MasterBrand, Inc.

Good afternoon and welcome to the MasterBrands first quarter 2026 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 like to now 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 early this afternoon disclosing our first quarter 2026 financial results. This document is available on the Investors section of our website at masterbrand.com. I would like to remind you that this call will include forward-looking statements. Neither are prepared remarks or the associated question and answer session. These forward-looking statements are based on current expectations and market outlets 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 risk can be found in our filings with the Securities and Exchange Commission, including under the heading Risk Factors in our full year 2025 Form 10-K, and updated as necessary in our subsequent 2026 Form 10-Qs, which are available at sec.gov and at masterbrain.com. The forward link 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. They are also available at sec.gov and at masterbrand.com. Our prepared remarks today will include a business update from Dave, followed by a discussion of our first quarter 2026 financial results from Andy, along with our second 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 first quarter results reflect the disciplined execution of our near-term priorities against a challenging backdrop. Despite persistent demand softness and ongoing macroeconomics uncertainty, we delivered net sales and adjusted EBITDA in line with our expectations. We continue to advance our tariff mitigation efforts fully executed our previously announced $30 million cost actions, and remain focused on the actions within our control as we navigate near-term headwinds and position MasterBrand to emerge stronger when the market recovers. In the first quarter, we generated net sales of $618 million, a 6.4% decrease compared to the same period last year. Our performance reflected a mid-single-digit year-over-year market decline and a slower pace of housing completions, partially offset by the continued flow through of previously implemented pricing actions. Adjusted EBITDA for the quarter was $28 million compared to $67 million in the prior year period, and adjusted EBITDA margin was 4.5%. The lower margin was primarily driven by lower volume and the related unfavorable fixed cost leverage, as well as unfavorable product mix across channels as consumers continue to shift toward value products and forego features in made-to-order categories. At current volume levels, these mixed dynamics carry an outsized impact on margins, as reduced fixed cost absorption amplifies the effect of even modest product mix shifts. Compounding these pressures, weather-related disruptions during the quarter resulted in more down days than typical across certain facilities, driving unplanned production downtime that created additional drag on our fixed cost absorption. These headwinds were partially offset by previously announced pricing actions, operational tariff mitigation efforts that progressed ahead of schedule, and savings from our ongoing cost reduction initiatives. As is typical for our first quarter, free cash flow reflected seasonal working capital outflows. This, in combination with our net loss position, resulted in free cash outflow of $146 million. compared to a $41 million outflow in the same period last year. Looking ahead, we expect these dynamics to normalize as we move through the year, and we continue to expect free cash flow for the full year to exceed net income. Turning to our end markets, demand remained pressured through the first quarter as affordability concerns, elevated interest rates, and cautious consumer sentiment continued to constrain activity across both new construction and repair and remodel markets. The ongoing conflict in the Middle East introduced an additional headwind to consumer confidence late in the quarter and further contributed to broader market volatility. In new construction, U.S. single-family new construction was down mid to high single digits in the quarter as weak consumer sentiment and elevated mortgage rates continued to weigh on buyer activity. To stimulate sales, builders sustained elevated incentive and rate buy-down programs. The market also continued to work through a reset in the spec and quick move-in inventory cycle with completed spec inventory down meaningfully year over year. Adding to these headwinds, housing starts outpaced completions on a seasonally adjusted basis for the first time since the fourth quarter of 2024. This dynamic creates an outsized near-term impact on our business as cabinets are typically purchased later in the construction cycle, closer to completion. Against this backdrop, Masterbrand's results largely tracked broader market trends while outperforming on a completions basis. Looking ahead, we expect new construction demand to remain under pressure as mortgage rates stay elevated and affordability challenges persist. In repair and remodel, demand remains soft through the first quarter as low existing home turnover and weak consumer confidence continue to suppress larger discretionary remodel activity. Consumer sentiment towards large household purchases fell to 40-year lows during the quarter, and while rising home prices have supported homeowner equity, this has not yet translated into meaningful remodel spending. Housing turnover remains structurally constrained as well, driven in part by the significant share of homeowners locked into sub-4% mortgages, limiting the remodel activity that typically accompanies a home sale. Where there is remodel activity, we continue to observe trade down behavior across our portfolio, with consumers gravitating toward lower priced options. Reflecting this environment, our R&R business declined mid-single digits, consistent with the broader market. Looking ahead, we expect consumer sentiment to remain the primary driver of R&R demand, and affordability constraints and low housing turnover to remain the primary headwinds. In Canada, first quarter conditions remain challenging, mirroring the trends in the U.S., our Canadian business declined low single digits consistent with the broader market. With the Bank of Canada holding rates steady, we expect these dynamics to continue weighing on the market through 2026. Stepping back, we continue to view 2026 as a transitional year, with end market demand softness persisting across both new construction and repair and remodel. Affordability pressures, low consumer