered core margin expansion of 200 basis points from solid productivity and operating leverage.

Turning to Page 13. I'll highlight our working capital performance, where we have demonstrated sustained multiyear improvements directly as a result of JEM. The deployment and consistent execution of our business operating system improves customer experience and enables growth through cycle time improvements. This also allows us to lean out our working capital deployed, accelerating asset velocity. From 2018 to 2020, net working capital improved 160 basis points as a percent of sales. Into 2021, the trend continues with the first quarter down 80 basis points compared to prior year. This track record demonstrates our ability to maintain high cash conversion while also accelerating future top line growth.

Please turn to Page 14. Operating cash performance improved $11.7 million compared to prior year, [while overall cash usage in the quarter was consistent with our normal seasonal working capital build cycle. The balance sheet remains healthy as net leverage remained steady at 2.4x, and] liquidity was strong at $990 million. We are focused on deploying cash in a disciplined, returns-focused manner and compounding that cash over time.

With that, I'll turn it back over to Gary, who will provide closing comments. Gary?

Thanks, John. The momentum we brought into the quarter further accelerated for us to deliver strong financial results. We're seeing the benefits of our operational execution, share gains and strong market fundamentals, which gives us confidence that our strong financial performance will continue throughout 2021. The effects of accelerating input cost inflation are expected to be more than offset by price, and favorable markets are expected to continue to provide a growth tailwind.

North America residential new construction and R&R markets continue to expand with strong housing starts and permitting numbers and strong RMI remodeling index continuing to increase in the quarter. We expect growth to continue across all product categories and through all channels, including share gains highlighted earlier.

Europe markets continue to be stable across our served markets, and we will enjoy growth as a result of regional share gains and project business growth.

Australasia markets have been strengthening as a result of the homebuilder stimulus in Australia for the last 2 quarters and are expected to continue as well.

As a result of increased visibility from these tailwinds and strong first quarter results, we're raising the full year outlook for 2021. We now expect to deliver full year revenue growth in the range of 8% to 11%, increased from the previous outlook of 4% to 7%, due to FX rates, recently completed pricing action and strong volume momentum.

Additionally, we now expect adjusted EBITDA of $505 million to $535 million, increased from the prior range of $480 million to $520 million, a result of improved pricing realization, higher volumes, partially offset by increased inflationary pressures.

Please turn to Page 17. This is an exciting time for JELD-WEN, and here's why. We have a multifaceted growth platform with a successful track record of earnings growth, compounding cash flow and capital deployment. We have a well-defined strategy and business operating system that are driving transformation and delivering profitable organic growth. The breadth and scale of the JELD-WEN franchise, including leading market positions, powerhouse brand and unparalleled global footprint is unmatched. Our disciplined execution is delivering consistent results. And our strong balance sheet and accelerating activity to deliver our bold ESG ambition position us for continued growth and financial performance in a sustainable way. We look forward to sharing more with you at our Investor Day on May 18.

Thank you again for joining us this morning and for your continued interest in JELD-WEN. We will now be happy to take your questions.

(Operator Instructions) Your first question comes from Truman Patterson from Wolfe Research.

So first, just wanted to dig in on the raw material and likely some transportation cost inflation commentary. Could you just give an update on your inflation expectations across the portfolio, either on a percentage basis or dollar headwind, the cadence that ends up impacting your P&L moving forward?

And then, Gary, if I heard you, you said that the price/cost dynamic should be favorable. Should we expect that price/cost to be positive in each quarter moving forward? Or is there some timing discrepancies?

Truman, it's John. I'll kick us off. Yes, I mean, just general comments about inflation to start. We are seeing pressure in millwork, and vinyl, resin, logs, lumber and freight, would certainly be some of the highest categories that we're feeling the pressure in. That said, we -- as mentioned on the call, we've taken proactive pricing actions to get ahead of this in multiple regions around the world. And so those pricing increases or multiple -- second round price increases are taking effect in North America this quarter.

So I'd say, in general, to answer your last question first, yes, we're still favorable price/cost for the full year. But order of magnitude, from the original guidance that we gave back in February until what's embedded in this current outlook, the total increase in inflation, both material and freight, is in the $35 million to $40 million magnitude in terms of total full year impact. But again, we've -- we believe we've more than offset that with the pricing actions that we've put into the market.

