MasterBrand, Inc. Q3 FY2024 earnings call

• Net sales in Q3 2024 were $718 million, up 6% y-o-y, driven by Supreme acquisition. Legacy MasterBrand down 3% due to lower net ASP.
• Adjusted EBITDA $104.5 million, margin 14.6% (160bps lower y-o-y) due to cost timing, inflation, and prior year benefits not repeating.
• Free cash flow $65 million in Q3, YTD $142 million. Confident in FCF > net income for 2024.
• End market demand: New construction growth moderating; repair and remodel soft due to consumer hesitancy. Canadian markets also soft.
• Strategic initiatives: Align to Grow (new products/channels for builders), Lead Through Lean (continuous improvement), Tech Enabled (digital infrastructure for efficiency).
• Supreme integration: Consolidation of Waterloo, Iowa facilities; dealer integration underway with new product offerings.

Net sales in the third quarter of 2024 were $718 million, a 6% increase over the same period last year. The growth was driven by the acquisition of Supreme Cabinetry Brands, which contributed 9% to net sales. The Legacy MasterBrand business saw a 3% decrease due to lower net average selling price. Gross profit in the third quarter was $238 million, with a margin of 33.1% compared to 35.1% in the same period last year. Adjusted EBITDA was $104.5 million, with a margin of 14.6%, 160 basis points lower than the prior year.

• Reiterate full year 2024 outlook: net sales low single-digit decline, adjusted EBITDA $385-405 million (margin 14-14.5%), EPS $1.50-1.62.
• Raise capital expenditures range to $80-85 million (inclusive of $9M integration CapEx).
• Expect FCF to be > net income in 2024, including impact of Supreme.

• Supply chain issues, including port strikes and potential Lunar New Year impacts.
• Macroeconomic uncertainties affecting mortgage rates and consumer spending, impacting housing turnover and repair/remodel activity.
• Potential demand impacts from storms, though not expected to be material in the long run.

Q: Garik Shmois asked about volume growth in new construction despite anticipated air pocket and visibility on volume.

A: New construction market still growing, with wins from large top 25 builders, though timing of projects affects revenue.

Q: Garik Shmois asked about pricing.

A: Pricing pressure in repair/remodel, but seeing benefits of price increases in Q4 as competitors followed. Fed rate cuts expected to help stabilize mortgage rates.

Q: Garik Shmois asked about commercial synergies.

A: Sales team organization, product identification, and dealer training ongoing; progress made but takes time for full benefit.

Q: Adam Baumgarten asked about ASP and promotions.

A: Promotions normal, with trade down more in new construction; Fed rate cuts expected to help.

Q: Adam Baumgarten asked about homebuilder wins detail.

A: Predominantly large top 25 builders, timing of projects affects revenue recognition.

Q: Tom Mahoney asked about inventory and storms.

A: Inventory had abnormal build due to port issues, bleeding off now; storms not material to long-term business demand.