American Woodmark (AMWD) Q1 2019 Earnings Conference Call Transcript

American Woodmark (AMWD -2.26%)
Q1 2019 Earnings Conference Call
Aug. 27, 2018 11:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day and welcome to the American Woodmark Corporation first-quarter 2019 conference call. Today's call is being recorded. During this call, the company may discuss certain non-GAAP financial measures included in our earnings release such as adjusted EBITDA, adjusted EBITDA margin, free cash flow, and adjusted EPS per diluted share. The earnings release, which can be found on our website, www.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 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 Scott Culbreth, senior vice president and CFO. Please go ahead, sir.

Scott Culbreth -- Senior Vice President and Chief Financial Officer

Good morning, ladies and gentlemen. Welcome to American Woodmark's first-fiscal-quarter conference call. Thank you for taking time to participate. Joining me today is Cary Dunston, chairman and CEO.

Cary 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. Cary?

Cary Dunston -- Chairman and Chief Executive Officer

Thank you, Scott, and good morning to you all. We had a very solid start to our new fiscal year. We continued to display our ability to execute within our markets as well as with the integration of RSI Home Products. We experienced growth in every channel and delivered on our adjusted EBITDA margin.

Net sales were up 55% for the first quarter, driven by the inclusion of RSI. Excluding the acquisition, our core growth was 8%, over-indexing the market and our competition. Looking at our revenue by channel with the new construction, we grew our business 20% over prior year with our core growing a very healthy 9%. Despite indications of slowing in single-family starts, our team continues to perform and gain market share.

Our direct-to-builder platform delivers a level of service that creates a clear competitive advantage in our markets. As I commented last quarter, we have a tremendous initiative to grow our business at a lower price point with our new platform. However, we remain confident in our ability to continue to grow our core new construction business at a higher price point. We certainly displayed our ability to deliver on this.

We also experienced very solid growth in our PCS direct business in Southern California. This business is served with our new frameless line added through the acquisition. Within opening price point, although we remain in the early stages, our strategy to leverage our low-cost products across our service platform is progressing as planned and we remain confident in our ability to deliver on synergy commitments. We continued to see growth in demand by first-time home buyers.

However, supply remains a significant challenge both in new and existing homes. Recent data indicated inventory of existing entry level homes is at a historical low of only four months. On the new construction side, although some builders are serving this market effectively, it is a challenge given the rising cost of material and labor. Combined with the impact of existing and future potential tariffs and continued labor constraints, our nation's top builders are facing top headwinds.

A key question is how consumer confidence is being affected. Opinions vary greatly on the impact to America and our industry growth rate. As I mentioned previously, housing starts have shown signs of slowing in the past couple of months. As of now, we remain confident in our demand going into the fall.

However, we are keeping a close eye on numerous leading indicators. We certainly know how unpredictable our industry has been. Coming out of recession and with the current environment, it is not getting any easier. With all the uncertainties in our economy, we could see variation in demand in the shorter term.

However, my confidence in continued long-term growth remains strong. We have seasonally adjusted single-family housing starts sitting at around 860,000. Most would agree we still have strong growth remaining. It has been over 11 years since single-family starts were near what most would consider a minimum steady state level of 1.1 million to 1.2 million starts per year to sustain our population growth.

Although rentals account for a higher percentage than the mix, it's hard to believe that pent-up demand does not exist, particularly given the very low existing home inventory levels and the rising first-time home buyer. As I stated before, our industry is very efficient. And in the long run, when there is demand, builders and lenders will find a way to meet it. Taking a look at our remodeled channel, which includes our home center and dealer distributor business, revenues increased 91% or 9% excluding the impact of the acquisition.

Although we classify this all under remodel, it is important to know that there is a mix between remodel and new construction within this channel, particularly when considering a pro consumer. With regards to our dealer/distributor channel, excluding the acquisition, we grew the business by just under 6%. We have consolidated our dealer and distributor business under one organization given the synergies and we will be reporting as a consolidated number going forward. Although our dealer business has been the stronger of the two with the growth of the pro business within larger distributors and our new low-cost platform that offers a strong growth opportunity for us.

