Merger Details - The merger between MasterBrand, Inc. and American Woodmark Corporation is set to occur, with the latter continuing as the surviving corporation[21] - The merger is intended to qualify as a "reorganization" for U.S. federal income tax purposes under Section 368(a) of the Code[23] - The Company Board has unanimously approved the merger agreement and recommended it to the Company stockholders[23] - The Parent Board has also unanimously approved the merger and directed that the Parent Stock Issuance be submitted for approval[23] - The merger will be consummated remotely via electronic exchange of documents and signature pages[25] - The effective time of the merger will result in Merger Sub ceasing to exist, with the Company becoming a wholly owned subsidiary of Parent[27] - The merger will become effective within 15 days following the filing of the Articles of Merger with the SCC[28] - Each share of Company Common Stock will be converted into the right to receive shares of Parent Common Stock based on the Exchange Ratio, which may be adjusted[41] - The Parent Board will consist of eleven directors, with eight designated by Parent and three by the Company[35] - R. David Banyard, Jr. will continue as the Chief Executive Officer and President of Parent after the Effective Time[38] - The articles of incorporation and bylaws of the Company will be amended to reflect the name "American Woodmark Corporation" for the Surviving Corporation[31] - No appraisal rights will be available to holders of Company Common Stock in connection with the merger[46] - The Exchange Agent will handle the exchange of Company Common Stock for Parent Common Stock and any cash distributions[47] - Holders of Converted Shares will receive cash in lieu of fractional shares based on the proceeds from the sale of such fractional shares[45] - The merger will not affect the name and NYSE ticker symbol of Parent, which will remain "MasterBrand, Inc." and "MBC" respectively[33] - The merger will have effects as outlined in Section 13.1-721 of the VSCA, impacting the capital stock of both the Company and Merger Sub[29] - No dividends or distributions on shares of Parent Common Stock will be paid to holders of Company Common Stock until the surrender of their Certificates[53] - The Merger Consideration issued will satisfy all rights pertaining to Converted Shares of Company Common Stock, except for the right to receive dividends[55] - Any undistributed portion of the Exchange Fund after 12 months will be delivered to Parent, and former holders of Company Common Stock will look only to Parent for payment[57] - The Exchange Agent will invest cash in the Exchange Fund in short-term obligations, and any investment income will belong solely to Parent[60] - Company Stock Options will be assumed by Parent and converted into Assumed Stock Options based on the Exchange Ratio[64] - Company RSUs will convert into the right to receive shares of Parent Common Stock based on the Exchange Ratio, with cash for fractional shares[66] - Company PSUs will convert into Assumed PSUs with the same terms, adjusted for performance metrics and the Exchange Ratio[68] - Company RSTUs will be converted into cash-settled restricted stock tracking units based on the Exchange Ratio[70] - The Company Board will take necessary actions to approve and effectuate the transactions contemplated in the agreement[71] Company Financials - The Company has 40,000,000 authorized shares of Common Stock, with 14,558,035 shares issued and outstanding as of August 1, 2025[81] - There are no shares of Preferred Stock issued or outstanding, and 551,531 shares of Common Stock are reserved for issuance under outstanding awards[82] - The Company has not granted or issued any Equity Awards since the Capitalization Date, except for those related to the vesting or exercise of existing awards[82] - All issued shares of Common Stock are fully paid, non-assessable, and free of preemptive rights[82] - The Company Board unanimously approved the Agreement and the Plan of Merger, recommending adoption to the Company Stockholders[89] - The Company is not subject to any anti-takeover provisions or rights plans that would affect the Merger[90] - The Company has all necessary corporate power to execute and deliver the Agreement and consummate the transactions contemplated[87] - The Company has no outstanding subscriptions, options, or warrants requiring the purchase or issuance of any Equity Securities[85] - The Company is in good standing in all jurisdictions where it operates, with no material adverse effects