Financial Performance - Fourth quarter 2024 net sales were $667.7 million, a decrease of 1% year-over-year, driven by a 6% decline in volume and a 4% lower net average selling price (ASP) [4] - Full year 2024 net sales totaled $2.7 billion, also a decrease of 1% compared to 2023, with a 4% decline in net ASP and a 1% decline in volume, partially offset by 4% growth from the Supreme acquisition [5] - Fourth quarter net income decreased 61% year-over-year to $14.0 million, resulting in a net income margin of 2.1%, down from 5.3% in the prior year [6] - Full year net income was $125.9 million, a decrease of 31% compared to 2023, with a net income margin of 4.7%, down from 6.7% [8] - Adjusted EBITDA for the fourth quarter was $74.6 million, with an adjusted EBITDA margin of 11.2%, a decrease of 150 basis points year-over-year [7] - Full year adjusted EBITDA was $363.6 million, with an adjusted EBITDA margin of 13.5%, down 60 basis points from the previous year [9] - Net income for the 52 weeks ended December 29, 2024, was $125.9 million, compared to $182.0 million for the 53 weeks ended December 31, 2023, reflecting a net income margin of 4.7% [30] - Adjusted EBITDA for the 52 weeks ended December 29, 2024, was $363.6 million, down from $383.4 million for the 53 weeks ended December 31, 2023 [30] - The company reported an adjusted diluted EPS of $1.37 for the 52 weeks ended December 29, 2024, compared to $1.58 for the prior year [30] Acquisition Impact - The Supreme acquisition contributed 9% to net sales in the fourth quarter and 4% for the full year [5] - Acquisition-related costs associated with the acquisition of Supreme Cabinetry Brands, Inc. amounted to $25.4 million for the 52 weeks ended December 29, 2024 [31] Cash Flow and Debt - The company had $120.6 million in cash and $405.4 million available under its revolving credit facility as of December 29, 2024, with total debt of $1,007.8 million [10] - Free cash flow for the fifty-two weeks ended December 29, 2024, was $211.1 million, down from $348.3 million in the prior year [10] - The company’s net debt rose to $887.2 million in 2024, compared to $559.1 million in 2023, indicating an increase of approximately 58.7% [42] - Free cash flow for the year was $211.1 million, down from $348.3 million in the prior year, reflecting a decrease of approximately 39.4% [43] Operational Challenges - The company anticipates challenges in managing costs and maintaining product quality due to dependence on third-party suppliers and fluctuations in raw material costs [24] Asset and Liability Changes - Total assets increased to $2,929.8 million in 2024, up from $2,381.7 million in 2023, reflecting a growth of about 22.9% [42] - The company’s total current liabilities increased to $395.4 million in 2024, up from $349.4 million in 2023, reflecting an increase of about 13.2% [42] - The company’s goodwill increased to $1,125.8 million in 2024, compared to $925.1 million in 2023, representing a growth of approximately 21.7% [42] Capital Expenditures - Capital expenditures for the year totaled $80.9 million, compared to $57.3 million in the previous year, indicating an increase of approximately 41.0% [43] Other Financial Metrics - Gross profit for the 52 weeks ended December 29, 2024, was $877.0 million, down from $901.4 million for the 53 weeks ended December 31, 2023, resulting in a gross profit margin of 32.5% [26] - Operating income for the 13 weeks ended December 29, 2024, was $37.5 million, a decline of 38.7% from $61.0 million in the prior year [26] - The company incurred a non-cash settlement charge of $2.9 million related to the termination of its defined benefit pension plan [37] - Restructuring charges for the 52 weeks ended December 29, 2024, totaled $18.0 million, compared to $10.1 million in the previous year [30] - Adjusted EBITDA for the full fiscal year was reported at $363.6 million, a decrease from $383.4 million in the previous year, representing a decline of about 5.0% [42] - The company recognized a gain of $4.3 million from the sale of facilities and land, contributing to non-operating income [36]

Core Viewpoint - MasterBrand (NYSE: MBC) is positioned for growth through market share gains via new product launches tailored to customer needs under the "Align to Grow" initiative and cross-selling synergies from the Supreme Cabinetry acquisition [1] Group 1: Growth Prospects - The company is expected to benefit from market share gains through the introduction of new products [1] - Integration of the Supreme Cabinetry acquisition is anticipated to create cross-selling synergies [1] Group 2: Strategic Initiatives - The "Align to Grow" initiative focuses on launching products that meet customer needs [1]

