MasterBrand, Inc.

Welcome to Masterbrand's fourth quarter and full year 2022 earnings conference call. During the company's prepared remarks, all participants will be in a listen-only mode. Following management's closing remarks, callers are invited to participate in a question and answer session. Please note that this conference call is being recorded. And now, I would like to turn the call over to Forend Pollack, Vice President of Investor Relations and Corporate Communication. Thank you. You may begin.

Thank you and good afternoon. We appreciate you joining us for today's call. With me on the call today are Dave Banner, President and Chief Executive Officer, and Andy Simon, Executive Vice President and Chief Financial Officer. We issued a press release earlier this afternoon disclosing our fourth quarter and full year 2022 financial results. If you do not have this document, it is available on the investor section of our website at masterbrand.com. I'd like to remind you that this call will include forward-looking statements in either our prepared remarks or the associated question and answer session. Each forward-looking statement contained in this call is based on current expectations and market outlook, and it's subject to certain risks and uncertainties that may cause actual results to differ materially from those anticipated. Additional information regarding these factors appears in the section entitled Forward-Looking Statements in the press release we issued today. More information about risks can be found under the heading Risk Factors on our Form 10 and other filings with the SEC, which are available at sec.gov and masterbrand.com. The four looking statements in this call speak only as of today, and the company does not undertake any obligation to update or revise these statements, except as required by law. Today's discussion includes certain non-GAAP financial measures, please refer to the reconciliation tables which are in the press release issued earlier this afternoon and are also available at sec.gov and masterbrand.com. Our prepared remarks today will include a business update from Dave, followed by a discussion of our fourth quarter and full-year financial results from Andy, along with our 2023 financial outlook. Finally, Dave will make some closing remarks before we host a question and answer session. And with that, let me turn the call over to Dave.