expected from its current operations[77] - The Company has filed a registration statement for shares subject to Assumed Equity Awards post-Merger[72] - The Company has filed all required SEC documents since April 30, 2023, ensuring compliance with the Securities Act and the Exchange Act[97] - The consolidated financial statements were prepared in accordance with GAAP and present fairly the Company's consolidated financial position and results of operations[99] - The Company has not made any material changes in its accounting methods since April 30, 2023, and there are no unresolved comments from the SEC[99] - The Company is in compliance with the Sarbanes-Oxley Act and NASDAQ corporate governance rules[100] - The Company maintains an effective system of internal control over financial reporting, ensuring reliability in financial statements[101] - No material liabilities have been identified that are not reflected in the most recent audited balance sheet[107] - The Company has conducted its business in the ordinary course since the last balance sheet date, with no adverse effects expected[110] - There are no pending or threatened actions that would materially affect the Company[111] - The Company holds all necessary permits for lawful business conduct, which are valid and in full force[113] Compliance and Legal Matters - The Company has implemented policies to ensure compliance with Anti-Corruption Laws and has not faced any violations since December 31, 2019[116] - Each Company Benefit Plan complies with applicable laws and has been administered in accordance with its terms, with no adverse effects expected[121] - No Company Entity has maintained or contributed to any multiemployer plan or multiple employer plan[122] - There are no pending or threatened actions against any Company Benefit Plan that could result in material liability[125] - No Company Benefit Plan provides retiree or post-employment medical or other welfare benefits[127] - Each Company Entity is in material compliance with all applicable employment laws and practices[135] - Since December 31, 2022, there have been no labor union organizing activities or material labor disputes affecting any Company Entity[133][134] - Each Company Entity holds all necessary Environmental Permits and is in compliance with Environmental Laws[140] - Each Company Entity has timely filed all required tax returns and paid all material taxes in full[148] - There are no claims or investigations pending regarding material taxes of any Company Entity[150] - No Company Entity has been a member of any affiliated group for tax purposes since January 1, 2020[151] - Each Company Entity has timely paid all material amounts required for taxes and complied with applicable laws[153] - No Company Entity has waived or extended any statute of limitations regarding the collection of material taxes since 2020[154] - There are no material actions pending against any Company Entity alleging infringement of intellectual property[167] IT and Security - The Company IT Assets are sufficient for the conduct of the businesses and have maintained a reasonable security program[170] - No Company Entity has distributed stock of another person in a transaction intended to be governed by specific sections of the Code since December 31, 2022[152] - Each Company Material Contract is valid and binding, with no breaches or defaults reported since the Company Balance Sheet Date[165] - The Company Entities have not been subject to tax in any country other than their country of incorporation[155] - The Company has not received any written notice of significant concerns from Material Customers or Suppliers regarding their relationships[165] - The Company has implemented disaster recovery and incident response plans to protect its IT assets and confidential information[170] - Since December 31, 2022, the Company has been in compliance with all applicable Privacy Requirements, with no claims or investigations reported[172] - There have been no breaches of information security or unauthorized access to Company IT Assets since December 31, 2022[173] - All Company insurance policies are in full force, with premiums paid and no breaches or defaults reported[176] - Since December 31, 2022, there have been no material product recalls or significant warranty claims against the Company[178] Financial Advisory - The Company has not engaged any financial advisor or incurred liabilities for financial advisory fees in connection with the transactions contemplated[181] - The Company Board has received a fairness opinion from its