Financial Performance - Net sales for the thirteen weeks ended September 29, 2024, were $718.1 million, an increase of $40.8 million or 6.0% compared to $677.3 million for the same period in 2023, primarily driven by the acquisition of Supreme, which contributed $60.8 million in incremental net sales [111]. - Net income for the thirteen weeks ended September 29, 2024, was $29.1 million, a decrease of $30.6 million or 51.3% compared to $59.7 million in the prior year [111]. - Net sales for the thirty-nine weeks ended September 29, 2024, were $2,032.7 million, a decrease of $16.4 million, or 0.8%, compared to $2,049.1 million for the same period in 2023 [126]. - Net income for the thirty-nine weeks ended September 29, 2024, was $111.9 million, a decrease of $34.0 million, or 23.3%, from $145.9 million in the previous year [124]. Costs and Expenses - Cost of products sold increased by $40.3 million or 9.2% to $480.1 million, representing 66.9% of net sales, compared to $439.8 million or 64.9% of net sales in the prior year [115]. - Selling, general and administrative expenses rose by $26.0 million or 18.5% to $166.3 million, accounting for 23.2% of net sales, compared to 20.7% in the previous year [116]. - Selling, general and administrative expenses increased by $33.5 million, or 8.0%, to $450.8 million, representing 22.2% of net sales, compared to 20.4% in the previous year [130]. - Cost of products sold decreased by $11.8 million, or 0.9%, to $1,359.0 million, representing 66.9% of net sales, compared to $1,370.8 million in the previous year [129]. Operating Income - Operating income decreased by $34.6 million or 37.5% to $57.6 million, down from $92.2 million in the same quarter last year [111]. - Operating income decreased by $47.1 million, or 19.2%, to $198.2 million compared to $245.3 million for the same period in 2023 [124]. Interest and Debt - Interest expense increased to $20.0 million from $15.3 million, primarily due to higher outstanding debt related to the funding of the Supreme acquisition [118]. - Interest expense rose to $54.7 million, an increase of $4.8 million, or 9.6%, compared to $49.9 million in the previous year [132]. - The company completed a refinancing transaction on June 27, 2024, raising $700.0 million in Senior Notes to fund the acquisition of Supreme and refinance existing debt [140]. - As of September 29, 2024, the company had $1,062.3 million in outstanding third-party borrowings, net of deferred financing fees [147]. Restructuring and Charges - Restructuring charges were $7.8 million, significantly higher than $1.4 million in the same quarter last year, reflecting costs associated with aligning workforce with forecasted demand [117]. - Restructuring charges increased to $11.0 million in the thirty-nine weeks ended September 29, 2024, compared to $4.1 million in the same period in 2023 [131]. Cash Flow - Net cash provided by operating activities was $176.9 million for the first three quarters of 2024, down from $336.5 million in the same period of 2023, reflecting unfavorable movements in accounts receivable and inventory [150]. - Net cash used in investing activities increased to $541.9 million in the first three quarters of 2024, primarily due to the acquisition of Supreme for $515.7 million [151]. - Net cash provided by financing activities was $331.3 million in the first three quarters of 2024, compared to a net cash used of $292.1 million in the same period of 2023 [152]. - The company reported a net decrease in cash, cash equivalents, and restricted cash of $39.3 million for the first three quarters of 2024 [150]. Acquisition and Integration - The acquisition of Supreme broadened the company's portfolio of premium cabinetry and was funded with cash on hand and proceeds from a revolving credit facility [109]. - The company completed the acquisition of Supreme on July 10, 2024, and is currently integrating its processes and internal controls [166]. Market Conditions - Overall end-market demand was softer in the repair and remodel markets, while single-family new construction showed strength compared to the previous year [112]. - Foreign currency impact was unfavorable by $0.4 million during the thirteen weeks ended September 29, 2024, compared to the same period in 2023 [114]. Compliance and Ratios - The company is required to maintain a minimum interest coverage ratio of 3.00 to 1.00 and a net leverage ratio not exceeding 3.50 to 1.00 for fiscal quarters ending on or prior to December 31, 2024 [146]. - The company was in compliance with all debt covenants under the 2024 Credit Agreement as of September 29, 2024 [146]. Taxation - Effective tax rate for the thirty-nine weeks ended September 29, 2024, was 24.6%, down from 25.4% in the prior year [135].

