Earnings Call: Q1 2022

Aug 31, 2021

Quarterly report

Good day, and welcome to the American Woodmark Corporation First Fiscal Quarter 2022 Conference Call. Today's call is being recorded, August 31, 2021. During this call, the company may discuss certain non GAAP financial measures included in our Earnings release such as adjusted net income, adjusted EBITDA, adjusted EBITDA margin, free cash flow, net leverage and adjusted EPS per diluted share. The earnings release, which can be found on our website, americanwoodmark.com, includes definitions of each of these non GAAP financial measures, the company's rationale for their usage and a reconciliation of these non GAAP financial measures to the most comparable GAAP financial measures. We also use our website to publish other information that may be important to investors such as investor presentations. We will begin the call by reading the company's Safe Harbor statement under the Private Securities Litigation Reform Act of 1995. All forward looking statements made by the company involve material risks and uncertainties and are subject to change based on factors that may be beyond the company's control. Accordingly, the company's future performance and financial results may differ materially from those expressed or implied in any such forward looking statements. Such factors include, but are not limited to, those described in the company's filings with the Securities and Exchange Commission and the annual report to shareholders. The company does not undertake to publicly update or revise its forward looking statements even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized. I would now like to turn the call over to Jillian Chek, Vice President I'm CFO. Please go ahead, sir. Good morning, ladies and gentlemen, and welcome to American Woodmark's 1st fiscal quarter conference call. Thank you all for taking time today to participate. Joining me today is Scott Culberth, President and CEO. Scott will begin with a review of the quarter and I'll add additional details regarding our financial performance. After our comments, we'll be happy to answer your questions. Scott? Thank you, Paul, and thanks to everyone for joining us today for our 1st fiscal quarter earnings call. I hope that you and your loved ones continue to remain safe As the country begins to manage the growing number of COVID cases related to the Delta variant. Our teams did an exceptional job of delivering sales growth in the quarter, But our margins were once again pressured by materials, logistics and labor inflation. Improved productivity, increasing production levels And a second round of pricing actions have been announced or are in process that will deliver additional margin improvement in the second half of our fiscal year that I will provide additional details on in a few minutes. Our first quarter sales were up 13.5%. Demand once again continued to outpace production in Our ability to match demand remains limited by 2 factors, labor and material availability. Material shortages led to unplanned downtime and efficiency loss and substitutions were made when available to continue production. Container challenges also persist with higher rates and air freighting at times due to poor congestion. Backlog increased across our made order platform with incoming order rates increasing over 25 plus percent versus the prior year. As a reminder, we level load our production on the made order platform. I mentioned last quarter that our incoming order rates across both the new construction and remodel businesses exceeded shipments for the quarter and that our teams are increasing production levels which would drive incremental sales in 1st fiscal quarter as we improved backlog levels. Incoming orders again exceeded shipments in our 1st fiscal quarter and we did not make as much progress as planned in reducing backlog. In fact, backlog increased significantly as we struggled with labor attraction retention, impacting our ability to increase production. Going forward, production levels will continue to increase and drive incremental sales over the next few quarters. Our teams will continue to invest in production capability via outsourcing staffing addition Within new construction, our business grew 8.5% versus prior year. Our Timberlake direct business comped positive low teens in units, Swaddler frameless PCS business count positive in units over 20%. These growth rates were partially offset by mix with our Origins product positioned to lower price point than our Port Timberlake offering. Demand and backlog in the coming months are expected to increase as many of the builders are attempting to close the unprecedented number of homes that was started in calendar Q2 before their fiscal year closes in calendar Q4. This anticipated increase in desired closings from all builders late in the year is going Revenue was up 17.1% to prior year. Within this, our home center business was up 20.3%. Our made to order remodel business continued to improve with 20 plus percent comps. Our stock business performed well as pro and