Within home center, we grew our core special order business by a very healthy 10% for the quarter. We have been stating for well over two years that if promotional levels were more at parity, we would quickly restore our share. Our performance in the quarter certainly reflects this. Although we remain optimistic about the future, it remains very dependent upon the overall promotional environment.

Within our home center kitchen and bath in-stock category, we had mixed results. On the positive, our in-stock kitchen business performed very well for the quarter, with strong year-over-year comps. With our strong home center partner and the focus on the pro consumer, we expect this business to continue to perform. With regards to bath, which includes stand-alone vanities, stand-alone tops, and combo units, which are vanities sold with a marble top, we had some challenges in the quarter.

We recently went through a significant reset with one of our home center partners. And unfortunately, execution has been challenging. We continue to work closely with our partner to get the resets completed and our new product displayed and inventoried. In addition, recent promotional and pricing activity by the home center themselves is favoring higher-end competitive products.

One thing we have learned within the bath space is that volume is much more volatile. To minimize this impact, we are challenging ourselves to establish a differentiated competitive advantage within the space as well as explore additional bath/vanity revenue within our other channels. Overall on revenue, we are very pleased with our strong growth. As I mentioned previously, we remain optimistic as we head into the fall.

However, as we all know, there are a great many variables in play right now that could impact our industry and the economy as a whole. Speaking specifically to the tariffs and the potential impact on our industry, under the $200 billion proposed China Section 301 tariffs, there are a number of items listed that would impact our industry and our company. The hearing process is under way now and it is very difficult to access the-- assess the exact impact. However, we are much less dependent upon China than many within our industry and therefore are less susceptible to tariffs.

In addition, we are working diligently to help to offset some of the impact through sourcing changes. While we cannot offset internally, we will plan to pass through via price. Moving on to our gross margin, we finished the quarter at 22.3% versus 20.1% prior year. Despite two significant headwinds in the logistics cost and material inflation, favorability was driven by stronger product mix as well as higher sales that generated overhead and leverage.

Operationally, our teams continued to perform well. I will also say it has been extremely impressive watching our organizations come together as one team as part of the immigration. They're aggressively working together in capturing cost synergies within our operations and remain confident in our commitments. Looking at our adjusted EBITDA margin, we finished the quarter at a very solid 15.9%, up from 13.5% in prior year.

We have communicated that we are targeting between 15.5% and 16% adjusted EBITDA margin, and I'm very pleased with our continued performance. I feel this is a testament to the strength of our consolidated team of employees and how successfully we are executing on the integration. On adjusted net income, we generated $36 million in the quarter, up from $22.3 million in the prior year. In summary, a very solid start to our new fiscal year.

Tremendous uncertainty exists within our industry, particularly related to tariffs. Although Chinese product has captured noticeable share in America, American Woodmark has been much less impacted than much of our competition due to our service platform. With our integration work, we continue to be focused on execution and ensuring we operate a competitive answer to this competition. We have always believed that we can successfully invest in America and have shown that by remaining one of the few vertically integrated cabinet companies.

We still purchase green lumber from the Appalachian Mountains and dry it in our kilns here in Virginia and in Kentucky. With our growth rates coming out of the recession, we had clearly proven the industry leading capability of our core special order manufacturing and service platform. By merging the capability of the special-order platform with RSI's highly efficient low-cost platform, we firmly believe we have the most competitive supply chain in the industry. When combined with the best team in the industry, we have the ability to develop the right strategy, to execute on the strategy, and the flexibility to efficiently respond when faced with our forever changing and challenging environment.

With that, I will turn it over to Scott for the financial details.