Financial Data and Key Metrics Changes - Net sales for Q3 2024 were $718 million, a 6% increase from $677.3 million in the same period last year, driven by the acquisition of Supreme Cabinetry Brands [7][23] - Adjusted EBITDA was $105 million with a margin of 14.6%, down 160 basis points from the previous year [9][28] - Net income decreased by 51.3% to $29.1 million compared to $59.7 million in Q3 2023, primarily due to acquisition-related costs and lower gross margin performance [27] - Diluted earnings per share were $0.22, down from $0.46 in the same quarter last year [28] Business Line Data and Key Metrics Changes - The Legacy MasterBrand business experienced a 3% decrease in net average selling price due to seasonal promotion activity and product mix [23] - Volume remained flat year-over-year, with strong performance in new construction offset by soft demand in the repair and remodel market [9][12] Market Data and Key Metrics Changes - The U.S. single-family new construction market showed mid-single-digit growth year-over-year, although this growth has moderated slightly [12][15] - The repair and remodel market remained soft, with demand expected to decline at the low end of mid-single-digit percentages for the full year 2024 [14] - Canadian markets also experienced softness in both new construction and repair and remodel segments, with housing affordability challenges persisting [15] Company Strategy and Development Direction - The company is focusing on strategic initiatives such as "Aligned to Grow," "Lead Through Lean," and "Tech Enabled" to drive growth and efficiency [17][20] - The integration of Supreme is expected to create operational and commercial synergies, with ongoing efforts to consolidate operations and enhance service levels [21][22] Management's Comments on Operating Environment and Future Outlook - Management noted that while end market demand remains choppy, they are confident in their ability to outperform the market due to strategic initiatives and pricing actions [33][36] - The company anticipates entering 2025 with a similar demand environment as currently observed, with potential benefits from Federal Reserve interest rate cuts not expected to materialize until 2025 [16] Other Important Information - Free cash flow for the year-to-date was $142 million, lower than the previous year due to a strategic inventory release in 2023 [11][31] - The company raised its capital expenditure guidance for 2024 to a range of $80 million to $85 million, including one-time integration costs [37] Q&A Session Summary Question: Insights on volume growth in new construction - Management indicated that the new construction market is still growing, with new business wins expected to support volume growth despite some anticipated air pockets [41][42] Question: Pricing trends and ASP pressures - Management noted that pricing pressures are consistent with previous quarters, with trade-down effects more pronounced in new construction [43][44] Question: Details on commercial synergies from the Supreme acquisition - Management discussed the ongoing integration of sales teams and product offerings, emphasizing that it will take time to realize the full benefits of commercial synergies [47][49] Question: Inventory trends and expectations - Management clarified that recent inventory builds were influenced by external factors and that they expect a return to normal inventory trends in the future [58][59]

Financial Performance - Net sales increased by 6.0% year-over-year to $718.1 million, driven by a 9% growth from the Supreme acquisition[1][3] - Net income decreased by 51.3% to $29.1 million, with a net income margin of 4.1% compared to 8.8% in the prior year[4] - Adjusted EBITDA was $104.5 million, with an adjusted EBITDA margin of 14.6%, down 160 basis points year-over-year[5] - Diluted earnings per share were $0.22, down from $0.46 in the prior year quarter; adjusted diluted earnings per share were $0.40 compared to $0.49[5] - Operating income for the quarter was $57.6 million, down from $92.2 million year-over-year, reflecting a decline of 37.5%[21] - Net income for the quarter was $29.1 million, a decrease of 51.2% from $59.7 million in the same quarter last year[21] - Year-to-date net income was $111.9 million, down from $145.9 million, reflecting a decline of 23.3%[25] - Year-to-date adjusted net income was $151.5 million, compared to $158.9 million in the previous year, a decrease of 4.3%[25] - Adjusted EBITDA for the quarter was $104.5 million, slightly down from $109.8 million in the prior year quarter, a decrease of 3.0%[23] Cash Flow and Debt - Operating cash flow for the thirty-nine weeks ended September 29, 2024, was $176.9 million, a decline from $336.5 million in the prior year[6] - Free cash flow for the same period was $142.3 million, down