financial advisor regarding the Exchange Ratio[182] Parent Company Information - As of the close of business on the Capitalization Date, there were 131,829,964 shares of Parent Common Stock issued and outstanding[193] - Parent has not granted or issued any Parent Equity Awards since the close of business on the Capitalization Date[193] - Parent owns all outstanding Equity Securities in each Parent Subsidiary, free and clear of any liens[197] - Merger Sub has not conducted any business or operations other than in connection with the Agreement and the contemplated transactions[198] - Parent, Merger Sub, and their subsidiaries do not own any equity securities of the Company or hold rights to acquire or vote any equity securities[199] - None of Parent, Merger Sub, or their affiliates have been an "interested shareholder" of the Company in the last three years[199]

Financial Data and Key Metrics Changes - Masterbrand's second quarter net sales were $730.9 million, an 8% increase compared to $676.5 million in the same period last year [26] - Gross profit was $239.7 million, up 3.8% year over year, with a gross profit margin of 32.8%, down 130 basis points from last year [28] - Net income for the second quarter was $37.3 million, down from $45.3 million in the same period last year [29] - Adjusted EBITDA was $105.4 million, relatively flat compared to $105.1 million in the same period last year [30] - Diluted earnings per share were $0.29, compared to $0.35 in the prior year [31] Business Line Data and Key Metrics Changes - Builder direct sales increased by 5% year over year, outperforming the broader single-family new construction market, which declined low single digits [22] - The legacy repair and remodel business, excluding Supreme, declined approximately mid single digits year over year, aligning with broader market trends [23] - Semi-custom products showed growth as consumers shifted towards mid-tier options, indicating a positive trend within the product offering [24] Market Data and Key Metrics Changes - The broader single-family new construction market is expected to decline mid single digits for the full year 2025 [22] - The repair and remodel market is anticipated to be down high to mid single digits for the full year 2025, reflecting ongoing consumer sentiment challenges [24] Company Strategy and Development Direction - The merger with American Woodmark aims to create the industry's most comprehensive portfolio of cabinet brands, enhancing customer choice and operational efficiency [7][8] - The combined entity expects to realize approximately $90 million in run-rate cost synergies by the end of year three, with a focus on procurement and overhead optimization [9][18] - The strategic focus includes investing in next-generation automation and enhancing customer experience through operational flexibility and marketing capabilities [20] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing market softness and a challenging external environment but expressed confidence in the company's strategic priorities and execution capabilities [22][39] - The expectation is for overall new construction and market demand to decline mid single digits for 2025, with a cautious but optimistic outlook for long-term growth [23][36] Other Important Information - The merger is expected to close in early 2026, pending shareholder and regulatory approvals, with Masterbrand shareholders owning approximately 63% of the combined company [10] - The combined company will maintain a significant presence in both Beachwood, Ohio, and Winchester, Virginia [10] Q&A Session Summary Question: Why is the merger happening now given the market conditions? - Management highlighted the compelling combination of two strong U.S. companies that can generate value through an expanded product portfolio and operational efficiencies [42][44] Question: Can you provide more detail on the cost synergies? - Management indicated that synergies would be approximately 40% from G&A and indirect costs and under 60% from COGS, with a detailed analysis already conducted [47][48] Question: How will the combined entity address potential regulatory hurdles? - Management expressed confidence in navigating regulatory processes and emphasized the compelling value proposition for customers and consumers [49][50] Question: What is the expected phasing of the $90 million in synergies? - Management indicated that synergies would phase in similarly to previous acquisitions, with some easier initiatives implemented first [54][55] Question: How will the merger impact market share and channel exposure? - Management noted that the merger would enhance value across all channels and provide opportunities for cross-selling, with a focus on maintaining and expanding customer relationships [64][66]

