Quanex Building Products Corp (NX) 2023 Q1 法說會逐字稿

 Good day, and thank you for standing by. Welcome to the First Quarter 2023 Quanex Building Products Earnings Conference Call. (Operator Instructions) Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today, Scott Zuehlke, SVP, CFO and Treasurer. Please go ahead.

美好的一天，感謝您的支持。歡迎參加 2023 年第一季度 Quanex 建築產品收益電話會議。 （操作員說明）請注意今天的會議正在錄製中。我現在想把會議交給今天的演講者，Scott Zuehlke，高級副總裁、首席財務官兼財務主管。請繼續。

Thanks for joining the call this morning. On the call with me today is George Wilson, our President and CEO. This conference call will contain forward-looking statements and some discussion of non-GAAP measures. Forward-looking statements and guidance discussed on this call and in our earnings release are based on current expectations. Actual results or events may differ materially from such statements and guidance, and Quanex undertakes no obligation to update or revise any forward-looking statements to reflect new information or events. For a more detailed description of our forward-looking statement disclaimer and a reconciliation of non-GAAP measures to the most directly comparable GAAP measures, please see our earnings release issued yesterday and posted to our website. I'll now turn the call over to George for his prepared remarks.

感謝您今天早上加入電話會議。今天與我通話的是我們的總裁兼首席執行官喬治·威爾遜。本次電話會議將包含前瞻性陳述和一些非 GAAP 措施的討論。本次電話會議和我們的收益發布中討論的前瞻性陳述和指導基於當前的預期。實際結果或事件可能與此類陳述和指導存在重大差異，Quanex 不承擔更新或修改任何前瞻性陳述以反映新信息或事件的義務。有關我們前瞻性聲明免責聲明的更詳細描述以及非 GAAP 措施與最直接可比的 GAAP 措施的協調，請參閱我們昨天發布並發佈在我們網站上的收益報告。我現在將電話轉給喬治，聽取他準備好的發言。

Thanks, Scott, and good morning to everyone joining the call. As I begin my fourth year as CEO of Quanex, I look back and realize that there is yet to be a normal period during my tenure. Shortly after I stepped into this role, we were faced with the unprecedented challenge of a global pandemic. We overcame many unknown challenges in the early stages of that crisis only to then face a rapid increase in demand, spurred on by government infusions of capital into economies around the world, coupled with the worldwide labor shortage that caused massive supply chain disruptions. Together, these factors tested the limits of every manufacturer's production capabilities and ultimately led to severe inflationary pressures over the last 2 years that largely continue today. In addition, longer than normal lead times during this period created strong protectionary demand amongst our customers that has resulted in inventory rebalancing and reduced demand now that our lead times have returned to normal levels. Through all this, the Quanex team has done a phenomenal job, and I'm extremely proud of what we have accomplished. I say all this as a backdrop to the following statement. I think we may have just experienced our first "normal quarter" since before the pandemic. When comparing our first quarter 2023 results to the same period of 2019, we are able to see a seasonality pattern that is very similar. Most of our customers scheduled shutdown days during the holiday period of December 2022, and the start-up periods in January 2023 were slow, but began to pick up towards the end of the month. This scheduling pattern was the norm pre-COVID, but was not followed over the past couple of years because of the abnormally high demand that everyone was seeing in the market. From an order intake perspective, the only items that I would call out as one-offs during the most recent quarter are some weather impacts on the West Coast and the impact of some customers reducing their inventory levels due to our lead times returning to normal. Looking at the overall macroeconomic environment, we still believe that in the near term, rising interest rates, driven by the uncertain actions of the Fed, tight labor markets and the ongoing war in Ukraine will continue to impact consumer confidence and create some uncertainty in the markets we serve. However, we also believe that housing remains underbuilt overall. And with the affordability of housing beginning to improve an uptick in both the new construction and R&R markets is not out of the question.

