American Woodmark Corporation (AMWD) Q3 2023 Earnings Call Transcript

American Woodmark Corporation (NASDAQ:AMWD) Q3 2023 Earnings Conference Call February 28, 2023 11:00 AM ET

Company Participants

Paul Joachimczyk - Senior Vice President and Chief Financial Officer

Scott Culbreth - President and Chief Executive Officer

Conference Call Participants

Adam Baumgarten - Zelman

Garik Shmois - Loop Capital

Steven Ramsey - Thompson Research Group

Tim Wojs - Baird

Collin Verron - Jefferies

Operator

Good day, and invited to nan American Woodmark Corporation Third Fiscal Quarter 2023 Conference Call. Today's telephone is being recorded, February 28, 2023.

During this call, nan institution whitethorn talk definite non-GAAP financial measures included successful our net merchandise specified arsenic adjusted nett income, adjusted EBITDA, adjusted EBITDA margin, free rate flow, nett leverage and adjusted EPS per diluted share. The net release, which tin beryllium recovered connected our website, americanwoodmark.com, includes definitions of each of these non-GAAP financial measures, nan company's rationale for their usage and a reconciliation of these non-GAAP financial measures to nan astir comparable GAAP financial measures. We besides usage our website to people different accusation that whitethorn beryllium important to investors, specified arsenic investor presentations.

We will statesman nan telephone by reference nan company's safe harbor connection nether nan Private Securities Litigation Reform Act of 1995. All forward-looking statements made by nan institution impact worldly risks and uncertainties and are taxable to alteration based connected factors that whitethorn beryllium beyond nan company's control. Accordingly, nan company's early capacity and financial results whitethorn disagree materially from those expressed aliases implied successful immoderate specified forward-looking statements. Such factors include, but are not constricted to, those described successful nan company's filings pinch nan Securities and Exchange Commission and nan yearly study to shareholders. The institution does not undertake to publically update aliases revise its forward-looking statements moreover if acquisition aliases early changes make it clear that immoderate projected results expressed aliases implied therein will not beryllium realized.

I would now for illustration to move nan telephone complete to Paul Joachimczyk, Senior Vice President and CFO. Please spell ahead, sir.

Paul Joachimczyk

Good morning, ladies and gentlemen, and invited to American Woodmark's 3rd fiscal 4th convention call. Thank you for taking nan clip coming to participate.

Joining maine is Scott Culbreth, President and CEO. Scott will statesman pinch a reappraisal of nan quarter, and I'll adhd further specifications regarding our financial performance. After our comments, we'll beryllium happy to reply your questions. Scott?

Scott Culbreth

Thank you, Paul, and acknowledgment to everyone for joining america coming for our 3rd fiscal 4th net call.

Our teams delivered nett income of $481 cardinal aliases maturation of 4.6%. Our made-to-order framework backlog normalized arsenic planned astatine nan extremity of nan almanac year. In addition, request trends softened passim nan 4th wrong remodel, and arsenic a result, we took respective unscheduled accumulation down days astir nan holidays. Recent trends, however, person improved, and we stay assured successful delivering our afloat twelvemonth forecast shared past quarter.

Within caller construction, our business grew 19.7% versus anterior year. Order maturation has slowed owed to nan diminution successful single-family lodging starts that began past summertime and fall. Builders are optimistic going guardant arsenic January income person improved. We proceed to show caller trends pinch liking rates, location prices, family formations and user confidence.

The semipermanent fundamentals of nan marketplace stay strong. There continues to beryllium a shortage successful nan number of homes built falling short of family formations, but we admit nan slowdown will hap successful almanac twelvemonth '23. Opportunities stay to turn our stock pinch caller and existing customers.

Looking astatine remodel, which includes our location halfway and independent trader and supplier businesses, gross declined 4.9% versus nan anterior year. Within this, our location halfway business was down 9.8% versus nan anterior year. Our banal successful made-to-order room business was down azygous digits pinch banal bath down double digits versus nan anterior year. Our banal bath business was impacted by a promo nonaccomplishment versus nan anterior twelvemonth astatine a retailer, on pinch inventory destocking efforts astatine our customers. With regards to our dealer/distributor business, we were up 14.4% versus nan anterior year.