Financial Performance - Q2 2025 - Net sales increased to $730.9 million, an 8% increase compared to $676.5 million in Q2 2024 [33] - Gross profit reached $239.7 million, a 3.8% increase from $231.0 million in Q2 2024, but gross profit margin decreased by 130 bps to 32.8% [33] - Net income decreased by 17.7% to $37.3 million, compared to $45.3 million in Q2 2024, with net income margin declining by 160 bps to 5.1% [33] - Adjusted EBITDA increased slightly by 0.3% to $105.4 million, compared to $105.1 million in Q2 2024, but adjusted EBITDA margin decreased by 110 bps to 14.4% [33] Full Year 2025 Outlook - The company anticipates a low single-digit percentage decline in net sales for the full year 2025 [35] - Adjusted EBITDA is projected to be between $315 million and $365 million [35] - Adjusted EBITDA margin is expected to be approximately 12.0%-13.5% [35] - Adjusted diluted EPS is forecasted to be between $1.03 and $1.32 [35] Long-Term Financial Targets - The company aims for a 4-6% CAGR in net sales [40] - The company targets an adjusted EBITDA margin of approximately 16%-18% [40]

Group 1 - MasterBrand's stock price has decreased by over 36% due to a combination of factors, including a historically weak housing environment [1] - The company is facing challenges following its acquisition of Supreme Cabinetry Brands [1] Group 2 - Spencer Chrisman, a Certified Public Accountant, follows a value-oriented investment approach focusing on long-term success criteria [1] - Chrisman is concentrating on micro-cap and small-cap investment opportunities across various sectors [1] - He has recently begun writing for Seeking Alpha and plans to create an investment series on a $1M portfolio of dividend stocks [1]

Core Insights - Astellas Pharma U.S. Inc. and MBC BioLabs announced DeepSeq.AI, Inc. and Serna Bio as winners of the Future Innovator Prize, which provides access to advanced lab facilities and Astellas' R&D capabilities [1][2][3] Group 1: Prize Overview - The Astellas Future Innovator Prize is awarded to pioneering scientists with innovative research that aligns with Astellas' Focus Area Approach, including Genetic Regulation, Immuno-Oncology, Targeted Protein Degradation, and Blindness & Regeneration [5] - This year, Astellas received over 50 applications, with the winners selected based on the strength of their innovation and therapeutic potential [2][5] Group 2: Company Profiles - DeepSeq.AI focuses on AI-driven large molecule discovery, utilizing high-throughput wet lab assays and generative models to optimize biologics, claiming to accelerate IND timelines by 10x and reduce costs by 50% [9] - Serna Bio is developing small molecules to upregulate protein translation by targeting functional RNA structures, leveraging a comprehensive platform for target discovery and chemical optimization [10] Group 3: Statements from Leadership - Issei Tsukamoto from Astellas emphasized the importance of supporting startups that have the potential to transform patient care globally [3] - Doug Crawford from MBC BioLabs highlighted the role of the Future Innovator Prize in providing access to a community of entrepreneurs and expert mentorship to accelerate early-stage breakthroughs [4]

Part I - Financial Information [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) The unaudited condensed consolidated financial statements detail the company's performance for Q1 2025 [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Q1 2025 saw higher sales but significantly lower operating and net income compared to the prior year Q1 2025 vs Q1 2024 Income Statement Highlights | Metric | Q1 2025 (13 Weeks Ended Mar 30) | Q1 2024 (13 Weeks Ended Mar 31) | Change | | :--- | :--- | :--- | :--- | | **Net Sales** | $660.3 million | $638.1 million | +3.5% | | **Gross Profit** | $202.2 million | $204.7 million | -1.2% | | **Operating Income** | $37.1 million | $62.8 million | -40.9% | | **Net Income** | $13.3 million | $37.5 million | -64.5% | | **Diluted EPS** | $0.10 | $0.29 | -65.5% | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets and liabilities increased slightly as of March 30, 2025, driven by a rise in long-term debt Balance Sheet Summary | Metric | March 30, 2025 | December 29, 2024 | | :--- | :--- | :--- | | **Total Current Assets** | $689.1 million | $650.7 million | | **Total Assets** | $2,955.8 million | $2,929.8 million | | **Total Current Liabilities** | $362.5 million | $395.4 million | | **Long-term Debt** | $1,058.2 million | $1,007.8 million | | **Total Liabilities** | $1,649.1 million | $1,635.1 million | | **Total Equity** | $1,306.7 million | $1,294.7 million | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The company experienced a net cash outflow from operations in Q1 2025, a reversal from the prior year's inflow Cash Flow Summary (13 Weeks Ended) | Activity | March 30, 2025 | March 31, 2024 | | :--- | :--- | :--- | | **Net Cash (Used in) Provided by Operating Activities** | $(31.4) million | $18.7 million | | **Net Cash Used in Investing Activities** | $(9.8) million | $(7.0) million | | **Net Cash Provided by (Used in) Financing Activities** | $33.5 million | $(7.1) million | | **Net (Decrease) Increase in Cash** | $(7.5) million | $5.0 million | [Notes To Unaudited Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20To%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Notes detail the Supreme acquisition's impact, revenue disaggregation, debt refinancing, and share repurchases - On July 10, 2024, the company acquired Supreme Cabinetry Brands for **$527.3 million**, funded by cash and revolving credit[26](index=26&type=chunk)[29](index=29&type=chunk) - For the 13 weeks ended March 30, 2025, Supreme contributed **$60.8 million in Net Sales** and **$4.1 million in Net Income**[26](index=26&type=chunk)[29](index=29&type=chunk) Net Sales by Channel (13 Weeks Ended) | Channel | March 30, 2025 | March 31, 2024 | | :--- | :--- | :--- | | Dealers | $353.1 million | $315.0 million | | Retailers | $223.5 million | $242.9 million | | Builders | $83.7 million | $80.2 million | | **Total** | **$660.3 million** | **$638.1 million** | - In June 2024, the company completed a refinancing transaction, issuing **$700.0 million of 7.00% Senior Notes** due 2032 and entering a new credit agreement with a **$750.0 million revolving credit facility**[54](index=54&type=chunk)[55](index=55&type=chunk)[57](index=57&type=chunk) - The company recorded restructuring charges of **$4.7 million in Q1 2025**, primarily for severance costs to align its workforce with demand[61](index=61&type=chunk) - During Q1 2025, the company repurchased **838,984 shares for approximately $11.4 million**[79](index=79&type=chunk)[82](index=82&type=chunk) - A new **$50.0 million share repurchase program** was authorized in March 2025[79](index=79&type=chunk)[82](index=82&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes sales growth to the Supreme acquisition, which offset declines in the legacy business [Results of Operations](index=30&type=section&id=Results%20of%20Operations) The Supreme acquisition drove a 3.5% net sales increase, but higher costs eroded gross and operating margins - Net sales increased **$22.2 million (3.5%) YoY**, with the Supreme acquisition contributing **$60.8 million**[99](index=99&type=chunk) - Legacy business sales **declined by $38.6 million** due to lower volume in repair/remodel and single-family new construction markets[99](index=99&type=chunk) - Cost of products sold as a percentage of net sales **increased to 69.4% from 67.9% YoY**, driven by higher manufacturing costs and unfavorable fixed cost leverage[101](index=101&type=chunk) - SG&A expenses **rose by $16.2 million (11.8%)**, primarily due to the inclusion of Supreme ($13.0 million), increased associate-related costs ($2.7 million), and acquisition-related costs ($1.6 million)[102](index=102&type=chunk) - Interest expense **increased to $19.4 million from $14.1 million** due to a higher outstanding debt balance following the refinancing transaction for the Supreme acquisition[104](index=104&type=chunk) [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity is supported by a revolving credit facility, with total debt standing at $1,058.2 million - The company completed a major debt refinancing in June 2024, issuing **$700 million in Senior Notes** and establishing a new **$750 million revolving credit facility**[111](index=111&type=chunk) - As of March 30, 2025, the company had **$1,058.2 million in outstanding debt** and was in compliance with all debt covenants[114](index=114&type=chunk)[115](index=115&type=chunk) - Net cash used by operating activities was **$31.4 million in Q1 2025**, compared to **$18.7 million provided in Q1 2024**, primarily due to a larger increase in accounts receivable and inventory[117](index=117&type=chunk) - Net cash from financing activities was **$33.5 million**, reflecting **$50 million in net borrowings** to fund working capital needs