Scott Culbreth -- Senior Vice President and Chief Financial Officer

The financial headlines for the quarter. Net sales are $429 million, representing an increase of 55% over the same period last year. Excluding the impact of the RSI acquisition, net sales for the first fiscal quarter increased 8% to $299 million. Adjusted net income was $36 million, or $2.04 per diluted share, in the current fiscal year versus $22.3 million, or $1.36 per diluted share, last year.

Net income was positively impacted by additional sales volumes and mix was partially offset by higher transportation costs and raw material inflation. Adjusted EBITDA was $68.1 million, or 15.9% of net sales, compared to $37.4 million, or 13.5% of net sales, for the same quarter of the prior fiscal year. The increase during the first fiscal quarter is primarily due to additional sales growth in the quarter and the inclusion of three months' results for RSI.The new construction market continues to perform well. Recognizing a 60- to 90-day lag between start and cabinet installation, the overall market activity in single-family homes was up 11.2% for the financial first quarter.

Single-family starts during March, April, and May of the prior period averaged 816,000 units. Starts over that same time period from the current year averaged 908,000 units. Completions over that same time period grew 6.8%. Our direct new construction base revenue increased 20% for the quarter and core growth was 9%.

The remodel business continues to be challenging. On the positive side, unemployment continues to improve. The July U3 unemployment rate was 3.9%; U6 was 7.5%, both measures were lower than the July 2017 reported figures. Consumer sentiment increased to $97.9 in July versus the $93.4 recorded July 2017.

On the negative side, existing home sales decreased slightly during the second calendar quarter 2018. Between April and June 2017, existing home sales averaged 5.55 million units. That same period for 2018 averaged 5.41 million units, a decrease of 2.4%. The median existing-home price rose 5.2% at $276,900 for June, impacting our consumers' affordability index.

Interest rates increased in the quarter, with a 30-year fixed rate mortgage at 4.53% in July, an increase of approximately 56 basis points versus last year. All cash purchases in June were 22%, up from 18% last year. Residential investment as a percent of GDP for the second calendar quarter of 2018 declined to 3.3% versus the prior year. Home ownership rates remain low versus historical averages.

The percent of Americans who own their home in the second calendar quarter was 64.3%, which increased slightly from last year's rate of 63.7%. The share of first-time buyers declined. The June reported rate was 31% versus 32% in the prior year. Keep in mind, the share remains well below the historical norm of 40%.

Our combined home center and dealer distributor channel revenues were up 91% for the quarter, with home centers increasing 126% and dealer distributor growing 20%. Core growth within home center and dealer distributor was 9% for the quarter.The company's gross profit margin for the first quarter of fiscal year 2019 was 22.3% of net sales versus 21.1% reported in the same quarter of last year. Gross margin in the first quarter was favorably impacted by higher sales volumes, mix, and overhead cost levers due to higher volumes. These favorable impacts were partially offset by higher transportation cost and raw material inflation.

Total operating expenses increased from 10% of net sales in the first quarter of the prior year to 12.3% this fiscal year. Selling and marketing expenses were 5.3% of net sales in the first quarter of fiscal 2019, compared with 6.6% of net sales for the same period in fiscal 2018. The decrease in the ratio is a result of leverage from our higher sales and timing of advertising cost. General and administrative expenses were 7% of net sales in the first quarter of fiscal 2019, compared with 3.4% of net sales for the same period in fiscal 2018.

The increase in the ratio was driven by $12.3 million of intangible amortization or approximately 295 basis points and higher incentive compensation cost. Free cash flow totaled $41.4 million for the current fiscal year, compared to $14.9 million in the prior year. The increase is primarily due to additional net income generated in the period excluding noncash items and decreases at customer receivables and income taxes receivable. Pro forma net leverage was just under 2.75 times adjusted EBITDA at the end of the first fiscal quarter, and the company paid down $63 million of its term loan facility during the quarter.

On August 23, 2018, the company's board of directors reinstated the company's previously suspended stock-repurchase program subject to the approval certain changes to the company's existing credit facility currently being negotiated with lenders. Approximately $36 million remains available under the program for repurchases. In closing, we are pleased with our performance during the quarter. As Cary noted, our integration efforts are going well and we are on track regarding synergy capture.