DIY demand drove comps in the high teens. With regards to our dealer distributor business, we were up 6.3% for the quarter. Demand has remained strong across both remodel and new construction channels especially within the value segment. Our adjusted EBITDA was $32,100,000 of EBITDA margins at 7.3% for the quarter with reported EPS of $0.18 and adjusted EPS of $0.70 We expect the new construction remodel markets to remain strong and anticipate growth for the remainder of our fiscal year. We are positioned to take advantage of this market as consumers invest in their homes and existing home sales and single family starts remain healthy. Lot supply, interest rates and overall price appreciation in new construction may impact demand in the early calendar year 2022, but long term growth remains solid. Should a short term reduction in demand impact the market, our backlog will allow us to maintain a higher production. I shared last quarter that cost of goods sold inflation expectations for the fiscal year included an additional approximately 2.5% to 3% for material and logistics on top of what was already realized in fiscal year 2021. The impact is more than double that for our current estimates. We will be able to recover inflation via price increases, but note there is a lag between incurred inflation and realized pricing. As stated previously, we're taking additional action in the current period across all channels. We will improve margins in fiscal year 2022. Pricing has not kept pace with inflation in the past 2 quarters Due to our elevated backlog and unprecedented materials and logistics increases, but we will be in better alignment by our fiscal third quarter with full realization of all pricing in the Q4. Many of our actions are effective tenone, which will place additional pressure on our fiscal second quarter adjusted EBITDA margins. Keep in mind that we only realized approximately $3,000,000 of impact in the Q1 of fiscal 2022 for pricing. At our current sales levels, we expect the impact of our confirmed pricing actions to increase in the second half of fiscal twenty twenty two to over $25,000,000 per quarter. Additional efforts are also underway within our operations teams to improve productivity and increased production levels. Sequential margin improvement is forecasted for each of the next three quarters with our fiscal Q4 comping positively versus the prior year. The Board and our team firmly believe in the long term potential of this business And the strategy I shared during our May call is unchanged. Investments will continue in our digital online capabilities and products, We focused our efforts on the enablers of customer experience, platform design, talent and ESG efforts. All of these will contribute to incremental revenue growth and improved margins. In closing, despite our financial results not matching the level of effort our teams are putting forth this quarter, I'm proud of our employees for what they have accomplished and I look forward to their continued contributions. I will now turn the call back over to Paul for additional details on the financial results for the quarter. Thank you, Scott. Financial headlines for the quarter. Net sales were $443,000,000 inclusive of $3,000,000 of price, representing an increase of 13.5% over the same period last year. The combined home center and independent dealer distributor channel net sales 17.1% for the quarter with home centers increasing 20.3% and dealer distributor increasing 6.3%. The remodel business continues to have strong tailwinds for both our made to order and our made to stock channels. Homeowners having greater equity in their homes and historical amounts And the demand from the first time homebuyers suggest this trend will continue. New construction net sales increased 8.5% for the 1st fiscal quarter compared with the same fiscal quarter in the prior year. Timberlake direct business comped positively for the quarter and we are still experiencing growth in our origins line as there is a continued mix shift occurring towards a lower priced product in the market. We are experiencing a delay from the builders and their ability to receive our cabinets and our building a finished goods backlog. This is impacting our inventory levels. Our frameless business continues to grow and has built a backlog of orders during Past 2 quarters due to logistical and supply constraints on the West Coast. New construction sales were above market completions during the 1st quarter of fiscal 2022, we are experiencing a 90 to 120 day plus lag between start and cabinet installation. The overall market starts in single family homes were up 47.6% for our fiscal Q1. Looking at completions during our fiscal Q1, we saw 4.7% increase year over year, which further supports timing impacts the market is experiencing. Net income was $3,000,000 or $0.18 per diluted share in the current fiscal year versus $16,100,000 or $0.94 per diluted share last year. Net income for the Q1 of fiscal 2022 decreased $13,100,000 due to an additional $5,000,000 of healthcare expenses and the rapidly