John Lovallo: Good morning, guys. Thank you for taking my questions as well. The first one is within that 15% decline in core revenue on a consolidated basis in the fourth quarter. Is there any way to parse out the impact of the lower volume versus the negative mix, perhaps on a consolidated basis and maybe even North America versus Europe, if possible?
Bill Christensen: Yes, so I would say, so a couple of maybe high level comments John, and then maybe Julie can jump in with some detail. So clearly the run rate, if you look at Q4, 14% volume mixed down in North America, 20% in Europe, which I mean, those are pretty significant numbers. And mainly volume, there was not a lot of price in Q4. So really volume was the key driver. And especially in North America, if you think about a lot of the large retail partners that are balancing their inventories going into their fiscal year end, which is early this year, some of the tight inventories in the market weren’t being reloaded. And by the way, we’re starting to see some rebalancing of inventories as people start to better position themselves for potential growth in the back half of this year.
So some of the signals that we’re seeing are, I’d say, better balancing of channel inventories. And that’s why we feel that the run rates that we saw in Q4 are not going to pull through to Q1. We’re expecting a bit better traction in Q1. Julie can share some numbers and some detail that may help underscore that.
Bill Christensen: Yes, just a little more color on the mix there. Really in Europe that was almost entirely volume. So there was really very little negative mix in that negative 20% of volume mix. North America, I would say that volume impact was probably more like kind of 11% within that incremental 2%, 3% being negative mix. So again, still in North America heavily weighted to lower volumes, but did have a little bit of negative mix in that region in that fourth quarter.
John Lovallo: Okay, that’s really helpful. And then just maybe moving forward, you gave us the expectation for low single digit volume declines in North America and high single digits volume declines in Europe. Are you expecting any meaningful mix impact in either region in 2024?
Bill Christensen: Yeah, I would say no. I think it’s going to track on kind of what we saw at the back half of last year. If you just think, where is the market in general, I’d say we’re mixing down, because the new construction market is tilted towards starter homes and lower price point homes. What we see, especially in January and February, a lot of the projects in Canada that we have, a lot of the projects on our VPI commercial side, also in Europe, which are typically you know better margin profile businesses are being pushed out based on financing constraints that the projects have. So people are still going to run the projects, they are just waiting. So we do think that in general, we are mixing down, which is consistent with what we saw at the end of last year.
John Lovallo: Great. Thank you guys.
Bill Christensen: You’re welcome.
Operator: Our next question comes from the line of Joe Ahlersmeyer with Deutsche Bank. Please go ahead.
Joseph Ahlersmeyer : Hey, good morning everybody. Congrats on the strong finish to the year here.
Bill Christensen: Thanks Joe. Good morning.
Julie Albrecht: Thanks Joe.
Joseph Ahlersmeyer : Yeah, maybe moving beyond ‘24, just thinking about the two parts of your North America business, the R&R business and the new construction side of things. Could you talk about, I guess, your views today, multi-year, on which of these end markets provide more upside off of what you deliver in ‘24? And then if you could just also speak to how you feel your manufacturing base, your infrastructure on distribution is agile enough, I guess to handle one outperforming the other.
Bill Christensen: Yeah. So starting with the second question first, Joe. So I would say that we’re definitely cleaning up our distribution model and we’re looking at that as we do assess our footprint and our cost to serve our key customers across all markets in North America. So we’re making sure that we’re balanced, not to current state, but to what we expect the future state to be. And clearly, based on the light volume, there’s been overcapacity in some of our sites in the market as well. So we have taken sites offline as we all know last year, and we’re continuing to critically look at cost to serve model. And that is, I think, well balanced to an upswing in the market, because we’ve been doing a lot of great homework there.
On the other side, as we kind of roll forward and just look at a very high level view, you asked North America, I’m going to just go up a level and say that we clearly expect macro headwinds in Europe to continue into next year. So clearly, the outlook in Europe is definitely weaker in the next couple of years than we would expect for North America. And North America clearly, as I said before, we’re underbuilt, we need the units, but there’s also going to be a snapback of R&R activity as resales kick in when interest rates come down. So we do expect both levers to be moving in the right direction. And clearly, we’re getting ourselves ready to be able to serve both of those models and make sure that our cost to serve is well balanced. And if we see an increase in volume in ‘25, as many people expect currently in North America, we should have some nice operating leverage that drops to the bottom line.
We’re focused on both pillars, traditional and retail, because they are both very important to us. And we’re making sure that our cost to serve and our on-time delivery and our quality is meeting customer expectations in both of those segments.
