Core Insights - MasterBrand Cabinets (NYSE: MBC) reported a quarter that was contextually acceptable, but sales are continuing to decline due to unexpected softness, leading to a decrease in share price to the mid-$14 range post-earnings [1] Company Performance - The company experienced a decline in sales, which was described as "unexpected" softness, impacting overall performance [1] - Following the earnings report, shares of MasterBrand Cabinets traded down, reflecting market reaction to the sales trend [1] Valuation Concerns - The primary concern regarding valuation is linked to the ongoing sales decline, raising questions about the company's future performance and market position [1]

Core Insights - Astellas Pharma U.S. Inc. and MBC BioLabs have launched the Astellas Future Innovator Prize to support early-stage life-science companies and entrepreneurial scientists by providing access to state-of-the-art facilities and Astellas' expertise [2][3][4] Group 1: Prize Details - The Astellas Future Innovator Prize offers up to two awards for innovative research ideas that align with Astellas' focus areas, including Blindness & Beyond, Genetic Regulation, Immuno-Oncology, Cell Therapy, and Targeted Protein Degradation [5][6] - Awardees will receive one year of priority access to MBC BioLabs' facilities and Astellas' research and development resources [6] Group 2: Application Process - The application period for the Astellas Future Innovator Prize runs from February 27 to April 1, 2025, requiring participants to submit a non-confidential company presentation and a one-page executive summary [4][6] - The selection process for the prize is solely at Astellas' discretion, with no appeals allowed [6] Group 3: Company Background - Astellas is a global life sciences company focused on developing transformative therapies in areas such as oncology, ophthalmology, urology, immunology, and women's health, addressing high unmet medical needs [8] - MBC BioLabs has supported over 350 startups since its inception in October 2013, facilitating 176 clinical trials and the introduction of 71 products to market, raising nearly $20 billion in funding [10]

Company Overview - MasterBrand is the largest manufacturer of residential cabinets in North America, leveraging superior product quality and innovative design to drive value[170]. - Following the Separation from Fortune Brands, MasterBrand became an independent publicly-traded company on December 15, 2022, with 128.0 million shares issued[174]. - The Separation allows MasterBrand to focus on strategic growth opportunities and operational effectiveness tailored to its industry[175]. Acquisition and Expansion - The company completed the acquisition of Supreme on July 10, 2024, enhancing its portfolio of premium cabinetry and expanding its dealer network[171]. - The acquisition was funded through cash on hand and proceeds from a revolving credit facility, indicating a strategic approach to capital deployment[171]. - The acquisition of Supreme contributed $121.2 million in incremental sales in the second half of 2024[184]. Financial Performance - Net sales for fiscal 2024 were $2,700.4 million, a decrease of $25.8 million or 0.9% compared to $2,726.2 million in fiscal 2023[183]. - Gross profit decreased by $24.4 million or 2.7% to $877.0 million in 2024 from $901.4 million in 2023[183]. - Operating income fell to $235.7 million, down $70.6 million or 23.0% from $306.3 million in the previous year[183]. - Net income for 2024 was $125.9 million, a decline of $56.1 million or 30.8% compared to $182.0 million in 2023[183]. - Selling, general and administrative expenses increased by $33.4 million or 5.9% to $603.1 million in 2024, primarily due to acquisition-related costs[187]. - Interest expense rose to $74.0 million in 2024, an increase of $8.8 million or 13.5% from $65.2 million in 2023[189]. - The effective tax rate for 2024 was 25.2%, up from 23.8% in 2023, primarily due to increased valuation allowance and nondeductible transaction costs[193]. Cash Flow and Liquidity - Net cash provided by operating activities decreased to $292.0 million in 2024, down from $405.6 million in 2023, primarily due to a decrease in net income from $182.0 million in 2023 to $125.9 million in 2024[209]. - Net cash used in investing activities increased significantly to $580.8 million in 2024, compared to $56.9 million in 2023, largely due to the acquisition of Supreme for $514.5 million[210]. - Net cash provided by financing activities was $269.6 million in 2024, a turnaround from net cash used of $299.9 million in 2023, aided by a refinancing transaction[211]. - The company maintained a minimum interest coverage ratio of 3.00 to 1.00 as per the 2024 Credit Agreement, with a net leverage ratio not exceeding 3.50 to 1.00 for fiscal quarters ending on or prior to December 31, 2024[204]. Debt and Obligations - The company refinanced its debt in June 2024, issuing $700.0 million of Senior Notes due 2032 to fund the acquisition of Supreme and repay existing debt[198]. - As of December 29, 2024, the company had $1,007.8 million in outstanding third-party borrowings, net of deferred financing fees[206]. - Total contractual cash obligations as of December 29, 2024, amounted to $1,636.9 million, including $1,020.0 million in debt payments and $486.8 million in interest payments[217]. Operational Efficiency - MasterBrand's operational model emphasizes standardization and lean manufacturing capabilities to enhance efficiency and cost management[180]. - The company aims to utilize technology and data to improve the consumer experience from visualization to delivery and installation[170]. - MasterBrand's financial condition and liquidity are underpinned by a tailored capital structure that enhances operational flexibility and resource allocation[180]. Inventory and Impairment - Inventory provision was recorded at $17.0 million as of December 29, 2024, compared to $15.9 million as of December 31, 2023, indicating an increase in provisions for obsolete or slow-moving inventory[233]. - An impairment charge of $26.0 million was recognized for an indefinite-lived tradename in Q2 2022, followed by an additional charge of $12.8 million in Q4 2022 due to shifts in forecasted revenue growth rates[240]. - The carrying value of the impaired indefinite-lived tradename was $46.2 million as of December 29, 2024, and December 31, 2023[240]. - A second indefinite-lived tradename incurred an impairment charge of $7.6 million in Q4 2022, with a carrying value of $19.1 million as of December 29, 2024, and December 31, 2023[241]. - The fair values of impaired tradenames were measured using the relief-from-royalty approach, with significant assumptions including forecasted revenue growth rates and market-participant discount rates[242]. Risk Management - The company does not enter into derivatives for trading or speculative purposes but uses financial instruments to manage foreign currency exchange rate risks[249]. - The estimated potential loss under foreign exchange contracts from movement in foreign exchange rates would not have a material impact on the company's results of operations[252]. - The company assesses goodwill for impairment at least annually, with qualitative and quantitative tests based on market conditions and operational performance[234]. - Future changes in market-participant discount rates or projected cash flows could lead to significant adjustments in the estimated fair values of intangible assets and goodwill[232].