The company expects that we'll grow core sales in the mid to high single-digit rate in fiscal 2019 with total sales growth of approximately 35%. This growth rate is very dependent upon overall industry and economic growth. Margins will be challenged with increases in labor costs, raw materials, fuel, and transportation rates. The company continues to expect adjusted EBITDA margins for fiscal 2019 of 15.5% to 16% depending upon synergy timing, execution, and the significance of inflation rate increases.

This concludes our prepared remarks. We'll be happy to answer any questions you have at this time.

Questions and Answers:

Operator

[Operator instructions] And we'll go first to Kathryn Thompson with Thompson Research Group.

Steven Ramsey -- Thompson Research Group -- Analyst

Good morning. This is Steven Ramsey on for Kathryn. I have the question on the promotional environment in retail. Just thinking out if it stays highly promotional over the next year or two, or stays around similar levels, do you see that as being a real risk to achieving sales or cash flows that are reasonable to you?

Cary Dunston -- Chairman and Chief Executive Officer

Hi, Steven. This is a Cary. The answer will be no. I don't see it as a big risk.

Right now the way to answer you is kind of I will say leveled out, as we've gotten to a level that I think most, and us and our competitors included, will probably say is about as high as we want from a sustainable level. I really don't see it going much higher. It just would not make sense, so we have taken hours up to the match and we are running-- I'll say we're definitely running higher than we would like. Right now it makes financial sense for us, particularly if we get the restoration of our share in that mix.

But overall, the industry is at a higher level. But right now, that is in our assumption. That's in our forecast. Obviously, there's always unpredictability there if a vendor were to come out or a competitor were to come out and do something that we don't predict.

But right now, I would not say it's a major risk.

Steven Ramsey -- Thompson Research Group -- Analyst

OK. Great. And then thinking about inflationary impacts on the material side, a couple of questions here. Is there a way to think about the inflationary impact in the different segments of your business? Is it hitting a certain channel or region or product type or end market more than another? And with lumber prices retreating, is that helping to offset these inflationary pressures and are you seeing any benefit of that yet?

Cary Dunston -- Chairman and Chief Executive Officer

Yes. I mean, as far as the channel by channel, the only difference is what we have kind of talked about in the past with regards to the really, efficiency of the timing is within the dealer distributor, where we can much more quickly take pricing changes to the market. Within our new construction market, probably would be second in line. We can take it to the market.

In some cases, we are under a longer-term contract that hasn't, I'm going to call, indexes, but has the opportunity to take pricing. It just takes a bit longer. And then within our home center world, we can definitely take it, but it's a little bit longer process. So, we're in those processes today.

We pass some price increases through, but we're continuing-- it's one of those things you don't want to pull the trigger too quickly. But we are kind of at the level now where we're starting to pass some of those on just given the inflationary pressure. With regard to your comment on lumber, there obviously is some lag in there. You realize it, by the way.

When they talk about the lumber prices, is it high-grade lumber, is it low-grade lumber, and so forth, and the impact of the tariffs. And so we are starting to see a little impact, but it's really too early to tell what the potential benefit would from that.

Steven Ramsey -- Thompson Research Group -- Analyst

Excellent. Thank you.

Cary Dunston -- Chairman and Chief Executive Officer

Thank you.

Operator

And next we'll go to Tim Wojs with Baird.

Tim Wojs -- Robert W. Baird & Company -- Analyst

Hey, guys. Good morning.

Cary Dunston -- Chairman and Chief Executive Officer

Hi, Tim.

Scott Culbreth -- Senior Vice President and Chief Financial Officer

Good morning.

Tim Wojs -- Robert W. Baird & Company -- Analyst

Hey, just a follow-up on the last question. So, has pricing not really been an impact on a like-for-like basis here in the first quarter? And is the assumption that that would be a bigger benefit to growth and profitability as you move through the year?

