MasterBrand, Inc.

Good afternoon and welcome to MasterBrand's fourth quarter and full year 2025 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. I would now like to turn the call over to Henry Harrison, Senior Director of Corporate Financial Planning and Analysis.

Thank you and good afternoon. We appreciate you joining us for today's call. With me on the call today are Dave Banyard, President and Chief Executive Officer of MasterBrand, 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 2025 financial results. This document is available on the investor section of our website at masterbrand.com. I would like to remind you that this call will include forward-looking statements in either our prepared remarks or the associated question and answer session. These forward-looking statements are based on current expectations and market outlook, and are subject to certain risks and uncertainties that may cause actual results to differ materially from those currently 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 in our filings with the Securities and Exchange Commission, including under the heading Risk Factors in our full year 2024 Form 10-K, and update it as necessary in our subsequent 2025 Form 10Qs, which are available at sec.gov and at masterbrand.com. The forward-looking statements in this call speak only as of today, and the company does not undertake any obligation to update or revise any of 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 at masterbrain.com. Our prepared remarks today will include a business update from Dave, followed by a discussion of our fourth quarter and full year 2025 financial results from Andy, along with our first quarter 2026 financial outlook. Finally, Dave will make some closing remarks before we host a question and answer session. With that, let me turn the call over to Dave.