evolving inflationary pressures outpacing our pricing actions taken across all of our channels. Material and logistic inflation was approximately 220 basis of sequential pressure within the quarter from our fiscal Q4 of 2021. Given the increased backlog of our products, there's an inherent lag in the realization of our pricing actions that we have executed to offset the 1st round of inflationary pressures we in fiscal 2021. Adjusted EBITDA for the 1st fiscal quarter was $32,100,000 or 7.3 percent of net sales compared to $56,400,000 or 14.5 percent of net sales for the same quarter of the prior fiscal year. The company's gross profit margin for the Q1 of fiscal 2022 was 12.1 percent of net sales versus 20.4% reported in the same quarter of last year. Gross margin in the Q1 of the current fiscal year was negatively impacted by an increase of $4,400,000 of healthcare costs and the rapidly evolving inflation in material and logistic input costs. These input costs were partially offset by the increase in sales, which created leverage of our fixed costs of our operating platforms and an accounting adjustment to move the total company to account for inventory on a FIFO basis. The movement to FIFO was done to be consistent with our peers and to standardize our approach for the total company. In addition, it will help facilitate our transition to the cloud based ERP, which impacts our finance and procurement teams and is slated to go live February 2022. Total operating expenses were 10.5% of net sales in the Q1 of fiscal 2022 compared with 12.8% of net sales for the same period of fiscal 2021. Selling and marketing expenses were 5.2% of net sales in Q1 of fiscal 2022 compared with 5.1% of net sales in the same period of fiscal 2021. The ratio to net sales increased 10 basis points resulting from the increased display, launch and healthcare costs, partially offset by the leverage created from the higher sales in the Q1 of fiscal 2022. General and administrative expenses We're 5.4% of net sales in the Q1 of fiscal 2022 compared with 7.7% of net sales for the same period of fiscal 2021. The decrease in the ratio is primarily driven by the leverage from higher sales, lower incentive costs and reduced spending in the Q1 of fiscal 2022. Free cash flow was negative for the quarter totaling $8,100,000 for the current fiscal year compared to positive free cash flows of $32,200,000 in the prior year. The decrease was primarily due to changes in our operating cash flows, specifically lower net income, higher inventory balances, lower accrued expenses, which was partially offset by improved accounts receivable balances. Net leverage was 2.35 times adjusted EBITDA as of the end of the 1st fiscal quarter. The company paid down $29,100,000 of total debt during the quarter. And in addition, we repurchased $25,000,000 or 300,000 shares within the 1st fiscal quarter. Shifting our focus to the remainder of fiscal 2022, we expect full year fiscal 2022 sales to be mid to upper single digit growth over the prior fiscal year. The growth rate is highly dependent upon overall industry, economic growth trends, material, logistics and labor as well as consumer behaviors that can be impacted by the ever changing COVID-nineteen environment. Margins will be continued to be challenged for the next two quarters. However, our is that margins will improve sequentially throughout the remainder of the year. Our Q4 of fiscal 2022 will be our highest margin for the fiscal year, comping positively from both the prior year and the prior quarter. All pricing actions will be fully executed by this time and are expected to offset all known Material and logistic inflation effects that we have experienced through the 1st fiscal quarter of 2022. We are in the process of executing our next round of price Across all of our sales channels, historically it takes 3 to 4 months to realize price on our made to stock platform and 5 to 6 months on our made to order platform. For the next round of pricing actions, we're being more aggressive on the timing to realize. The trend of higher inflation could pose a future risk to this outlook, The company's cash position as of July 31, 2021 was $27,800,000 of cash on hand and access to $243,000,000 of additional availability under our revolver. In fiscal 2022, our Q1 performance impacted our normal expectation on free cash flow for the fiscal year. Due to timing delays of capital projects related to supplier constraints and the extended timing of our ERP project, We are revising our full year capital spending outlook to be 3.5% of net sales versus the 4% previously stated. Our team members continue to make it happen daily. This has been a consistent trend throughout the past 18 months. Thank you to all of our employees for continued passion in making a difference. They've helped contribute to our top line growth while working to offset the ever increasing inflation in materials and the difficulties in logistics. We will stick to our plan, reinforce our pricing actions and continuously improve our operations to return to our targeted