MBC

Image source: The Motley Fool. Tuesday, Aug. 4, 2026, at 4:30 p.m. ET Senior Director of Corporate Financial Planning and Analysis - Henry Harrison President and Chief Executive Officer - Dave Banyard Executive Vice President and Chief Financial Officer - Andi Simon Operator: Good afternoon, and welcome to MasterBrand's Second Quarter 2026 Earnings Conference Call. 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. Henry Harrison: 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 Andi Simon, Executive Vice President and Chief Financial Officer. We issued a press release earlier this afternoon disclosing our second quarter 2026 financial results. This document is available on the Investors 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. 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 2025 Form 10-K and updated as necessary in our subsequent 2026 Form 10-Qs, 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 masterbrand.com. Our prepared remarks today will include a business update from Dave, followed by a discussion of our second quarter 2026 financial results from Andi, along with our second half 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. R. Banyard: Thank you, and good afternoon, everyone. We appreciate you joining us for today's call. The second quarter marked an important milestone for MasterBrand. On May 28, we completed our merger with American Woodmark, bringing together 2 industry leaders to create the most comprehensive portfolio of trusted cabinet brands in North America. I want to start by welcoming our new associates from American Woodmark and thanking our teams for staying focused on executing and delivering for our customers through the close. This is our first earnings call as a combined company, and the commitment we have seen across the organization in these first weeks has only strengthened our conviction in what this combination can deliver. Today, I'll cover our second quarter results, the state of our end markets and the combined company's path forward. Now turning to the quarter. We generated net sales of $815 million in the quarter, which includes $126 million of American Woodmark net sales from the close date. Legacy MasterBrand net sales were $690 million, in line with our guidance range, following a mid- to high single-digit year-over-year market decline, slightly offset by favorable net average selling price due to the flow-through of tariff pricing. Adjusted EBITDA for the quarter was $63 million, including $4 million of partial period contribution from American Woodmark and adjusted EBITDA margin was 7.7%. Legacy MasterBrand adjusted EBITDA was $58 million and adjusted EBITDA margin was 8.4%. The lower margin was primarily due to market-driven volume declines and the related unfavorable fixed cost leverage, unfavorable product mix and material, labor and freight inflation, partially offset by the flow-through of tariff mitigation, our continuous improvement efforts and previously announced cost actions. For the quarter, free cash flow was $129 million compared to $67 million in the same period last year, primarily reflecting improved working capital. This quarter, we are introducing second half 2026 outlook for the combined company. Now that the merger is complete and integration planning has converted to execution, we have better visibility into the combined business than earlier this year and have grown more confident in our ability to navigate the dynamic trade environment. The introduction of the second half guide reflects our improved line of sight and confidence in the actions and plans underway. It's not a change in our view of the market. Andi will walk you through the details shortly. Let me now briefly review our end markets in the quarter. During the second quarter, as anticipated, the broader single-family new construction market softened further, down mid- to high single digits, driven by ongoing pressures on completions and persistent affordability challenges. With inflation picking back up, the higher for longer outlook on interest rates continues to weigh on both builders and buyers. Builder confidence remains near its weakest level since the housing crisis era and more than 60% of builders are offering sales incentives. Against that backdrop, our new construction business declined low single digits, excluding the impact of partial period American Woodmark sales in the quarter, continuing to outperform the broader market. Shifting to the repair and remodel market served by our dealer and retail customers, we saw continued softness in demand, consistent with recent quarters as end markets remain impacted by affordability pressure, low existing home turnover and historically weak consumer sentiment. Consumers continue to defer large discretionary projects and the trade down trend we've been seeing persisted as consumers opted for value products and pared back features in made-to-order categories, a key driver of this quarter's mix pressure. Excluding the partial period contribution from American Woodmark, our repair and remodel business declined mid- to high single digits, in line with the broader market and our expectations. Layered on top of these market dynamics, the ongoing conflict in the Middle East continues to introduce added consumer uncertainty and broader market volatility that remain difficult to size at this stage, including rising fuel costs that are adding further pressure to an already cautious consumer. Taken together, our view of the 2026 addressable market down mid-single digits is directionally unchanged from our previous view, and our outlook assumes no improvement in demand conditions this year with the broader market expected to begin its recovery in 2027. Now turning to the merger and why we're so excited about the combined company. As we said at the announcement, this combination brings together 2 customer-centric platforms with highly complementary strengths, strong broad portfolios of trusted cabinet brands and streamlined low-cost manufacturing profiles. Both are long established American companies with the vast majority of manufacturing operations based in the United States, a differentiator we believe matters more than ever in today's trade environment. We believe this combination will ultimately enable us to drive growth and improve margins beyond what either company could achieve on its own. New construction in the home centers have been the 2 most resilient segments of the market through this downturn, and we believe they hold significant potential when the eventual recovery comes. Together, MasterBrand and American Woodmark can build the most efficient, cost-effective model for serving these large channels. In new construction, the combination gives us the geographic reach with an industry-leading model to better meet the customer where they are, whether direct or through distribution. The combination also strengthens our position in key new construction markets and enhances our product portfolio. We plan to apply the same disciplined approach to the combined business that has helped legacy MasterBrand outperform the new construction market, and we're confident in our ability to earn back the share American Woodmark has ceded in this channel prior to the merger. In the home centers, the added scale across our combined network enables better inventory management, more product options and an operating footprint that is well positioned to bring the high service levels our partners expect. In the dealer channel, the clearest opportunity is cross-selling American Woodmark's products into MasterBrand's much larger dealer population, allowing us to meet customers and consumers at every price point with the best value, quality and design. Realizing the full sales potential of this channel will take more time given current market conditions. It also requires thoughtfully organizing a combined product portfolio and brand package, including meaningful brand and price point white space for a highly fragmented market. We expect this work will simplify our offering for the channel over time. Across new construction, home centers and dealer, these cross-sell and white space opportunities were not built into our original deal model, and we view them as upside to the transaction economics. Stepping back, the strategic logic of this combination comes down to 2 factors: scale and flexibility. Our scale reduces inefficiencies and duplication and extends service across a broader geographic footprint. The flexible operating model that we have championed over the past 6 years creates a simple connected product continuum that consumers can choose from with ease. And because we are investing in a much larger platform, our investments make an outsized impact, including increased investment in next-generation automation, product innovation and enhanced in-person and digital engagement, all aimed at greater efficiency and a better customer experience. Turning to integration and cost synergies. Integration is off to a strong start. We've aligned our senior leadership structure, and we're now organizing the next layers of the business. Where processes overlap, we're adopting the best of what each company has built. Where they differ, we're implementing the strongest approach, along with the systems that come with it. Additionally, across the 2 companies, we have overlapping capabilities and products as well as excess capacity in our manufacturing network. We intend to apply the same manufacturing network optimization and disciplined integration track record we've built