Yes. As we said, Truman, in the prepared comments, the price/cost remains favorable, and we feel we've got that under control and really supports our guidance rise. The -- we expect to see margin expansion every single quarter, and we have been delivering that over a period of time now. Obviously, we've got some -- a little more difficult comparables in the second quarter, given the benefits to cost last year as we were battening down the hatches a little bit for COVID-19. But that -- we're more than offsetting that at this point, but -- and we do expect to see margin expansion to continue throughout the year.

Okay. Okay. That's definitely encouraging. And then, Gary, I know you mentioned in your prepared remarks about improving capacity in your Western facility. But just big picture, could you give a lay of the land, if you will, in each of your 3 segments about your ability to increase production levels from here over the coming year? Look, we've just been hearing industry-wide supply is very tight, and clearly it doesn't make sense to ramp production at the risk of product quality. But just wanted to get your broad overview in each of the segments.

Yes. So one of the great benefits of our business operating system and the deployment JEM across the entire enterprise is the ability to increase cycle time, improve throughput and add capacity within our existing footprint. The rationalization and modernization program that we started 2 years ago though has also been key to deploying those lean tools in a bigger and better way, using not only some automation and modernization tools, but also looking at how we operate -- how we make doors, how we make windows everywhere.

The example out West was -- a story to talk about is just how much we can get out of one value stream. You think about our windows business today, we are operating at a competitive advantage, quite frankly, with our lead times of vinyl windows compared to a market today that's seeing 15- and 20-week lead times on windows. We're able to offer things with a 6- to 8-week lead time, which we'd still like to be better than that, but competitively, we're able to perform there. We're applying these same tools to our door business in North America, our businesses in Europe and Australasia.

The market in Australia had been soft. It's now bouncing back, and we're seeing the benefits of the rationalization work we did there and the JEM deployment in Australia as we're able to use our -- our more efficient footprint there, our more efficient operations to grow at the speed of the market rebound there as well.

So it's an enterprise-wide global deployment of JEM, and we're really excited. There's still plenty room. I would say, Truman, we're in the early stages because, there's just an opportunity to hit our value streams over and over again.

At our Investor Day coming up in May, we're going to talk a little bit more about how we pick the value streams that we spend the most time on and how much more opportunity there is. So hopefully, you'll stay tuned for that as well.

And your next question will come from Matthew Bouley from Barclays.

Congrats on the results. So really interesting commentary there on windows, Gary, just on that improvement in the lead times. It seems like you already started to see some of the benefits of that with the low teens growth in the quarter. Can you just elaborate a little on, number one, just how you knocked those lead times down. It's probably hard to do that in windows in general. And then today, even more challenging given the demand out there. But then going forward, just how to think about the potential for additional share gain in that category?

Thank you for the question. Again, yes, really taking a look at -- a few years ago, when we were having -- when we had issues keeping up with demand, we applied our business operating system and the tools of lean to our operations in windows. And we started by doing very basic things, looking at the value stream, mapping it out and applying the tools like for real lean, for leaner -- like me, tools like 3P preparedness for production, looking at modeling, how we build windows, looking at the supply chain and really looking at how we organize the work to set up standard work to build windows in each of our plants and then working continuously to improve the cycle time to meet the demand that we see from the customer.

So being able to build the feeder lines, being able to build all the supply chains into that. It's not a -- there's really no silver bullet other than applying these tools over and over again and understanding where the bottlenecks are in the value stream and eliminating those one at a time until you get good flow through the system and are able to meet the demand. The timing for us happened to work out fairly well because we were improving significantly our operations in windows at a time when demand was increasing. So we're able to maintain that. Six weeks is probably not the desired state, but competitively right now, given the demand for vinyl windows, we've been able to maintain that, and we believe there's upside for us to continue to grow.

And Matt, I'll add on one item as well. In addition to the benefit that you saw in the first quarter results from the actions that Gary mentioned, we are making some selective capacity expansion investments in vinyl windows, some automation investments in a few of our plants, which will add incremental throughput capacity in addition to sort of the organic capacity expansions that Gary just described.

Great. Very helpful detail and interesting as well. The second one, I'm just curious on the volume outlook a little more. I guess, maybe stick with North America. Clearly, "easy comparison" here in the second quarter, but even as we get to the second half, I would say the volume comparisons for the segment are not as difficult for JELD-WEN as we might be seeing elsewhere in the sector. So just any sense of how to think about the progression of volumes just given this kind of surge in residential demand here for you guys in North America?