margins. This concludes our prepared remarks. We'll be happy to answer any questions you have at this time. We will now begin the question and answer session. Our first question comes from Garik Shmois with Loop Capital. Please go ahead. Great. Thank you. Thanks for taking my question. First off, just trying to reconcile the pricing that you secured in the quarter, the 3,000,000 How did that track relative to your prior expectations? It seems like it might have been a little bit light to us. And if so, is that more of a function of just the lag In pushing through the price increases because of the lag in completions versus starts or were there additional challenges in putting a price increase through to your different customer channels? Yes. So the delta in Q1 that was below our original expectations when we were thinking about modeling out our Q1. It wasn't due to the percentage that we wanted to achieve in the respective channels and by customer. It really was tied to an increasing backlog. So we negotiated the increases as expected. We got the percentages that we expected, but actually realizing it and delivering those cabinets at that newer price was pushed out. So as a result, we only realized that $3,000,000 inside the quarter that rolls forward obviously into the future quarters and we'll realize it at that time. Got it. And then the $25,000,000 in price improvement in the second half of the year in 3Q and 4Q, You addressed this a little bit in your prepared remarks, but is it fair to assume that really does not assume much of the October price increase Just given the lag in implementing additional pricing? So it does include a small amount of the October Actions that I mentioned, but let me take a step back. We had our initial round of pricing, let's call it round 1 that we went through and it does vary depending on The channel when you go achieve that. That plus a second round that we're in the midst of doing now. Now with regards to the second round actions, We've already executed that in one of our channels. 2 of our channels will be getting notification tomorrow regarding that next round of pricing So it's a bit of a hybrid. The $25,000,000 includes all of the first round actions including that one channel I mentioned that we've already communicated to in the 2nd round. And then we're expecting incremental pricing that will be realized really late Q3 into Q4 for this next round of actions. Great. And then just my last question before I pass it on. On the cost side, can you elaborate a little bit more on what you're seeing there specifically related to Transportation costs and then also just on the hardwood side, any visibility as to when Those costs might potentially start to offer some relief. Yes. So we've not yet seen any relief. I'll address that one first around hardwood. We continue to see An increasing trend there. I know softwood has taken a tumble and our hope was that we would see hardwood follow that. That's not yet occurred. So we still have expectations that that's going to continue to run high. With regards to transportation, it's really 2 different stories. There is Import transportation related impacts and then there's domestic transportation related impacts. On the import side, certainly you've seen all the issues that have Played out in Asia that's created various challenges with getting product to the U. S. It's resulted in container rates that are 4, 5, 6 times Historical norm, so getting the product here is more expensive than normal. Then you get it to the port, you deal with congestion delays there, sometimes you have to expedite and then you're challenged Getting domestic freight carriers to haul it for you and you see a price increase there as well. On the domestic transportation side, similar to the challenges We have and many industries have around labor. Transportation is also struggling on the labor side. So they're running shorthanded and as a result we're seeing rate increases for final mile delivery as well as any intra plant shipments that we coordinate ourselves. Okay. Thanks for that and best of luck. Thank you. Our next question comes from Colin Barron with Jefferies. Please go ahead. Hi. Thank you for taking my questions. I was just curious on the sales expectations for the full year you guys. How much of that is going to be From pricing versus, I guess, volume growth? And then any color if you're seeing any large or you're expecting any large variances by Customer? Yes, maybe take the last part first. I wouldn't say that I'm seeing any Large variances by customers I think about our performance forward. I don't see any variation necessarily by channel. I expect all of our channels to continue to perform strong, Deliver growth as we push forward as my prepared remarks indicated even if you were to see a small step back perhaps in a channel or a customer, We've got plenty of backlog to continue to drive that through our platform and continue to deliver a good robust growth rate. On breaking out pricing precisely, I don't want to get to that level of granularity, but certainly