Our adjusted EBITDA accrued 66.8% to $51 million, aliases 10.6%, for nan quarter. Reported EPS was $0.88, and adjusted EPS was $1.46. The betterment successful capacity is owed to pricing amended matching inflationary impacts, operation and improved efficiencies successful nan manufacturing platforms.

Our rate equilibrium was $45.8 cardinal astatine nan extremity of nan 3rd fiscal quarter, and nan institution has entree to an further $277.6 cardinal nether its revolving in installments facility. Leverage was reduced to 1.81 times adjusted EBITDA arsenic nan institution paid down $46.1 cardinal successful indebtedness during nan quarter.

As I shared successful nan anterior 2 quarterly net calls, we committed to reconstruct profitability and are delivering connected that commitment. A slowdown successful request will coming a near-term headwind, but we were prepared to navigate short-term request reductions, and our merchandise portfolio is positioned to triumph and pull customers successful a much difficult economical environment.

Our afloat twelvemonth outlook remains unchanged from nan anterior 4th arsenic we proceed to bespeak a debased double-digit maturation complaint successful nett income pinch mid-single-digit antagonistic income comps expected successful fiscal Q4. Despite this gross headwind, we are maintaining nan anticipation of debased double-digit adjusted EBITDA margins for nan fiscal year.

We released an updated Investor Relations platform successful January that shared our position connected financial capacity complete nan adjacent 5 years. Despite a near-term slowdown successful demand, we judge nan 4% to 5% CAGR successful nett income is appropriate, and past we will turn adjusted EBITDA small complete $350 million. The cardinal driver of separator description is tied to our level creation activity that I will screen successful a moment.

Our squad continues to execute against our strategy that has 3 main pillars: growth, integer translator and level design.

Growth will use from our upcoming summertime motorboat astatine 2 caller finishes successful respective caller doorway styles.

Digital translator efforts complete nan past fiscal 4th see nan readying efforts for nan adjacent implementation area of ERP and our manufacturing operations, including world creation and Monterrey location planning. We besides completed nan first 2 sprints successful nan build shape of our CRM project, which goes unrecorded this summer.

Platform creation activity is accelerating arsenic crushed break successful dense occurred wrong nan 4th for our description successful Monterrey, Mexico and Hamlet, North Carolina, that will present further capacity successful our banal room and bath cabinetry merchandise lines. Automation efforts continue, and we person committed complete $75 cardinal successful automation investments complete nan adjacent 5 years.

In closing, I americium proud of what this squad accomplished successful nan 3rd fiscal 4th and look guardant to their contributions during nan 4th fiscal 4th of fiscal twelvemonth '23.

I will now move nan telephone backmost complete to Paul for further specifications connected nan financial results for nan quarter. Paul?

Paul Joachimczyk

Thank you, Scott.

Financial headlines for nan 4th and year-to-date. Net income for nan 3rd 4th of fiscal twelvemonth 2023 were $481 million, representing an summation of 4.6% complete nan aforesaid play past year. And year-to-date, our income were $1.6 billion, representing an summation of $229.6 cardinal aliases 16.9%.

Adjusted nett income was $24.4 cardinal aliases $1.46 per diluted stock successful nan 3rd 4th of fiscal twelvemonth 2023 versus $9.9 cardinal aliases $0.60 per diluted stock past year. Adjusted nett income for nan 3rd 4th of fiscal twelvemonth 2023 accrued $14.5 cardinal owed to higher sales, mostly driven by value increases and improvements successful our operations. Year-to-date, our adjusted nett income was $90 cardinal compared to $32 cardinal successful anterior year, representing a $58 cardinal increase.

Adjusted EBITDA for nan 3rd 4th of fiscal twelvemonth 2023 was $51 cardinal aliases 10.6% of nett income compared to $30.6 cardinal aliases 6.6% of nett income for nan aforesaid 4th successful nan anterior fiscal year, representing a 400-basis constituent betterment year-over-year. Adjusted EBITDA year-to-date is $175.1 cardinal compared to $93.5 cardinal successful nan anterior year, representing an $81.6 cardinal increase.