謝謝斯科特，早上好，所有加入電話會議的人。在我開始擔任 Quanex 首席執行官的第四個年頭之際，回顧過去，我意識到在我的任期內還沒有一個正常的時期。在我上任後不久，我們就面臨著全球大流行病這一前所未有的挑戰。在那場危機的早期階段，我們克服了許多未知的挑戰，然後卻面臨著需求的快速增長，這是由於政府向世界各地的經濟注入資本，再加上全球勞動力短缺導致大規模供應鏈中斷。這些因素共同考驗著每個製造商生產能力的極限，並最終在過去 2 年中導致嚴重的通貨膨脹壓力，這種壓力在很大程度上一直持續到今天。此外，在此期間比正常交貨時間更長的時間在我們的客戶中產生了強烈的保護需求，導致庫存重新平衡並減少需求，因為我們的交貨時間已恢復到正常水平。通過這一切，Quanex 團隊完成了非凡的工作，我為我們所取得的成就感到無比自豪。我說這一切是為了以下聲明的背景。我認為我們可能剛剛經歷了自大流行之前以來的第一個“正常季度”。將我們 2023 年第一季度的業績與 2019 年同期的業績進行比較時，我們可以看到非常相似的季節性模式。我們的大多數客戶在 2022 年 12 月的假期期間安排了停工日，而 2023 年 1 月的開工時間緩慢，但在月底開始回升。這種調度模式是 COVID 之前的規範，但由於每個人都在市場上看到異常高的需求，因此在過去幾年中並未遵循。從訂單接收的角度來看，在最近一個季度中，我唯一認為是一次性的項目是對西海岸的一些天氣影響，以及由於我們的交貨時間恢復正常而導致一些客戶降低庫存水平的影響。縱觀整體宏觀經濟環境，我們仍然認為，短期內，美聯儲行動不明朗、勞動力市場吃緊以及烏克蘭戰爭持續導致的利率上升將繼續影響消費者信心，並給經濟帶來一定的不確定性。我們服務的市場。然而，我們也認為住房建設總體上仍然不足。隨著住房負擔能力開始改善，新建築和 R&R 市場的上漲也不是不可能的。

Globally, inflationary pressures have been mixed. We have realized significant price decreases in some of the commodity raw materials we consume that are tied to index pricing mechanisms. In other areas, such as PVC resin, we saw some decreases, but those costs have stabilized and have actually started to increase slightly more recently. On the flip side, strong inflationary pressures still exist when it comes to labor and benefit costs, freight, energy and other services. We will continue to aggressively work on productivity projects to help offset these pressures, but where needed, we will increase price to protect margins. I will now provide some general comments on each of our reporting segments. Compared to Q1 of 2022 and excluding the contribution from the LMI mixing business we acquired in November. Revenues in our North American Fenestration segment declined by approximately 7%. Having said that, the comp in 2022 was tough and seasonality was essentially nonexistent over the last 2 years. We believe that a return to a more normal seasonality pattern, combined with customer initiated programs to reduce their working capital as lead times have improved resulted in the softer year-over-year demand. Although the year-over-year comps for the next 2 quarters will also be challenging, we do anticipate that volumes will follow a more traditional seasonal pattern with increases into the spring and summer months. We believe this additional volume will also result in improved margin performance as our more leveraged product lines are able to realize the volume benefits. Operational performance in this segment has been solid, and we've been able to adjust our lead times back to normal levels. We just need the seasonal demand to return as we expect it will. Looking at the LMI acquisition and now 4 months into the integration, I am pleased to report that we are on track with our integration plan and fully expect to meet or exceed the synergy target of $500,000 that we announced at the time of acquisition.

在全球範圍內，通脹壓力喜憂參半。我們已經意識到，我們消費的一些與指數定價機制相關的商品原材料價格大幅下跌。在其他領域，例如 PVC 樹脂，我們看到了一些下降，但這些成本已經穩定下來，實際上最近開始略有增加。另一方面，在勞動力和福利成本、貨運、能源和其他服務方面仍然存在強大的通脹壓力。我們將繼續積極開展生產力項目，以幫助抵消這些壓力，但在需要時，我們將提高價格以保護利潤。我現在將對我們的每個報告部分提供一些一般性評論。與 2022 年第一季度相比，不包括我們在 11 月收購的 LMI 混合業務的貢獻。我們北美開窗部門的收入下降了約 7%。話雖如此，2022 年的比賽很艱難，過去兩年基本上不存在季節性。我們認為，回歸到更正常的季節性模式，加上客戶發起的計劃，以減少他們的營運資金，因為交貨時間有所改善，導致需求同比下降。儘管接下來兩個季度的同比比較也將充滿挑戰，但我們確實預計銷量將遵循更傳統的季節性模式，並在春季和夏季月份增加。我們相信，由於我們槓桿化程度更高的產品線能夠實現銷量收益，因此增加的銷量也將提高利潤率。該部門的經營業績一直很穩定，我們已經能夠將交貨時間調整回正常水平。我們只需要季節性需求能夠像我們預期的那樣恢復。看看 LMI 的收購，現在已經進行了 4 個月的整合，我很高興地向大家報告，我們正在按照我們的整合計劃走上正軌，並完全有望達到或超過我們在收購時宣布的 500,000 美元的協同目標。