confidence, and the complex and evolving trade environment remain primary headwinds. Federal Reserve is expected to hold rates steady through 2026 amid persistent inflation concerns, limiting the rate relief that would foster a meaningful improvement in housing activity. Additionally, the ongoing conflict in the Middle East introduces further layers of consumer uncertainty and outlook volatility that are difficult to size at this stage. While the near-term outlook remains challenging, we remain confident in the underlying long-term fundamentals that we believe will ultimately drive a recovery across our end markets. The approximately 3 million homes underbuilt, the millennial generation entering prime home buying years, an aging housing stock primed for remodel activity, and rising home equity levels all support our expectation that pent-up demand remains intact. We continue to manage the business responsibly through this period, and while we do not expect the market to begin to recover until 2027, we are focused on ensuring MasterBrand is well-positioned to capitalize when conditions do improve. Turning to the trade environment. Since our last call, the trade landscape has continued to evolve. Following the Supreme Court's ruling that invalidated tariffs imposed under the International Emergency Economic Powers Act, a 10% global tariff was implemented, which effectively returns us to a similar tariff environment as under the reciprocal tariff regime. This tariff is time limited and is set to expire in late July, at which point we anticipate further changes to the tariff landscape. While wood and wood product tariffs remain the primary driver of our overall tariff exposure, tariffs continue to stack across categories, and the broader environment remains highly volatile and fluid. We are actively monitoring further developments and remain prepared to adjust our mitigation strategy as the landscape continues to evolve. In the first quarter, gross tariff costs were approximately $25 million, and I'm pleased to share that our teams executed exceptionally well against these headwinds. delivering mitigation efforts that exceeded our expectations for the quarter. This outperformance was driven primarily by the speed and effectiveness of our supply chain actions, including sourcing flexibility initiatives and supplier engagement efforts that progressed ahead of schedule. While supply chain actions were the primary driver of our first quarter mitigation performance, pricing remains an important and necessary component of our overall mitigation strategy, and we will continue to lean on both levers as we move through the year. We continue to monitor the potential indirect impact of tariffs on consumer demand and housing affordability, which remain inherently difficult to size. Operationally, our teams navigated a challenging first quarter, managing through demand volatility while working to maintain service levels across our network. We took further actions to align our cost structure with current demand conditions, including targeted line and shift adjustments and workforce actions across our manufacturing network. as well as facility closure consistent with our ongoing Supreme integration efforts. On the Supreme integration, we remain on track to achieve our target of $28 million in annual run rate cost synergies by year three post-close. We continue to identify additional opportunities to expand the benefits of the merger over time as end markets recover. During the first quarter, we also fully executed our broader $30 million cost savings initiative with benefits expected to phase in over the remainder of the year. Our continuous improvement efforts delivered strong results in the quarter with notable contributions across our manufacturing network and standoff performance from several of our key facilities. Our teams continue to make progress on core efficiency gains using daily management practices, standard work processes, and operating discipline. These efforts contributed meaningfully to our financial performance in the quarter, offsetting material, personnel, and utility inflation. We're encouraged by the impact of our continuous improvement system, and we remain confident in its ability to drive further gains throughout the year. Turning to our pending merger with American Woodmark, our teams continue to make meaningful progress on integration planning and readiness, ensuring we are well positioned to move quickly and capture value following close while maintaining the customer service levels and operational continuity our customers expect. We continue to expect approximately $90 million in annual run rate cost synergies by the end of year three post-flow, based on the assumptions underlying our analysis at the time of announcement. Following close, we plan to assess these estimates in the context of the current operating environment and provide updated guidance as appropriate. We remain confident in the strategic and financial merits of the merger and are progressing through the regulatory review process. As disclosed in our 8-K filed on April 22nd, We now expect the transaction to close in the second calendar quarter of 2026. Finally, turning to capital allocation. We remain disciplined in our approach to capital deployment, prioritizing investments that support our operational execution, integration activities, and long-term value creation. Capital expenditures in the quarter were in line with our expectations, and our balance sheet and liquidity position remained healthy. We expect our leverage ratio to remain elevated in the near term, primarily reflecting lower trailing 12-month adjusted EBITDA in the current demand environment. Andy will provide additional details in her remarks. In closing, the first quarter unfolded largely as we expected, a challenging environment defined by persistent demand softness, a complex trade landscape, and cautious consumer sentiment. While these conditions are not without difficulty, I'm proud of the way our teams have responded, executing our mitigation strategy ahead of schedule advancing our cost savings initiatives, and maintaining focus on the operational and strategic priorities that will position MasterBrand for the recovery ahead. We have a clear line of sight to the long-term drivers of demand across our end markets, and we remain confident that the actions we're taking today are building a stronger, more resilient MasterBrand. With that, I'll turn it over to Andy for a detailed review of our financial results and outlook.