Looking astatine our income for nan quarter. The mixed location halfway and independent trader and supplier nett income decreased 4.9% successful nan 3rd fiscal 4th pinch location centers decreasing 9.8% and dealer/distributors expanding 14.4%.

New building nett income accrued 19.7% successful nan 3rd fiscal 4th compared to nan anterior year. New building income outpaced marketplace request during nan 3rd 4th of fiscal twelvemonth 2023, recognizing a 60- to 90-day lag betwixt commencement and furniture installation. The wide marketplace starts successful single-family homes were down 24.6% for nan fiscal 3rd quarter. Looking astatine completions during our 3rd fiscal quarter, we saw an 8.1% summation year-over-year. Given nan diminution successful starts and a ample separation betwixt starts and completions, our backlog returned to normal levels wrong nan first portion of this quarter.

The company's gross profit separator for nan 3rd 4th of fiscal twelvemonth 2023 was 15.7% of nett income versus 11.3% reported successful nan aforesaid 4th of past year, representing a 440-basis constituent improvement. Year-to-date, our gross separator was 16.5% compared to 11.6% of nett income successful nan anterior year. Gross separator successful nan 3rd 4th of nan existent fiscal twelvemonth and year-to-date was positively impacted by nan pricing actions and operational improvements, offset by increases successful labour and home logistic costs.

Total operating expenses were 10.4% of nett income successful nan 3rd 4th of fiscal twelvemonth 2023 compared pinch 10.2% of nett income for nan aforesaid play successful fiscal twelvemonth 2022.

Selling and trading expenses were 4.4% of nett income successful nan 3rd 4th of fiscal twelvemonth 2023 compared pinch 5.1% of nett income for nan aforesaid play successful fiscal twelvemonth 2022. The ratio to nett income decreased 70 ground points resulting from decreased spending and little committee scheme expenses, mixed pinch leverage created from higher income successful nan 3rd 4th of fiscal twelvemonth 2023.

General and administrative expenses were 6% of nett income successful nan 3rd 4th of fiscal twelvemonth 2023 compared pinch 5.1% of nett income for nan aforesaid play successful fiscal twelvemonth 2022. The summation successful nan ratio was chiefly driven by increases successful incentives and profit sharing, partially offset by leverage created from higher sales.

Free rate travel totaled a affirmative $91.5 cardinal for nan existent fiscal twelvemonth compared to a antagonistic $48.8 cardinal successful nan anterior year. The $140.3 cardinal summation successful free rate travel was chiefly owed to changes successful our operating rate flows, specifically higher nett income, little accounts receivable balances and little superior spending.

Net leverage was 1.81 times adjusted EBITDA astatine nan extremity of nan 3rd fiscal quarter, representing a 1.72 times betterment from nan 3.53 times astatine nan extremity of nan fiscal twelvemonth 2022.

As of January 31, 2023, nan institution had $45.8 cardinal of rate and rate equivalents connected hand, positive entree to $277.6 cardinal of further readiness nether nan revolving facility. The institution paid down $67.3 cardinal of indebtedness during nan first 9 months of nan existent fiscal year.

Shifting our attraction to nan remainder of 2023. Our afloat twelvemonth outlook remains unchanged, and we expect debased double-digit maturation complaint successful our nett income versus fiscal twelvemonth 2022. To execute this, our 4th fourth income are expected to beryllium mid-single-digit decline. The maturation complaint is highly limited upon wide industry, economical maturation trends, worldly constraints, labour impact, liking rates and user behaviors. Our EBITDA separator for nan fiscal twelvemonth 2023 remains debased double-digit EBITDA percentages.

It is awesome to spot nan commitment, difficult activity and efforts our labor put successful nan institution to execute our results, and respond to nan changing dynamics successful nan macroeconomic environment. I'm grateful for what nan squad has accomplished and convey each of our squad members astatine American Woodmark for their continued efforts. They are nan ones who make it hap daily.

This concludes our prepared remarks. We'll beryllium happy to reply immoderate questions you person astatine this time.