Yes, we did increase our full year revenue outlook as referenced on the call from 4% to 7% to 8% to 11% in terms of revenue there. In terms of the components of how that breaks down, certainly, there is some additional FX translation in there. There's some additional pricing from the pricing actions we took. And there's definitely some additional volume from what we're seeing both in North America as well as Australasia and that market turning around. I don't want to get overly specific in terms of exactly what volume assumptions we've made just because there is an interplay between price, volume and mix throughout the year, but I think it's fair to say that embedded in that midpoint of the guide is a nice pickup in volume mix and North America would be leading the way in terms of the 3 segments for sort of what's embedded in our volume guide for the full year.

And your next question will come from John Lovallo from Bank of America.

The first one is on CapEx. It looks like you guys pulled in, in the outlook just ever so slightly. Curious if this is sort of timing-related. And along those lines, how are you feeling about the current door skin capacity, and you guys working on building any more additional capacity on that front?

So on the CapEx front, the change in guidance is really just a timing issue, and we just didn't get everything spent in the first quarter that we expected to. So we just trimmed it down slightly. But we see a nice pipeline of investments for the year, mixed between capacity expansion-type investments. Particularly in exterior doors in North America, we're making some investments to support that business. We see some nice productivity projects to do some automation and see some productivity. And then also, of course, some maintenance and sustaining type of investments as well. So feel pretty good about our ability to deploy this capital outlook in a way that's accretive for shareholder value.

Yes. On the door skin side, without being too specific, by -- we try not to be too specific on actual plans or anything like that, but we are applying the same type of energy that we apply to windows and doors -- door assembly to our skin businesses as well. And we're seeing the same kind of cycle time improvements and throughput improvements as well and adding capacity where we can. Clearly, that's a major input component to our door business and one that we watch very closely based on the demand that we see for doors, John.

Okay. That's helpful, guys. And then there was a mention of a robust pipeline of M&A opportunities. Curious if there's any color you can provide on sort of product focus, maybe the size of the potential deals, and how multiples look at this point with demand being where it is.

Yes. So I think, John, we're pretty enthusiastic about the M&A future. I mean, we've got a good track record. We did 15 bolt-ons, as you know, from 2015 to 2019. Took a bit of a pause over the last couple of years to sort of integrate what we bought and then a bit of a pause during the COVID disruption. We spent quite a bit of time over the last year doing some more investments and strategy on where we really want to play and where we really want to grow and starting to cultivate and fill up the M&A pipeline again after that pause that I referenced.

So I'd say the most attractive opportunities at this point would be in North America and Europe, windows and doors at this point, largely close to the core that would be -- add some value to our portfolio. Over time, we believe that JELD-WEN has a fantastic platform for growth and that there is an opportunity to look at -- open the lens just from sort of the core door and window platform to high-performing interior and exterior building products in general. And we plan to shed some more light on that in our Investor Day in a few weeks.

Your next question will come from Phil Ng from Jefferies.

Mid single-digit volume growth on a same-day basis in North America is really impressive. John, did I hear you correctly, you expect volumes to kind of accelerate from this pace here? The reason why I ask is given some of the door skin capacity constraints you have, just trying to gauge what type of bandwidth you have on volumes in North America broadly? Is that like a limiting factor, just because certainly we're seeing a lot of growth across resi right now?

Yes. So certainly, the second quarter, we would expect an acceleration in volume over the first quarter, largely just because we're comping a quarter last year where we had facilities sort of shut down for the majority of the quarter in certain regions. And so just we've got a favorable comp there that would imply volume acceleration.

As we think about the back half and what's possible in sort of Q3, Q4, in terms of North America volumes, I'd say that, the order of magnitude, something similar to what we've delivered in the first quarter is doable. Like I said in the prepared remarks that the pipeline looks good, demand is good, book-to-bill is good, order intake is good. So I mean, you're right, we got to be selective around where we choose to take volume. We want to make sure we keep our lead times healthy and the business continues to perform and service our customers. But as of right now, we do not see any volume headwinds for North America business at this point in the year.

Yes. The commercial excellence work that we've done previously on segmentation of customer base and channel, really paying off. And we continue to work on capacity and throughput through JEM, where the value streams can support that growth. So we're already looking ahead of that and planning for it.

Excellent. Last year, mix was kind of a headwind just because you saw outsized growth on your retail channel. And then certainly, you saw a big V-shaped recovery in demand. Just curious if you're seeing any nuance or improvement on the mix side as 2021 has started off this year?