have given you a lens around $3,000,000 this quarter, dollars 25,000,000 a quarter in the back half. Certainly, we have an expectation for delivering incremental pricing with the announcements that we'll push out tomorrow. Pricing in will be meaningful on a full year basis for the business. Okay. Thanks for the color. And then Just in terms of what's baked into that sales guidance, from the labor material shortage perspective, are you baking in any Relief as we move through the rest of the year or are you kind of expecting things to continue as is right now? Yes, it's a great question. So around the labor side and Capacity, let me take a couple of minutes to maybe share a few remarks there because that is one of the biggest challenges. We are modeling in an improvement in our output across our As we think about our labor environment, retention is what comes front and center. And our current reality today is that the economic environment Continues to create challenges not only in our business, but all of manufacturing many end industries around labor availability as well as attraction and retention. We do have some optimism, however, that with stimulus payments ending here at the beginning of next week that perhaps that becomes a tailwind For employment as opposed to a headwind. We're seeing on our platform, of course, increasing demand, which creates challenges on the workforce. We're seeing material availability challenges. What's that all yield? It yields overtime, right? So we wind up putting more overtime on our teammates, which results in lower job satisfaction. So With all that said, what are we doing to try to impact that? How can we make change to drive increased employment levels and then thus higher output levels? Well, we've looked at hourly bonus plans and making modifications there. We've modified wage plans and then signing bonuses, retention plans, attendance Plans or referral plans, you name it, we have deployed, we continue to use and modify. And sometimes those are different depending on location what our issues are. We're also looking at evaluating and expediting new plant schedules and maybe even shifts. So as an example, our made to order business, We've never really run a 410 model because we're so integrated. We are testing and exploring that in some of our areas. We have it in a couple of Smaller sales of one of our plants. So that might be an option that makes us more attractive versus competition. We're also looking at other work schedules, Schedules for semi retired, parents with childcare challenges, etcetera. Early on, are we seeing any benefits from that? I guess the two things I'd point to Is although U. S. Manufacturing turnover data remains high, right? You look at that data, it's still very high. It does seem to be leveling off. So it doesn't seem to be increasing, it's maintaining. So I'll take that as a positive at this point. And then secondly, on our business, we are starting to see a reduction in new hire attrition in the 1st 60 days. So that hiring of our labor teammates within the 1st 60 days is one of our most critical time frames and we've seen a reduction in attrition in that group as of late. So I know that's a long answer to your question, but it's a meaningful one. And yes, we are modeling an improvement in our labor employment levels and an improvement in The next question is from Julio Romero of Sidoti and Company. Please go ahead. Hey, good morning, Scott and Paul. Hey, good morning. So you mentioned you expect your new cloud based ERP to go live in February of 'twenty two. Can you speak to the benefits expected both from a financial standpoint as well as from a strategic standpoint? Yes, Julio, great question. So the first wave of this, just to remind everybody too, it's our finance and our procurement. It is a multi wave, the journey and a vision that we have to get the company to really be 1 operating company and fully integrated. The benefits that we see kind of in the first wave Fully integrated. The benefits that we see kind of in the first wave is really the consolidation of our platforms and looking at the expectations there will be Some synergies that we'll leverage between the two platforms, mainly on the G and A side of things. And then looking at our procurement side to enhancing and Really evaluating our overall performance between those two purchasing powers of the two halves of the legacy RSI business and the legacy Woodmark businesses. Now as far as giving you an exact range of those benefits, we haven't given that guidance out there yet. There is significant synergies and savings that we will Achieve as of the overall ERP when it is fully done through our final wave of the scenarios, but our first wave we'll implement There will be some moderate savings out there. Understood. And then just Yes, I took a look at your most recent slide deck on your website, which lays out some of your 2025 vision in greater detail. And one of the pillars there, I guess, is customer experience. You speak to what strategies you're using you're looking to utilize to create