Cary Dunston -- Chairman and Chief Executive Officer

I think that's probably a good way to put it, Tim. As we move forward, you'll start to see more pricing action.

Tim Wojs -- Robert W. Baird & Company -- Analyst

OK. OK. Great. And then could you just talk a little bit about the reset challenges that you had in the quarter? I guess, were there any costs associated with that? And from a time-frame perspective, what type of time frame would you expect to kind of getting that on a run rate or fully operational basis?

Cary Dunston -- Chairman and Chief Executive Officer

Yes, from a cost perspective, most of the costs we incurred on the reset were actually this past spring. So, now it's really just a matter of working with our retailer and getting the inventory aligned with our actual displays and so forth. So, it's really coming down to the layout in the store itself. So we're hoping to get all that completed early in next quarter.

And the promotional piece is hard to predict. That obviously has a major impact as well. As far as getting our inventory aligned with our actual displays and the resets and the layout set, we should be-- hopefully get that all set up in the next 60 days or so.

Tim Wojs -- Robert W. Baird & Company -- Analyst

OK. So, relative to RSI, I mean how would you characterize its performance in the quarter relative to your expectations?

Cary Dunston -- Chairman and Chief Executive Officer

That's kind of the mix. When I talk about the in-stock, that's really our size. So, as we-- as I think you know, our big bucket in there is our in-stock kitchen business with one of the retailers that did very, very well, very strong comp but unfortunately, we had the reversal on bath. So, it's-- we also are working on a little year over year.

We discontinued medicine cabinet a year ago prior to the acquisition RSI did that we're still lapping. So, there's some impact to that in there as well as some impact from a couple of countertops that were discontinued or stopped from carrying last year. So, we still have to lap that as well. So, there's a little bit of mix in there, but really it's-- the kitchen business is doing great and right now the bath business is a challenge.

Tim Wojs -- Robert W. Baird & Company -- Analyst

OK. And then just on the on the debt pay-down and in some of the interest renegotiations or the negotiations with your credit facilities, I think before you kind of quoted maybe $38 million or so of interest expense this year, but you're also paying down debt. So, I'm wondering if there is an updated number at all and kind of what we can expect to maybe end the year in terms of leverage?

Scott Culbreth -- Senior Vice President and Chief Financial Officer

Yes, I don't have a projection for you yet on where the year will end and part of that, Tim, depends on the update we just made with regards to stock repurchases. So, we've got the authorization from the board, but we need to work through the credit agreement modifications. Once we've done that, we've got the opportunity to spend some of the free cash flow, of course, on that. So that will be an option for us through the rest of the year.

That will impact what the overall leverage cap will be at year end. With respect to interest rates, rates have moved up, certainly on the variable portion of our debt that we'd paid down faster. We still think the number is probably in that $37 million, $38 million range unless we lean in and pay a bit more down second half.

Tim Wojs -- Robert W. Baird & Company -- Analyst

OK. Great. Well, good luck on the second half year.

Cary Dunston -- Chairman and Chief Executive Officer

Thanks, Tim.

Operator

Our next question will come from Justin Speer with Zelman Associates.

Justin Speer -- Zelman Associates -- Analyst

Hi. Good morning. Thanks for taking the time. A couple of questions for me.

You mentioned in terms of the maybe the portending of slowing in new construction with starts and absorptions having slowed a little bit here end of July, just thinking and I characterizing your guidance for mid-single-digit core, do you feel like we have enough cushion in that guidance to accommodate for maybe a slowing or deceleration growth from that part of the channel?

Cary Dunston -- Chairman and Chief Executive Officer

When we talk about that kind of that forward-looking that is based on our current forecast of the new construction business. So, depending on any major changes, based on what we see today, and yes we are looking at current growth rates and obviously we are very focused on picking up business within the opening price point. We're still very early in the stages, so the revenue we have in that space is very small right now, but growing. So, really that growth that you saw when you talk about core, that really is our growth at the higher price point.