Yes. So the traditional cycle in that business as well is more stock units in the first quarter as you're building up for the season. So right now, we're starting to see that special order demand pick up somewhat and the mix moving a little more favorably. But sell-through at retail continues to -- our -- the in and the out is about equal, right? We're keeping up at point of sale. We're still trying to build up -- build up to the seasonal norms at the point of sale. So there's still a little bit of a mix issue there, but it's starting to improve. There still hasn't been really the type of specialist promotions because the stock units have been flowing through so nice, but we are seeing that as a tailwind for our business this year.

And your next question comes from Josh Chan from Baird.

Gary, John, Chris, you guys mentioned that demand kind of accelerated through the quarter. I was just wondering -- I assume that you saw that in North America as well. So within that segment, I was wondering if you could give some color as to what's kind of driving the acceleration? Is it the new construction channel improving because of the housing starts improvement that we've seen?

Yes. So it's really what we're seeing in North America as well, but Australia has been strengthening as well over the last few quarters. So after a long period of tough markets down there, these stimulus programs around homebuilding and (inaudible) markets has really been taking off, and we're starting to see -- starting to see moves in Australia as well. So we're pretty excited about that market starting to come back to life, and it's a real opportunity for us, the work that we've been doing to gain share, to accelerate that growth.

In North America, housing fundamentals remain strong in the short term and quite frankly over the horizon. All the basic fundamentals of housing growth here still apply. We're probably seeing a little more of that millennial buying going on. We're seeing house creations or household creations still outpacing completions. So we feel good about that. And we're seeing RNC business pretty good. And R&R, which tends to be fairly stable, has been robust over the last 12 months or so. And we continue to see that as evident through that retail business. So the month-to-month, day-to-day comps are still there, and we're excited about those.

Yes. I'll just add on. Certainly, the retail channel, as Gary mentioned, in North America, continues to be strong. Sell-through is greater than our sell-in for them, and so that continues to be a strong channel.

On the resi new construction side, completions were 10%, 12%, I think, in the quarter. So certainly, completions in the market are not keeping up with the starts that the homebuilders have been reporting. So I think there continues to be a little bit of a lag here on sort of that starts to completions, and we would track more with completions than we would with starts in terms of our revenue.

And then just a reminder, we do have a small portion of our North America business through our distribution business that services non-resi and commercial. That market, of course, is a little bit lighter than resi. So if you're trying to do a blended average of sort of where we play, we do need to take into account that a portion of our North America revenue does have some exposure there.

But in general, yes, we saw that demand sort of trajectory continue to move up as the quarter progressed.

That's encouraging to hear. You guys mentioned earlier about the sort of the M&A strategy kind of sticking to the core and then maybe eventually kind of broadening out a little bit. Could you talk about sort of the strategic or financial metrics that you're going to be using to kind of evaluate acquisition opportunities? Just kind of put a little bit of a finer point on those details.

It's a great question and a great setup for our Investor Day on May 18, where we'll certainly share the work that we've done on looking at how JELD-WEN grows and what our positioning is, and we'll share quite a bit of detail on that coming up on May 18.

But if you think about the work that we've been doing to be a reliable operator and be able to provide a differentiated and superior customer experience in the building products space, that's a primary focus. Looking at how we can solve problems for -- the problems that exist for our channel partners, the builders and the like, is another area. But really understanding that at our core, being able to provide logistical support, being able to reliably meet the needs of our channel partners, to provide innovative use of materials that matter in building homes primarily and, to a certain extent, in that -- in the multifamily/light commercial space is really where we're looking. And we've done a nice job of demonstrating, and we will continue to demonstrate our ability to meet those demands with those customers. I really look forward to being able to share even more with you in a couple of weeks. And I think you'll see it's a really exciting time for us to use -- kind of use our franchise, use our capabilities and help our customers grow as well.

And your next question comes from Sue Maklari from Goldman Sachs.

My first question is, obviously, given the severe weather events that we saw in the quarter down in Texas, people have been seeing some issues in terms of some of the raw material procurement. Can you talk to any impact that you saw there? And I guess with that, as you've done all the initiatives around JEM and your efficiencies, were you able to kind of better offset some of that impact and perhaps get through it a little bit easier?

Yes, so clearly we're not immune to any of the issues related to the shortages or supply disruptions from the Gulf. But that being said, we do have, just the nature of our supply chain, the breadth of it and our vertical integration capabilities and substitution capabilities have probably -- have isolated us a little bit from the -- affecting customer deliveries.