a competitive advantage there? Yes, absolutely. And customer experience is not a new differentiator for us. Noah, I've characterized as an enabler as part of the strategy communication back in May and then also what's on the Investor Relations deck. But it's been a core part of The last three vision cycles we've had in the company, but what does it mean, right? Ultimately, it's a differentiator that we want to use to be able to exceed our customer expectations. Things like packaging, right? How robust and effective is our packaging and protecting the product to make it to the job site or the consumer home. Damages, right? So not only is the packaging robust, but when you open the package, is the cabinet damaged, right? And Does that create an issue for you again at either remodel or new construction job site, won't be able to address that. Things like star ratings, Certainly with our retail partners, star ratings are important and what can we do to continue to manage and increase and improve star ratings for our product Specifically. And then finally, I guess I'd hit response times and lead times. So how quickly can we fulfill orders and get product To your job site or again to your home for a model standpoint, those are going to be really critical and we think those are things that will allow us to keep gaining share In our current business lines as well as with our Pro customers. Understood. Thanks for taking the questions. Yes. Thank you. Thank you. The next question comes from Steven Ramsey with Thompson Research Group. Please go ahead. Hi, good morning. Maybe to kind of start with the challenges in the market, still demand strong, but curious To hear if you think peers are having the same issues maybe to the same degree and if there's any share shifts going on. Yes. I'm not sure there's been any meaningful share shift, Stephen, in the marketplace. What I would go to as a way to indicate performance from the peer set would be lead times. So what our manufacturers communicating is lead times in the various channels. So certainly you can get exposure to that in our retail and dealer channels and Sure, it sounds pretty effectively. And we've seen really across the board elevation of lead times. So folks Continue to bump out lead times because they have similar challenges, right? We hear things like labor challenges. It appears we hear about material issues as well at peer sets. So lead times have moved out pretty consistently across the board. We still believe we provide an advantage against most of those lead times in the markets that we Participate in channels that we participate, but I don't think there's been any meaningful share shift. Okay, great. And then secondly, wanted to think about backlogs by channel with demand strong in both channels. Does the greater backlogs point to greater strength in one channel or another? And how does that mix impact margins? And then secondly, with the price increases That are coming through, will those have a bigger impact than maybe what you expected earlier in the year given these higher backlogs would go through at be sold at the higher prices? Yes, so let me unpack a couple of different questions there. So certainly our pricing actions that we're taking and expect to realize are much more meaningful than what we modeled 100 days when we were thinking about the fiscal year and that's been a function of the increased inflation. So we've definitely done that. Specifically to your questions around backlog, No material difference as I see it across channels or customer. Backlog is elevated across the board. We see Robust demand from all channels and customers. So really no differentiation from that standpoint. I think your next question was you were trying to indicate would that drive would backlog relief if we prioritize one channel versus another? Is Different based on perhaps pricing and margin. Theoretically, yes, because there is a different margin profile around each of the channels that we've got. But we're managing to try to keep we're trying to keep all of our customers as satisfied as we can across each of the channels. So If we've elevated lead times, we've had to do that across each of the end markets. As we reduce backlog, we'll do that and apply that across each the markets because we want to maintain our customers and obviously back to the customer experience provide a positive customer experience for each of our accounts. But we'll see strong backlog. We'll be working to reduce the backlog. And as we do that, we'll realize the pricing. Now Maybe the last point that was perhaps nuanced in there was, is there anything different around backlog and timing and our ability to recover pricing? That's kind of a completely different question. Paul alluded to this a bit. As we go through our more recent pricing actions, we're trying to work Pretty aggressively with our customers and partners on how we can realize pricing faster, right? So does it have to be Start to date in new construction as opposed to install and ship date. Do we need to have A robust notification period