over time to capture greater efficiency. We're already realizing early procurement and overhead synergies, and we've initiated 2 plant closures to begin consolidating our production footprint. We've also begun the process of cross-selling our product portfolios into the dealer network. As of the end of July, we've executed approximately $30 million of annualized cost synergies, and we expect roughly $15 million of savings in the second half of 2026, with corporate overhead and procurement the primary sources executed to date. In total, we now expect over $100 million of annual run rate cost synergies by the end of year 3 post close, exceeding our original synergy target, and we continue to expect the transaction to be accretive to adjusted diluted earnings per share in year 2 post close. Importantly, the stated $100 million plus annual run rate synergy target excludes both the $30 million of Legacy MasterBrand cost actions we announced last quarter and American Woodmark's previously announced closure of its Monterrey, Mexico facility, which has already completed its wind down. Both of those programs are incremental savings on top of the synergy target. Now turning to capital allocation. For the second half of 2026, we expect capital expenditures of $71 million or 3% of net sales, including integration capital. We are prioritizing high-return projects and by eliminating planned spending in overlapping areas of the network, we estimate $4 million of CapEx synergies in the second half of 2026 alone. Beyond CapEx, our priorities are clear. The near-term focus is the balance sheet. We're currently targeting a net leverage ratio below 2x by the end of 2028. As synergies build and the integration process progresses, we expect our financial flexibility will grow. We anticipate that achieving our target leverage range will open the door to resuming share repurchases and opportunistic M&A. The path is straightforward, and we have a clear line of sight to executing against it. Before I turn it over to Andi, I want to step back and talk about the earnings potential of this combined business because it follows the same principle, focusing on what we can control. After an initial assessment, we believe there's a path to structurally higher profitability for the combined business, independent of the market recovery, meaning any improvement in demand will be upside to that path. There are 4 levers that drive it. First and our top priority is cost discipline. The last 3 years have taught us, we can't count on a market recovery. So we're removing that variable from the equation. Across SG&A and our manufacturing footprint, it is clear that both companies carried excess costs from operating independently through a prolonged downturn and the merger closing process. We're aligning that cost base to a level appropriate for a combined company of our scale, and that work is already underway. Second, resetting our product portfolio and the supply chain behind it. Consecutive years of inflation and market decline forced fast pricing and portfolio decisions at both companies and not all of them are optimized for where the market has landed. Similarly, the need to rapidly mitigate tariffs required us to make quick supply chain decisions that prioritize speed over optimization. Legacy MasterBrand already carried the industry's most comprehensive product portfolio and the combination with American Woodmark presents a natural opportunity to rebalance the portfolio of the combined company, while maintaining complete coverage and a range of choices across the full price spectrum. In parallel, we are implementing the MasterBrand way to optimize our sourcing and manufacturing configuration to ensure the combined business operates as efficiently as possible without sacrificing key service metrics. We have a strong track record here. Over the past 5.5 years, we've closed 11 plants while consolidating production into our remaining network, all the while preserving capacity and service levels, and we intend to bring that same discipline to the combined footprint. Third, leveraging the portfolio to support a healthier product mix across end markets and drive profitable growth. This opportunity is particularly meaningful in new construction, where we believe our breadth of products and price points, combined with our deep relationships and service expertise enables the combined company to serve builders better and more efficiently. And finally, we're investing behind dealer share gains. We believe the continued investment in technology, quality and service across the combined dealer network will position us to grow with our dealer partners even in a flat market, and we expect that to meaningfully advance that path. Despite persistent challenging market conditions, the completion of this merger marks the start of a new chapter for MasterBrand, a combined platform with a clear path to growth, tangible synergy targets and strong early momentum on integration. I'm pleased to announce that we will host an Investor Day in the first quarter of 2027, where we plan to size each of these levers and lay out the time-bound plan behind. We will also introduce the full combined company story, including our strategy and refresh long-term financial targets. This is a company we are proud to be building, and we look forward to seeing many of you there. With that, I'll turn it over to Andi for a detailed review of our financial results and outlook. Andrea Simon: Thanks, Dave, and good afternoon, everyone. I'll start with how we are reporting the quarter as a combined company, then review our second quarter results and close with our outlook for the second half of 2026. First, on reporting conventions. Our results include American Woodmark from the May 28 close date, 32 days of contribution and prior year comparisons reflect legacy MasterBrand only. It should be noted that purchase accounting estimates included in our second quarter results are preliminary and remain subject to finalization within the 1-year allowed measurement period. American Woodmark's results have been conformed to MasterBrand's fiscal calendar and account categorizations. Article 11 pro forma financial statements were filed via Form 8-K/A on June 26, 2026. Now turning to our second quarter results. Net sales in the second quarter were $815.2 million with a contribution of $125.5 million of American Woodmark net sales from the close date. Legacy MasterBrand net sales were $689.7 million, down 5.6% compared to $730.9 million in the same period last year, driven by the mid- to high single-digit market decline and slightly offset by favorable net average selling price due to the flow-through of tariff pricing. Gross profit was $205.5 million with partial period contribution of $16.7 million from American Woodmark and gross profit margin was 25.2%. Legacy MasterBrand gross profit was $188.8 million compared to $239.7 million in the same period last year. Legacy gross profit margin was 27.4% compared to 32.8% in the second quarter of 2025, down 540 basis points year-over-year amid a choppy spring selling season, primarily reflecting market-driven volume decline and the related unfavorable fixed cost leverage, unfavorable product mix and material freight and personnel inflation, partially offset by our continuous improvement efforts and favorable average selling price driven by tariff pricing. The net tariff impact in the quarter was relatively neutral with the tariff landscape developing largely as we expected. On a combined basis, our exposure is currently offset, aided in part by the IEEPA refund. Legacy MasterBrand's pricing and supply chain mitigation actions have now largely reached a full run rate offset, and we will continue executing additional actions at American Woodmark over the second half of the year to reach that same run rate level. SG&A expenses totaled $216.7 million with partial period contribution of $24.3 million from American Woodmark. Excluding American Woodmark and merger-related costs of $38.4 million, legacy MasterBrand SG&A was $154 million, up 50 basis points as a percentage of net sales, driven by the impact of increased fuel costs on distribution, partially offset by the initial benefits of cost actions in the quarter. Fuel and freight costs were a significant headwind in the quarter, driven by a shrinking pool of available drivers, stricter federal regulations and persistent operating cost inflation across the trucking industry. We are working to offset this pressure through pricing, though these actions take time to fully flow through. Interest expense was $20.8 million compared to $18.9 million in the same period last year. The increase reflects the previously announced refinancing of American Woodmark's debt. Our effective tax rate in the quarter was negative 18.8% and positive 13.7% year-to-date. I would like to spend a moment on the negative tax rate. When the merger closed in the second quarter, nondeductible merger-related costs were incurred, which, as expected, negatively impacted our full year estimated tax rate. Because the first quarter was properly recorded at the premerger close effective tax rate, in the second quarter, we were required to record a catch-up tax expense related to the first quarter in the amount of $16 million. This catch-up expense will not repeat in future quarters and thus is an add-back in our reported second quarter adjusted diluted earnings per share. However, the full year expected tax rate is now estimated at 12% to 15%, reflecting the impact of nondeductible merger-related