UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2024 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 001-41545 MasterBrand, Inc. Table of Contents (Exact name of registrant as specified in its charter) Delaware 88-3479920 (State or other jurisdiction of incorporation or organiz ...

[First Quarter 2024 Financial Results Overview](index=1&type=section&id=First%20Quarter%202024%20Financial%20Results%20Overview) [CEO Commentary](index=1&type=section&id=CEO%20Commentary) MasterBrand's CEO, Dave Banyard, reported a solid start to the year with continued year-over-year **adjusted EBITDA margin expansion** and **strong first-quarter free cash flow**, indicating progress across strategic initiatives: Align to Grow, Lead through Lean, and Tech Enabled - The company delivered a solid quarter with continued year-over-year **adjusted EBITDA margin expansion** and **strong first quarter free cash flow**[3](index=3&type=chunk) - Meaningful progress was made across strategic initiatives: Align to Grow, Lead through Lean, and Tech Enabled[3](index=3&type=chunk) [Q1 2024 Key Financial Highlights](index=1&type=section&id=Q1%202024%20Key%20Financial%20Highlights) MasterBrand reported a 5.7% net sales decrease in Q1 2024, offset by gross profit margin expansion and a 7.1% increase in net income | Metric | Q1 2024 (Millions USD) | Q1 2023 (Millions USD) | Change (%) | Basis Point Change | Source Chunk | | :----------------------- | :--------------------- | :--------------------- | :--------- | :----------------- | :----------- | | Net Sales | $638.1 | $676.7 | -5.7% | - | 4, 5 | | Gross Profit | $204.7 | $204.6 | Flat | - | 4 | | Gross Profit Margin | 32.1% | 30.2% | - | +190 bps | 4 | | Net Income | $37.5 | $35.0 | +7.1% | - | 5 | | Adjusted EBITDA | $79.4 | $81.5 | -2.6% | - | 5 | | Adjusted EBITDA Margin | 12.4% | 12.0% | - | +40 bps | 5 | | Diluted EPS | $0.29 | $0.27 | +7.4% | - | 5 | | Adjusted Diluted EPS | $0.29 | $0.28 | +3.6% | - | 5 | [Balance Sheet, Cash Flow and Share Repurchases](index=2&type=section&id=Balance%20Sheet%2C%20Cash%20Flow%20and%20Share%20Repurchases) MasterBrand maintained strong liquidity with $153.7 million cash, improved net debt to adjusted EBITDA to 1.5x, and generated positive operating and free cash flow | Metric | As of March 31, 2024 (Millions USD) | As of March 31, 2023 (Millions USD) | Source Chunk | | :-------------------------------- | :---------------------------------- | :---------------------------------- | :----------- | | Cash and cash equivalents | $153.7 | $116.3 | 6, 30 | | Revolving credit facility availability | $477.3 | - | 6 | | Net Debt | $554.3 | $823.3 | 6, 30 | | Net Debt to Adjusted EBITDA | 1.5x | 2.0x | 6, 30 | | Operating Cash Flow (13 weeks) | $18.7 | $62.1 | 6, 32 | | Free Cash Flow (13 weeks) | $11.7 | $59.2 | 6, 32 | - The company repurchased **approximately 104 thousand shares of common stock** during the thirteen weeks ended March 31, 2024[6](index=6&type=chunk) [2024 Financial Outlook](index=2&type=section&id=2024%20Financial%20Outlook) [CFO Commentary](index=2&type=section&id=CFO%20Commentary) CFO Andi Simon reiterated the full-year 2024 outlook, with Q1 performance meeting expectations and strategic initiatives supporting growth despite uncertainty - The company reiterates its **full year 2024 outlook**, with **Q1 financial and operational performance in line with expectations**[7](index=7&type=chunk) - Despite macroeconomic uncertainty, the initial view of **end market demand remains intact**, and **strategic initiatives will help achieve the outlook and invest for growth**[7](index=7&type=chunk) [Full Year 2024 Guidance](index=2&type=section&id=Full%20Year%202024%20Guidance) MasterBrand reiterated its full-year 2024 guidance, projecting flat to low single-digit net sales decline, adjusted EBITDA of $370-$400 million, and adjusted diluted EPS of $1.40-$1.60 | Metric | Full Year 2024 Guidance | Source Chunk | | :-------------------- | :---------------------- | :----------- | | Net Sales | Low single-digit decline to flat | 8 | | Adjusted EBITDA | $370 million to $400 million | 8 | | Adjusted EBITDA Margin | 14.0% to 14.5% | 8 | | Adjusted Diluted EPS | $1.40 to $1.60 | 8 | [Additional Company Information](index=3&type=section&id=Additional%20Company%20Information) [Conference Call Details](index=3&type=section&id=Conference%20Call%20Details) MasterBrand