Masonite International Corporation

Welcome to MasonAid's second quarter 2022 earnings conference call. During the presentation, all participants will be in a listen-only mode. After management's prepared remarks, investors are invited to participate in a question and answer session. Please note this conference call is being recorded. I would now like to turn the conference over to Rich Leland, Vice President, Finance and Treasurer. Thank you. You may begin.

Thank you and good morning, everyone. We appreciate you joining us for today's call. With me here this morning are Howard Heckett, President and Chief Executive Officer, and Russ Tejima, Executive Vice President and Chief Financial Officer. Also joining us today for Q&A is Chris Ball, our President of Global Residential. We issued a press release and earnings presentation yesterday, reporting our second quarter 2022 financial results. These documents are available on our website at masonite.com. Before we begin, let me remind you that this call will include forward-looking statements. Each forward-looking statement contained in this call is subject to risks and uncertainties that could cause actual results to differ materially from those projected in such statements. Additional information regarding these factors appears in the section entitled Forward-Looking Statements in the press release we issued yesterday. More information about risks can be found under the heading Risk Factors in Masonite's most recently filed annual report on Form 10-K. and our subsequent Form 10Qs, which are available at scc.gov and at masonite.com. The four looking statements in this call speak only as of today, and we undertake no obligation to update or revise any of these statements. Our earnings release and today's discussion includes certain non-GAAP financial measures. Please refer to the reconciliations, which are in the press release and the appendix of the earnings presentation. Our agenda for today's call includes a business overview from Howard, followed by a review of second quarter results from Russ, and then Howard will provide some closing remarks and we'll begin a question and answer session.