costs. Net loss for the quarter was $57.6 million, which includes $28.9 million of partial period impact from American Woodmark and net loss margin was 7.1%. Legacy MasterBrand net loss was $28.7 million in the second quarter compared to net income of $37.3 million in the same period last year. Legacy MasterBrand net income margin was negative 4.2% compared to positive 5.1% in the prior year, reflecting lower gross profit, higher SG&A expenses and a higher tax expense, as discussed, partially offset by the initial benefits of cost actions taken during the quarter. Adjusted EBITDA for the quarter was $62.5 million, which includes $4.3 million of partial period contribution from American Woodmark and adjusted EBITDA margin was 7.7%. Legacy MasterBrand adjusted EBITDA was $58.2 million compared to $105.4 million in the prior year period. and adjusted EBITDA margin was 8.4%, down 600 basis points due to market-driven volume declines and the related unfavorable fixed cost leverage, unfavorable product mix and higher material, labor and freight inflation as fuel costs continue to rise, partially offset by the flow-through of tariff mitigation, our continuous improvement efforts and previously announced cost actions. Diluted loss per share was negative $0.38 in the second quarter based on 153.6 million outstanding shares, which is reflective of the additional shares issued at close proportionate to the timing of the closing within the quarter. This compares to earnings per share of $0.29 in the second quarter of 2025 based on 129.1 million outstanding shares. Adjusted diluted earnings per share was positive $0.05 in the current quarter based on 153.6 million outstanding shares compared to earnings of $0.40 in the prior year period based on 129.1 million outstanding shares. Before turning to the balance sheet, I want to spend a moment on American Woodmark's performance. Since American Woodmark last reported public results, its fiscal third and fourth quarter performance came in below our expectations. More specifically, the underperformance was driven by excess fixed capacity and the related absorption pressure amid lower volumes, compounded by capacity decisions that were understandably delayed pending the close of the merger. We saw American Woodmark's volume begin to improve in June, moving more in line with our legacy business at the end of the second quarter. Addressing this excess capacity is a top priority in our integration efforts, and we've already begun the work. We have announced 2 manufacturing facility consolidations since the merger closed, the first steps in rightsizing the combined footprint, and we've identified further consolidation opportunities as we continue evaluating the network. These closures will take time to work through, and they are just the beginning of the actions that underpin our confidence in the earnings potential of the combined platform. Turning to the balance sheet. We ended the quarter with $241.6 million of cash on hand and $393.9 million of liquidity available under our revolving credit facility. Net debt at the end of the second quarter was $1.15 billion, reflecting the financing associated with the American Woodmark acquisition. The trailing 12-month net leverage ratio, including American Woodmark's full trailing 12-month adjusted EBITDA was 3.9x. I want to take a moment to provide context on how our leverage ratio is calculated for covenant purposes as it differs from the reported figure. Under our credit agreement, the bank covenant calculation permits the inclusion of full trailing 12-month adjusted EBITDA for American Woodmark, along with other certain additional add-backs as well as 18 months of anticipated merger synergies. On that basis, our covenant leverage ratio was 3.4x at quarter end within the 3.75x maximum permitted under the post-close 4-quarter leverage ratio holiday in our credit agreement. Similarly, our interest coverage ratio, which measures adjusted EBITDA relative to net interest expense, was 5.1x on a covenant basis, above the 3x minimum required. Both measures reflect the full benefit of the combined business and confirm that we have headroom under our covenant at this stage of the integration. Our deleveraging path is clear. We are targeting net leverage below 2x by the end of 2028. That target reflects tariffs currently in effect, including Section 232 and its current 25% rate. As I'll discuss in a moment, the scheduled increase to 50% on January 1, 2027, remains in place. Should that increase take effect, it would extend our deleveraging time line. Once we achieve our leverage target, we expect to resume share repurchases. From a liquidity perspective, our post-close cash and revolver availability of $393.9 million and the absence of any near-term debt maturities, while synergies and cost actions flow through to adjusted EBITDA, we believe, give us ample financial flexibility to execute the integration while continuing to reduce debt. Turning to cash flow and capital expenditures. Net cash provided by operating activities was $138.8 million in the second quarter compared to $84.8 million in the prior year period. For the same period, free cash flow was $128.6 million compared to $66.7 million in the same period last year, primarily reflecting the timing of home center collections, which we manage proactively within our existing contract terms. Capital expenditures in the quarter were $10.2 million and for the second half of the year, we expect capital expenditures of $71 million or 3% of net sales, including integration capital. On synergies and cost actions, Dave covered the framework, so I'll be brief. Our updated $100 million plus annual run rate cost synergy target is composed of footprint, SG&A and procurement opportunities, roughly 60% in cost of goods sold and 40% in SG&A and indirect. We expect onetime costs to achieve these synergies to total a 1:1 ratio of the run rate synergy target. For the second half of 2026, we expect those onetime costs to total approximately $30 million. Revenue synergies are expected to represent upside over time. Turning to the current trade environment. Let me provide an update on our exposure as a combined company. The tariff landscape has continued to evolve since our last call, adding additional layers of complexity. On July 20, the administration announced additional Section 338 tariffs on certain Canadian imports. On July 23, the administration replaced the expired 10% global tariff with Section 301 tariffs ranging from 10% to 12.5% on imports from approximately 60 trading partners. Section 232 tariffs on wood and wood products, however, remain the primary driver of our exposure. Unlike the expired global tariffs, these measures have no sunset date. The scheduled increase in the Section 232 tariff rate to 50% previously delayed until January 1, 2027, remains in place. We have contingency plans and are prepared to act should it take effect. Similar to MasterBrand, American Woodmark entered the combination with a comprehensive tariff mitigation program already underway, including pricing and surcharge actions, supplier renegotiations, sourcing optimization and manufacturing footprint initiatives, including the closure of its Monterrey, Mexico facility. With that said, in the second quarter, combined company gross tariff costs were $41.9 million with a net impact essentially breakeven after mitigation and IEEPA duty refunds. For the full year of 2026, we expect the combined company's tariff exposure to be approximately 5% to 6% of net sales, inclusive of American Woodmark's total tariff exposure and net sales since the merger close. This figure also includes the newly announced Section 338 and Section 301 tariffs and the Section 232 tariffs at 25%. We continue to expect to fully offset this tariff exposure on a dollar-for-dollar run rate basis by year-end, though further work is still required to offset the newly announced tariffs as we continue to adapt to the evolving landscape. Additionally, following the Supreme Court's ruling invalidating tariffs imposed under IEEPA, we have begun receiving refunds for $14.9 million in tariffs previously paid by MasterBrand and American Woodmark. In the second quarter, we received $1.2 million of refunds, which we recognized as a reduction in cost of goods sold. Given uncertainty in the refund and administrative approval process, we are recognizing these refunds as they are collected rather than accruing a receivable. Since second quarter end, we have received an additional $9.2 million in refunds, which we will recognize in the third quarter, along with any further portion of the outstanding $4.5 million in expected refunds that are collected during the quarter. Turning to outlook. This quarter, we are introducing second half 2026 outlook. This shift in approach reflects that the combination is complete, integration planning has converted execution, and we are more confident in our ability to navigate tariffs, though the broader macro and demand environments remain uncertain. This outlook reflects the combined company with American Woodmark included for the full second half and includes our second half tariff impact and mitigation expectations for tariffs currently in effect. The outlook also embeds approximately $15 million of synergy capture and approximately $11 million of IEEPA duty refunds received and expected to be received over the period. As Dave mentioned, the ongoing conflict in the Middle East adds another layer of complexity to an already uncertain consumer environment with fuel and related input costs