In our North American Cabinet Components segment, we saw a year-over-year decrease in revenues of 12.3%, which was primarily a result of lower market demand. In addition, most of our customers implemented additional shutdown days over the holiday period to lower their working capital. We anticipate this reduction in revenue will continue near term as the pricing of both hard and soft maple are still decreasing, triggering our raw material index mechanisms. From a margin perspective, we were able to maintain our improved operational performance levels and to capitalize on the timing of the lower cost lumber purchases. As a reminder, index pricing tends to be on a 90-day lag. So when lumber prices are dropping, we tend to benefit from the timing cycle as long as the prices don't drop too quickly. Finally, revenues in our European Fenestration segment declined by 6.7% year-over-year. However, when you exclude the foreign exchange impact, revenue actually increased by approximately 4% compared to Q1 of last year. Although the macroeconomic headwinds of inflation and an energy crisis related to the Ukraine war are still present, this segment continues to perform well. Share gains within our vinyl profile products, price increases to offset inflation and the launch of new products continue to offset the headwinds. On that front, we are very excited about the recent launches of our new 090 and 090R window systems, a new vented head drip for Windows systems. And finally, our new Genesis spacer system, which adds another spacer product to our already high-performing superspacer product line. All 3 of these new products have generated much excitement in the market and will help address thermal and operating performance of insulating glass units and full window systems.

在我們的北美機櫃組件部門，我們看到收入同比下降 12.3%，這主要是市場需求下降的結果。此外，我們的大多數客戶在假期期間實施了額外的停工日，以降低他們的營運資金。我們預計收入的減少將在短期內持續，因為硬楓木和軟楓木的價格仍在下降，從而觸發我們的原材料指數機制。從利潤的角度來看，我們能夠保持我們改進的運營績效水平，並利用低成本木材採購的時機。提醒一下，指數定價往往有 90 天的滯後。因此，當木材價格下跌時，只要價格不會下跌得太快，我們往往會從時機週期中受益。最後，我們歐洲門窗部門的收入同比下降 6.7%。然而，當你排除外匯影響時，收入實際上比去年第一季度增長了約 4%。儘管通貨膨脹和與烏克蘭戰爭相關的能源危機等宏觀經濟逆風依然存在，但該板塊繼續表現良好。我們乙烯基型材產品的份額增長、價格上漲以抵消通貨膨脹以及新產品的推出繼續抵消不利因素。在這方面，我們對最近推出的新 090 和 090R 窗戶系統感到非常興奮，這是一種適用於 Windows 系統的新型通風頭滴。最後，我們的新 Genesis 墊片系統為我們已經高性能的超級墊片產品線增加了另一種墊片產品。所有這 3 種新產品都在市場上引起了極大的轟動，並將有助於解決絕緣玻璃裝置和全窗系統的熱性能和操作性能問題。

In summary, we believe we are seeing a return to a more seasonal cadence of orders as global supply chains have improved and the world economy has become more accustomed to a new post-COVID normal. Near-term headwinds provide challenges and make it much more difficult to be able to provide narrow guidance ranges. However, we remain optimistic on the long-term outlook. The entire company remains focused on continuous improvement, serving our customers and controlling the things that we can control: optimizing return on invested capital and working capital remain top priorities for improved cash flow generation, which will support our growth initiatives and align with our road to $2 billion strategy. We are well positioned to capitalize on growth opportunities as they arise or to weather any type of prolonged macroeconomic downturn, if it's necessary. In short, the future of this company is bright despite near-term challenges. I'll now turn the call over to Scott, who will discuss our financial results in more detail, and we'll finish up by providing some modeling assumptions and a cadence for Q2.

總而言之，我們認為，隨著全球供應鏈的改善以及世界經濟已經更加習慣新的後 COVID 常態，我們正在看到訂單的季節性節奏正在回歸。近期的不利因素帶來了挑戰，並使得提供狹窄的指導範圍變得更加困難。然而，我們對長期前景保持樂觀。整個公司仍然專注於持續改進，為我們的客戶服務並控制我們可以控制的事情：優化投資資本回報和營運資本仍然是改善現金流產生的首要任務，這將支持我們的增長計劃並與我們的發展道路保持一致20億美元的戰略。如果有必要，我們有能力抓住出現的增長機會或經受住任何類型的長期宏觀經濟衰退。簡而言之，儘管近期面臨挑戰，但該公司的未來一片光明。我現在將電話轉給斯科特，他將更詳細地討論我們的財務結果，最後我們將提供一些建模假設和第二季度的節奏。