announced a live conference call and webcast on May 7, 2024, to discuss financial results and outlook, with replay options available - A live conference call and webcast were scheduled for May 7, 2024, at 4:30 p.m. ET to discuss financial results and business outlook[9](index=9&type=chunk) - A telephone replay will be available until May 21, 2024, and an archived webcast will be accessible on the company's website[10](index=10&type=chunk) [Non-GAAP Financial Measures](index=3&type=section&id=Non-GAAP%20Financial%20Measures) MasterBrand uses non-GAAP measures to clarify core operations and aid management, with forward-looking guidance reconciliation omitted due to forecasting difficulties - **Non-GAAP financial measures** such as **EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Diluted EPS, Free Cash Flow, Net Debt, and Net Debt to Adjusted EBITDA** are used to supplement GAAP information[12](index=12&type=chunk)[13](index=13&type=chunk) - These measures are intended to **enhance understanding of financial information, evaluate operating results, and assist in management decisions regarding resource allocation and performance assessment**[11](index=11&type=chunk)[12](index=12&type=chunk)[13](index=13&type=chunk) - **Reconciliation of fiscal 2024 adjusted EBITDA, adjusted EBITDA margin, and adjusted diluted EPS guidance is not provided** due to the **inherent difficulty of forecasting certain items**[7](index=7&type=chunk)[15](index=15&type=chunk) [About MasterBrand](index=5&type=section&id=About%20MasterBrand) MasterBrand, Inc. is North America's largest residential cabinet manufacturer, distributing diverse products through an extensive network of over 4,400 dealers and major retailers - MasterBrand, Inc. is the **largest manufacturer of residential cabinets in North America**[16](index=16&type=chunk) - The company offers a **comprehensive portfolio of residential cabinetry products** across stock, semi-custom, and premium categories[16](index=16&type=chunk) - Products are delivered through an **industry-leading distribution network of over 4,400 dealers, major retailers, and builders**[16](index=16&type=chunk) [Forward-Looking Statements](index=5&type=section&id=Forward-Looking%20Statements) This section disclaims forward-looking statements, which are subject to risks and uncertainties detailed in SEC filings, with no obligation for updates - Statements in the press release, other than purely historical information, are **forward-looking statements** and based on current management plans and expectations[17](index=17&type=chunk) - These statements are subject to **numerous factors, risks, and uncertainties**, including those listed under 'Risk Factors' in the company's Form 10-K, which could cause actual results to differ materially[17](index=17&type=chunk)[19](index=19&type=chunk) - The company undertakes **no obligation to update, amend, or clarify any forward-looking statements** after the date of the press release, except as required by federal securities laws[18](index=18&type=chunk) [Condensed Consolidated Financial Statements](index=7&type=section&id=Condensed%20Consolidated%20Financial%20Statements) [Condensed Consolidated Statements of Income](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) This section presents unaudited condensed consolidated statements of income for Q1 2024 and Q1 2023, detailing key revenue, expense, and net income figures | (U.S. Dollars presented in millions, except per share amounts) | 13 Weeks Ended March 31, 2024 | 13 Weeks Ended March 26, 2023 | | :----------------------------------------------------------- | :---------------------------- | :---------------------------- | | NET SALES | $638.1 | $676.7 | | Cost of products sold | 433.4 | 472.1 | | GROSS PROFIT | 204.7 | 204.6 | | Gross Profit Margin | 32.1 % | 30.2 % | | Selling, general and administrative expenses | 137.8 | 135.3 | | Amortization of intangible assets | 3.7 | 4.0 | | Restructuring charges (adjustments) | 0.4 | (0.4) | | OPERATING INCOME | 62.8 | 65.7 | | Interest expense | 14.1 | 17.4 | | Other (income) expense, net | (0.3) | 0.4 | | INCOME BEFORE TAXES | 49.0 | 47.9 | | Income tax expense | 11.5 | 12.9 | | NET INCOME | $37.5 | $35.0 | | Average Number of Shares of Common Stock Outstanding | | | | Basic | 127.0 | 128.2 | | Diluted | 130.5 | 129.5 | | Earnings Per Common Share | | | | Basic | $0.30 | $0.27 | | Diluted | $0.29 | $0.27 | [Supplemental Information](index=8&type=section&id=Supplemental%20Information) This section provides supplemental unaudited financial information, including GAAP to non-GAAP reconciliations, an EPS summary, profit margins, and adjustment explanations [Reconciliation of Net Income to EBITDA to Adjusted EBITDA](index=8&type=section&id=Reconciliation%20of%20Net%20Income%20to%20EBITDA%20to%20Adjusted%20EBITDA) | (U.S. Dollars presented in millions) | March 31, 2024 | March 26, 2023 | | :----------------------------------- | :------------- | :------------- | | Net income (GAAP) | $37.5 | $35.0 | | Interest expense | 14.1 | 17.4 | | Income tax expense | 11.5 | 12.9 | | Depreciation expense | 12.2 | 11.3 | | Amortization expense | 3.7 | 4.0 | | EBITDA (Non-GAAP Measure) | $79.0 | $80.6 | | [1] Separation costs | — | 1.6 | | [2] Restructuring charges (adjustments) | 0.4 | (0.4) | | [3] Restructuring-related adjustments | — | (0.3) | | Adjusted EBITDA (Non-GAAP Measure) | $79.4 | $81.5 | [Reconciliation of Net Income to Adjusted Net Income](index=8&type=section&id=Reconciliation%20of%20Net%20Income%20to%20Adjusted%20Net%20Income) | (U.S. Dollars presented in millions) | March 31, 2024 | March 26, 2023 | | :----------------------------------- | :------------- | :------------- | | Net Income (GAAP) | $37.5 | $35.0 | | [1] Separation costs | — | 1.6 | | [2] Restructuring charges (adjustments) | 0.4 | (0.4) | | [3] Restructuring-related adjustments | — | (0.3) | | [4] Income tax impact of adjustments | (0.1) | (0.2) | | Adjusted Net Income (Non-GAAP Measure) | $37.8 | $35.7 | [Earnings per Share Summary](index=8&type=section&id=Earnings%20per%20Share%20Summary) | (U.S. Dollars presented in millions, except per share amounts) | March 31, 2024 | March 26, 2023 | | :----------------------------------------------------------- | :------------- | :------------- | | Diluted EPS (GAAP) | $0.29 | $0.27 | | Impact of adjustments | $— | $0.01 | | Adjusted Diluted EPS (Non-GAAP Measure) | $0.29 | $0.28 | | Weighted average diluted shares outstanding | 130.5 | 129.5 | [Profit Margins](index=8&type=section&id=Profit%20Margins) | (U.S. Dollars presented in millions, except percentages) | March 31, 2024 | March 26, 2023 | | :------------------------------------------------------- | :------------- | :------------- | | Net Sales | $638.1 | $676.7 | | Gross Profit | $204.7 | $204.6 | | Gross Profit Margin % | 32.1 % | 30.2 % | | Adjusted EBITDA Margin % | 12.4 % | 12.0 % | [Tick Legend & Effective Income Tax Rate](index=9&type=section&id=Tick%20Legend%20%26%20Effective%20Income%20Tax%20Rate) - **Separation costs** represent one-time costs incurred directly by MasterBrand related to the separation from Fortune Brands[24](index=24&type=chunk) - **Restructuring charges** are nonrecurring costs for significant cost reduction initiatives, including workforce reductions and facility closures[25](index=25&type=chunk) - **Restructuring-related charges** are expenses directly related to restructuring initiatives that do not represent normal, recurring expenses but cannot be reported as restructuring under GAAP[26](index=26&type=chunk) | (U.S. Dollars presented in millions, except percentages) | March 31, 2024 | March 26, 2023 | | :------------------------------------------------------- | :------------- | :------------- | | Income taxes (a) | $11.5 | $12.9 | | Income before taxes (b) | 49.0 | 47.9 | | Effective income tax rate (a)/(b) | 23.5 % | 26.9 % | [Condensed Consolidated Balance Sheets](index=10&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents unaudited condensed consolidated balance sheets for Q1 2024 and Q1 2023, detailing assets, liabilities, equity, and a net debt reconciliation | (U.S. Dollars presented in millions) | March 31, 2024 | March 26, 2023 | | :----------------------------------- | :------------- | :------------- | | ASSETS | | | | Current assets | | | | Cash and cash equivalents | $153.7 | $116.3 | | Accounts receivable, net | 224.4 | 278.3 | | Inventories | 247.9 | 349.6 | | Other current assets | 76.5 | 66.4 | | TOTAL CURRENT ASSETS | 702.5 | 810.6 | | Property, plant and equipment, net | 353.3 | 344.0 | | Operating lease right-of-use assets, net | 59.9 | 62.8 | | Goodwill | 