representing a direct exposure that has already weighed on our margins this year. We are monitoring developments closely. Our outlook does not attempt to quantify any incremental impact to the market at this time. With that said, for the second half of 2026, we expect net sales of $2.05 billion to $2.11 billion. At the midpoint, American Woodmark is expected to contribute approximately $730 million or 35% of the combined total with legacy MasterBrand comprising the remainder. This reflects an addressable market down mid-single digits year-over-year, partially offset by the full period contribution from American Woodmark and price and mix dynamics. We expect second half adjusted EBITDA of $129 million to $149 million, representing an adjusted EBITDA margin of 6.3% to 7.1%. It is worth noting the key building blocks embedded in this range. Approximately $20 million reflects the contribution from American Woodmark's legacy business, $15 million is derived from integration synergies already executed and flowing through and approximately $11 million relates to anticipated IEEPA tariff refunds, of which $9 million has already been received in July. We continue to expect decremental adjusted EBITDA margins to improve versus the first half as tariff mitigation, cost actions and synergies continue to phase in. Additionally, in the second half, we expect interest expense to be approximately $50 million, reflecting the newly arranged $375 million delayed draw Term A loan used to retire American Woodmark's debt at close. We expect second half adjusted diluted earnings per share of negative $0.05 to positive $0.03. As a reminder, the effective tax rate and the pro rata increase in our diluted share count over the course of the year as a result of the merger introduced variability into this measure. We anticipate diluted shares outstanding to reach 203.6 million by year-end and effective tax rate of 12% to 15%. Finally, we continue to expect free cash flow for 2026 to be in excess of net income for the year. Stepping back, our focus in the second half is straightforward, disciplined execution on costs and synergies and steady progress on the balance sheet. As integration progresses and our visibility into both the combined business and the broader trade environment continues to improve, we expect to return to full year guidance beginning in 2027. And at our Investor Day in the first quarter of 2027, we plan to lay out the long-term financial targets behind the path Dave described. Between the 2, we aim to provide a complete picture of the combined company. Now I'd like to turn the call back to Dave. R. Banyard: Thanks, Andi. This is a transformational quarter for MasterBrand. We believe the combination with American Woodmark positions us to navigate through this cycle and outperform in the recovery. And the early progress on integration gives us confidence that we will capture the full value of this transaction. As I said earlier, we see a path to structurally higher profitability for this business, one that doesn't depend on the market and executing against the 4 levers to achieve that path is central to our focus in the second half and beyond. At the same time, our confidence in the long-term demand fundamentals of our industry is unchanged. The structural underbuild of housing, the millennial generation entering prime home buying years and aging housing stock prime for remodel activity and rising home equity all support our expectation that pent-up demand remains intact with the broader market expected to begin its recovery in 2027. When that recovery comes, our goal is for it to be upside to a business we've already made structurally stronger. The strategy is clear. Execution is underway, and we're confident this combination positions MasterBrand to deliver meaningful growth. And with that, I'll open up the call to Q&A. Operator: Our first question is from McClaran Hayes with Zelman & Associates. McClaran Hayes: Yes, I guess maybe starting off, it's been about 2 months now since the merger closed. Can you talk a bit more about what your experience has been in these early days getting closer to the Woodmark team and starting to integrate the businesses? And maybe a bit more on the cost synergies as well. It seems like the team is off to a really strong start so far. What gave you the confidence to bring that target up with just a few months in the book so far? R. Banyard: Yes. Thanks, McClaran. I'd say I'd start by saying the teams are working really well together. There is a -- we're in the same business in a lot of ways. And so there's a lot of commonality. There's some maybe different language in a few different processes. But the team has really come together very well and gotten after the work. I think both teams were ready to go. It was a long wait for the regulatory process. And so I think everyone was just ready to hit the ground running on day 1, which was great. I think what I've observed, and I've been to I've been to most of the legacy American Woodmark factories now. There is a lot of commonality, but there's also some best practices that both companies have come up with on their own. And one of the main tasks for the team is to pick those best processes from each company and then spread those to the other side, if you will. Where there's differences that maybe don't make sense, then let's kind of figure out what's better and go from there. And so if you think about the work that the team is doing, it starts with a lot of that. It's looking at how we do things. There's a couple of examples where we've already adopted some processes that the legacy American Woodmark team implemented and they're working really well across the broader enterprise. Obviously, some of -- when you're changing a large process, it takes time. So I wouldn't say there's a ton of those yet, but we've certainly identified quite a few -- when it comes to the synergies, obviously, we had a really strong plan from what we could look at as an independent teams prior to the close. Once we close, that team really hit the ground -- the entire integration team hit the ground running and really just sat down and started putting numbers down on the page to compare to what we thought versus the reality. And I think we found more opportunities there. And I think not the least of which is we've recalibrated our view of where we think the market is over the last 9 months, and I think it's unfortunately different. And so we have more capacity that we need to take out. I think we're just looking at the business holistically here and being realistic about what we can afford. And the teams are going through that methodically to right-size the cost of the entire business, and that's the primary mission over the next couple of years. McClaran Hayes: Awesome. And I guess maybe how have conversations been with your customers so far? I think you hinted at it in your prepared remarks, but do you see potential for any revenue synergies as you go to market with this combined product portfolio? Are there any channels where you think that, that might be a more near-term target versus other channels? R. Banyard: Yes. I've met with several customers through this period. And I think that it's -- the conversations have been good. I think it does take time for things to develop. They want to understand what we bring to the table as a combined enterprise, which we're in the process of building those at that picture for them. I think early days, I think, in the new construction paths to market that we have, I think we've demonstrated over the past couple, I'd say, year, 1.5 years that the MasterBrand approach that allows for a broader set of paths to market has been successful. And I think that there's opportunity there to take what is a great team from the Legacy Woodmark side, great products work with those products, perhaps introduce different product selection into that -- into their model, but also take a look at how they're going to market and really using what we call a more flexible model of how you address the customer needs. And I think that's really a big area of focus for us because I think they have not performed as well as the market in that particular portion of the market, and we want to go and gain that back. And I think that's going to be job one. Elsewhere, I think things take time. The home centers don't move really fast. I mean, they have both companies in their stores. We want to help them organize and make that easier for the consumer. That's a primary goal and help them sell more. And then in the dealer network, it's really much like with Supreme, bringing our product portfolio together in the most logical way takes a lot of time. It takes time to train your sales force. We've already started that, but that -- those will develop more over years rather than months, but I think that's the order in which we're thinking of things. Operator: Our next question is from Steven Ramsey with Thompson Research Group. Steven Ramsey: I wanted to start with the core MasterBrand's performance in the builder channel. You said you're outperforming there, which is good to see. Can you talk about how you're able to do this? And is there any connection to Woodmark's struggles in the channel being connected to your success? R. Banyard: Yes. I think if you remember, we go to market with a combination of direct to builders and distribution. And I think that for a variety of reasons, builders like that model. And I think that's -- we're going to lean into that with the combined enterprise. And I think there's also some