Primarily, the chemical supply issues out of the Gulf affect glues and foams. We have alternatives for both of those. Well, we have the ability to source and to manufacture glue that we need for the door processes internally. And we've been able to -- we've been able to just offset that issue. That's actually improving at this point, the supply of those chemicals. So we expect that to be a nonissue going forward. And on the foam side, we've been able to substitute alternatives that have kept us flowing and allowed us to keep up with order demand.

Okay. All right. That's helpful. My follow-up question is, John, you highlighted the work and the improvements that you've seen in working capital. As we think about this year and obviously given the fact that your inventories are still below normal and your --sounds like you're still looking to catch up some of your customers. How should we be thinking about the working capital this year? Could we see inventories kind of being more of a factor in that versus normal? And just any other thoughts there.

Sure. So certainly, for us to support the volume growth that we've got embedded in the guide, there is going to be some level of working capital investments to support that. I think it would be consistent to think about it as, on a percent of sales basis, if we were growing -- if we were growing volumes, every dollar of volume, just apply sort of low teens percent of sales to that in terms of the working capital investment needed to support it.

That said, I mean, we're -- JEM is allowing us to really lean out cycle times, and the amount of inventory that we do keep on hand continues to improve. And so as we think about sort of over a longer period of time, the opportunity can continue to chip away at that and lean out the investment in working capital required to grow the business. That's what we get really excited about, is we got the ability to grow the top line while also leaning out the working capital investment, which should translate to a pretty attractive cash conversion story over the longer-term beyond 2021.

And your next question will come from Mike Dahl from RBC.

I have two follow-ups. The first one is on the cost side. And John, I'm not sure if I heard you correctly, but I think your reference to Truman's question on cost inflation for $35 million to $40 million, sounded like that was incremental to the prior guide. But even if I kind of take that combined with your prior commentary, I think -- and maybe my numbers are off, but I think it's implying kind of 3% of COGS for the full year. Could you clarify that? Because if that's right, it just seems a little low, given the magnitude of inflation we've seen in a lot of things.

Yes. I mean, roughly 2.5% of sales would be sort of the expectation for the material and freight inflation that we expect to see for the full year. So yes, the $35 million, $40 million was incremental to the prior guide. That's the inflation that we expect to realize after the benefits of our sourcing team and the actions that they're taking. Certainly, I agree with you there, if you read headlines on steel, millwork, lumber or anything else, the market inflation is higher than that. But what I'm conveying is what we expect to actually realize in the P&L after our -- after the efforts of our procurement team.

Okay. Got it. That's helpful. And good to see the progress on the procurement side.

And then my follow-up is on the revenue side. I understand you don't want to get too detailed into the breakdown. And if I'm looking kind of high level, it looks like FX would probably contribute a few points. I mean, price, just based on what you've been generating in the past couple of quarters and the increases that you've got in the market, it seems like you're kind of mid-single digits on price. But the 8 to 11 then for the full year, it doesn't seem to imply a heavy lift on the volume side. You seem fairly optimistic. So I guess what I'm trying to parse out is kind of how you're thinking about, whether it's kind of market share or if there's some conservatism baked into that or if you just have different assumptions behind whether it's FX or price there.

Yes. So I mean at the midpoint, revenue guide went up about 4 percentage points, 400 basis points. I think that FX is certainly a piece of that. We don't necessarily -- we can make our own assumptions around sort of what you think FX rates today will flow through for the year, but we have taken our FX up -- assumption up slightly from the original guide. We've taken our pricing assumption up slightly from the original guide. And we've taken our volume mix assumption up more meaningfully from the original guide. But as I mentioned before, there is some interplay between price, volume and mix. We want to make sure that we have some room to execute on each one of those items. And yes, there is an opportunity to outperform the volume guide that we're giving you here today. But still sitting here in the second quarter, we want to see how the year progresses.

Your next question will come from Steven Ramsey from Thompson Research.

This is actually Brian Biros on for Steven. I guess first one, can you speak to any regional differences you're seeing across North America, maybe if one region is significantly outperforming or underperforming? And if any part of the U.S. is kind of best positioned for growth going forward from where we stand today.