Question-and-Answer Session

Operator

Thank you. We will now statesman nan question-and-answer session. [Operator Instructions] And nan first mobility will beryllium from Adam Baumgarten from Zelman. Please spell ahead.

Adam Baumgarten

Hey, everyone. Good morning.

Scott Culbreth

Hey, bully morning, Adam.

Adam Baumgarten

Just connected nan quarter, tin you break down nan gross maturation by measurement and value overall?

Paul Joachimczyk

We don't break it down to that level of degree, Adam, but I tin show you that intelligibly units were down successful nan quarter. And then, I deliberation possibly much importantly is that there's been nary activity to rotation backmost pricing.

Adam Baumgarten

Okay. Got it. That's helpful. And then, conscionable connected nan input costs handbasket arsenic we deliberation astir heading into fiscal '24, possibly really you're seeing trends coming and really that whitethorn play retired arsenic we move forward?

Paul Joachimczyk

To make judge I heard that mobility correctly, were you asking astir input costs?

Adam Baumgarten

Yes. So, what you're seeing coming and really you deliberation that flows done into adjacent year?

Paul Joachimczyk

Yes. What we're seeing correct now is hardwood lumber prices person started to travel down for respective species, not all. But we are still seeing different commodity purchases that proceed to show elevated acquisition prices, things for illustration particleboard, plywood, paint. And then, certainly, I don't deliberation there'll beryllium a slowdown successful unit connected labour costs and apt not a slowdown connected home proscription arsenic I deliberation guardant into nan remainder of almanac twelvemonth '23.

Adam Baumgarten

Okay. Got it. And past conscionable past 1 for me, conscionable connected CapEx. It seems for illustration it's trending beautiful good beneath nan 3% to 3.5% scope that you talked to for nan year. Is that scope still intact? Or is that pushed retired a bit, and should we deliberation astir that scope arsenic a bully level for adjacent year?

Paul Joachimczyk

Yes, Adam, decidedly nan scope is pushed retired and we benignant of -- for this year, we'll move backmost to normal humanities levels, chiefly owed to, I'll telephone it, constraints connected our suppliers for instrumentality and manufacturing, but superior is suppressed. And say, going forward, we'll springiness you that afloat twelvemonth FY '24 outlook erstwhile we do our yearly call.

And, Adam, it's not a deficiency of awesome projects. Our squad has a full big of awesome projects to either amended capacity aliases information aliases wide costs positions. It's conscionable nan marketplace is tight and nan expertise to get nan suppliers to meet nan first timelines has proved difficult. So, a batch of those projects proceed to push.

Adam Baumgarten

Got it. Makes sense. Best of luck.

Paul Joachimczyk

Thank you, Adam.

Scott Culbreth

Thanks.

Operator

And nan adjacent mobility is from Garik Shmois from Loop Capital. Please spell ahead.

Garik Shmois

Hi. Thanks for taking my mobility present today. I'm conscionable wondering if you could quantify nan downtime that you had taken nan quarter, really overmuch did that effect EBITDA? And is accumulation backmost to much normalized levels correct now?

Paul Joachimczyk

Yes. I don't needfully person a worth that I want to property to that, Garik. I'd conscionable show you that we didn't expect to person nan number of down days going into nan 4th erstwhile we gave our position successful nan past 4th net call. So that was a alteration owed to nan softening demand. We chose to do initially pinch to return days retired of nan schedule. Then arsenic we get done nan holidays into nan January timeframe, we fto attrition set our staffing levels. Unfortunately, that didn't afloat execute it, and past we coiled up having to return immoderate targeted reductions successful unit astatine nan extremity of January. So, astatine this stage, we now person rightsized our labour unit pinch nan wide request and accumulation plans that we person successful beforehand of us.

Garik Shmois

Okay. Great. I wanted to inquire my follow-up mobility pinch respect to a remark you made successful nan prepared remarks. You said that caller trends person improved. Is that related to conscionable immoderate of nan commentary coming retired of nan builder channel? Or are you seeing an betterment successful your orders arsenic well?

Scott Culbreth

It would beryllium both. So, certainly, we spot nan aforesaid commentary that you spot from nan marketplace. So, we're seeing that. But past we besides are evidently monitoring our incoming bid trends connected a daily, weekly, monthly basis, and we've seen those trends amended from wherever they were mid anterior quarter.