from $315.1 million year-over-year[6] - As of September 29, 2024, total debt was $1,062.3 million, with a net debt to adjusted EBITDA ratio of 2.5x[6] - Net debt increased to $953.9 million as of September 29, 2024, compared to $585.0 million a year earlier, reflecting a significant rise of 62.9%[36] - Long-term debt rose to $1,062.3 million from $699.3 million, an increase of approximately 52%[36] - The net cash provided by operating activities was $176.9 million, down from $336.5 million, a decrease of about 47.5%[38] - The company reported a net cash used in investing activities of $541.9 million, compared to $21.1 million in the previous year, showing a substantial increase in investment outflows[38] Acquisition and Integration - The integration of the Supreme acquisition is progressing as planned, with expectations for continued operational excellence[2][8] - The company incurred $15.0 million in acquisition-related costs associated with the acquisition of Supreme Cabinetry Brands, Inc.[23] - The company incurred $515.7 million in cash outflows for business acquisitions during the reporting period[38] Outlook and Market Performance - The company reiterates its 2024 financial outlook, expecting net sales to increase by a low single-digit percentage and adjusted EBITDA in the range of $385 million to $405 million[7][8] - The company anticipates organic net sales performance to align with underlying market demand as new products and previously implemented price actions gain traction[7] Asset Management - Total current assets increased to $686.9 million as of September 29, 2024, compared to $684.0 million on September 24, 2023[36] - Cash and cash equivalents decreased to $108.4 million from $122.5 million year-over-year, a decline of approximately 11.5%[36] - Capital expenditures amounted to $34.6 million, up from $21.4 million in the prior year, indicating an increase of 62.5%[38] Profitability Metrics - Gross profit margin decreased to 33.1% for the quarter ended September 29, 2024, compared to 35.1% in the prior year quarter[21] - The net income margin for the quarter was 4.1%, down from 8.8% in the prior year quarter[23]

Company Overview - MasterBrand (NYSE: MBC) is a leading manufacturer of residential cabinetry in North America, offering a wide range of products for kitchens, bathrooms, and other areas of the home [1]. Financial Performance - MasterBrand has demonstrated stable revenue growth over the years, indicating a consistent demand for its products [1]. Investment Philosophy - The investment approach focuses on fundamental analysis, emphasizing companies with a strong competitive moat, consistent growth in free cash flow, and a robust financial performance track record [1].

Financial Performance - Net sales for the thirteen weeks ended June 30, 2024, were $676.5 million, a decrease of $18.6 million or 2.7% compared to $695.1 million for the same period in 2023[93] - Gross profit for the period was $231.0 million, down $5.2 million or 2.2% from $236.2 million in the previous year[93] - Operating income decreased by $9.6 million or 11.0% to $77.8 million compared to $87.4 million in the prior year[93] - Net income for the period was $45.3 million, down $5.9 million or 11.5% from $51.2 million in the previous year[93] - Net sales for the twenty-six weeks ended June 30, 2024, were $1,314.6 million, a decrease of $57.2 million or 4.2% compared to $1,371.8 million for the same period in 2023[107] - Gross profit for the twenty-six weeks ended June 30, 2024, was $435.7 million, a decrease of $5.1 million or 1.2% from $440.8 million in the previous year[105] - Operating income for the period was $140.6 million, down $12.5 million or 8.2% from $153.1 million in the same period last year[105] - Net income for the twenty-six weeks ended June 30, 2024, was $82.8 million, a decrease of $3.4 million or 3.9% compared to $86.2 million in the previous year[105] Cost and Expenses - Cost of products sold decreased by $13.4 million or 2.9% to $445.5 million, representing 65.9% of net sales, compared to 66.0% in the prior year[97] - Selling, general and administrative expenses increased by $5.0 million or 3.5% to $146.7 million, accounting for 21.7% of net sales, up from 20.4%[98] - Cost of products sold decreased by $52.1 million or 5.6% to $878.9 million, representing 66.9% of net sales, compared to 67.9% in the prior year[109] - Selling, general and administrative expenses increased by $7.5 million or 2.7% to $284.5 million, which is 21.6% of net sales, compared to 20.2% in the prior year[110] Sales Performance - Net sales to dealers declined by $26.0 million or 6.9%, while sales directly to builders increased by $13.7 million or 17.5%[96] - Net sales to dealers declined by $57.8 million or 8.0%, while sales directly to builders increased by $22.5 million or 