Thanks, George. On a consolidated basis, we generated net sales of $261.9 million during the first quarter of 2023, which represents a decrease of 1.9% compared to $267 million during the first quarter of 2022. The decrease was mostly attributable to softer demand, customer inventory rebalancing initiatives and foreign exchange translation impact. Overall, we believe that our results for the first quarter of 2023 indicate a return to what was normal seasonality prior to COVID with Q1 being the lowest quarter of each fiscal year. Net income decreased to $1.9 million or $0.06 per diluted share for the 3 months ended January 31, 2023, compared to $11.2 million or $0.34 per diluted share for the 3 months ended January 31, 2022. After adjusting for onetime transaction and advisory fees, net income decreased to $6.1 million or $0.18 per diluted share for the quarter compared to $11.3 million or $0.34 per diluted share for the same period of last year. On an adjusted basis, EBITDA for the quarter decreased to $20.5 million compared to $24.4 million during the same period of last year. The decrease in earnings for the first quarter of 2023 was largely due to lower volumes, onetime transaction and advisory fees foreign exchange translation, higher interest expense and increased stock-based compensation expense, mostly due to stock price appreciation. Now for results by operating segment. We generated net sales of $153 million in our North American Fenestration segment for the first quarter of 2023, which represents growth of 4.3% compared to the first quarter of 2022. The increase in revenue was driven by the contribution from the LMI custom mixing assets we acquired in November of 2022. -- excluding the contribution from LMI, revenue would have been down approximately 7% year-over-year driven by a decrease in volumes due to softer market demand and customer inventory rebalancing initiatives. Adjusted EBITDA was $15 million in this segment or about 8% lower than prior year. We do expect margins to improve in this segment as the year progresses. We generated net sales of $54.7 million in our North American Cabinet Components segment in Q1 of 2023, which was 12.3% lower than prior year. Once again, the decrease was driven by lower volumes.

謝謝，喬治。在綜合基礎上，我們在 2023 年第一季度的淨銷售額為 2.619 億美元，與 2022 年第一季度的 2.67 億美元相比下降了 1.9%。下降的主要原因是需求疲軟、客戶庫存重新平衡計劃和外匯換算的影響。總體而言，我們認為我們 2023 年第一季度的業績表明恢復到 COVID 之前的正常季節性，第一季度是每個財政年度最低的季度。截至 2023 年 1 月 31 日止三個月的淨收入下降至 190 萬美元或攤薄後每股收益 0.06 美元，而截至 2022 年 1 月 31 日止三個月的淨收入為 1120 萬美元或攤薄後每股收益 0.34 美元。調整一次性交易和諮詢費後，淨收入本季度收入下降至 610 萬美元或攤薄後每股收益 0.18 美元，而去年同期為 1130 萬美元或攤薄後每股收益 0.34 美元。在調整後的基礎上，本季度的 EBITDA 下降至 2050 萬美元，而去年同期為 2440 萬美元。 2023 年第一季度收益下降的主要原因是交易量下降、一次性交易和諮詢費外匯換算、利息支出增加以及股票薪酬支出增加，這主要是由於股價上漲。現在按運營部門劃分結果。 2023 年第一季度，我們的北美開窗部門實現了 1.53 億美元的淨銷售額，與 2022 年第一季度相比增長了 4.3%。收入的增長是由我們的 LMI 定制混合資產的貢獻推動的於 2022 年 11 月收購。--如果不包括 LMI 的貢獻，由於市場需求疲軟和客戶庫存重新平衡計劃導致銷量下降，收入將同比下降約 7%。該部門調整後的 EBITDA 為 1500 萬美元，比上年減少約 8%。隨著時間的推移，我們確實預計該部門的利潤率會有所提高。 2023 年第一季度，我們的北美機櫃組件部門的淨銷售額為 5470 萬美元，比去年同期下降 12.3%。減少的原因再次是銷量下降。

Adjusted EBITDA was $1.7 million for the quarter compared to $2 million in the first quarter of 2022. Margins were consistent compared to the first quarter of 2022. Hardwood pricing started to come down towards the end of fiscal 2022 and continues to decline, which will pressure revenue for the remainder of the year in this segment. Our European Fenestration segment generated revenue of $55 million in the first quarter, which represents a decrease of 6.7% year-over-year. However, excluding foreign exchange impact, revenue in this segment increased by 3.9%, driven by higher pricing across all products and share gains in our vinyl extrusion business. These items were partially offset by volumes declining in our space product line due to some customer inventory rebalancing initiatives and softer market demand. From an operational standpoint, this segment performed well during the quarter despite additional macroeconomic headwinds, including the war in Ukraine and related increases in energy costs.

本季度調整後的 EBITDA 為 170 萬美元，而 2022 年第一季度為 200 萬美元。與 2022 年第一季度相比，利潤率保持一致。硬木價格在 2022 財年末開始下降並繼續下降，這將給壓力帶來壓力該部門今年剩餘時間的收入。我們的歐洲門窗部門在第一季度創造了 5500 萬美元的收入，同比下降 6.7%。然而，排除外匯影響，該部門的收入增長了 3.9%，這是由於所有產品的定價更高以及我們的乙烯基擠出業務的份額增加。由於一些客戶庫存重新平衡計劃和市場需求疲軟，我們的空間產品線的銷量下降部分抵消了這些項目。從運營的角度來看，儘管存在額外的宏觀經濟逆風，包括烏克蘭戰爭和相關的能源成本增加，但該部門在本季度表現良好。