924.3 | 923.8 | | Other intangible assets, net | 330.9 | 345.3 | | Other assets | 29.2 | 21.6 | | TOTAL ASSETS | $2,400.1 | $2,508.1 | | LIABILITIES AND EQUITY | | | | Current liabilities | | | | Accounts payable | $163.6 | $202.8 | | Current portion of long-term debt | 26.9 | 22.2 | | Current operating lease liabilities | 16.3 | 14.4 | | Other current liabilities | 133.6 | 149.4 | | TOTAL CURRENT LIABILITIES | 340.4 | 388.8 | | Long-term debt | 681.1 | 917.4 | | Deferred income taxes | 81.9 | 84.4 | | Pension and other postretirement plan liabilities | 8.3 | 12.2 | | Operating lease liabilities | 45.8 | 50.6 | | Other non-current liabilities | 13.6 | 8.3 | | TOTAL LIABILITIES | 1,171.1 | 1,461.7 | | Stockholders' equity | 1,229.0 | 1,046.4 | | TOTAL EQUITY | 1,229.0 | 1,046.4 | | TOTAL LIABILITIES AND EQUITY | $2,400.1 | $2,508.1 | | Reconciliation of Net Debt | | | | Current portion of long-term debt | $26.9 | $22.2 | | Long-term debt | 681.1 | 917.4 | | LESS: Cash and cash equivalents | (153.7) | (116.3) | | Net Debt | $554.3 | $823.3 | | Adjusted EBITDA for Prior Fiscal Year | 383.4 | 411.4 | | LESS: Adjusted EBITDA for 13 weeks ended prior year first quarter | (81.5) | (80.8) | | PLUS: Adjusted EBITDA for 13 weeks ended current year first quarter | 79.4 | 81.5 | | Adjusted EBITDA (trailing twelve months) | $381.3 | $412.1 | | Net Debt to Adjusted EBITDA | 1.5x | 2.0 x | [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section presents unaudited condensed consolidated statements of cash flows for Q1 2024 and Q1 2023, detailing operating, investing, and financing activities | (U.S. Dollars presented in millions) | 13 Weeks Ended March 31, 2024 | 13 Weeks Ended March 26, 2023 | | :----------------------------------- | :---------------------------- | :---------------------------- | | OPERATING ACTIVITIES | | | | Net income | $37.5 | $35.0 | | Adjustments to reconcile net income to net cash provided by operating activities: | | | | Depreciation | 12.2 | 11.3 | | Amortization of intangibles | 3.7 | 4.0 | | Restructuring charges, net of cash payments | (0.8) | (10.4) | | Amortization of finance fees | 0.5 | 0.5 | | Stock-based compensation | 4.3 | 4.9 | | Changes in operating assets and liabilities: | | | | Accounts receivable | (21.7) | 14.1 | | Inventories | 1.6 | 23.3 | | Other current assets | 1.3 | (2.0) | | Accounts payable | 10.2 | (16.9) | | Accrued expenses and other current liabilities | (29.6) | (14.6) | | Other items | (0.5) | 12.9 | | NET CASH PROVIDED BY OPERATING ACTIVITIES | 18.7 | 62.1 | | INVESTING ACTIVITIES | | | | Capital expenditures | (7.0) | (2.9) | | Proceeds from the disposition of assets | — | 0.2 | | NET CASH USED IN INVESTING ACTIVITIES | (7.0) | (2.7) | | FINANCING ACTIVITIES | | | | Issuance of long-term and short-term debt | — | 40.0 | | Repayments of long-term and short-term debt | — | (79.6) | | Repurchase of common stock | (1.6) | — | | Payments of employee taxes withheld from share-based awards | (4.9) | (2.8) | | Other items | (0.6) | (0.3) | | NET CASH USED IN FINANCING ACTIVITIES | (7.1) | (42.7) | | Effect of foreign exchange rate changes on cash and cash equivalents | 0.4 | (1.5) | | NET INCREASE IN CASH AND CASH EQUIVALENTS | $5.0 | $15.2 | | Cash and cash equivalents at beginning of period | $148.7 | $101.1 | | Cash and cash equivalents at end of period | $153.7 | $116.3 | | Reconciliation of Free Cash Flow | | | | Net cash provided by operating activities | $18.7 | $62.1 | | Less: Capital expenditures | (7.0) | (2.9) | | Free cash flow | $11.7 | $59.2 |

Knowing your choices can help you make the right decisions when buying the best $20 stocks for April. According to Finviz.com, there are only three stocks in the Nasdaq 100 under $20 and 22 stocks in the S&P 500. It jumps to 1,055 in the Russell 2000, so let’s use that index to identify some winners. Of course, a stock isn’t worth buying just because it’s under $20. It has to have growth prospects or something tangible that makes it worth owning for the long haul. I always like to spread my love around with ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2023 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 001-41545 MasterBrand, Inc. (Exact name of registrant as specified in its charter) Delaware 88-3479920 (State or other jurisdiction of incorporation or organization ...

