Masonite International Corporation

Welcome to Masonite's second quarter 2023 earnings conference call. During the presentation, all participant lines 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 that this conference call is being recorded. I would now like to turn the call over to Rich Leland, Vice President, Finance, and Treasurer.

Thank you and good morning, everyone. We appreciate you joining us for today's call. With me here this morning are Howard Heckes, President and Chief Executive Officer, and Russ Tijima, 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 2023 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 10-Q, which are available at sec.gov and at masonite.com. The forward-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 in 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 the 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. Beginning on slide four, I'm pleased to report that Masonite delivered strong financial results in the second quarter, executing effectively against a mixed macro backdrop while making continued progress on key strategic initiatives. Net sales in the quarter were $742 million, down 3% year-over-year as macroeconomic conditions continue to suppress demand in our end markets. However, adjusted EBITDA of $118 million was equivalent to last year despite lower volumes, with margins improving 50 basis points to 16%, due in large part to the ongoing execution of our 2023 playbook initiatives. Year-to-date operating cash flow hit a record high $218 million for the six months ending in June, thanks to the outstanding work our teams are doing to optimize working capital levels across the company. As noted in the press release issued yesterday, we are excited to announce that we will host a virtual investor day on September 19th to discuss the growth opportunities we are targeting over the next several years, the execution of our doors to do more strategy, and our long-term financial objectives for value creation. I encourage you to add this event to your calendar and refer to our press release for details on how to register. Moving to the business and operations highlights for the quarter. As expected, we saw weaker demand in Q2 compared to last year due to double digit declines in both housing starts and RRR activity. During the quarter, we were encouraged to see early signs of an uptick in U.S. new home construction. While the scale and durability of this trend is still to be determined, We believe first-half volume trends are likely to continue throughout the year, with new construction-related demand stronger than we originally expected, offset by softer-than-expected demand in RRR, resulting in volumes down low to mid-teens for the year. As the industry moves through this economic cycle, we remain laser-focused on taking action to optimize our performance based on factors within our control. Price cost management is one of these important levers that we are using to preserve margin in a soft market to effectively coil the spring for accelerated margin growth when demand strengthens. Our global sourcing team is aggressively pursuing cost reductions on freight and raw materials to help offset ongoing inflation in overhead wages and benefits. In addition, I'm pleased to report that we are also on track to capture the cost benefits from our previously announced restructuring actions and the Endura integration synergies that we projected at the beginning of the year. Speaking of Endura, the business delivered an excellent quarter with margins improving year over year. The team is doing an outstanding job and we remain confident in the value this acquisition will bring to both our customers and our investors. We continue to optimize our manufacturing footprint in North American residential business with the closure of another legacy plant, our second this year, and the opening of a new hybrid facility in Texas. These moves reflect our ongoing strategy to modernize and reshape our network to deliver a superior level of service that differentiates us in the market. I'll talk about this in more detail in just a moment. Overall, we're very happy with the performance in the quarter. We improved margins, we generated formidable cash flows to fund our capital allocation priorities, and we remain confident in our ability to deliver our four-year outlook. Now let's turn to slide five. Earlier this year, we presented our 2023 playbook, which includes a number of margin opportunities and growth initiatives, as outlined here on the left side of the slide. We currently have projects underway throughout the company that address all parts of this playbook, but today I'd like to highlight one of our significant growth initiatives centered on enhancing value for our customers with superior service. During the quarter, we opened a new hybrid production and distribution center in the Dallas metropolitan area. This facility was launched in collaboration with channel partners as a result of joint business planning focused on optimizing our collective supply chain. Consistent and reliable supply is one of our strategic pillars and an area where we continue to raise the bar. In addition to pre-hanging and finishing doors at this site for the retail channel, we are leveraging the space to pilot a new make-to-stock program for the wholesale channel. This program will allow us to fill orders for full pallets of high-moving SKUs in just three days. This is less than half the time it would take to fulfill a request through the traditional make-to-order process. This hybrid facility and new QuickShift program is a great example of how we are leveraging supply chain optimization to improve service and using strategic investments in reliable supply to create win-win opportunities together with our channel partners. Dallas and the South Central region are high-growth housing markets. an ideal place for both masonite and our channel partners to benefit from these capabilities my congratulations go out to the sales and operations teams that brought this project to life and my sincere appreciation to our business partners who are embracing and benefiting from our doors at do more strategy i'm pleased with the progress we're making on all of our growth initiatives and i look forward to discussing them with you in more detail at our upcoming investor day Now I'd like to turn the call over to Russ to provide more details on our second quarter financial performance. Russ?