Adjusted EBITDA came in at $9.7 million for the quarter compared to $10.4 million in the first quarter of 2022. Margins held up nicely, and we expect continued success protecting margins in Europe as we flex our cost structure and push price to cover inflationary costs where appropriate in a softer market. As a reminder, we do not have pass-through mechanisms built into our contracts in Europe. Moving on to cash flow and the balance sheet. Cash provided by operating activities improved significantly to $3.1 million for the first quarter of 2023 compared to negative $21.7 million for the first quarter of 2022. The value of our inventory decreased during the quarter due to easing raw material inflationary pressures, which had a positive impact on working capital. Free cash flow was negative for the quarter, which is not uncommon for our company in Q1. However, we realized an improvement of about $25 million year-over-year. Our balance sheet continues to be strong. Our liquidity position is solid, and our leverage ratio of net debt to last 12 months adjusted EBITDA was 0.8x as of January 31, 2023. Excluding real estate leases that are considered finance leases under U.S. GAAP, our leverage ratio of net debt to last 12 months adjusted EBITDA was 0.4x. Previously disclosed, we did borrow $92 million to acquire substantially all of the assets of LMI on November 1, 2022. We were able to repay $5 million of it towards the end of the first quarter because of our free cash flow position.

本季度調整後的 EBITDA 為 970 萬美元，而 2022 年第一季度為 1040 萬美元。利潤率保持良好，我們預計隨著我們調整成本結構並推動價格以在適當的情況下彌補通脹成本，我們將繼續成功保護歐洲的利潤率在較軟的市場中。提醒一下，我們在歐洲的合同中沒有內置傳遞機制。繼續討論現金流量和資產負債表。經營活動提供的現金在 2023 年第一季度顯著增加至 310 萬美元，而 2022 年第一季度為負 2170 萬美元。由於原材料通脹壓力緩解，我們的存貨價值在本季度有所下降，這產生了積極影響關於營運資金。本季度自由現金流為負，這在我們公司第一季度並不少見。然而，我們實現了約 2500 萬美元的同比增長。我們的資產負債表繼續保持強勁。我們的流動性狀況穩健，截至 2023 年 1 月 31 日，我們的淨債務與過去 12 個月調整後 EBITDA 的槓桿比率為 0.8 倍。不包括根據美國公認會計原則被視為融資租賃的房地產租賃，我們的淨債務槓桿比率與過去12 個月調整後的 EBITDA 為 0.4 倍。此前披露，我們確實在 2022 年 11 月 1 日借了 9200 萬美元來收購 LMI 的幾乎所有資產。由於我們的自由現金流狀況，我們能夠在第一季度末償還其中的 500 萬美元。

In the near term, we will remain focused on generating cash, paying down debt and opportunistically repurchasing our stock. We will maintain our focus on growing the company through organic, inorganic and innovative growth opportunities as they arise, while continuing to preserve our healthy balance sheet. As stated in our earnings release, we are now prepared to provide official guidance for fiscal 2023, albeit with wider ranges than prior years, which is based on current macro fundamentals, coupled with ongoing conversations with our customers. The near-term outlook for our business is cautious, softening market demand, lower raw material pricing and related surcharge rollbacks offset in some ways by inflationary pressure in other areas and weaker consumer confidence in part due to rising interest rates are all causing near-term uncertainty. However, we are cautiously optimistic about the second half of our fiscal year and our long-term view of the residential housing market remains positive. Guidance and modeling assumptions for fiscal 2023 are as follows: net sales of $1.12 billion to $1.16 billion, adjusted EBITDA of $130 million to $142 million, depreciation and amortization of approximately $42 million to $43 million; SG&A of $120 million to $125 million, interest expense of $8 million to $8.5 million, a tax rate of 25%; CapEx of $30 million to $35 million and free cash flow of $50 million to $55 million.

在短期內，我們將繼續專注於產生現金、償還債務和機會主義地回購我們的股票。我們將繼續專注於通過出現的有機、無機和創新增長機會來發展公司，同時繼續保持我們健康的資產負債表。正如我們在收益發布中所述，我們現在準備為 2023 財年提供官方指導，儘管範圍比往年更廣泛，這是基於當前的宏觀基本面，以及與客戶的持續對話。我們業務的近期前景持謹慎態度，市場需求疲軟、原材料價格下降和相關附加費回滾在某種程度上被其他地區的通脹壓力和部分由於利率上升導致的消費者信心減弱所抵消，這些都導致近期不確定。然而，我們對下半財年持謹慎樂觀態度，我們對住宅市場的長期看法仍然樂觀。 2023 財年的指導和建模假設如下：淨銷售額為 11.2 億美元至 11.6 億美元，調整後的 EBITDA 為 1.3 億美元至 1.42 億美元，折舊和攤銷約為 4200 萬至 4300 萬美元； SG&A 為 1.2 億至 1.25 億美元，利息支出為 800 萬至 850 萬美元，稅率為 25%；資本支出為 3000 萬至 3500 萬美元，自由現金流為 5000 萬至 5500 萬美元。