Joseph Ahlersmeyer : That’s really helpful. Thank you for that. And then Julie, on the CapEx guide for this year, I understand the need to invest here. Could you help us maybe think about how long we might be running at this type of level, if it’s sort of the new stable state or if maybe next year we see some productivity coming out of the CapEx budget?
Julie Albrecht: Yeah, I’d say – I think clearly we’d say in the past, JELD-WEN’s underinvested in its capital for both growth and efficiency, which again, has shown in the results we’ve delivered historically. So this year, we’ve obviously evaluated our pipeline. We’re pretty bullish on the opportunities. We’ll continue to reevaluate that obviously on an annual basis. But I would expect it to be higher than the past, call it that 2% to 2.5%. And again, if it continues at 4%, I think TBD, but absolutely I’d expect it to be elevated over our historical levels per capital. The other thing I’ll note is, we mentioned in our materials in our outlook for this year that we’ve got around $100 million of non-recurring cash expenses this year, that I would say we do feel like are unique to this year, and that we’d expect that type of activity to go back to more normal levels beyond this year.
And so also wanted to highlight that from a cash flow perspective and investing in ourselves.
Bill Christensen: Yeah, and Joe, I would just add that, these 800 plus projects, we have high visibility in our system, we’re sequencing. As long as we see opportunity to deliver IRRs, 20% and above, we’re investing in ourselves, because I believe that is an outstanding return for our shareholders and the right way to deploy capital. And so I would expect that also next year CapEx would be elevated from a historical run rate if it’s the same as this year. We’ll have a discussion as we see the portfolio, the maturity and what kind of investments we need to make, but we will be investing and that will continue into next year on the capital side. Julie mentioned the one-time we’ll be out, but we’ll still be funding projects that are very attractive and candid. But we just don’t have the resource currently to push all of these through the pipeline at the same time. So we’re making sure that we’re not biting off more than we can chew.
Joseph Ahlersmeyer : Yeah, makes a lot of sense. I agree with the philosophy there, and thanks for the call out on the one-time expenses. I’ll pass it on. Thanks a lot.
Bill Christensen: Alright, thanks Joe. Have a good day.
Julie Albrecht: Thank you, Joe.
Operator: Our next question comes from the line of Michael Rehaut with JPMorgan. Please go ahead.
Andrew Azzi: Hi, guys. This is Andrew Azzi on for Mike. I appreciate you taking my questions.
Bill Christensen: Hey Andrew. Good morning.
Andrew Azzi: Good morning. I just wanted to ask maybe on the new single family construction side in North America, at least flat to up slightly, it looks potentially a little bit conservative as compared to maybe some of the larger home builders in terms of a year-over-year percentage increase. And I’m just hoping maybe you can help me bridge that gap, and maybe if there’s some upside or conservatism baked in there.
Bill Christensen: Yeah, well, so there’s still a high level of uncertainty, I would argue, in the market in general. Clearly there’s some key macro levers that are going to potentially soften the back half of this year, which could potentially improve the reality. But don’t forget, we’re three to six months behind a start until our products are built in. First window is to button up the envelope and then doors later in the process. So it takes a while for this to trickle down. Second point is, we potentially see these starts out there, but it’s a lower end. And so we would actually like to see the higher end come back. So the custom and that’s a pull through for our wood windows and our premium products. And so clearly, there’s some pretty good value appreciation when that market comes back.
But clearly, it’s way softer than the low end of the market. So we’re, I would say, I wouldn’t call us overly cautious. I would just say that we’re careful, because there’s just so many things that are influencing this market in the current state, and this is our view. If things are better, then I think we’ll all be proud and happy to report that as the year goes on.
Andrew Azzi: Understood. Yeah, I think that definitely sounds appropriate. I guess I’m just curious on the price cost neutral. Is that on a dollar basis or a margin basis?
Julie Albrecht: Yeah, it’s really a dollar basis, which I guess dropped through as really not having much impact on margins. And so yeah, it’s – but when we say that, we’re definitely talking about, targeting a dollar neutral, close to zero impact on year-over-year changes in EBITDA.
Bill Christensen: And I would say we’ve talked, Andrew, on prior calls. There’s a couple of things. I mean, we still have a lot of work to do on cleaning up kind of the pricing foundation and making sure that we are doing a better job of being consistent and that’s still ongoing. But I’d say on a broader level, the input costs, we want to make sure that we can offset that with price, but nothing more than that.
Andrew Azzi: Okay, that’s all for me. Thank you, Bill and Julie and good luck. Congrats on the quarter.
Bill Christensen: All right, thanks Andrew.
Julie Albrecht: Yeah, thank you Andrew.
Operator: Our next question comes from the line of Steven Ramsey with Thompson Research Group. Please go ahead.