So, we clearly picked up some market share gain and we'll see how it goes. I'm remaining-- I will use the term "pessimistically optimistic." It's one of those where it's really hard to predict, but we-- if you think about a year ago, we had the hurricanes and everything. So, we're hoping that what builders are telling us is they have seen some softening right now, but they're planning on picking it up this fall and having some strong close to their fiscal year in which most of them, obviously, are toward the end of this year, so calendar year. So we-- right now, we're remaining somewhat optimistic on this fall and we'll just have to keep a close eye on it.

Justin Speer -- Zelman Associates -- Analyst

And secondly, just kind of tethered to the first question in thinking about your comment about the ability to get price of the channel in your full-year guidance for margins in the 15.5%, 16% range, do you have what you need in hand with that channel, with that homebuilder channel? And do those pricing negotiations, how do they in a slowing environment-- I don't think it'll get easier. But I guess, I want to make sure that you have that in hand-- what you need in hand based on the current cost trends today.

Cary Dunston -- Chairman and Chief Executive Officer

Yes, for the most part. I mean, it's really the way the business works. You still have the elasticity curve. So, we can actually pass price through.

It is a bidding process when you go subdivision to subdivision in some cases. Obviously, with our relationships with the national builders and our service platform, it's not all about price. So, that's a good thing. Builders are very well aware of what's going on out there and they have already saw-- have, had seen quite a bit of inflationary pressure through various industries that supply them.

So, I think we've actually done quite well. We have passed some on, but we've also been very focused on at this movement toward opening price points. So, to me the bigger question is as this demand grows and you see the shift downward or-- and I'll say as builders come back and start to put pricing pressure on you with regards to this demand elasticity it's going to require a lower price product. And we are now obviously following the acquisition, well-positioned to serve that.

So, it's not just about going out and putting price through. We certainly expect to maintain our margins on our existing product that we sell through Timberlake and we also have the ability now to sell a lower-price product as this elasticity curve drives demand down to the lower price points. So yes, we feel comfortable with our future forecast on margins.

Justin Speer -- Zelman Associates -- Analyst

Excellent. Well, thanks and congrats on a great quarter.

Cary Dunston -- Chairman and Chief Executive Officer

Thank you.

Operator

Your next question will come from Garik Shmois with Longbow Research.

Jeff Stevenson -- Longbow Research -- Analyst

Hi, this is Jeff Stevenson on for Garik. Great quarter. Just a couple of questions. First, you mentioned what the potential China tariffs.

You're looking at different options for sourcing and also passing through pricing. I'm just wondering if you can give any other examples of some of the things that you're doing to prepare for this potentially happening?

Cary Dunston -- Chairman and Chief Executive Officer

Yes. I mean, for the most part, when we talk about resourcing is we do have our low-cost platform that we acquired through the acquisition and that obviously gives us a lot of opportunity to move some things to North America here versus through China. Can't cover all of it, but we definitely have that opportunity. So, that's -- most of the resourcing we talk about, it's not chasing us to other countries, per se.

It's really more about bringing internal to our low-cost platform down in Mexico. So the percentage of that, it really all depends and you have various parties out there that are really trying to argue, can you get exclusionary things on certain items that you just can't produce in America. Some things are only produced in China within our industry. So, tariffs are really more of a-- I'll say, more of a negative impact on American companies, just because of the fact that they're importing a Chinese product, and by taxing or by tariffing the component side, it hurts American companies as well, but we are watching that closely.

If something happens to go through that does not impact, like the plywood one that went through, the CBD that went through probably a year ago now. That actually damaged American companies more than it damaged China just because it had no impact on the imported RTA cabinetry or the imported fully assembled cabinetry coming into America. So, when we talk about the market share gain that's really happening primarily in the dealer channel and in multifamily channel, so it was obviously two channels that we compete in dealer, but it's certainly a much lower percentage of our mix, we don't compete in multifamily today, but that's really where the Chinese have kind of gotten their share from. So right now, until something is done to really get those prices up or in our case where we actually now have the product to compete against it, we feel pretty comfortable, but there's no way we can cover nor can any of the other companies cover it all up with any type of resourcing.