Looking to the second quarter of this year, we expect market volume to improve versus the first quarter of this year, which follows normal seasonality. From a cadence perspective, for the second quarter of this year versus the first quarter of this year, we expect revenue to be up 2% to 4% on a consolidated basis. By segment for the second quarter of this year compared to the first quarter of this year, we expect revenue to be up 3% to 5% in our North American Finestration segment, down 6% to 7% in our North American Cabinet Components segment and up 12% to 14% in our European Fenestration segment. Adjusted EBITDA margin is forecasted to improve by 350 to 450 basis points on a consolidated basis in the second quarter of 2023. Again, this is compared to the first quarter of this year. Operator, we are now ready to take questions.

展望今年第二季度，我們預計市場銷量將比今年第一季度有所改善，這是正常的季節性。從節奏的角度來看，今年第二季度與今年第一季度相比，我們預計綜合收入將增長 2% 至 4%。與今年第一季度相比，按今年第二季度的細分市場來看，我們預計北美精細加工業務的收入將增長 3% 至 5%，北美櫥櫃組件業務的收入將下降 6% 至 7%，以及我們的歐洲開窗部門增長了 12% 至 14%。預計 2023 年第二季度調整後的 EBITDA 利潤率將在綜合基礎上提高 350 至 450 個基點。同樣，這是與今年第一季度相比。接線員，我們現在準備好接受提問了。

(Operator Instructions)One moment while we compile the Q&A roaster. Our first question comes from the line of Daniel Moore with CJS Securities.

（操作員說明）一會兒我們編譯問答烘焙機。我們的第一個問題來自 CJS 證券公司的 Daniel Moore。

Thank you, George Scott. -- start with North American Fenestration. Can you give us any sense for the magnitude of the impact of customers rebalancing inventories last quarter and in the current fiscal Q2 so far and a sense for kind of where we are in that process nearing the end, likely to continue for a couple of quarters? Any color there would be great.

謝謝你，喬治斯科特。 -- 從北美開窗開始。您能否讓我們了解客戶在上個季度和本財年第二季度到目前為止對庫存進行再平衡的影響程度，以及我們在該過程接近尾聲時所處的位置，可能會持續幾個季度？任何顏色都會很棒。

In terms of the magnitude, I don't think we're prepared publicly to break that out versus the volume drops. But in terms of where we're at in the process, we started seeing that destocking or inventory rebalancing initiatives really starting to take hold at the beginning of December, has gone into January and early February. -- knowing where we're at within our customers and during our visits, we think that, that should start coming to an end here very soon, probably within this month and going into the next. So I think we'll see an end to that in this quarter because at some point here, they're going to have to start repurchasing inventory. And we're starting to see some signs of that.

就幅度而言，我認為我們不准備公開打破這一點與交易量下降的關係。但就我們在這個過程中所處的位置而言，我們開始看到去庫存或庫存重新平衡舉措真正開始在 12 月初站穩腳跟，已經進入 1 月和 2 月初。 - 了解我們在客戶中所處的位置以及在我們訪問期間，我們認為，這應該很快開始結束，可能在本月內並進入下個月。所以我認為我們會在本季度看到這種情況的結束，因為在某個時候，他們將不得不開始回購庫存。我們開始看到一些跡象。

That's helpful, George. You gave good color full year and then Q2 kind of outlook. What can you say about expectations for the trajection of margin -- trajectory of margins across the segments embedded in your fiscal '23 guide, given some of the moving parts with index pricing. And what -- how should we think about margins year-over-year in each of the 3 segments for the full year?

這很有幫助，喬治。你給出了全年的良好色彩，然後是第二季度的前景。考慮到一些具有指數定價的移動部分，你能說一下對利潤率軌蹟的預期——你的 23 財年指南中嵌入的各個細分市場的利潤率軌跡。什麼——我們應該如何考慮全年 3 個細分市場中每個細分市場的同比利潤率？

Yes. I think for the full year, for our Finastration segments, year-over-year EBITDA margins flattish to maybe slightly down. I mean, again, we're trying to protect margins in all segments. But I'd say for the Cabinet Components segment, there's going to be a little more pressure on margins for the full year.

是的。我認為全年，對於我們的 Finastration 部門，EBITDA 利潤率同比持平甚至可能略有下降。我的意思是，我們再次努力保護所有部門的利潤率。但我要說的是，對於機櫃組件部門，全年的利潤率壓力會更大一些。

 And I think as we look at margins, and I hope what came across through our comments is going even back to 2019, you would see some fluctuations just based on seasonality because we do have a couple of product lines that are more highly leveraged, such as spacers in the vinyl profiles that do the profitability is very much correlated and tied to volume because of the fixed cost structure. So as we start seeing that seasonality volume ramp up, we would expect as in the past to see the profitability improve. In the Cabinet segment, I think what we saw in the first quarter and what we said all along is on the backside of index pricing, as wood prices go down, the ability to get ahead of those pricing mechanisms gives us some short-term benefit. So I think we'll be working really hard even with the drop on revenue to be able to hold and sustain margins as much as possible in that segment.

