MasterBrand, Inc. Q4 FY2024 earnings call

• Dave mentioned that the unexpected decline in the fourth quarter was due to increased choppiness in the repair and remodel business, with volume declines and negative mix shift impacting net ASP. The acquisition of Supreme continued to perform well.
• Andi discussed fourth quarter and full year financial results, including net sales, gross profit, SG&A expenses, net income, and balance sheet details. The organization reviewed and prioritized future spending, including cost reductions and continued investment in strategic initiatives like Tech Enabled.
• Operationally, actions such as consolidating three facilities in North Carolina and relocating the Colton, California facility to North Las Vegas, Nevada were announced, along with plans for cost savings and preserving growth investments.

In the fourth quarter, net sales were $668 million, a 1% decrease compared to the same period last year. The acquisition of Supreme Cabinetry Brands contributed a 9% year-over-year increase to net sales. For the full year 2024, net sales were $2.7 billion, a 1% decline year-over-year, with the Supreme acquisition contributing 4% to net sales. Gross profit in the fourth quarter was $203.3 million, down 9% from the same period last year, and for the full year, gross profit was $877 million, down 3% year-over-year. Adjusted EBITDA in the fourth quarter was $75 million, with a margin of 11.2%, and for the full year, adjusted EBITDA was $363.6 million, down 5% year-over-year.

• Overall end market demand is expected to be down low single-digits in 2025. Net sales are anticipated to be up mid-single digits, with Supreme contributing mid-single digits to net sales and organic net sales expected to be flat year-over-year.
• Adjusted EBITDA is expected to be in the range of $380 million to $410 million for 2025, with adjusted EBITDA margins of roughly 13.5% to 14.3%.
• Plan to invest an incremental $15 million in the Tech Enabled initiative in 2025, and capital expenditures are expected to be in the range of $85 million to $95 million.

• Tariffs pose a risk. Approximately 70%-80% of materials are domestically sourced, around 15%-20% come from Asia, and only low single-digits from China. Recently announced potential tariffs on Canada, Mexico, China, steel and aluminum are expected to require wide-ranging price increases averaging mid-single digits to recover cost impacts. The company has plans in place to mitigate the direct effects of tariffs, including working with customers and suppliers and using alternative supply options.

Q: Adam Baumgarten asked about how revenue and margins are expected to trend throughout 2025, including first half and second half.

A: Dave mentioned normal seasonality, with February picking up to a pace on par with Q3 and early Q4, and fourth quarter next year expected to be better than this year materially.

Q: Adam Baumgarten inquired about whether price increases are delayed or lower than anticipated.

A: Dave responded that it's mostly delayed, with price/cost relationship negative in the fourth quarter but expected to improve as the year goes on.

Q: Adam Baumgarten asked about the performance of the Supreme business in the late November to January period.

A: Dave said it was more resilient, having a similar seasonal pattern but performing at expected levels.

Q: Garik Shmois asked about like-for-like price declines and mix.

A: Dave stated that mix was the majority of the issue, with a slide into lower price points impacting the situation.

Q: Garik Shmois inquired about what showed improvement back to normal in February.

A: Dave and Andi responded that the repair and remodel piece came back, with volume and stronger ASP contributing to confidence.

Q: Garik Shmois asked about the longer-term implications of cost projects.

A: Dave said it's roughly equivalent to Tech Enabled investments, aiming to preserve growth investments.