and **$11.4 million used for stock repurchases**[119](index=119&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=35&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Market risk disclosures remain materially unchanged from the 2024 Annual Report on Form 10-K - There have been **no material changes in market risk** since the last Annual Report on Form 10-K[123](index=123&type=chunk) [Controls and Procedures](index=35&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective with no material changes to internal controls - The CEO and CFO concluded that the company's disclosure controls and procedures were **effective** as of the evaluation date, March 30, 2025[124](index=124&type=chunk) - **No changes in internal control over financial reporting** occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[125](index=125&type=chunk) Part II - Other Information [Legal Proceedings](index=36&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in routine litigation and is addressing a now-annulled tax assessment in Mexico - The company is a defendant in ordinary routine litigation and does not consider any pending action to be **material**[127](index=127&type=chunk) - A Mexican tax authority (SAT) issued a **~$54.9 million tax assessment** for the 2018 tax year, which the SAT later annulled[128](index=128&type=chunk) - The company is taking legal action to make the annulment final and believes the risk of additional loss is **remote**[128](index=128&type=chunk) [Risk Factors](index=36&type=section&id=Item%201A.%20Risk%20Factors) Key risks include supply chain efficiency, third-party supplier dependence, and changing government regulations - Risks related to improving organizational productivity and global supply chain efficiency, including **potential interruptions in raw material supply**, could adversely affect operations[131](index=131&type=chunk)[132](index=132&type=chunk) - The company is exposed to global business risks, including **uncertain trade environments, tariffs, and political changes** in countries where it manufactures or sources materials[133](index=133&type=chunk) - Dependence on third-party suppliers presents risks of **supply disruption, quality issues, and cost increases**[135](index=135&type=chunk) - Changes in government and industry regulations related to trade, health, safety, taxes, and the environment could **increase costs and impact results**[137](index=137&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=39&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased 838,984 shares for $11.4 million in Q1 2025 under its authorized programs Share Repurchases in Q1 2025 | Period | Total Shares Purchased | Average Price Paid per Share | Maximum Amount Remaining for Purchase | | :--- | :--- | :--- | :--- | | **Feb 24 - Mar 30, 2025** | 838,984 | $13.60 | $60,015,416 | | **Q1 2025 Total** | **838,984** | **$13.60** | | - As of March 30, 2025, **$10.0 million remained** under the 2023 Share Repurchase Authorization and **$50.0 million remained** under the new 2025 Share Repurchase Authorization[139](index=139&type=chunk) [Other Information](index=39&type=section&id=Item%205.%20Other%20Information) No directors or executive officers adopted, modified, or terminated Rule 10b5-1 trading plans during the quarter - **No directors or executive officers** adopted, modified, or terminated any Rule 10b5-1 trading plans during the quarter[142](index=142&type=chunk)

Financial Data and Key Metrics Changes - The company reported net sales of $660 million for the first quarter of 2025, representing a 3% increase compared to the same period last year [6] - Adjusted EBITDA was $67 million, with an adjusted EBITDA margin of 10.2%, which is 220 basis points lower than the same period last year [8][30] - Free cash flow was negative $41 million, a decline from positive $12 million in the same period last year [9][33] - Net income decreased to $13.3 million from $37.5 million year-over-year, primarily due to higher selling, general, and administrative expenses [28] Business Line Data and Key Metrics Changes - The Supreme acquisition contributed to a 10% growth, while legacy business saw a 2% increase in net average selling prices (ASP) [7] - Market volume declines of 9% were noted in the base business, particularly affecting customers in the repair and remodel market [7] - Builder Direct sales increased by over 4% compared to the prior year, despite declines in the new construction market [8] Market Data and Key Metrics Changes - Year-over-year market volume declines were observed across all channels and end