product differences. And again, if you talk about things that we knew, but we didn't know all the details, I think there's opportunity there with the Timberlake product as an example, where it's -- there's been a lot of trade down in the market, and that's -- you have to move with that. I think our team has done a nice job of flexing with that, albeit they're a lower price point product, obviously. And we have some work to do there to bring the performance of that product line and that group of products back to where it was several years ago. But I think there's a lot of lessons we've learned over the last 12 months on how to navigate the current market conditions that I think the combined enterprise can really benefit from. Steven Ramsey: Okay. Okay. That's helpful. If you think 2, 3 years down the road, and maybe this is an Investor Day topic. But when you think about the potential sales benefit, do you think the new construction market offers more opportunity than through the dealer channel as you get a couple of years down the road? R. Banyard: I don't know if it's more. I think it's sooner. So maybe we'll address that in more detail, as you said at Investor Day. But I think it's a less fragmented market. So those are -- you can target things easier when there's less fragmentation. But by the same token, the dealer R&R market is larger. And so there's -- the population opportunity is larger. So I think I wouldn't -- I'm not in a position today to scope the size of each, but I think it's more of a timing question. Steven Ramsey: Okay. And then lastly for me, make sure I heard you correctly and understand this correctly. The second half guide for Woodmark was $730 million of sales and EBITDA around $20 million. That points to a margin that's a little bit lower than what they contributed in the second quarter. Maybe you can connect the dots here, make sure I've got my numbers right and kind of the margin gains you expect in the second half for Woodmark? R. Banyard: Yes. Maybe I'll say a couple of things and then maybe Andi can fill in. We only disclosed the June -- effectively the last 32 days of the quarter where we were a combined entity. And if you look at that margin, about $126 million in sales, $4 million of EBITDA, it's roughly on par with what you're seeing in the second half. And that's where we think we are with -- and we got some work to do there. It's not what we expected. I think the business can perform better than that, but we've got some work to do there. Is there anything else, Andi? Andrea Simon: No, you got it right. That's right. Operator: Our next question is from Jeffrey Stevenson with Loop Capital. Jeffrey Stevenson: All the detail around the merger with Woodmark. It's been very helpful. But as you're looking at the back half of the year, are you expecting the trade down to lower-priced cabinetry to continue at a similar rate as the first half? Or are you seeing any signs of stabilization in mix as we stand here in early August? R. Banyard: Yes. I think the trend that we're on is going to continue. And I think that we will start annualizing that in the fourth quarter. That's when we really started seeing a market difference last year. And again, like we talked a little bit about -- we've had to reorganize the supply chain around inflation, around tariffs. There's been pricing involved in that. And now as a combined enterprise, I think we have the opportunity to rethink that portion of the market. If this is the new -- and I think it will -- there's going to be a portion of this market that's always going to look for this kind of lower price point product. And we -- when you change your supply chain so drastically over a short period of time, it's -- you do it for speed, you do it for certain optimizations, but I think there's better choices we can make, and that's the beauty of having this larger enterprise is that we've got good ideas on both teams, and we're going to be implementing those over the next couple of periods. And that will prepare us. If our thought is that -- and our belief is that as the market returns, you still do compete on features. And consumers want more features when they're healthier. But we're in this mode for a bit of time here, and we've got to be prepared for that. And so we're going to do that as well. It doesn't preclude us from having the features down the road nor the capacity down the road to handle that. But I think in the near term, we've got to be prepared for this and that requires some change. Jeffrey Stevenson: Understood. And then it's encouraging to hear you offset tariffs on a dollar-for-dollar basis of what was there. But at a high level, how should we think about price cost given the additional tariff changes we've seen in the market and higher energy prices? Just how we should think about overall price cost during the back half of the year? R. Banyard: Yes. I think we have some more catch-up to do with -- particularly with freight. I call it freight because it's partially fuel -- but trucking rates, as Andi highlighted in her remarks, have come up as well for a number of reasons that she outlined. And don't forget that petroleum goes into other things, paint being one and resin being another. And so we're still fighting inflation. And as we've said many times before, we don't have instantaneous ability to price or to counteract that. And so it takes some time. And that's what you're going to see through the rest of the year here. Operator: This now concludes our question-and-answer session. Ladies and gentlemen, thank you for joining MasterBrand's Second Quarter 2026 Earnings Conference Call. This does conclude today's teleconference. Please disconnect your lines, and have a wonderful day. Before you buy stock in MasterBrand, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and MasterBrand wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. 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As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool recommends MasterBrand. The Motley Fool has a disclosure policy. MasterBrand (MBC) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

This article first appeared on GuruFocus. Net Sales: $815.2 million in Q2 2026, including $125.5 million from American Woodmark (32 days post-close); legacy MasterBrand net sales were $689.7 million, down 5.6% year-over-year. Adjusted EBITDA: $62.5 million, with a margin of 7.7%; legacy MasterBrand adjusted EBITDA was $58.2 million, down from $105.4 million in the prior year, with a margin of 8.4%. Gross Profit: $205.5 million, with a margin of 25.2%; legacy MasterBrand gross profit margin was 27.4%, down 540 basis points year-over-year. Net Loss: $57.6 million, or a net loss margin of 7.1%; legacy MasterBrand net loss was $28.7 million compared to net income of $37.3 million in the prior year. Diluted Loss Per Share: Negative $0.38, based on 153.6 million shares; adjusted diluted EPS was positive $0.05. Free Cash Flow: $128.6 million in Q2 2026, compared to $66.7 million in the same period last year. Capital Expenditures: $10.2 million in the quarter; expected to be $71 million, or 3% of net sales, in the second half of 2026. Second Half 2026 Outlook: Net sales expected between $2.05 billion and $2.11 billion; adjusted EBITDA expected between $129 million and $149 million, with a margin of 6.3% to 7.1%. Tariff Costs: Combined company gross tariff costs were $41.9 million in Q2, with a net impact essentially breakeven after IEPA duty refunds. Cost Synergies: Approximately $30 million of annualized cost synergies executed as of end of July; total target raised to over $100 million annual run rate by end of year three post-close. Warning! GuruFocus has detected 7 Warning Signs with MBC. Is MBC fairly valued? Test your thesis with our free DCF calculator. Release Date: August 04, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Completed the merger with American Woodmark, creating the most comprehensive portfolio of trusted cabinet brands in North America and positioning the combined company for long-term growth. Exceeded the original cost synergy target, now expecting over $100 million in annual run rate cost synergies by the end of year three post-close, with $30 million already executed. Generated strong free cash flow of $128.6 million in the second quarter, up from $66.7 million in the prior year, primarily due to improved working capital. Legacy MasterBrand's new construction business outperformed the broader market, declining only low single-digits versus a mid to high single-digit market decline. The company has a clear path to structurally higher profitability through four levers: cost discipline, product portfolio reset, leveraging the portfolio for healthier mix, and investing in dealer share gains. Tariff exposure is expected to be fully offset on a dollar-for-dollar run rate basis, aided by IEPA refunds and mitigation actions, with $14.9 million in refunds received or expected. Integration is off to a strong start, with two plant closures initiated and early procurement and overhead synergies already being realized. Legacy MasterBrand adjusted EBITDA margin declined 600 basis points year-over-year to 8.4%, driven by market-driven volume declines, unfavorable product mix, and material, labor, and freight inflation. The repair and remodel market remained soft, with consumers deferring large discretionary projects and trading down to value-based products, leading to mid to high single-digit declines in that segment. American Woodmark's performance came in below expectations, with excess fixed