It's going to have to come through price, which obviously is a concern just from elasticity perspective, inflationary pressure in America as you can only take price up so much. So, it's something I think every industry is paying attention to and is watching what the overall impact on America is going to be from an inflationary perspective.

Jeff Stevenson -- Longbow Research -- Analyst

Great. Very helpful. And then just on homes, I guess, you guys did a great job going over the areas of strength and some challenges you're having during the quarter. But just wondering with your outlook, especially moving into the busy holiday season coming up, are you very comfortable with your position right now and just any more color on kind of what you're seeing in that environment?

Cary Dunston -- Chairman and Chief Executive Officer

Yes, we're very comfortable. In fact, I think everybody would say that we just-- our business partnerships with our two key home center partners is extremely strong and we really, really look at it strategically and we are having even, I will say deeper level, more strategic conversations with them post-acquisition just because of our position grew significantly within both retailers. So yes, we feel very comfortable with it. We're talking very proactively about the upcoming holiday season and Black Friday sales and so forth.

So, we've got strong positions and we feel good about our current forecast.

Jeff Stevenson -- Longbow Research -- Analyst

Thank you.

Operator

[Operator instructions] And we'll go next to Truman Patterson with Wells Fargo.

Truman Patterson -- Wells Fargo Securities -- Analyst

Hey. Good morning, guys, and congrats on a good quarter.

Cary Dunston -- Chairman and Chief Executive Officer

Thanks very much.

Truman Patterson -- Wells Fargo Securities -- Analyst

So first question just over margin performance. I know that you guys aren't breaking it out EBITDA margin performance by legacy American Woodmark and RSI businesses, but could you give us an idea of what pro forma or combined EBITDA margins were last year similar three-month period? And then looking at the past couple of years on a core basis, the first quarter has been a high-water mark for the year. Should we think about on a pro forma basis that EBITDA margins follow a similar path that 1Q is kind of a high watermark?

Scott Culbreth -- Senior Vice President and Chief Financial Officer

Yes. To you first question, there'll be a pro forma release inside the Q when that comes out, pro forma look back. The actual EBITDA margins are comparable though when you do the year over year if you were to include RSI. So, it's within the same ballpark from an overall perspective and consistent with the outlook and guidance we have given going forward.

With respect to seasonality, it was a bit more seasonal when you looked at the core business historically. You tended to have Q1 and Q4 be the stronger revenue periods overall and then best-- typically the stronger margin performance. What clouds that a bit is inflation. So, even though volume might be strong in those two particular periods, what's become a bigger variable is when does inflation come through and when does pricing happen.

So, now we've already got inflationary impacts, pricing starts to maybe pickup in the Q2 Q3 time frame. So that can distort and move down the overall– move up or down the overall EBITDA margins period to period.

Truman Patterson -- Wells Fargo Securities -- Analyst

OK. As we think about the back half of '18, you guys are expecting pricing to at least offset the inflationary pressures. Is that a fair way to think about it with your EBITDA margin guidance?

Scott Culbreth -- Senior Vice President and Chief Financial Officer

That's correct.

Cary Dunston -- Chairman and Chief Executive Officer

Yes, that's correct.

Truman Patterson -- Wells Fargo Securities -- Analyst

OK. OK. And then I didn't hear-- I believe on your core revenue growth you guys gave mid to high single-digit revenue growth guidance. Is your total revenue growth guidance, does it still remain at 35% level?

Scott Culbreth -- Senior Vice President and Chief Financial Officer

Yes.