Garik Shmois

Great. Thanks for that. And I'll walk it on.

Operator

And nan adjacent mobility is from Steven Ramsey from Thompson Research Group. Please spell ahead.

Steven Ramsey

Hi, bully morning. Maybe I wanted to study a small spot much connected nan unit decline. Can you talk astir benignant of nan cadence of that diminution done nan quarter, possibly nan sell-in, sell-out impact? And if there's immoderate colour to adhd connected really that's unfolded year-to-date?

Scott Culbreth

I would conscionable opportunity nan trends were astir unfavorable successful November, December. And past arsenic we sewage backmost into nan January timeframe is wherever we saw things commencement to amended overall.

Steven Ramsey

Great. And then, connected institution inventories, which had been expanding since nan 4th fourth of 2020, but declined sequentially this quarter. Is that expected to continue? And tin you talk astir really overmuch of that was little purchasing? Or really overmuch of that was vanished equipment being delivered, immoderate different factors were progressive there?

Scott Culbreth

Yes. Steven, truthful really benignant of [indiscernible] connected inventories is during COVID, location was that banal up of that just-in-case inventories, and we are refocusing each of our efforts to beryllium much backmost extremity conscionable successful time. We are seeing our suppliers' lead times and everything commencement to normalize and stabilize passim nan period. So that is thing you'd opportunity is we're going to beryllium hyper-focused connected our inventory levels conscionable astir nan moving superior plays that are retired there, and making judge that, that inclination will proceed for america and stabilize our balances internally arsenic well.

And to your mobility astir wherever it's coming from, our teams are focused connected raw, WIP and vanished goods. So, we're looking astatine each areas to find opportunities to amended rate flow.

Steven Ramsey

Okay. Helpful. And then, 1 different speedy 1 connected nan dealer/distributor channel, benignant of 1 adjacent term, 1 agelong term. Can you talk astir what's driving nan maturation successful that conception successful specified an outsized way? And then, reasoning agelong word connected this segment, your lowest marketplace stock segment, tin you talk astir occurrence year-to-date and gaining share, and what you spot for gaining stock successful a perchance slowing situation complete nan adjacent 12 months?

Scott Culbreth

Yes, possibly commencement pinch nan second portion of that peculiar question. So, arsenic you noted, that's wherever we're nan astir underrepresented from a stock position standpoint. So again, we didn't moreover person a merchandise statement to waste into nan trader abstraction 10 years agone until we launched nan Waypoint brand. We judge we tin proceed to thrust stock gains successful some nan trader and supplier channel. We expect that to over-index nan institution average, if you will, arsenic we spell forward. So, we want to proceed to summation stock successful that space.

Why do we deliberation we tin do that? And why person we done that? We deliberation we bring a really bully offering successful nan marketplace. It's a worth value play, pinch nan value that galore dealers and distributors are excited astir to service either their remodel aliases their caller building customers. We've been capable to bring immoderate caller merchandise to that abstraction arsenic well. So, we talked astir [simple trends] (ph) a mates of quarters agone that we launched successful nan Northeast. We've done that. We're starting to look astatine description of that to different markets. And past different opportunities successful categories specified arsenic bath that possibly we tin bring into nan space.

Steven Ramsey

Okay. Excellent. Thank you.

Operator

And nan adjacent mobility is from Tim Wojs from Baird. Please spell ahead.

Tim Wojs

Hey, guys. Good morning.

Scott Culbreth

Hey, bully morning, Tim.

Tim Wojs

Maybe conscionable -- possibly much of a theoretical question, Scott aliases Paul. If you do spot income declines benignant of commencement successful nan April 4th and past possibly proceed into fiscal '24, for illustration what types of for illustration measurement decrementals would you usually expect to spot connected nan income diminution benignant of from a theoretical perspective? And then, I guess, what levers do you deliberation are disposable to you internally to possibly offset immoderate of that volume-based decremental?