Financial Performance - Fourth quarter 2023 net sales were $677.1 million, a decrease of 14% year-over-year from $784.4 million in Q4 2022[4] - Full year 2023 net sales totaled $2.7 billion, down 16.8% from $3.3 billion in 2022[8] - Fourth quarter gross profit increased to $223.1 million, with a gross profit margin of 32.9%, up 550 basis points year-over-year[4] - Full year net income rose to $182.0 million, a 17.1% increase compared to $155.4 million in 2022[9] - Operating income for the 14 weeks ended December 31, 2023, was $61.0 million, significantly higher than $15.1 million for the same period last year[29] - Net income for the 14 weeks ended December 31, 2023, was $36.1 million, compared to $15.4 million for the 13 weeks ended December 25, 2022, representing a 134.4% increase[29][31] - The company reported an adjusted net income of $193.6 million for the 53 weeks ended December 31, 2023, compared to $260.4 million for the prior year[33] EBITDA and Margins - Adjusted EBITDA for Q4 2023 was $85.8 million, with an adjusted EBITDA margin of 12.7%, up 20 basis points from the previous year[6] - Full year adjusted EBITDA was $383.4 million, with an adjusted EBITDA margin of 14.1%, an increase of 150 basis points year-over-year[10] - Adjusted EBITDA for the 14 weeks ended December 31, 2023, was $85.8 million, while the adjusted EBITDA margin was 12.7%[31] - Adjusted EBITDA for the full fiscal year was $383.4 million in 2023, down from $411.4 million in 2022, a decline of about 6.8%[44] Cash Flow and Debt - Operating cash flow for 2023 was $405.6 million, significantly up from $235.6 million in the prior year[10] - Net cash provided by operating activities rose significantly to $405.6 million in 2023, compared to $235.6 million in 2022, an increase of approximately 72.0%[45] - Free cash flow improved to $348.3 million in 2023, up from $179.7 million in 2022, marking a growth of about 93.9%[45] - Net debt decreased from $877.9 million in 2022 to $559.1 million in 2023, a reduction of approximately 36.3%[44] - The net debt to adjusted EBITDA ratio improved from 2.1x in 2022 to 1.5x in 2023, indicating better leverage[44] - Long-term debt decreased significantly from $961.5 million in 2022 to $690.2 million in 2023, a decline of about 28.2%[44] Assets and Liabilities - Total assets decreased from $2,529.4 million in 2022 to $2,381.7 million in 2023, a decline of approximately 5.8%[44] - Current liabilities decreased from $411.1 million in 2022 to $349.4 million in 2023, a reduction of approximately 15.0%[44] - Cash and cash equivalents increased from $101.1 million at the beginning of the period to $148.7 million at the end of the period in 2023[45] Future Outlook - For 2024, the company expects adjusted EBITDA in the range of $370 million to $400 million, with adjusted EBITDA margins of approximately 14.0% to 14.5%[13] - New products and channel-specific packages were launched to capture market share in growth areas[15] Earnings Per Share and Tax Rate - Diluted earnings per share (EPS) for the 14 weeks ended December 31, 2023, was $0.28, up from $0.12 in the same period last year[31] - The effective income tax rate for the 14 weeks ended December 31, 2023, was 16.4%, down from 20.6% in the prior year[42] Restructuring Charges - The company incurred restructuring charges of $6.0 million for the 14 weeks ended December 31, 2023, compared to $14.2 million for the same period last year[29][31]

MasterBrand Inc. (NYSE:MBC) Q3 2023 Earnings Conference Call November 7, 2023 4:30 PM ET Company Participants Andrea H. Simon - Executive VP & CFO Farand Pawlak - VP of IR & External Communications R. David Banyard - CEO, President & Director Conference Call Participants Adam Michael Baumgarten - MD, Zelman & Associates Alex Hantman - Executive Officer, Sidoti & Company Garik Simha Shmois - MD, Loop Capital Markets Thomas Mcnally Mahoney - Research Associate, Cleveland Research Operator Welcome to the Maste ...