Thanks, Farron, and good afternoon, everyone. First, I'd like to thank you all for joining us here today for our first earnings conference call as a standalone public company. It's been a few months since our management team and I had a chance to introduce MasterBrand at our investor day in New York. Since then, we've not only completed the successful spinoff from Fortune Brands, but also continue to execute well on our near-term and long-term goals. afternoon i'll be i'll update you on our transformation progress and provide insights on how we're navigating the current and market conditions but before i do so i'll give a brief overview of our fourth quarter and full year financial performance andy will provide greater details later in the call and we'll share our 2023 outlook i'm pleased with our strong finish to 2022. we delivered another quarter of solid financial and operational performance to end the year with net sales of $784.4 million, an increase of over 5% compared to the fourth quarter of 2021. This year-on-year growth was driven by the continued benefit of previously announced price increases across our business and strong performance from select brands. As an example, Mantra, our affordably priced full plywood construction product, grew double digits year-over-year in the fourth quarter, outpacing other parts of our business. Net sales growth was partially offset by volume declines in the broader business as higher interest rates and general economic uncertainty negatively impacted our customers. Adjusted EBITDA was $97.8 million compared to $66.7 million in the fourth quarter of 2021. This increase is due to favorable net average selling price, or ASP, along with continuous improvement benefits, which more than offset material, logistics, and personnel inflation. Adjusted EBITDA margin was 12.5% compared to 9% in the comparable period of the prior year, an expansion of 350 basis points. The fourth quarter performance closed out an exceptional full year. We ended 2022 with net sales of approximately $3.3 billion. This represents year-on-year growth of roughly 15%, slightly higher than our expected range of 13% to 14%. Whole year 2022 adjusted EBITDA was $411.4 million, a year-on-year increase of roughly 29% compared to 2021. Adjusted EBITDA margins expanded 150 basis points year-on-year to 12.6%, in line with our expected margin performance. We achieve our expected net sales and adjusted EBITDA margin performance despite the softening in our end markets. I'd like to take a moment and provide more color on what we're seeing in both new construction and repair and remodel, or R&R. Since early December, we saw builder channel orders slow more than anticipated as we exited the year. This varies by region, with new construction market in the southeast part of the U.S. holding up better than other areas. Western states, traditionally some of the faster-growing markets, are stable, but activity is slower than this time last year. Overall, for new construction, we've seen the market stabilize through the beginning of 2023, but we are anticipating a challenging year in this portion of our business. R&R through both our dealer and retail channel has been consistent since the end of the third quarter, albeit at a lower level than in the prior year. While our higher-priced custom product has proven resilient, we are seeing a bigger shift to lower-priced product in general. Our breadth of offering from custom to stock cabinets allows us to shift customers between product lines. Our Mantra brand, which I mentioned earlier, is a great example of a high-quality, lower-priced option we can offer to customers looking to reduce costs. As we discussed during our Investor Day presentation, our multi-brand strategy is designed to move with the market and meet consumers where they are, whether it be in style or price point. We anticipate similar market conditions to persist for much of 2023, with larger declines in new construction and more moderate declines in our dealer and retail channel servicing R&R. Andy will provide more detail on our outlook later in the call. While 2023 looks to be a softer environment, We believe, and I think there's good data to support this view, that the longer-term trends are very favorable for the housing market and the building product companies servicing it. We look at the significant aging of the housing stock, with the median age of a house now at 39 years, and the U.S. market being roughly underbuilt by 3 million homes is a positive long-term backdrop for us. And if you look at our performance over the last several years, we've built a track record of continuous improvement. Since we started our transformation in 2019, We've grown net sales by almost $1 billion, with a compound annual growth rate of 11%. Likewise, we've grown adjusted EBITDA during the same three-year period by over $150 million, for a compound annual growth rate of roughly 17%. The exceptional results we've delivered over the last few years is due to consistent execution. Having a clear strategy is important, but it needs field results, and that's why execution is a key to success. The unique culture we have at Masterbrand is focused on utilizing the established tools of the Masterbrand way, our business system, which is allowing us to achieve our strategic goals. At our investor day, we discussed why Masterbrand is the number one North American residential cabinet business. It's our industry-leading dealer network, our unmatched product and brand portfolio, and our operational excellence at scale. The continuing transformation of the company is how we win going forward. and it's what makes me so excited about our future growth potential. We've made meaningful progress in the fourth quarter on the three key initiatives driving this future growth, Align to Grow, Lead Through Lean, and Tech Enabled. Align to Grow, based on the tools of AB20, helps us identify great customers, determine what they want, and then deliver it exactly the way they want it, in the most efficient way. That's how we get value from Align to Grow. I spoke about some meaningful Align to Grow successes at our investor day, specifically around our common box initiative. And I'm pleased to say that we continue to make progress in this area. During the fourth quarter, we moved two more facilities to one of our four common construction platforms. With our Winnipeg, Manitoba operations now converted, roughly 75% of our facilities are utilizing common construction. The common box has greatly reduced the number of component SKUs within our operations and eliminated unnecessary complexities. The important point to remember is this is complexity our customers and end consumers did not notice or value. Therefore, complexity we were not being rewarded for. CommonVox also allows us to shift volume across our platform, which has proven extremely advantageous as we look to manage capacity in a softer environment. Since we've now transformed the business to allow us to shift volume across our manufacturing network, we've been able to take three facilities offline in 2022 with no impact to customer service and delivery. We know our business can be cyclical, so our strategic transformation aims to create a company that can flex production up and down depending on the market conditions. This is one reason why we believe we can deliver superior margin performance in any market. Lead Through Lean is the next set of tools we're using to drive future growth for the organization. Many of you might be familiar with the tools by now, and candidly, they're not the differentiator. The tools are foundational. It's the disciplined deployment of them and our culture that sets us apart. We look at Lead Through Lean as the ultimate engagement tool. We host a plethora of events every week, empowering associates with the tools and resources they need to solve problems and drive efficiency. During the fourth quarter alone, the organization held 59 Kaizen events. And for the full year, we hosted over 350 events, identifying roughly $80 million in addressable waste. Equipped with this information, we will prioritize this waste for future cost savings initiatives. In 2022, our prior initiatives yielded over $40 million in accumulated cost savings. When we give employees closest to the problem the tools and training they need to address it, we see them step forward and fix the issue. This not only engages them with their work, but it also helps us see leadership in action and allows us to promote from within. Given the continued labor constraints, our ability to develop talent is great for retention. That's why we say trust the tools, empower the team, and move forward. Our last tool, and one with a lot of runway left, is Tech Enable. We are focused on simplifying and modernizing our technology foundation to drive better insights and outcomes for the business. We plan to further leverage data and analytics in the back office, on the plant floor, and with our customers to create value. During the fourth quarter, we continue to make progress in this area. In the back office, we made great strides on data consistency. We expanded our data lake footprint and usage of recently created digital dashboards, which have standardized multiple key metrics across the business. These focus on sales, orders, receivables, purchases, operations, and incentives, providing our team the near real-time information they need to make decisions. On the plant floor, we're making similar progress. We outlined additional automation solutions in the fourth quarter, such as further RFID usage and a pallet serialization implementation. These initiatives will both improve inventory accuracy and provide better visibility to material movement on the plant floor. We believe these actions can have a cost savings as early as the first half of 2023. On the customer-facing front, we successfully piloted a third-party delivery management software solution. This software enhances the customer experience for home delivery with improved order information, answering the common question, where's my order? As you can see, a lot of great operational improvements by the team since we last spoke publicly in December. Now let me hand it over to Andy for a deeper review of our financial performance. Andy?