markets in the first quarter [10] - The new construction market is expected to decline by mid-single digits for the full year 2025, influenced by lower foot traffic and builder commentary [12] - The repair and remodel market is anticipated to decline by high to mid-single digits for 2025, with fluctuations in order patterns noted [14][16] Company Strategy and Development Direction - The company is focusing on cost preservation and maintaining a strong balance sheet while investing in targeted growth areas [17] - Facility consolidations are underway to reduce costs and improve service, with expected financial benefits materializing in the third quarter [19] - Strategic initiatives include "Align to Grow," "Lead through Lean," and "Tech Enabled," aimed at positioning the company for future growth [20][25] Management's Comments on Operating Environment and Future Outlook - Management noted that the current demand environment is choppy, with expectations of continued weakness in the second half of 2025 [10][12] - Tariffs are impacting consumer confidence and large ticket purchases, contributing to a more cautious outlook for the year [16][39] - The company anticipates adjusted EBITDA for 2025 to be in the range of $315 million to $365 million, with a focus on balancing near-term performance and long-term growth [41][42] Other Important Information - The company ended the quarter with $113.5 million in cash and $358.6 million in liquidity available [30] - A new share repurchase program was authorized, allowing for the repurchase of up to $50 million of common stock [33] Q&A Session Summary Question: How is the company thinking about pricing in relation to tariffs? - Management indicated that additional pricing actions are necessary to counteract tariff impacts, using a surcharge methodology [46][48] Question: What is the expected demand cadence for Q2? - Management expects to see normal seasonality in Q2, but acknowledges challenges due to tariff costs and inefficiencies in certain factories [53][66] Question: How will margin progression look in Q2? - Margins are expected to improve from Q1, but not to the company's standards due to fixed cost pressures and tariff impacts [64][66] Question: What factors will influence the EBITDA guidance range? - The range is primarily dictated by market demand and the company's ability to gain market share amidst tariff uncertainties [69][70] Question: How does the company view its position relative to tariffs? - The company believes it is better insulated from tariffs due to its production being predominantly in the U.S., allowing it to absorb volume changes more effectively [75][78]

Financial Data and Key Metrics Changes - The company reported net sales of $660 million for the first quarter of 2025, representing a 3% increase compared to the same period last year [6][24] - Adjusted EBITDA was $67 million, with an adjusted EBITDA margin of 10.2%, which is 220 basis points lower than the same period last year [7][28] - Net income decreased to $13.3 million from $37.5 million year-over-year, primarily due to higher selling, general, and administrative expenses [26][30] - Free cash flow was negative $41 million, compared to positive $12 million in the same period last year [9][30] Business Line Data and Key Metrics Changes - The Supreme acquisition contributed to a 10% growth, while the legacy business saw a 2% increase in net average selling prices (ASP) [6][7] - Builder Direct sales increased by over 4% year-over-year, despite declines in the new construction market [7] - The repair and remodel market experienced mid-single-digit declines, particularly in lower-priced products [13][14] Market Data and Key Metrics Changes - Year-over-year market volume declines were observed across all channels and end markets, with the new construction market down low single digits [10][12] - The Canadian market saw high single-digit declines in both new construction and repair and remodel markets [15] - Overall end market demand is now expected to decline by high to mid-single digits in 2025, revised from previous expectations [16] Company Strategy and Development Direction - The company is focusing on cost preservation and maintaining a strong balance sheet while investing in targeted growth areas [16][19] - Facility consolidations are underway to improve efficiency and reduce costs, with expected benefits materializing in the third quarter [17][18] - Strategic initiatives include Align to Grow, Lead through Lean, and Tech Enabled, aimed at positioning the company for future growth [19][20][22] Management's