And with that, let me turn the call over to Howard. Thanks, Rich. Good morning and welcome, everyone. I'm pleased to report that Masonite continued to deliver significant year-over-year growth in the second quarter as expected and as noted on slide four. Net sales for the quarter were up 15%, while adjusted EBITDA increased 7%. Adjusted earnings per share for the period grew 16%, driven by both positive earnings and a reduction in shares outstanding. The accelerated share repurchase program we announced in March of this year was completed in the second quarter, resulting in retirement of roughly 320,000 shares on top of the approximately 848,000 shares that had been retired as part of the program in Q1. In total, this program reduced shares outstanding by approximately 5%. A key part of our operating philosophy is to maintain price-cost favorability. Once again, this quarter, we took appropriate actions given material and logistics inflation that continues to run higher than anticipated this year. With respect to business operations, our North American residential segment once again delivered excellent results by servicing steady demand and realizing 3% year-over-year volume growth in the quarter. In Europe, economic and geopolitical issues continue to weigh on consumer confidence and negatively impacted market demand. In this difficult environment, our team has done a good job of navigating the challenges and continues to take actions to manage costs. Lastly, the architectural segment delivered sequential improvement in profitability as expected. despite experiencing lingering material constraints on a critical component. Overall, it was another very solid quarter for the company, driven by the focus, execution, and alignment on our Doors That Do More strategy by our dedicated teams around the world. I'm very pleased with the continued progress we made in the second quarter on strategic initiatives, which further strengthened our competitive position. Specifically, I'm talking about new plants, new products, and new marketing initiatives. Let's turn to slide five. For those that are new to our story, we developed the Doors That Do More strategy in 2020 as a way to accelerate the growth of the company. The objective of this strategy is to drive outperformance in any macro environment by being the most reliable supplier to our customers, launching differentiated products, and becoming the most preferred door brand in our markets. We believe that by executing this strategy, we can achieve our ambitious 2025 Centennial Plan goals of $4 billion in net sales, 20% adjusted EBITDA margins, and sector-leading return on invested capital. The strategy has three core pillars. Deliver consistent and reliable supply, our focus on operational excellence. Drive specified demand, our focus on product leadership. And when at the point of sale, our focus on building the most respected brand in the category. In Q2, we made further progress in all three of these areas. Let's turn to slide six. Last year, we announced plans to open two new greenfield door plants, one in Fort Mill, South Carolina, and one in Stoke-on-Trent, England. Today, I'm happy to report that both plants are online and have started producing and shipping quality doors. The plant in Fort Mill specializes in the assembly of interior doors and is an important upgrade to the production network for our North American residential business. The manufacturing footprint has been designed using our mVantage principles and the practical use of automation to drive a safer, more efficient, and reliable operation. The plant has been strategically located to take advantage of a deep and talented local labor pool as well as major transportation routes that enhance our access to key markets. We plan to continue adding equipment and expanding operations in the Fort Mill plant throughout the second half of this year and into 2023, with the objective of making it our most efficient door assembly plant in the U.S. Over in England, our team fully completed transition of production to the new Stoke-on-Trent site in the second quarter. As you may recall from our previous comments, this plant combines the exterior door assembly operations from five buildings into one new facility with a highly optimized production layout. Moreover, the old buildings were located in an area where local ordinances limited our hours of operation. Our new site is in an area with no such restrictions, which gives us headroom for future growth. I'm proud of what these two plants represent in terms of the first pillar of our strategy, consistent and reliable supply. We are making our production networks more resilient and flexible while giving us opportunities to achieve production efficiencies that were not possible in our older facilities with less ideal layouts. I'd like to thank and congratulate the many Masonite employees involved in these two successful projects and give special recognition to the UK team that transition production into the new location without any interruption in service to our customers. Let's turn to slide seven and talk about driving specified demand. Fiberglass entry doors have been gaining popularity for over a decade because of the energy efficiency, low maintenance, durability, and style they offer. Mason Ice sells a wide range of fiberglass doors, from opening price point up to our M-Power smart doors. And this June, we were excited to add the Masonite Performance Door System, backed by a 10-year limited full replacement warranty to our fiberglass product portfolio. This door system features a four-point performance seal, including an Endura self-adjusting sill, adaptive weatherstripping, square edges, and enhanced corner pads. It has undergone certified third-party testing and has proven to be 64% better. at keeping air and water out than the leading competitor. The system is offered with all Masonite exterior fiberglass doors, including three new shaker style designs. These new exterior designs, also released in Q2, represent an important addition to one of our most popular product portfolios. Builders and homeowners can now buy exterior doors that match our popular interior shaker style doors in a complete whole home package. The Masonite performance door system and the new fiberglass exterior door designs demonstrate our continued commitment to product leadership and will help us drive positive mix in both home builders and homeowners that are looking for an upgrade in performance and style. For more information on these new products, I invite you to visit our product pages at masonite.com. Turning to slide eight, winning at the point of sale is about building strong brand loyalty creative down-channel marketing and creating a seamless purchasing experience. Although we have prioritized enhancements in consistent and reliable supply and product innovation in the early phases of our strategic plan journey, our team has been working hard on a number of initiatives related to winning at the point of sale as well. These have included digital marketing campaigns to drive awareness and preference, refreshing in-store displays to aid in product selection, increasing the assortment of products for sale online to meet consumers where they want to buy, developing channel-specific programs to improve product mix, and adding the Masonite name to hinges on the millions of pre-hung doors we sell into the market each year to expand visibility of the Masonite brand. Two case studies that demonstrate the importance of this strategic pillar are the programs we put together to drive barn door and solid core volume growth. In both cases, we began with market research that gave us insights into consumer product preferences, where consumers go for inspiration, how they learn about their options, and the key factors in their decision to make a purchase. To engage these consumers, our marketing team created digital content targeted at both builders and homeowners. Simultaneously, we placed physical displays in retail stores so people could touch and feel the difference between products. Finally, we expanded our online selection to give both pros and DIYers more ways to buy at their convenience. As a result of these initiatives, we have seen tangible mix shift toward these higher value products. Barn door sales volumes have shown a compound annual growth rate of over 20% since pre-pandemic days, and the growth rate of solid core door volumes has been nearly three times the growth rate of interior doors overall since launching our Sound Decision marketing campaign. As you can see, implementation of our Doors that Do More strategy is happening across the organization. Many of the projects have required months to bring to life. so I'm thrilled to see us hitting big milestones with these new plants, products, and marketing initiatives in the second quarter of this year. I'm confident that these investments are driving product mix, operational efficiencies, and overall competitive advantage that will make valuable contributions to our performance in 2023 and beyond. The execution of our strategy is foundational to our ambitious Centennial Plan goals. With that, I'll turn the call over to Russ to provide more details on our financials. Russ?