Scott Culbreth

Sure. We've historically talked, and I cognize you've followed this for rather immoderate clip pinch a decremental gross separator of astir 25%. And we've surely had periods wherever we performed amended than that and past besides periods wherever we've performed worse than that. As we commencement our readying cycle, and conscionable arsenic a reminder, we're conscionable now doing that now to get our afloat fund and scheme group for fiscal twelvemonth '24. As we commencement to do that work, we do deliberation there'll beryllium unit connected nan apical side. As we deliberation astir our gross separator and EBITDA separator performance, we judge will execute amended than nan humanities norm. I don't person an nonstop number to present to you today, Tim, but that's what we're moving done arsenic we commencement to build retired our fund plans, but we'll beryllium amended than nan 25% arsenic we spell into adjacent year.

So, why, which is nan different portion of your question, what are nan things that we person arsenic levers? Well, we person a batch of awesome projects that we put successful spot this year, OpEx savings that will transportation forward. And past we've sewage a robust platform of projects that we'll proceed to execute connected arsenic we displacement into fiscal twelvemonth '24 that will thrust savings. We've sewage nan level activity that we mentioned arsenic well. That will commencement to thief america much towards nan extremity of '24, but group america up really nicely into '25 arsenic well.

Tim Wojs

Okay. Good. That's bully to hear. And then, I conjecture from your discussions pinch immoderate of your builder customers aliases different transmission partners, I mean, it doesn't sound for illustration there's been immoderate existent push connected price. But I mean, has location been immoderate alteration to really they benignant of deliberation astir operation arsenic they deliberation astir early communities aliases benignant of early support space?

Scott Culbreth

Nothing important astir operation different than opportunities that we bring to nan array wherever we tin possibly put successful Origins versus nan halfway Timberlake offering. So that is our emblematic operation guidance offering that we'll bring to a builder. And we surely want to proceed to thrust Origin's maturation successful nan space. It's a use for nan builder arsenic good arsenic nan enterprise. So, we've done mixed guidance by driving much and much Origins. We've not rolled backmost pricing, but there's surely a batch of value chatter successful nan marketplace to your point.

Tim Wojs

Okay. Good. And then, conscionable nan past portion connected nan installation description s. I mean is location immoderate benignant of start-up costs aliases immoderate benignant of expenses that benignant of tally done nan P&L complete nan adjacent 12 to 18 months that would you conscionable beryllium alert of?

Scott Culbreth

There'll decidedly beryllium immoderate startup expenses that will person wrong fiscal twelvemonth '24 arsenic we get nan operations ready. Again, we're conscionable finalizing again nan -- starting to really work. I shouldn't usage finalize for Paul, but we're starting to activity connected our fund process correct now. And arsenic we do commencement to finalize that, we'll person a amended statement of sight. As to those start-up costs, don't expect immoderate of those really to effect nan existent fiscal year. But certainly, we'll person immoderate disbursal and vulnerability successful nan adjacent fiscal year.

Tim Wojs

Okay. Good. Well, bully luck connected nan remainder of nan year, guys. Thanks for nan color.

Scott Culbreth

All right. Thanks.

Paul Joachimczyk

Thanks, Tim.

Operator

[Operator Instructions] Your adjacent mobility is from Collin Verron from Jefferies. Please spell ahead.

Collin Verron

Good morning. Thank you for taking my questions. In nan prepared remarks, I judge you mentioned immoderate destocking headwinds successful nan unit transmission successful nan quarter. Can you thief quantify nan destocking that you're seeing successful nan unit channel? And astatine this point, do you deliberation your unit customers' inventory levels are successful a bully spot? Or do you deliberation you could spot immoderate further income headwinds for American Woodmark successful nan unit transmission going guardant from this dynamic?

Scott Culbreth

Yes. In nan prepared remarks, that was beautiful circumstantial to nan banal bath category, and really, again, 2 points wrong nan existent quarter. We had a promo nonaccomplishment that we had realized nan twelvemonth prior. So that gave america a headwind arsenic we looked astatine nan wide quarter. And then, we saw efforts to trim inventory levels by nan cardinal retailers. We person not yet seen important activity backmost successful building backmost those peculiar inventory levels, but nan feedback we're getting is that is apt successful nan adjacent 30 to 45 days. So, we believe, and information shows america that we're beneath optimal levels successful that class astatine nan retailers, and we would look to proceed to thrust inventory backmost successful nan stores to thrust POS.

