Select Interior Concepts, Inc (NASDAQ:SIC) Q2 2020 Earnings Conference Call - Final Transcript

Aug 06, 2020 • 09:00 am ET

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Select Interior Concepts, Inc (NASDAQ:SIC) Q2 2020 Earnings Conference Call - Final Transcript

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Presentation
Executive
Nadeem Moiz

was managed well by the team with no major interruptions and product supply, quality or delivery. In addition, we completed the implementation of a common ERP system in all our ASG locations.

Moving to Slide 5, our year-over-year net sales bridge. Year-over-year sales at $125.4 million decreased by 21% compared to last year. RDS sales fell $19.4 million or approximately 21% to $73.4 million compared to last year. Lower volumes in construction slowdowns resulting from COVID-19 along with unfavorable price/mix growth drove the decrease. Construction paused in a number of locations during Q2 due to local regulations in certain regions, particularly in Northern California. However, as of the end of Q2, our operations had resumed in all locations. ASG sales fell $13.9 [Phonetic] million or approximately 21% to $52.5 [Phonetic] million due to lower sales, volume and price/mix in all product categories, including natural stone, quartz and tile.

Regarding market conditions in the remainder of 2020, we are encouraged by improving trends and positive sentiments in the homebuilding sector. Permit issuances for new, single-family construction, a leading indicator of our business, increased 25% in June versus May. Recent estimates for full year 2020 new single-family starts published by various industry trackers contemplate an approximately 15% decrease from 2019 to 2020. However, these have been tempered from original forecast at the end of first quarter, as the demand for single-family housing in key markets has continued to recover.

Moving to Slide 6, year-over-year adjusted EBITDA bridge. Year-over-year adjusted EBITDA at $10.4 million, decreased by $6.2 million or 38% compared to last year Q2. On a sequential basis, Q2 EBITDA increased by $5.8 million compared to Q1. Lower volumes, along with lower margin mix in both segments contributed to $12.8 million decline. This negative impact from lower volume/price/mix was partially offset by $6.6 million decrease in operating expenses.

Moving to Slide 7. During Q2, our focus remained our preservation of liquidity and strict cash deployment. Cash flow from operations for the quarter was $9.7 million, representing a solid 93% conversion into cash of our adjusted EBITDA of $10.4 million for the quarter. We ended the quarter with liquidity of $62.6 million, net debt of $156.7 million and 3.4 times in net debt-to-LTM adjusted EBITDA. Year-to-date, we've generated $17.6 million in cash flow from operations and continue to expect to deliver positive operating cash flow for the year.

We remain committed to strict cost discipline to preserve cash. The cost and cash actions we have taken and our resilient business model positions us to maintain EBITDA profitability and positive cash flow for 2020, ensuring we have liquidity to support continued investments and strategic growth initiatives. To conclude, our team executed successfully during Q2 given the unprecedented environment. We are very encouraged by the positive trends in the housing sector during the second half of 2020 and are well positioned to capitalize on the coming opportunities.

With that, I would like to pass it back to Bill for his concluding thoughts.

Executive
Bill Varner

Thank you, Nadeem.