Q3 2023 Investor Presentation This presentation includes forward-looking statements. Each forward-looking statement contained in this presentation is based on current expectations and market outlook; and is subject to certain risks and uncertainties that may cause actual results to differ materially from those currently anticipated. More information about risks can be found in our filings with the Securities and Exchange Commission, including under the heading "Risk Factors" in our full year 2022 Form 10-K ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q MasterBrand, Inc. (Exact name of registrant as specified in its charter) Delaware 88-3479920 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) One MasterBrand Cabinets Dr. Jasper, Indiana 47547 x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 24, 2023 OR o TRANSITION REPORT PURSU ...

Financial Data and Key Metrics Changes - Net sales in Q2 2023 were $695.1 million, an 18.8% decline from $855.6 million in Q2 2022, aligning with expectations [24] - Adjusted EBITDA was flat year-over-year at $106.3 million compared to $106.8 million in Q2 2022, with adjusted EBITDA margin expanding by 281 basis points to 15.3% [8][29] - Free cash flow increased by 82% to $123.4 million in Q2 2023, up from the previous year [10][33] - Net income rose to $51.2 million, a 25.2% increase from $40.9 million in the same period last year [28] Business Line Data and Key Metrics Changes - The new construction market showed sequential demand increase, benefiting from a pause in interest rate hikes, while the repair and remodel market experienced a slight decline in point-of-sale activity [11][12] - The U.S. retail channel was largely in line with expectations, but dealer customers reported consumers being more budget-conscious and seeking multiple quotes [13][57] - Canadian market performance was below expectations, with anticipated weakness continuing into the second half of 2023 [14] Market Data and Key Metrics Changes - The new construction market is trending better, while the repair and remodel market is expected to remain soft for the remainder of 2023 [15][35] - The company noted that consumer spending is shifting towards vacations, impacting remodeling project decisions [56] Company Strategy and Development Direction - The company is focused on strategic initiatives such as Align to Grow, Lead Through Lean, and Tech Enabled to drive operational excellence and future growth [10][15] - Investments in technology and supply chain optimization are expected to enhance efficiency and support growth initiatives [17][20] - The company plans to increase investment spending for 2023, raising the adjusted EBITDA outlook to $345 million to $365 million [36] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to maintain or expand adjusted EBITDA margins year-over-year despite a softer demand environment [36] - The company anticipates mid-teens year-over-year decline in net sales for the second half of 2023, with expectations of normal seasonality [35] - Management highlighted the importance of preparing for future growth during the current softer demand period [21][39] Other Important Information - The company published its inaugural environmental, social, and governance (ESG) report and was recognized as one of America's Safest Companies [22][23] - The company has initiated a stock repurchase program, repurchasing 404,858 shares at a cost of approximately $4.4 million [34] Q&A Session Summary Question: Impact of pricing in the back half of the year - Management indicated a return to a normal pricing environment without the need for price increases, utilizing a breadth of product offerings to meet customer needs [42][43] Question: Trade down impact on top line declines - Management acknowledged trade downs as a factor but stated it was in line with expectations and not materially impactful [45] Question: ERP system modernization - Management noted that there are about 5 to 6 more facilities that require modernization to improve data clarity and efficiency [46][47] Question: Margin walk for the second half of the year - Management highlighted expected revenue declines and increased investments, with historical patterns indicating lower profitability in the fourth quarter [52][54] Question: Changes in project size or cancellations - Management reported no significant cancellations but noted consumers are more selective and may be delaying projects [56][58] Question: Lag between housing starts and sales - Management indicated that the lag continues to decrease, with a normalized pace expected by the end of the year [61] Question: Input cost quantification and inventory flow - Management stated that material costs represent about 50% of cost of sales, with inventory costs aligning with new incoming inventory [63][66] Question: Growth relative to the market - Management believes growth will be on par with the market, with ongoing investments aimed at accelerating growth in 2024 [67][70]