15.0%[108] Debt and Financing - The company refinanced its debt by completing the offering of $700.0 million aggregate principal amount of Senior Notes on June 27, 2024[119] - The company plans to use proceeds from the refinancing to fund the acquisition of Supreme, which is expected to close in July 2024[119] - As of June 30, 2024, the company had $688.9 million in outstanding third-party borrowings, net of deferred financing fees[127] - The company repaid a $712.5 million term loan and replaced it with $700.0 million of Senior Notes in a refinancing transaction completed in the second quarter of 2024[131] - The company was in compliance with all debt covenants under the 2024 Credit Agreement as of June 30, 2024[126] Cash Flow - Net cash provided by operating activities decreased to $96.1 million in the first half of 2024 from $194.0 million in the first half of 2023, reflecting a decline of approximately 50.5%[129][130] - Net cash used in investing activities was $11.9 million in the first half of 2024, slightly up from $11.2 million in the same period of 2023[131] - Net cash used in financing activities significantly decreased to $40.3 million in the first half of 2024 from $172.0 million in the first half of 2023[131] Taxation - The effective tax rate decreased to 24.6% from 26.5% in the prior year[102] - The effective income tax rate decreased to 24.1% for the twenty-six weeks ended June 30, 2024, from 26.7% in the prior year[115] Strategic Initiatives - The company expects to leverage technology and data to enhance consumer experience and further extend competitive advantages[91] - The company completed the acquisition of Supreme on July 10, 2024, indicating ongoing market expansion efforts[132] - The financial covenant requires the company to maintain a net leverage ratio not exceeding 3.50 to 1.00 for fiscal quarters ending on or prior to December 31, 2024[126] - The company believes its cash and cash equivalents, along with operating cash flows and credit facilities, will be adequate to fund typical needs and projected capital expenditures[132] Inventory Management - The company experienced an unfavorable movement in inventory of $20.7 million in the first half of 2024, compared to a favorable movement of $54.0 million in the first half of 2023[129]

Financial Data and Key Metrics Changes - Net sales for Q2 2024 were $677 million, a 3% decline compared to the same period last year, which was in line with expectations [4][13] - Adjusted EBITDA was $105 million with a margin of 15.5%, a 20 basis point increase year-over-year [6][15] - Net income decreased by 11.5% year-over-year to $45.3 million, primarily due to lower net sales and nonrecurring expenses [14] - Adjusted diluted earnings per share were $0.45, slightly up from $0.44 in the prior year [15] Business Line Data and Key Metrics Changes - The new construction market showed healthy performance, driving year-over-year volume growth, particularly among large and medium builders [5] - The repair and remodel market experienced softer demand, with expectations for mid single-digit declines for the full year 2024 [11][12] Market Data and Key Metrics Changes - Demand in the US single-family new construction market increased year-over-year by low teens in Q2 2024, with large production builders performing the best [10] - The Canadian market remained slow year-over-year, with expectations of continued weak demand [11] Company Strategy and Development Direction - The acquisition of Supreme Cabinetry Brands for $520 million aligns with MasterBrand's growth priorities and enhances its product portfolio in the premium kitchen and bath categories [7][8] - The company is focused on strategic initiatives like "Align to Grow" to capitalize on market opportunities and improve customer service [5] Management's Comments on Operating Environment and Future Outlook - Management anticipates continued growth in the new construction market but at a more moderate rate, with potential challenges in the repair and remodel market due to consumer hesitancy [10][12] - The company expects end market demand to trend towards the lower end of the original outlook, down low single digits year-over-year in 2024 [19] Other Important Information - The company successfully restructured its debt, enhancing its capital structure and financial flexibility [9][16] - Capital expenditures for 2024 are expected to be in the range of $65 million to $75 million, reflecting increased investments in tech-enabled initiatives [17][21] Q&A Session Summary Question: Actions on manufacturing side due to slower organic demand - Management indicated that they are managing through choppy demand without significant changes to capacity, focusing on maintaining steady operations [23] Question: Impact of pricing increases on trade-down behavior - Management