or can we shrink that notification period? So that's where there's opportunities to recover the pricing faster and we're pursuing that. And as a result, we'll be able to get some pricing on some of that backlog a little bit faster. Excellent. Thanks for that color. The next question comes from Josh Chan with Baird. Please go ahead. Hi, good morning, Scott and Paul. Thanks for taking my questions. Good morning, Josh. Hey, Josh. Good morning. I guess to start off with a clarifying question about sort of the Run rate of the price increases. So when you say $25,000,000 per quarter, does that comprise of something lower in Q3 and then With the higher number in Q4 or should we think of it as fairly even kind of through the back half? Fairly even for the confirmed in the back half, Josh. Okay. Okay. That makes sense. And then I guess, when you talk about being able to drive margin improvement in Q4, I mean, does that require your price to exceed your raw material inflation? Because I guess mathematically, even if You matched dollar for dollar, you still have a margin percentage headwind. So I guess I'm just wondering what you're assuming in Q4 when you say you can drive a Margin improvement year over year? Yes. So we obviously do want to get the incremental pricing that we Spoke about it's not about getting pricing above and beyond what we've incurred is inflation. So the other factors that are going to be driving an improvement margin for us Would be specifically around productivity improvements. So running our operation more effectively and it's everything you can think of, Josh. It's going to be scrap reduction, it's going to be overhead spending, it's going to be labor efficiency rates, etcetera. So we're going to be driving more productivity as we get into Q4 And we're going to be at a higher sales rate as well. So as a result, my expectation is that we'll be able to leverage across our fixed cost with those higher sales. Okay. Yes, that makes sense. And then I guess last one for me. I know that you're guiding to the full year, but is there anything Even qualitative, you can give us in terms of how you're thinking about the sequential margin improvement in Q2 and whether It's going to be similarly challenged to Q1 or the degree of improvement that would be helpful. Thank you. Josh, I'm surprised it took 5 parties to first ask that question. I expected it to come in the very first round. So you were the first one to bring it up. So let me frame it pretty specifically, right? And again these are models and forecasts. But as we look at it, We're expecting margin to improve sequentially 50 to 100 basis points each of the next two quarters. So we expect an improvement into Q2 and an improvement again into Q3 and then a more meaningful improvement as we move into Q4 And that will put us back into double digit low teen EBITDA margins. That's great color. Thanks and good luck for the rest of the year guys. Thanks. The next question comes from Adam Baumgartner with Zelman, please go ahead. Hey, good morning guys. Thanks for taking my questions. Just on that strategy you guys talked about, about Pressing the time it takes to raise pricing, can you give us a sense for what you think the ultimate opportunity is? Are we talking a matter of Maybe a couple of weeks, could it be a month plus, maybe if everything goes right, how we should think about it? Because I think the range is 3 to 6 months depending on the product category, but do you think the ultimate opportunity is to shrink that going forward? Yes. We're trying to take a couple of months out of that cycle. Okay. That's meaningful. Just next, just on the CapEx lowered for the year, is that just primarily a push out or is 3.5 a good number of views going forward or some of that just trickling into fiscal 'twenty three? Yes, Adam, good question. So really it is kind of a push out of projects literally due to Capital products that we're evaluating, suppliers that we're dealing with can't get the materials to us quick enough. They can't build out kind of our capital expenditures. And we did shift out our ERP project to delay it one additional quarter that's out there. All of those kind of combined together that Those costs are still being incurred as a business and we'll evaluate it obviously when we do our next fiscal 'twenty three plan. But right now those are being viewed as a push out into the next fiscal year. Got it. Thanks. And then just last one for me, just on price. When you gave us 1Q, you gave us 3Q, 4Q. Any color on how price should look In the Q2, maybe somewhere I'm thinking somewhere in between 1Q and 3Q levels, but any finer point on that would be helpful. Yes, you nailed it. Somewhere between the 3 $25,000,000 Got it. Thank you. As I do not see that there is anyone else waiting to ask a question, I would like to turn the line over to Mr. Joe Hing Jack, for any closing comments. Please go ahead, sir. Since there are no additional questions, this concludes our call. Thank you all for taking time to participate. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.