Collin Verron

Great. That's adjuvant color. And then, you guys saw immoderate really beardown incremental maturation successful EBITDA separator successful nan quarter. Can you thief locomotion america done benignant of what nan value costs look for illustration and past really overmuch of nan separator betterment was from those accrued efficiencies that you guys called out?

Scott Culbreth

I'll conscionable spell backmost to nan prepared remarks. Price, obviously, is simply a cardinal contributor and has been nan past mates of quarters arsenic we took nan actions to offset nan inflation, but besides operating efficiencies person been really important. And we spent nan amended portion of 2 years dealing pinch labour challenges, ostentation challenges, measurement challenges, and our teams person done a overmuch much effective occupation of stabilizing nan operating footprint. And erstwhile we do that, we're capable to thrust ratio passim nan full process. So that's been a cardinal contributor for america successful nan 4th arsenic well.

Collin Verron

Okay. Thank you. Good luck connected nan adjacent quarter.

Scott Culbreth

Thanks, Collin.

Operator

[Operator Instructions] The adjacent mobility is from Julio Romero from Sidoti. Please spell ahead.

Unidentified Analyst

Good morning. This is [indiscernible] connected for Julio Romero. Thank you for your time.

Scott Culbreth

Good morning.

Unidentified Analyst

Good morning. My first mobility is, fixed nan existent macro environment, person you been approached connected value from builders?

Scott Culbreth

Yes. We've been asked astir pricing, but we've taken nary action.

Unidentified Analyst

Thank you. And what was nan exit complaint successful January by channel?

Scott Culbreth

I'm sorry, could you restate nan question?

Unidentified Analyst

What was nan exit complaint successful January by channel?

Scott Culbreth

I judge you're asking maine nan exit rate. I'm not rather judge I understand nan question.

Unidentified Analyst

Right. I conjecture nan measurement I'm asking is like, let's say, if you -- let's opportunity thing goes up this period if you suffer GBP10. The adjacent month, you spell for illustration you suffer GBP15. So that's what I'm asking for illustration what was an exit rate. So, is it trending upward aliases downward, I guess, I don't know?

Scott Culbreth

Yes. I deliberation nan terminology we typically usage erstwhile we talk astir nan demand, Stefan, is incoming bid rates. So backmost to nan earlier questions successful that space, we decidedly saw a decreasing incoming bid complaint passim nan quarter. We saw January past commencement to rebound, and we've seen that sustain. So, we've seen an improving incoming bid complaint recently.

Unidentified Analyst

All right. Thank you. And nan past 1 for me. Can you talk astir your operating ratio initiatives?

Scott Culbreth

Sure. I mean what we're going to beryllium focused connected is making judge we've rightsized our operations to nan demand. So again, we had immoderate attrition activities and simplification successful unit efforts wrong nan quarter. Our teams are focused connected taking costs retired of nan process sloppy of wherever it is. So that could beryllium materials driven. It could beryllium logistics proscription related. It could beryllium manufacturing related. We proceed to make investments successful instrumentality specified arsenic automation. And we want to target that to beryllium capable to trim nan request for labor, which drives nan use to nan enterprise, but besides makes nan activity easier for our employees. If we're capable to do that, we're capable to way and clasp nan labour unit much effectively. And conscionable having little turnover wrong nan 4th has been a immense use for nan endeavor arsenic well.

Unidentified Analyst

Thank you truthful overmuch for taking my questions.

Scott Culbreth

Yes, convey you.

Operator

Ladies and gentlemen, astatine this time, I spot location is cipher other waiting to inquire nan questions. So, I'd for illustration to move nan telephone backmost complete to Mr. Joachimczyk for immoderate closing comments. Please spell ahead, sir.

Paul Joachimczyk

Since location are nary further questions, this concludes our call. Thank you each for taking nan clip to participate.

Operator

Thank you, sir. And nan convention has now concluded. Thank you for attending today's presentation. You whitethorn now disconnect your lines.