capacity and absorption pressure, and its second-half 2026 EBITDA margin is expected to remain low at approximately 2.7%. The company faces significant headwinds from rising fuel and freight costs, driven by a shrinking pool of drivers and stricter federal regulations, which are pressuring margins. The scheduled increase in Section 232 tariffs to 50% on January 1, 2027 remains in place, which could extend the deleveraging timeline and add further cost pressure. The company's net leverage ratio is elevated at 3.9 times on a trailing twelve-month basis, and the deleveraging path to below 2 times is not expected until the end of 2028. The ongoing conflict in the Middle East adds consumer uncertainty and market volatility, with rising fuel costs further pressuring an already cautious consumer environment. Q: It's been about two months since the merger closed. Can you talk about your experience in these early days integrating the businesses, and what gave you the confidence to raise the cost synergy target so quickly?A: Dave Banyard (CEO): The teams are working really well together, and both were ready to hit the ground running after the long regulatory wait. We are identifying best practices from each company and spreading them across the enterprise. The confidence in raising the synergy target comes from the integration team putting real numbers on paper post-close and finding more opportunities than initially planned. We have recalibrated our view of the market, which means we have more capacity that needs to be taken out, and we are being realistic about right-sizing the cost of the entire business. Q: How have conversations been with your customers so far, and do you see potential for revenue synergies as you go to market with the combined portfolio? Are there any channels that might be a more near-term target?A: Dave Banyard (CEO): Conversations have been good, but it takes time for things to develop. In new construction, we see a big opportunity to take the legacy Woodmark team's great products and apply MasterBrand's more flexible go-to-market model to win back share they have ceded. The home centers won't move fast, but we want to help them organize the combined portfolio to make it easier for the consumer. In the dealer network, it's a longer-term project to train the sales force and logically combine product portfolios, similar to what we did with Supreme. Q: Can you talk about how Legacy MasterBrand is able to outperform in the builder channel, and is there any connection to Woodmark's struggles there?A: Dave Banyard (CEO): Our success is driven by a combination of direct-to-builder and distribution go-to-market models, which builders like. There are also product differences, such as the Timberlake product, which has seen significant trade-down. Our team has done a nice job flexing with that, and we have learned a lot of lessons over the last 12 months on navigating current market conditions that the combined enterprise can benefit from. Q: When you think about the potential sales benefit two or three years down the road, does the new construction market offer more opportunity than the dealer channel?A: Dave Banyard (CEO): I don't know if it's more, but it's sooner. New construction is a less fragmented market, so you can target things easier. However, the dealer R&R market is larger, so the population opportunity is bigger. It's more of a timing question than a size question, and we will scope this out in more detail at our Investor Day. Q: Can you confirm the second half guide for Woodmark is $730 million of sales and around $20 million of EBITDA, which points to a margin lower than their Q2 contribution? Can you connect the dots on the margin gains you expect?A: Dave Banyard (CEO): The $126 million in sales and $4 million of EBITDA from the 32 days of contribution in Q2 is roughly on par with what we are seeing in the second half. That is where we think we are, and we have some work to do there. It's not what we expected, and we believe the business can perform better, but we need to execute on our integration plans to get there. Q: Are you expecting the trade down to lower price cabinetry to continue at a similar rate in the back half, or are you seeing any signs of stabilization in mix?A: Dave Banyard (CEO): The trend will continue, and we will start annualizing it in the fourth quarter. As a combined enterprise, we have the opportunity to rethink the supply chain for this portion of the market. We made quick decisions for speed during the tariff crisis, but now we can make better, more optimized choices. We are preparing for this value-focused market to persist, but this doesn't preclude us from having the features and capacity for when the market recovers. Q: How should we think about overall price cost given the additional tariff changes and higher energy prices in the back half of the year?A: Dave Banyard (CEO): We have some catch-up to do, particularly with freight, which is partially driven by fuel, but trucking rates are also up. Petroleum also goes into other things like paint and resin, so we are still fighting inflation. We don't have the ability to instantaneously price or counteract these costs, so it takes time, and that is what you will see through the rest of the year. Q: Can you provide more detail on the path to structurally higher profitability for the combined business that is independent of a market recovery?A: Dave Banyard (CEO): There are four levers driving this path. First is cost discipline, as both companies carried excess cost from operating independently through a prolonged downturn. Second is resetting our product portfolio and supply chain, as rapid tariff mitigation required quick decisions that prioritized speed over optimization. Third is leveraging the portfolio to support a healthier product mix, particularly in new construction. Fourth is investing behind dealer share gains through technology, quality, and service. We will size each of these levers and lay out a time-bound plan at our Investor Day in Q1 2027. For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. The merger with American Woodmark creates a comprehensive North American cabinet portfolio, aiming to leverage combined scale for better inventory management and service levels. Performance was impacted by a mid- to high single-digit market decline, driven by affordability challenges and weak consumer sentiment in repair and remodel segments. Management observed a persistent 'trade down' trend where consumers are opting for value products and paring back features in made-to-order categories. New construction outperformance was driven by a flexible go-to-market model that combines direct builder relationships with distribution channels. The strategic rationale centers on scale and flexibility, allowing for outsized impacts from investments in automation, product innovation, and digital engagement. Operational challenges at American Woodmark prior to the close included excess fixed capacity and absorption pressure, which management is addressing through facility consolidations. The 'MasterBrand Way' is being implemented across the combined footprint to optimize sourcing and manufacturing configurations without sacrificing service metrics. Second half 2026 guidance assumes no improvement in demand, with a broader market recovery not expected until 2027. Management identified four levers for structurally higher profitability: cost discipline, product portfolio resetting, leveraging mix in new construction, and investing in dealer share gains. The company raised its annual run rate cost synergy target to over $100 million by the end of year three, exceeding the original deal model. Financial strategy prioritizes debt reduction with a target net leverage ratio below 2x by the end of 2028 to enable future share repurchases and M&A. The outlook assumes a 25% Section 232 tariff rate; a scheduled increase to 50% in January 2027 would extend the deleveraging timeline. The company recognized $1.2 million in IEEPA tariff refunds in Q2, with an additional $9.2 million received in July and $4.5 million still outstanding. Two manufacturing facility consolidations have been initiated to right-size the combined footprint and eliminate excess capacity. Rising fuel and freight costs, driven by driver shortages and stricter regulations, remain a significant headwind requiring ongoing pricing actions. The ongoing conflict in the Middle East is cited as a source of consumer uncertainty and volatility in fuel-related input costs. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Management raised synergy targets after gaining visibility into redundant capacity and finding more opportunities to align the cost base to current market realities. Integration teams are identifying best practices from both legacy companies, such as adopting specific American Woodmark processes across the broader enterprise. New construction is viewed as the most immediate opportunity for revenue gains by applying MasterBrand's flexible go-to-market model to American Woodmark's product lines. Dealer channel growth will take longer as it requires training sales forces and thoughtfully organizing a combined product portfolio to fill price point white spaces. Management expects the trade-down trend to continue through the end of the year, with year-over-year comparisons beginning to annualize in the fourth quarter. The combined company is re-engineering its supply chain to be more efficient at lower price points while maintaining the capacity to re-introduce features when the market recovers.