Comments on Operating Environment and Future Outlook - Management noted that the current demand environment is choppy, with expectations for continued weakness in the second half of 2025 [10][12] - Tariffs are impacting consumer confidence and purchasing behavior, leading to a cautious outlook for large-ticket items [15][36] - The company anticipates adjusted EBITDA for 2025 to be in the range of $315 million to $365 million, with a wider range due to tariff uncertainties [38] Other Important Information - The company authorized a new share repurchase program of up to $50 million [30] - Capital expenditures for 2025 are expected to be between $75 million and $85 million, down from previous estimates [39] Q&A Session Summary Question: Thoughts on pricing and demand impacts - Management indicated that additional pricing actions are needed to counteract tariff impacts, with a focus on timing and customer negotiations [43][44] Question: Demand cadence and seasonality - Management expects a normal seasonal pattern in Q2, but acknowledges challenges due to tariffs and operational adjustments [49][50] Question: Margin progression in Q2 - Margins are expected to improve from Q1, but not to desired levels due to inefficiencies and tariff costs [58][61] Question: Factors affecting EBITDA guidance - The wide range in EBITDA guidance is primarily driven by market demand and the company's ability to gain market share [63][65] Question: Positioning relative to tariffs - The company is better insulated from tariffs due to its U.S.-based production, allowing it to absorb volume changes if necessary [70][72] Question: ASP trends and inventory growth - Management noted that inventory growth is partly due to safety stock and not a significant pre-buy, with plans to adjust inventory levels as demand stabilizes [78]

Financial Performance - Net sales for Q1 2025 were $660.3 million, a 3% increase year-over-year, driven by a 10% contribution from the Supreme acquisition and a 2% increase from average selling price improvements[4] - Net income decreased 65% year-over-year to $13.3 million, resulting in a net income margin of 2.0%, down from 5.9% in the prior year[5] - Adjusted EBITDA was $67.1 million, a decrease from $79.4 million in Q1 2024, with an adjusted EBITDA margin of 10.2%, down 220 basis points year-over-year[6] - The company reported a diluted earnings per share of $0.10, compared to $0.29 in the prior year, and adjusted diluted earnings per share of $0.18, down from $0.31[6] - Operating income fell to $37.1 million, a decline of 41.0% from $62.8 million in the previous year[26] - Net income for the period was $13.3 million, a significant decrease of 64.5% compared to $37.5 million in the same quarter last year[26] - Adjusted EBITDA was $67.1 million, down from $79.4 million, reflecting a margin of 10.2% compared to 12.4% in the prior year[29] - Basic and diluted earnings per share were both $0.10, down from $0.30 and $0.29 respectively in the previous year[29] Debt and Cash Flow - As of March 30, 2025, total debt was $1,058.2 million, with a net debt to adjusted EBITDA ratio of 2.7x[8] - Free cash flow was negative $41.2 million for the thirteen weeks ended March 30, 2025, compared to positive $11.7 million for the same period in 2024[8] - The company reported a net debt of $944.7 million, an increase from $554.3 million year-over-year, with a net debt to adjusted EBITDA ratio of 2.7x[38] - Free cash flow for the quarter was negative at $(41.2) million, compared to positive free cash flow of $11.7 million in the same quarter last year[40] - Cash and cash equivalents decreased to $113.5 million from $153.7 million year-over-year[38] Future Outlook - The company expects organic net sales performance to outperform the underlying market in 2025, driven by new products and pricing actions[9] - Adjusted EBITDA for 2025 is projected to be in the range of $315 to $365 million, with an adjusted EBITDA margin of approximately 12.0% to 13.5%[12] - The company plans to focus on preserving margins through cost actions and facility rightsizing amid economic uncertainty[11] Shareholder Actions - MasterBrand repurchased approximately 839 thousand shares of common stock for about $11.4 million during the first quarter[8] Profitability Metrics - Gross profit decreased to $202.2 million, resulting in a gross profit margin of 30.6%, down from 32.1% in the prior year[26] - The company incurred restructuring charges of $4.7 million, significantly higher than $0.4 million in the prior year[29]

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]