Financial Data and Key Metrics Changes - The company reported net sales of $668 million in Q4 2024, a decrease of 1% compared to the same period last year [8][37] - Adjusted EBITDA for Q4 was $75 million, with a margin of 11.2%, down 150 basis points year-over-year [13][46] - Full year 2024 net sales totaled $2.7 billion, also down 1% from the previous year [46] - Net income for Q4 was $14 million, a decline from $36.1 million in the same period last year [42] - Diluted earnings per share were $0.11 in Q4 2024, down from $0.28 in the prior year [45] Business Line Data and Key Metrics Changes - The repair and remodel business experienced a year-over-year volume decline of 6% in the legacy business during Q4 [9] - The acquisition of Supreme Cabinetry Brands contributed a 9% year-over-year increase to net sales [13] - Gross profit for Q4 was $203.3 million, down 9% compared to $223.1 million in the same period last year [38] Market Data and Key Metrics Changes - The U.S. single-family new construction market was estimated to be slightly up year-over-year in Q4, with expectations of flat to low single-digit declines for the full year 2025 [18][20] - The Canadian market saw low single-digit declines across both new construction and repair and remodel markets [23] Company Strategy and Development Direction - The company is focusing on three strategic initiatives: Align to Grow, Lead Through Lean, and Tech Enabled, with plans to invest an incremental $15 million in the Tech Enabled initiative in 2025 [30][64] - Cost reduction measures have been identified, including targeted headcount reductions and reduced discretionary spending [29] Management's Comments on Operating Environment and Future Outlook - Management noted that the market remained choppy throughout Q4, with expectations of continued choppiness through at least the first half of 2025 [22] - The company anticipates overall market demand to be down low single-digits in 2025, but expects annual net sales to be up mid-single-digits due to the Supreme acquisition [58][60] Other Important Information - The company ended the year with $120.6 million in cash and a net debt to adjusted EBITDA leverage ratio of 2.4 times [54][55] - Capital expenditures for 2024 were $80.9 million, an increase from $57.3 million in the prior year [56] Q&A Session Summary Question: Can you elaborate on the 2025 guidance regarding revenue and margins? - Management indicated that while the first half of 2025 may be softer, February showed a return to normal demand levels, providing confidence for the year [78][80] Question: What is the status of pricing increases? - Pricing increases have been mostly delayed, with the dealer network realizing prices quicker than other channels [84][85] Question: How did the Supreme business perform during the recent market fluctuations? - The Supreme business was more resilient during the late November through January period compared to other segments [87] Question: Can you clarify the impact of mix on pricing? - The mix was primarily responsible for pricing declines, with a shift towards lower price point products affecting overall pricing [92][93] Question: What recent improvements have been observed in the market? - The repair and remodel segment has shown signs of recovery in February, returning to pre-holiday levels [97][100]

Q4 and FY 2024 Investor Presentation February 18, 2025 Forward-Looking Statements Certain statements contained in this presentation, other than purely historical information, including, but not limited to estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are forward-looking statements. Statements preceded by, followed by or that otherwise include the word "believes," "expects," "anticipates ...

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]