我認為，當我們審視利潤率時，我希望通過我們的評論得出的結論甚至可以追溯到 2019 年，你會看到一些僅基於季節性的波動，因為我們確實有幾個槓桿率更高的產品線，例如乙烯基型材中的墊片，由於固定的成本結構，盈利能力與銷量密切相關。因此，當我們開始看到季節性銷量增加時，我們會像過去一樣預計盈利能力會提高。在櫥櫃部分，我認為我們在第一季度所看到的以及我們一直以來所說的都是在指數定價的背後，隨著木材價格的下跌，領先於這些定價機制的能力會給我們帶來一些短期利益.因此，我認為即使收入下降，我們也會非常努力地工作，以便能夠盡可能多地保持和維持該細分市場的利潤率。

That's really helpful. Maybe one more and I'll jump out. In terms of revenue at the midpoint, looking at sort of a low double-digit decline organically year-over-year. How much of an impact is pricing in that? Is it kind of low single-digit headwind versus volume? Just trying to get the breakout of those expectations.

這真的很有幫助。也許再來一個，我就跳出去。就中點收入而言，有機地同比下降兩位數。定價對此有多大影響？與交易量相比，這是一種低個位數的逆風嗎？只是想突破這些期望。

Yes, that's tough to answer. I'd say so far year-to-date, it's mostly been volume-driven only because year-over-year, specifically in the first quarter, pricing was actually still up year-over-year. Obviously, as raw material costs come down, pricing is going to be impacted more going through the year. So I think it will start balancing out between volume and price, probably more in the second half of the year.

是的，這很難回答。我想說到目前為止，它主要是由數量驅動的，只是因為同比，特別是在第一季度，價格實際上仍然同比上漲。顯然，隨著原材料成本的下降，全年定價將受到更大的影響。所以我認為它將開始在數量和價格之間取得平衡，下半年可能會更多。

 Makes sense. I will jump back with any follow-up.Â

有道理。我會跳回任何後續行動。

And one moment for our next question -- our next question comes from the line of Steven Ramsey with TRG.

請稍等一下我們的下一個問題——我們的下一個問題來自 TRG 的 Steven Ramsey。

This is actually Brian Biros on for Steven. I want to start on cash generation. A lot of companies as you've taken time to highlight their cash generation abilities, especially compared to last year, which was a tough year. And I guess, touched on that a little bit in the prepared remarks and in the guidance. Can you just expand on how you're thinking about the free cash flow for the year, maybe cadence through the year and items to keep in mind that are different from last year?

這實際上是 Brian Biros 代替 Steven。我想開始產生現金。很多公司都花時間強調了他們的現金生成能力，特別是與去年相比，去年是艱難的一年。我想，在準備好的評論和指南中稍微提到了這一點。你能不能擴展一下你是如何考慮今年的自由現金流的，也許是一年中的節奏和要記住的與去年不同的項目？

Yes. I mean I think if you look at last year, there was a pretty large hit to working capital mainly because of what was going on with the inventories and the inflationary pressures there. Obviously, that's subsided. So we do expect that to benefit us this year. Historically, we generate most all of our cash in the second half of each fiscal year, and I don't think this year is going to be any different.

是的。我的意思是，我認為如果你看一下去年，營運資金受到了相當大的打擊，主要是因為庫存情況和那裡的通脹壓力。顯然，這已經平息了。所以我們確實希望這對我們今年有利。從歷史上看，我們在每個財政年度的下半年產生大部分現金，我認為今年不會有任何不同。

Got it. And follow-up, I guess, would be just on the labor front. I guess how are you guys thinking about labor through this kind of, call it, a tough period here. It's easy to fire and protect margins, tough to hire then. How are you thinking about the labor dynamic of protecting margins versus keeping that labor for the long term, given the second half when things are expected to pick back up?

知道了。我想，後續行動只會在勞工方面。我想你們是如何看待這裡的艱難時期的勞動。解僱和保護利潤很容易，然後很難僱用。考慮到下半年情況有望回升，您如何看待保護利潤率與長期保留勞動力的勞動力動態？

Yes. As we look at labor, and I think your point is spot on. It is difficult to get labor back when you lose it. So I think we've been very cautious on reducing our labor workforce in our teammates at any of the facilities. And we've worked very hard to offset any sort of inflationary or margin pressures in other areas through continuous improvement and other activities. We've deployed them in terms of really getting caught up on some of those activities that we've done in preparing for the increase in volumes that we do anticipate. If we get to a point where we feel that a permanent reduction in workforce is needed, we'll obviously pull that trigger. But our confidence level on where the market can go has really pushed us to look to find ways to offset costs in other areas before going to labor.