Truman Patterson -- Wells Fargo Securities -- Analyst

OK. OK. So, kind of total revenue growth remains unchanged as of now. And whenever I'm looking at RSI sales of about $130 million, how does that really compare to last year's metric at this time? And how should we kind of think about RSI sales going forward, legacy RSI sales now that we've anniversaried the two regional home center losses?

Scott Culbreth -- Senior Vice President and Chief Financial Officer

Yes, I think we've kind of addressed this couple of times. Our intent is not to have segment reporting or historical reporting specific to just the RSI versus the core business. But in Cary's remarks and comments, he really addressed the two largest portions of that business. And our in-stock kitchen business performed very well in the period.

It was up double-digit, which was consistent with what the retailer spoke about. However, we did have some challenges in the bath space overall. We think that's likely to continue at least for the next quarter as we unwind and work through some of the challenges on the bath space and then the overall guidance includes what we think that will look like for the second half of the year.

Truman Patterson -- Wells Fargo Securities -- Analyst

OK. Was the bath space issues, was that kind of more self-inflicted or was that actually market dynamics because I know your largest competitor is restructuring some of their assets to target more the in-stock and kind of stock channel. If you just discuss that, how does the change the industry and maybe what you guys would be watching to see if it's actually impacting your business?

Cary Dunston -- Chairman and Chief Executive Officer

Yes. No, it had nothing to do with our key competitor. This is really more just when it comes down to the resets in the store and execution. Part of it's on the store and part of it's on us.

So, nothing related to the actual reset. So, I have nothing related to competition. So, it's just getting out the store and making sure when you launch new product, when you walk down that aisle that, that new product that you're launching is actually on display. So, it's a proper management of the inventory levels and making sure what's underneath that display matches what's actually on display.

So, all those things are in the process of being worked through now and being corrected. And then like I said we're basically the-- in this case, home center themselves is tending to drive via promotional activity trying to drive some higher-margin vanity type stuff off the shelf, which we don't play in that space with our current product offerings. So, that tended to favor a different competitor not necessarily the one that you spoke of.

Truman Patterson -- Wells Fargo Securities -- Analyst

OK. OK. Gotcha. Is there anybody else in the queue right now? Do you know?

Operator

We have no one in the queue at this time.

Truman Patterson -- Wells Fargo Securities -- Analyst

OK. Thanks. I'll just ask my last question then. You guys offer your share repurchase program.

How should we think about share repo compared to your debt pay down? And is-- the share repo, is it just really to offset dilution or would it be maybe something more aggressive?

Scott Culbreth -- Senior Vice President and Chief Financial Officer

It's really about opportunistic. Overall, we believe the stock is undervalued. So, we wanted to make sure we had the option to do something if that trend was to continue. So, it's going to be opportunistic for us and if we think it's the right time to buy, then we'll go ahead and repurchase stock.

But we'll significantly be able to continue to focus on debt pay down for the remainder of the year as well.

Cary Dunston -- Chairman and Chief Executive Officer

Yes, our debt is the No. 1 priority. But obviously, with our recent cash generation and expected future cash generation, we want to take advantage of the opportunity to do share repurchase. [Inaudible]

Truman Patterson -- Wells Fargo Securities -- Analyst

OK. Thank you, guys.

Cary Dunston -- Chairman and Chief Executive Officer

Thank you.

Operator

And 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. Culbreth for any closing remarks. Please go ahead.

Scott Culbreth -- Senior Vice President and Chief Financial Officer

Since there are no additional questions, this concludes our call. Thank you for taking time to participate.

Operator

[Operator signoff]

Duration: 39 minutes

Call Participants:

Scott Culbreth -- Senior Vice President and Chief Financial Officer

Cary Dunston -- Chairman and Chief Executive Officer

Steven Ramsey -- Thompson Research Group -- Analyst

Tim Wojs -- Robert W. Baird & Company -- Analyst

Justin Speer -- Zelman Associates -- Analyst

Jeff Stevenson -- Longbow Research -- Analyst

Truman Patterson -- Wells Fargo Securities -- Analyst

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