Interested in MasterBrand, Inc.? Here are five stocks we like better. Q2 results weakened sharply: Net sales were $815.2 million, including $125.5 million from American Woodmark, while legacy MasterBrand sales fell 5.6%. The company posted a $57.6 million net loss, and legacy adjusted EBITDA margin declined to 8.4% as weak discretionary demand, lower volumes and higher costs pressured profitability. Integration savings are ahead of plan: MasterBrand has achieved approximately $30 million in annualized synergies and raised its three-year run-rate target to more than $100 million. Two plant closures have begun, with savings expected from manufacturing consolidation, procurement and overhead reductions. Management expects continued market pressure: The company forecasts a mid-single-digit decline in its 2026 addressable market and introduced second-half guidance of $2.05 billion–$2.11 billion in sales and $129 million–$149 million in adjusted EBITDA. Tariff mitigation and refunds are expected to offset much of the tariff burden, while leverage remains elevated at 3.9 times following the acquisition. MasterBrand (NYSE:MBC) reported second-quarter results that included a partial-period contribution from American Woodmark following the completion of their merger on May 28, while management outlined a second-half outlook centered on integration, cost savings and tariff mitigation. Net sales totaled $815.2 million in the quarter, including $125.5 million from American Woodmark during the 32 days following the transaction’s close. Legacy MasterBrand sales were $689.7 million, down 5.6% from $730.9 million a year earlier, as a mid- to high-single-digit market decline was partly offset by higher net average selling prices tied to tariff pricing. → SpaceX’s First Earnings Report Could Decide Whether Shorts or Bulls Have Control The company posted a net loss of $57.6 million, or $0.38 per diluted share, compared with net income of $37.3 million, or $0.29 per share, in the prior-year quarter. Adjusted diluted earnings per share were $0.05, down from $0.40 a year earlier. Adjusted EBITDA was $62.5 million, including $4.3 million from American Woodmark, for a 7.7% margin. Legacy MasterBrand adjusted EBITDA was $58.2 million, down from $105.4 million in the year-earlier period, while adjusted EBITDA margin fell 600 basis points to 8.4%. Chief Executive Officer Dave Banyard said lower volume, unfavorable fixed-cost leverage, product mix shifts and higher material, labor and freight expenses pressured profitability. → 3 Drone Stocks That Should Soar After the Summer Slump “Consumers continued to defer large discretionary projects,” Banyard said, noting that shoppers continued to trade down toward value products and fewer features in made-to-order cabinetry. Legacy repair-and-remodel sales declined mid- to high-single digits, in line with management’s view of the broader market. In new construction, MasterBrand’s legacy business declined by a low-single-digit percentage, excluding American Woodmark’s contribution. Banyard said the company continued to outperform the broader single-family construction market, which declined mid- to high-single digits amid affordability pressures, weaker completions and persistent concerns around interest rates. → Why Rare Earth Processing Could Be the Real 2027 Opportunity The company maintained its expectation for its 2026 addressable market to decline by a mid-single-digit percentage and said its outlook assumes no improvement in demand this year. Management expects a broader market recovery to begin in 2027. MasterBrand said it has executed about $30 million of annualized cost synergies as of the end of July, primarily through corporate overhead and procurement initiatives. It expects roughly $15 million of savings to be recognized in the second half of 2026. The company increased its expected annual run-rate cost synergy target to more than $100 million by the end of the third year after closing, above its original target. About 60% of the targeted savings are expected to come from cost of goods sold, including manufacturing footprint actions, while approximately 40% are expected from selling, general and administrative expenses and indirect costs. MasterBrand has initiated two plant closures as part of efforts to consolidate its manufacturing network. Banyard said the combined company has overlapping capabilities, products and excess manufacturing capacity, and that it plans to apply the same network-optimization approach used by legacy MasterBrand. The updated synergy target excludes $30 million of legacy MasterBrand cost actions announced in the prior quarter and American Woodmark’s previously announced closure of its Monterrey, Mexico, facility. The company continues to expect the transaction to be accretive to adjusted diluted earnings per share in the second year after closing. Chief Financial Officer Andi Simon said American Woodmark’s performance before the merger had fallen below MasterBrand’s expectations because of excess fixed capacity, lower volumes and capacity decisions delayed during the merger process. She said American Woodmark’s volume improved in June and moved more in line with MasterBrand’s legacy business. Combined gross tariff costs were $41.9 million in the second quarter, though the net impact was essentially break-even after mitigation measures and refunds of duties paid under the International Emergency Economic Powers Act, or IEEPA. MasterBrand expects full-year tariff exposure of approximately 5% to 6% of net sales and said it aims to fully offset that exposure on a dollar-for-dollar run-rate basis by year-end. The company received $1.2 million in IEEPA refunds during the second quarter and an additional $9.2 million after quarter-end, which it expects to recognize in the third quarter. It has $4.5 million in additional expected refunds outstanding. Management said it continues to face higher freight and fuel costs. Simon cited a shrinking pool of available drivers, federal regulations and trucking-industry operating-cost inflation as factors affecting distribution expenses. Banyard added that higher petroleum prices can also affect materials such as paint and resin. MasterBrand ended the quarter with $241.6 million in cash and $393.9 million available under its revolving credit facility. Net debt was $1.15 billion following the financing of the American Woodmark acquisition. Its reported trailing-12-month net leverage ratio was 3.9 times, while its covenant leverage ratio was 3.4 times, below the 3.75-times maximum permitted during a post-close leverage-ratio holiday. The company is targeting net leverage below two times by the end of 2028 and said it expects to consider resuming share repurchases and pursuing opportunistic acquisitions after reaching its leverage target. For the second half of 2026, MasterBrand expects net sales of $2.05 billion to $2.11 billion and adjusted EBITDA of $129 million to $149 million, representing an adjusted EBITDA margin of 6.3% to 7.1%. The outlook includes American Woodmark for the full second half, approximately $15 million of integration synergies and about $11 million of IEEPA refunds received or expected during the period. At the midpoint of the sales outlook, American Woodmark is expected to contribute approximately $730 million, or 35% of combined sales. MasterBrand expects second-half adjusted diluted earnings per share ranging from a loss of $0.05 to earnings of $0.03, with interest expense of about $50 million. The company plans to host an Investor Day in the first quarter of 2027, where management said it will provide refreshed long-term financial targets and further detail on the combined company’s strategy. MasterBrand Inc is one of the largest manufacturers of cabinetry and home storage solutions in North America. The company specializes in designing, producing and distributing kitchen and bath cabinetry for both new construction and the remodeling markets. Its offerings span a broad spectrum of styles and price points, serving homebuilders, home improvement retailers and independent dealers. MasterBrand's product portfolio includes framed and frameless cabinet lines, bath vanities, closet systems and other organizational accessories. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "MasterBrand Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.

Closed transformative all-stock merger with American Woodmark during the quarter and raised long-term annual run-rate cost synergy target to over $100 million Net sales were $815.2 million, including a $125.5 million contribution from American Woodmark Net loss was $(57.6) million and net loss margin was (7.1)% Adjusted EBITDA1 was $62.5 million, representing an adjusted EBITDA margin1 of 7.7% Diluted (loss) earnings per share were $(0.38), compared to $0.29 in the prior year period, adjusted diluted earnings per share1 were $0.05, compared to $0.40 in the prior year period Company introduces second-half 2026 financial outlook, which includes $15 million of synergy realization from the $30 million in annualized synergies executed to date BEACHWOOD, Ohio, August 04, 2026--(BUSINESS WIRE)--MasterBrand, Inc. (NYSE: MBC, the "Company," or "MasterBrand"), the largest residential cabinet manufacturer in North America, today announced second quarter 2026 financial results. "The second quarter marked an important milestone for MasterBrand. We completed our merger with American Woodmark, establishing the most comprehensive portfolio of trusted cabinetry brands in North America, while our legacy business delivered results largely in line with our outlook despite continued softness in demand," said Dave Banyard, President and Chief Executive Officer. "With integration ahead of schedule, we remain confident that this combination positions MasterBrand to streamline our cost structure, unlock greater earnings power, and drive growth as our markets recover." Second Quarter 2026 Results for the second quarter include American Woodmark from the May 28, 2026, close date. Prior year comparisons reflect legacy MasterBrand only. Net sales were $815.2 million, including a $125.5 million contribution from American Woodmark. Legacy MasterBrand net sales were $689.7 million, a decrease of 5.6% compared to the second quarter of 2025, reflecting a mid- to high-single-digit market decline, as expected, slightly offset by favorable net average selling price ("ASP") due to the flow through of tariff pricing. Gross