Thank you, and good afternoon, everyone. We appreciate you joining us for today's call. Our fourth quarter and full year 2025 results were shaped by ongoing demand pressure and a complex trade backdrop. Despite these pressures, our teams remain focused on supporting customers, advancing our integration efforts, and maintaining financial flexibility through targeted cash management. While near-term results remain under pressure, we made meaningful progress on the priorities within our control to navigate ongoing volatility while ensuring MasterBrand remains positioned to capture meaningful upside when demand returns. In the fourth quarter, we generated net sales of $645 million, a 3.5% decrease compared to the same period last year. Our performance reflected a mid-single-digit year-on-year market decline, partially offset by the continued flow-through of previously implemented price and tariff-related pricing actions. Adjusted EBITDA for the quarter was $35 million compared to $75 million in the prior year period, and adjusted EBITDA margin was 5.4%. The variance in our results versus our implied fourth quarter outlook was primarily driven by a sharper-than-expected late quarter slowdown in new construction, which pressured price and mix and reduced factory utilization and operating leverage. Free cash flow for the quarter was $53 million compared to $69 million in the same period last year. While cash generation declined year-over-year due to lower profitability and deal-related expenses, we remained focused on preserving liquidity and financial flexibility. Looking ahead, we continue to expect full-year free cash flow to exceed net income on an annual basis, reinforcing our long-standing commitment to discipline cash conversion across cycles. Turning to our end markets, 2025 marked the third consecutive year of market contraction, with elevated interest rates, ongoing affordability concerns, and lower consumer confidence continuing to constrain activity across new construction and repair and remodel. US single-family new construction declined high single digits in the quarter and mid-single digits for the full year, with the fourth quarter slowdown sharper than expected. Builders remained under pressure, driven by tighter financing conditions, lower consumer sentiment, and greater uncertainty around input costs. However, consistent with prior quarters, Masterbrand's new construction sales again outperformed the broader market, driven by our exposure to production builders, the breadth of our portfolio, and our continued focus on service reliability and execution. We expect current headwinds in the new construction market to continue in 2026, as affordability and uncertainty around trade and pricing continue to influence buyer behavior. In repair and remodel, demand was uneven throughout the fourth quarter, reflecting a consumer that remains pressured. The U.S. cabinet R&R market declined mid-single digits in both the quarter and the full year, with demand constrained by low existing home turnover, which historically underpins larger discretionary kitchen and bath remodel activity. Elevated interest rates, affordability concerns, and uncertainty in the job market continued to weigh on consumer confidence. Across our portfolio, we continue to observe trade-down behavior. Stock customers shifted towards our opening price point offerings, while in our premium tier, demand migrated towards semi-custom and value semi-custom options, reflecting a continued focus on value, even in traditionally less price-sensitive channels. Looking into 2026, we anticipate U.S. cabinet R&R demand will remain subdued and closely tied to financing conditions, consumer confidence, and housing turnover. We are helping offset these pressures with our broad, refreshed portfolio and continued technology investments that enhance the end-to-end experience, making ordering, fulfillment, and support more seamless. Until affordability improves and housing turnover normalizes, demand is likely to remain below historical levels, but we remain confident that the long-term structural drivers of R&R are intact. In Canada, market conditions remain challenging in the fourth quarter, driven by the same affordability and turnover dynamics we saw domestically. The Canadian market declined mid single digits in the quarter and for the full year, with new construction and R&R demand both down mid single digits. We expect the Canadian market to remain pressured in 2026, with demand continuing to be constrained by consumer sentiment and low resale activity. As in prior periods of subdued demand, our focus remains on disciplined execution and targeted commercial actions to remain competitive and effective. Stepping back, we view 2026 as a continuation of the industry's extended period of muted demand with end market conditions expected to remain soft and decline roughly mid single digits across most categories as affordability pressures persist. Following multiple years of market contraction and with tariff related costs still continuing to flow through, we expect competitive discounting to be elevated across the industry. In that environment, our ability to pass through additional pricing could be more limited. Where tariff mitigation actions require incremental pricing, those moves could further weigh on demand in select value-oriented categories, particularly stock cabinetry, adding uncertainty to near-term demand elasticity. At the same time, historically low existing home turnover is expected to continue to suppress cabinet repair and remodel activity. Looking ahead, we expect market conditions to stabilize and modestly improve in 2027, supported by historically low comps, improving affordability, easing financing conditions, and a gradual normalization in housing turnover. As a reminder, because cabinets are typically purchased later in the cycle, we expect a modest lag between a general market recovery and when the momentum is reflected in master branch results. In the meantime, we're maintaining rigorous cash discipline pursuing targeted cost reductions, and preserving financial flexibility so we're well positioned to capitalize on an eventual recovery as conditions improve. As part of these actions, we are implementing $30 million of planned cost reductions in 2026, which Andy will discuss more in detail in a few minutes. Turning to the trade environment, which remains an important and dynamic input to our planning and operations. As a reminder, in October 2025, new Section 232 tariffs on timber, lumber, kitchen cabinets, vanities, and related wood products went into effect, introducing meaningful additional duties across our materials and imports. While the scheduled January 1, 2026 tariff rate increase was deferred, the current 25% tariff on cabinets, vanities, and related products remains in place throughout 2026, with a 50% tariff rate now scheduled for January 1, 2027, absent further developments. Although timing has shifted, the trade environment remains challenging. Existing tariffs continue to pressure costs across the system and require ongoing management across sourcing, operations, and pricing. As we discussed last quarter, the impact of these measures is not limited to direct costs. It also has the potential to influence housing affordability and consumer behavior over time, effects that tend to emerge gradually rather than immediately. In response, we are continuing to execute a coordinated mitigation strategy across the organization. This includes enhancing sourcing flexibility and supplier engagement to reduce exposure, making targeted manufacturing footprint and operational adjustments to better align with demand and cost dynamics, adjusting product component design to lower overall tariff exposure, and maintaining consistent surcharge methodology where appropriate to provide transparency and predictability for our customers. These actions require careful sequencing and discipline execution, and they remain a key focus for our teams. We are closely monitoring ongoing trade and macroeconomic developments and have incorporated the updated tariff timeline into our planning assumptions. We expect the benefits of our tariff mitigation and cost reduction actions to phase in over the course of 2026, supporting stronger profitability towards the later part of the year. Andy will provide additional details in her remarks. Operationally, we stayed focused on execution in the fourth quarter and throughout the year, keeping service levels strong, aligning production with demand, and continuing to build capability across the organization, even as the external environment remained pressured. Turning to Supreme, 2025 represented our first full year operating as an integrated organization. We made strong progress capturing the cost synergies we targeted, with benefits coming through across procurement, network, and logistics efficiencies and overhead alignments. Just as importantly, we've been able to do this while maintaining critical operational continuity and customer service. As we look ahead, we remain on track to realize our target of $28 million in annual run rate cost synergies by year three post-close, and we continue to see additional opportunity to expand the benefits of the Supreme combination over time, particularly on the commercial side as end markets recover through broader portfolio access, cross-selling, and channel expansion. As for the pending American Woodmark transaction, we continue to advance our planning and are encouraged by our progress to date. Our teams remain focused on the integration planning and readiness work so we can move quickly following close while protecting customer service levels and maintaining continuity. We're excited about the strategic and financial opportunity the combination represents for customers and shareholders, and we anticipate closing the transaction early this year, subject to remaining customary regulatory approvals. Importantly, we continue to expect approximately $90 million in run rate cost synergies by the end of year three post-close. Finally, turning to our continuous improvement efforts and capital allocation priorities. Our continuous improvement efforts remain a core enabler of operational excellence and long-term value creation. Our programs, again, outperform plan, helping to partially offset volume pressure and tariff-related cost impacts. Importantly, continuous improvement broadened and deepened across the organization. gaining traction not only in production, but also in back office functions. Collectively, these actions are strengthening productivity, enhancing cost and performance visibility, and enabling more consistent decision-making, positioning the organization to sustain and build on these gains over time. From a capital allocation perspective, capital expenditures were in line with expectations in 2025, and we remain focused on operational execution and flexibility, consistent with the master brand way. Our balance sheet and liquidity position remain healthy, providing the flexibility to support integration activities and long-term shareholder returns. In closing, while near-term market and trade challenges persist, our strategy remains intact and guided by the MasterBrand way. We have a resilient operating model, strong portfolio, and a proven integration playbook. As industry conditions stabilize and demand recovers, we believe MasterBrand is well positioned to emerge stronger and deliver longer-term value. With that, I'll turn the call over to Andy for a detailed review of our financial results and outlook.