noted that the separation between high-end and low-end markets has already occurred, and pricing actions are considered normal rather than a significant inflection point [24] Question: Seasonality of Supreme post-acquisition - Management stated that Supreme typically follows a similar seasonal pattern, but this year may differ due to the timing of the acquisition [25][26] Question: Revenue contribution and EBITDA guidance from Supreme - Management indicated that the legacy company is expected to be at the low end of previous estimates, with Supreme's contribution integrated into overall guidance [28] Question: Nature of rising costs - Management identified ocean freight and general inflationary pressures as contributing factors to rising costs, affecting the overall P&L [31] Question: Cadence of demand and backlog activity - Management described a choppy order pattern, particularly in the repair and remodel space, with varying demand across dealer and retail channels [32]

Financial Performance - Net sales decreased 2.7% year-over-year to $676.5 million, down from $695.1 million in Q2 2023[1][2] - Net income was $45.3 million, a decrease of 11.5% from $51.2 million in the prior year, resulting in a net income margin of 6.7% compared to 7.4%[3] - Diluted earnings per share were $0.35, down from $0.39 in the prior year, while adjusted diluted earnings per share increased to $0.45 from $0.44[3] - Operating income decreased to $77.8 million for the 13 weeks ended June 30, 2024, down from $87.4 million in the same period last year, representing a decline of 8.8%[18] - Net income for the 13 weeks ended June 30, 2024, was $45.3 million, a decrease of 11.5% from $51.2 million for the same period in 2023[18] - Adjusted net income for the year-to-date period was $98.9 million, an increase from $95.6 million in the same period last year, representing a growth of 3.4%[21] - Net income for the 26 weeks ended June 30, 2024, was $82.8 million, a decrease of 3.9% compared to $86.2 million for the same period last year[28] Cash Flow and Debt - Operating cash flow for the twenty-six weeks ended June 30, 2024, was $96.1 million, compared to $194.0 million in the same period last year[4] - Free cash flow for the twenty-six weeks ended June 30, 2024, was $77.8 million, down from $182.6 million in the prior year[4] - Net debt decreased to $499.5 million from $705.0 million, a significant reduction of 29.2%[26] - Long-term debt decreased to $688.9 million from $788.3 million, a decline of 12.6%[26] - The net cash provided by operating activities was $96.1 million, down from $194.0 million, a decrease of 50.5%[28] - The company issued $700.0 million in long-term and short-term debt during the period, compared to $55.0 million in the previous year[28] EBITDA and Margins - Adjusted EBITDA margin increased by 20 basis points year-over-year to 15.5%, with adjusted EBITDA at $105.1 million[3][4] - Adjusted EBITDA for the 13 weeks ended June 30, 2024, was $105.1 million, slightly down from $106.3 million in the same period last year[20] - Adjusted EBITDA for the trailing twelve months was $380.1 million, down from $411.4 million, indicating a decline of 7.6%[26] - Gross profit margin improved to 34.1% for the 13 weeks ended June 30, 2024, compared to 34.0% for the same period in 2023[18] Future Projections - For full year 2024, the company expects net sales to increase by a low single-digit percentage, with adjusted EBITDA projected between $385 million and $405 million[5][6] - The company anticipates adjusted diluted EPS in the range of $1.50 to $1.62 for 2024[5] Acquisition Details - The acquisition of Supreme Cabinetry Brands was completed for a net cash payment of $520 million, with expected annual run-rate cost synergies of $28 million by the end of year three[5] - The company incurred acquisition-related costs of $4.4 million in the second quarter of fiscal 2024, primarily associated with the acquisition of Supreme Cabinetry Brands, Inc.[24] Assets and Liabilities - Cash and cash equivalents increased to $189.4 million from $110.2 million year-over-year, representing a 72% increase[28] - Total current assets rose to $745.3 million from $728.2 million, reflecting a 2.9% increase[26] - Total liabilities decreased to $1,168.0 million from $1,316.4 million, a reduction of 11.3%[26]

All considered, I like MasterBrand and am happy to follow them over time - it's a simple, relatively easy-to-understand business levered to a growing, albeit cyclical, end-market. Fundamentally, while I don't contextualize there being much more room for growth outside of what the market grants given how mature the industry is, the market isn't pricing really any growth over time notwithstanding the market's history and what appears to be a stabilizing market. Furthermore, I do see MBC as better operators th ...