Part I - Financial Information [Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20%28Unaudited%29) Unaudited Q2 2023 financials reflect decreased net sales, increased operating income from non-recurring charges, and improved operating cash flow post-separation [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Q2 2023 net sales decreased to $695.1 million, while net income rose to $51.2 million, driven by higher operating income offsetting new interest expenses | Metric (in millions) | 13 Weeks Ended June 25, 2023 | 13 Weeks Ended June 26, 2022 | 26 Weeks Ended June 25, 2023 | 26 Weeks Ended June 26, 2022 | | :--- | :--- | :--- | :--- | :--- | | **NET SALES** | $695.1 | $855.6 | $1,371.8 | $1,632.7 | | **GROSS PROFIT** | $236.2 | $249.6 | $440.8 | $460.6 | | **OPERATING INCOME** | $87.4 | $51.9 | $153.1 | $113.4 | | **NET INCOME** | $51.2 | $40.9 | $86.2 | $87.9 | | **Diluted EPS** | $0.39 | $0.32 | $0.66 | $0.69 | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 25, 2023, total assets decreased to $2,424.0 million, total liabilities decreased, and total equity increased | Balance Sheet Item (in millions) | June 25, 2023 | December 25, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $110.2 | $101.1 | | Accounts receivable, net | $235.7 | $289.6 | | Inventories | $319.6 | $373.1 | | **TOTAL ASSETS** | **$2,424.0** | **$2,529.4** | | Accounts payable | $182.2 | $219.2 | | Long-term debt | $788.3 | $961.5 | | **TOTAL LIABILITIES** | **$1,316.4** | **$1,520.2** | | **TOTAL EQUITY** | **$1,107.6** | **$1,009.2** | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) H1 2023 net cash from operating activities significantly increased to $194.0 million, primarily due to working capital improvements, funding debt repayments | Cash Flow Activity (in millions) | 26 Weeks Ended June 25, 2023 | 26 Weeks Ended June 26, 2022 | | :--- | :--- | :--- | | NET CASH PROVIDED BY OPERATING ACTIVITIES | $194.0 | $76.1 | | NET CASH USED IN INVESTING ACTIVITIES | ($11.2) | ($22.1) | | NET CASH USED IN FINANCING ACTIVITIES | ($172.0) | ($69.6) | | Net increase (decrease) in cash | $9.1 | ($15.6) | [Notes To Unaudited Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20To%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Notes detail the company's separation from Fortune Brands, revenue channels, debt structure, and a $50 million stock repurchase program - MasterBrand completed its separation from Fortune Brands on **December 14, 2022**, becoming an independent, publicly-traded company. Historical financial statements prior to this date were prepared on a carve-out basis and include expense allocations from Fortune Brands[22](index=22&type=chunk)[24](index=24&type=chunk) - A tornado on **January 12, 2023**, damaged the Jackson, GA production facility. In Q1 2023, the company incurred **$9.4 million** in related expenses. In Q2 2023, it received **$2.2 million** in insurance proceeds. Both amounts are recorded in cost of products sold[33](index=33&type=chunk) Revenue by Channel (in millions) | Revenue by Channel (in millions) | 26 Weeks Ended June 25, 2023 | 26 Weeks Ended June 26, 2022 | | :--- | :--- | :--- | | Dealers | $686.3 | $833.6 | | Retailers | $463.6 | $540.0 | | Builders | $149.8 | $160.0 | | International | $72.1 | $99.1 | | **Total Net Sales** | **$1,371.8** | **$1,632.7** | - In November 2022, the company entered into a **$1.25 billion** credit agreement, consisting of a **$750 million** term loan and a **$500 million** revolving credit facility. As of June 25, 2023, total debt outstanding was **$815.2 million**, net of issuance costs[64](index=64&type=chunk)[160](index=160&type=chunk) - A stock repurchase program was authorized on **May 9, 2023**, for up to **$50.0 million**. During the quarter, **404,858 shares** were repurchased for approximately **$4.4 million**[99](index=99&type=chunk)[100](index=100&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=36&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes Q2 2023 net sales decrease to lower volume, operating income increase to non-recurring charges, and strong liquidity [Results of Operations](index=41&type=section&id=Results%20of%20Operations) Q2 2023 net sales fell 18.8% due to lower volume, while operating income increased 68.4% from non-recurring charges and cost savings - **Q2 2023 vs Q2 2022:** - Net sales decreased by **$160.5 million** (**18.8%**) due to lower sales unit volume, partially offset by favorable pricing[121](index=121&type=chunk) - Gross profit margin improved from **29.2%** to **34.0%** - Operating income increased by **$35.5 million** (**68.4%**), mainly due to the non-recurrence of a **$26.0 million** asset impairment charge from Q2 2022 and cost savings[122](index=122&type=chunk)[129](index=129&type=chunk) - **H1 2023 vs H1 2022:** - Net sales decreased by **$260.9 million** (**16.0%**) due to lower sales volume[140](index=140&type=chunk) - Operating income increased by **$39.7 million** (**35.0%**), despite **$7.2 million** in net costs from the Jackson, GA tornado[141](index=141&type=chunk)[146](index=146&type=chunk) - Net income decreased slightly by **$1.7 million** (**1.9%**), as the growth in operating income was offset by **$34.6 million** in new interest expense[154](index=154&type=chunk) [Liquidity and Capital Resources](index=47&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity is strong, with H1 2023 net cash from operations increasing to $194.0 million, used for debt repayments and stock repurchases - Net cash from operating activities increased to **$194.0 million** in H1 2023 from **$76.1 million** in H1 2022, primarily due to a **$54.0 million** favorable change in inventory and a **$58.6 million** favorable change in accounts receivable[162](index=162&type=chunk)[163](index=163&type=chunk) - Net cash used in financing activities was **$172.0 million** in H1 2023, which included **$164.4 million** in net debt repayments and **$4.1 million** in stock repurchases[165](index=165&type=chunk) - The company entered into a **$1.25 billion** credit agreement in November 2022, consisting of a **$750.0 million** term loan and a **$500.0 million** revolving credit facility. The company believes it was in compliance with all financial covenants as of **June 25, 2023**[157](index=157&type=chunk)[159](index=159&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=49&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes were reported regarding the company's market risk exposures since December 25, 2022 - No material changes were reported regarding market risk from the information provided in the Annual Report on Form 10-K for the fiscal year ended **December 25, 2022**[169](index=169&type=chunk) [Controls and Procedures](index=50&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 25, 2023, with no material changes to internal controls - The Chief Executive Officer and Chief Financial Officer concluded that as of **June 25, 2023**, the company's disclosure controls and procedures were effective[170](index=170&type=chunk) - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[171](index=171&type=chunk) [Other Information](index=50&type=section&id=Item%205.%20Other%20Information) On August 7, 2023, the company filed a Corrected Amended and Restated Certificate of Incorporation to correct an officer exculpation error - The company filed a Corrected Amended and Restated Certificate of Incorporation on **August 7, 2023**, to correct an error regarding officer exculpation provisions[172](index=172&type=chunk) Part II - Other Information [Legal Proceedings](index=51&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in routine litigation incidental to its business, which management believes will not have a material adverse effect - The company is a defendant in routine litigation incidental to its business and does not believe these actions will have a material adverse effect on its financial condition or results[176](index=176&type=chunk) [Risk Factors](index=51&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors were reported since the 2022 Form 10-K and Q1 2023 Form 10-Q disclosures - No material changes to risk factors were reported since the previous disclosures in the **2022 Form 10-K** and **Q1 2023 Form 10-Q**[178](index=178&type=chunk) [Issuer Purchases of Equity Securities](index=51&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q2 2023, the company repurchased 404,858 shares at an average price of $10.89, with $45.6 million remaining in the program - On **May 9, 2023**, a stock repurchase program was authorized for up to **$50.0 million** of common stock over a twenty-four month period[179](index=179&type=chunk) Issuer Purchases of Equity Securities (in millions) | Period | Total Shares Purchased | Average Price Paid Per Share | Approx. Value Remaining (in millions) | | :--- | :--- | :--- | :--- | | April 24 - May 21, 2023 | 60,000 | $10.75 | $49.4 | | May 22 - June 25, 2023 | 344,858 | $10.91 | $45.6 | | **Total** | **404,858** | **$10.89** | **$45.6** | [Exhibits](index=52&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including the Corrected Amended and Restated Certificate of Incorporation and SOX certifications - Key exhibits filed include the Corrected Amended and Restated Certificate of Incorporation and Sarbanes-Oxley Act certifications from the CEO and CFO[180](index=180&type=chunk)