Yes. Surprisingly, one of the things that we were looking at is particularly the RNC business is actually picking up across the country, right, even in places where probably a few months ago were maybe even somewhat depressed. So we're actually seeing a general -- kind of a general across-the-country favorability in markets, I guess, is what I would call it. The R&R business is supporting that as well. It's -- there's no call-out, that one area is pulling the rest up. I mean we're pretty -- looking at it, it looks pretty consistent across the country.

Okay. Then a quick follow-up, I guess would be interested to hear how you guys would describe the labor environment currently, and if that is meaningfully impacting your business, either from limiting production or increased costs, and if you're seeing any impact on your suppliers or customers' kind of stuff as well.

Yes. I mean we're not immune to the issues of -- and we certainly talked about them in the past quarters that in certain markets, in certain areas, there are -- there's issues in getting labor into the plant. But that being said, all of our plants, as of this morning around the world, are all operating, and they're able to operate at full capacity, with the exception of really 2 in Indonesia which are under -- still under a bit of a government [throttle].

That being said, we've had to make some alterations in our -- in the way that we operate the plants based on the people that we have there. So we are meeting our demand, and we are able to, using our JEM playbook, operate at either different shift timing, different throughputs and the like, so that we're operating at the most productive level, given the demand and the people that we have to operate the plant.

We have made some modifications in premiums and in how we are hiring in different communities. It's not -- I don't want to give the impression here that this is a widespread, every single plant, every -- around the world problem. It's not. We've -- it's isolated in a few communities, in a few places, and we've been able to work through that and even move work around if we had to.

So yes, it's something we're working through. But just like everything else, we felt we've got it under control and not something that is particularly worrisome at this point. It's just something we're working through.

(Operator Instructions) Your next question comes from Reuben Garner from The Benchmark Company.

Sorry about that, guys. All my questions have actually been asked. So I thought I backed out of the queue, but congrats on the quarter.

Your next question will come from Michael Rehaut from JPMorgan.

This is Elad Hillman on for Mike. So first, I was hoping to get a couple more numbers on the volume mix in North America, but really just focusing on this quarter and just maybe some quantification of the pieces. I was wondering if you could break out what pure volume growth was for this quarter and then also how much the negative mix headwind from stock versus special orders was this quarter.

Sure. So the -- we reported 3% volume/mix in North America, which on a days-adjusted basis is about 6% to 7% that we talked about. I would say that, that was pretty much all volume. The mix impact year-over-year was negligible in the quarter. Certainly, the stock/special dynamic is there, but it was not a headwind to our performance in North America in the quarter.

Great. That's really helpful. And then second, I was wondering if you could provide more color on the North America door results this quarter. What was revenue growth and margin expansion there?

Yes. I'd say, as we said in the prepared remarks, we saw nice growth and margin expansion across all of our products in North America. In terms of doors, I would say it grew sort of in line with segment performance and some very nice margin expansion year-over-year as well. So nothing really unusual to call out about doors versus windows margin expansion or performance in the quarter. All sort of similar with segment performance.

Okay. Great. And just lastly, all 3 segments saw pretty solid margin expansion this quarter. So I was just curious if you could provide some more color on your expectation for margin expansion sort of by segment for the full year, driving to that 70 basis points for the full year.

Yes. I think North America is going to be the outperformer in terms of the overall segment margin expansion. I'd say we do expect gross margin expansion in all 3 segments, a pretty nice magnitude. But depending on sort of the COVID costs that we had to absorb from last year as -- that we're lapping, that can certainly impact the magnitude of the EBITDA margin expansion. But I'd say North America would be the standout.

And then just to call out, as we progress into Q2, we do expect gross margin expansion, pretty nice gross margin expansion in Q2, but we are lapping $35 million or so of onetime benefits that we had last year in SG&A and other income related to furloughs and subsidies and some other items. So as you think about margin progression through the year, that will certainly -- the overall margin expansion a little bit in Q2, but we feel very confident about our ability to deliver gross margin expansion as the year progresses.

I have no further questions in queue. I turn the call back over to our presenters for closing remarks.

Well, thank you all again for joining us today. Our strong performance in the first quarter definitely is a demonstration of our multi-faceted growth platform delivering consistently. And with the market dynamics that we just talked about and the execution of our strategy and the deployment of our business operating system, we expect those to continue for the remainder of the year.

We look forward to sharing more about our strategy and our expectations on May 18 at our Investor Day. We hope that you all can join us. And again, thank you for your interest in JELD-WEN, and we look forward to sharing our progress in coming quarters.

Thank you, everyone, for joining us today. This will conclude today's conference call. You may now disconnect.