是的。當我們看勞動力時，我認為你的觀點是正確的。勞力一旦失去，就很難再找回來。因此，我認為我們一直非常謹慎地減少我們在任何設施的隊友中的勞動力。我們非常努力地通過持續改進和其他活動來抵消其他領域的任何形式的通貨膨脹或利潤壓力。我們已經部署了它們，真正趕上了我們在為我們預期的數量增長做準備時所做的一些活動。如果我們覺得需要永久裁員，我們顯然會扣動扳機。但我們對市場走向的信心水平確實促使我們在投入勞動力之前尋找方法來抵消其他領域的成本。

And we'll move for our next question. And our next question comes from the line of Julio Romero with Sidoti.

我們將繼續下一個問題。我們的下一個問題來自 Julio Romero 與 Sidoti 的對話。

How do you feel about the prospects to achieve price index rollbacks across the portfolio compared to, say, 3 months ago?

與 3 個月前相比，您如何看待整個投資組合實現價格指數回滾的前景？

 I think we continue to have success, and that's because we're being very open and transparent with our customer base. Areas such as we notated in our scripts that are still very, very real home labor and benefit cost, you're not seeing rollbacks in those areas. Freight is very much in everyone's face and will continue. So I think -- there's obviously pushback, but we go with data that's justified and being able to justify it in all means. So I think we've had continued success, and we'll continue to work and keep the dialogue open with our customers. The other thing it helps when we're showing that we are focused on productivity and finding ways to offset. So we're also, I think, doing a very good job of trying to minimize what price increases we have to go and working with our customers to get the best value possible. To this point, we've been successful. It's not just a game, but I think our performance and our continued transparency gives us confidence that we'll continue to be successful in pricing.

我認為我們繼續取得成功，那是因為我們對我們的客戶群非常開放和透明。我們在腳本中註明的領域仍然是非常非常真實的家庭勞動和福利成本，您在這些領域看不到回滾。貨運是每個人都非常關心的問題，並將繼續存在。所以我認為 - 顯然存在阻力，但我們使用的數據是合理的，並且能夠以各種方式證明它是合理的。所以我認為我們已經取得了持續的成功，我們將繼續努力並與我們的客戶保持開放的對話。當我們表明我們專注於生產力並尋找抵消方法時，它會有所幫助。因此，我認為，我們也做得很好，試圖盡量減少我們必須去的價格上漲，並與我們的客戶合作以獲得盡可能大的價值。到目前為止，我們已經成功了。這不僅僅是一場比賽，但我認為我們的表現和我們持續的透明度讓我們相信我們將繼續在定價方面取得成功。

Okay. That's very helpful. And then George, I think you touched on it earlier. Just trying to think about product lines in the North American Fenestration segment from a leverage standpoint. I think are spacers and vinyl profile on kind of equal footing from a leverage standpoint, if you could just dig into that at all, if you could.

好的。這很有幫助。然後是喬治，我想你之前提到過。只是想從槓桿的角度考慮北美開窗部分的產品線。我認為從槓桿的角度來看，墊片和乙烯基型材處於同等地位，如果你可以深入研究的話。

Yes, I think they're very, very similar. And the fact that they're both extrusion processes, although they extrude different materials. So it's one of those things where the machines like to be run and taking things down for changeovers or even shut down during the way. Startups are expensive, scrap levels are high. So they're profitable when those extruders are running. So I would say the impact on leverage is very, very similar when comparing those 2 product lines versus a screen product, which tends to be much more labor paced.

是的，我認為它們非常非常相似。事實上，它們都是擠壓工藝，儘管它們擠壓的材料不同。因此，這是機器喜歡運行並停止運行以進行轉換甚至在途中關閉的事情之一。初創企業成本高，報廢率高。因此，當這些擠出機運行時，它們是有利可圖的。所以我想說，在將這兩條產品線與屏幕產品進行比較時，對槓桿的影響非常非常相似，屏幕產品往往需要更多的勞動力。

Really appreciate the color there. I'll hop back in the queue.

真的很欣賞那裡的顏色。我會跳回到隊列中。

And I'm showing no further questions, and I'd like to turn the conference back over to George Wilson for any further remarks.

我不會再提出任何問題，我想將會議轉回給喬治·威爾遜，讓他發表進一步的評論。

 I'd like to thank you all for joining the call today, and we look forward to providing an update on our next earnings call in early June. Thank you.

感謝大家參加今天的電話會議，我們期待在 6 月初的下一次財報電話會議上提供最新消息。謝謝。

This concludes today's conference call. Thank you for participating. You may now disconnect.

今天的電話會議到此結束。感謝您的參與。您現在可以斷開連接。