profit was $205.5 million, with a contribution of $16.7 million from American Woodmark. Gross profit margin was 25.2%. Legacy MasterBrand gross profit was $188.8 million, compared to $239.7 million in the prior year period. Legacy gross profit margin decreased 540 basis points to 27.4%, compared to 32.8% in the second quarter of 2025, driven by lower volume and the related unfavorable fixed cost leverage, unfavorable product mix, and material, labor, and freight inflation, partially offset by our continuous improvement efforts and favorable ASP from tariff pricing flow-through. Net (loss) income was $(57.6) million, with a contribution of $(28.9) million from American Woodmark and net (loss) income margin was (7.1)%. Legacy net (loss) income was $(28.7) million compared to $37.3 million in the second quarter of 2025 and net (loss) income margin was (4.2)%, compared to net income margin of 5.1% in the prior year, driven by lower gross profit and higher SG&A expenses, primarily due to merger-related costs, and a higher tax expense due to non-deductible expenses and jurisdictional differences, partially offset by the initial benefits of cost actions taken in the quarter. Adjusted EBITDA1 was $62.5 million, including a $4.3 million contribution from American Woodmark. Adjusted EBITDA margin1 was 7.7%. Legacy MasterBrand adjusted EBITDA1 was $58.2 million compared to $105.4 million in the prior year period, and adjusted EBITDA margin1 was 8.4%, down 600 basis points due to market driven volume declines and the related unfavorable fixed cost leverage, unfavorable product mix, and material, labor, and freight inflation, partially offset by the flow through of tariff mitigation, our continuous improvement efforts and previously announced cost actions. Diluted (loss) earnings per share were $(0.38) based on 153.6 million weighted average shares outstanding compared to $0.29 in the second quarter of 2025 based on 129.1 million weighted average shares outstanding. Adjusted diluted earnings per share1 was $0.05 based on 153.6 million weighted average shares outstanding compared to $0.40 in the second quarter of 2025 based on 129.1 million weighted average shares outstanding. American Woodmark Integration and Synergies On May 28, 2026, MasterBrand completed its merger with American Woodmark, creating the most comprehensive portfolio of trusted cabinetry brands in North America. Integration of American Woodmark is underway, with approximately $30 million of annual synergy actions completed as of the end of July. The Company now expects over $100 million in annual run-rate cost synergies by the end of year three post-close, exceeding its original synergy target. This target excludes the previously announced $30 million legacy MasterBrand cost reduction initiative and American Woodmark's closure of its Monterrey, Mexico, facility, both of which are incremental. Balance Sheet, Cash Flow and Capital Allocation As of June 28, 2026, the Company had $241.6 million in cash and $393.9 million of availability under its revolving credit facility. Additionally, total debt was $1,390.3 million, net debt1 was $1,148.7 million and the ratio of net debt to adjusted EBITDA1 from the most recent trailing twelve months, inclusive of American Woodmark’s most recent trailing twelve-months adjusted EBITDA1, was 3.9x. The Company's credit agreement permits the inclusion of trailing twelve-month adjusted EBITDA for American Woodmark and stock-based compensation, among other permitted adjustments, for covenant compliance purposes. The Company remained in full compliance with all applicable financial covenants related to its outstanding debt as of the end of the second quarter. Net cash provided by operating activities was $5.8 million for the twenty-six weeks ended June 28, 2026, compared to $53.4 million for the twenty-six weeks ended June 29, 2025. Free cash flow1 was $(17.6) million for the twenty-six weeks ended June 28, 2026, compared to $25.5 million in the prior-year period. The decrease in net cash provided by operating activities and free cash flow were driven by a decrease in net income in the twenty-six weeks ended June 28, 2026, compared to the twenty-six weeks ended June 29, 2025. No share repurchases were made during the second quarter of 2026. The Company intends to prioritize integration investments and debt reduction and is currently targeting net leverage below 2.0x by the end of 2028. Second-Half 2026 Financial Outlook For the second half of 2026, the Company expects the following: Net sales of $2.05 to $2.11 billion Adjusted EBITDA1,2 in the range of $129 to $149 million, with related adjusted EBITDA margin1,2 in the range of 6.3% to 7.1% Adjusted diluted earnings per share1,2 in the range of $(0.05) to $0.03 This outlook reflects the combined company, with American Woodmark included for the full second half, and includes approximately $15 million of synergy capture and approximately $11 million of IEEPA duty refunds received and expected to be received over the period. For full year 2026, MasterBrand is reiterating its expectation that its addressable market will be down mid-single digits. The Company now expects the following: Gross tariff costs of approximately 5-6% of full-year 2026 net sales; expected to be fully offset on a dollar-for-dollar run-rate basis by end of year The Company continues to expect free cash flow1 for full-year 2026 to be in excess of net income This financial outlook only reflects the impact of those tariffs in effect as of the date of this release and does not reflect any other potential tariffs or tariff-related impacts on company costs or end market demand. The Company believes the dynamic nature of tariffs, specifically the uncertainty of implementation, potential timing and duration, limits the usefulness of estimating this information. MasterBrand undertakes no obligation to update this outlook as circumstances evolve. This outlook reflects the combined company including American Woodmark. "Our teams continued to execute cost actions and tariff mitigation efforts while accomplishing early synergy realization from the combination," said Andi Simon, Executive Vice President and Chief Financial Officer. "With the merger complete and integration planning continuing and converting to execution, we are introducing second-half 2026 outlook for the combined company. Our priorities from here are clear: disciplined execution on costs and synergies, and steady progress on the balance sheet." Conference Call Details The Company will hold a live conference call and webcast at 4:30 p.m. ET today, August 4, 2026, to discuss the financial results and business outlook. Telephone access to the live call will be available at (877) 407-4019 (U.S.) or by dialing +1 (201) 689-8337 (international). The live audio webcast can be accessed on the "Investors" section of the MasterBrand website, www.masterbrand.com. A telephone replay will be available approximately one hour following completion of the call through August 18, 2026. To access the replay, please dial (877) 660-6853 (U.S.) or +1 (201) 612-7415 (international). The replay passcode is 13761068. An archived webcast of the conference call will also be available on the "Investors" page of the Company's website. Non-GAAP Financial Measures To supplement the financial information presented in accordance with generally accepted accounting principles in the United States ("GAAP") in this earnings release, certain non-GAAP financial measures as defined under SEC rules have been included. It is our intent to provide non-GAAP financial information to enhance understanding of our financial information as prepared in accordance with GAAP. Non-GAAP financial measures should be considered in addition to, not as a substitute for, other financial measures prepared in accordance with GAAP. Our methods of determining these non-GAAP financial measures may differ from the methods used by other companies for these or similar non-GAAP financial measures. Accordingly, these non-GAAP financial measures may not be comparable to measures used by other companies. We use EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted net income margin, adjusted diluted earnings per share ("adjusted diluted EPS"), free cash flow, net debt, and net debt to adjusted EBITDA, which are all non-GAAP financial measures. EBITDA is defined as earnings before interest, taxes, depreciation and amortization. We evaluate the performance of our business based on income before income taxes, but also look to EBITDA as a performance evaluation measure because interest expense is related to corporate functions, as opposed to operations. For that reason, we believe EBITDA is a useful metric to investors in evaluating our operating results. Adjusted EBITDA is calculated by removing the impact of non-operational results and special items from EBITDA. Adjusted EBITDA margin is calculated as adjusted EBITDA divided by net sales. Adjusted net income is calculated by removing the impact of non-operational results, including non-cash amortization expense, which is not deemed to be indicative of the results of current or future operations, and special items from net income. Adjusted net income margin is calculated as adjusted net income divided by net sales. Adjusted diluted EPS is a measure of our diluted earnings per share excluding non-operational results and special items. We believe these non-GAAP measures are useful to investors as they are representative of our core operations and are used in the management of our business, including decisions concerning the allocation of resources and assessment of performance. Free cash flow is defined as cash flow from operations less capital expenditures. We believe that free cash flow is a useful measure to investors because it is a meaningful indicator of cash generated from operating activities available for the execution of our business strategy, and is used in the management of our business, including decisions concerning the allocation of resources and assessment of performance. Net debt is defined as total balance sheet debt less cash and cash equivalents. We believe this measure is useful to investors as it provides a measure to compare debt less cash and cash equivalents across periods on a consistent basis. Net debt to adjusted EBITDA is calculated by dividing net debt by the trailing twelve months adjusted EBITDA. For periods impacted by an acquisition, trailing twelve months adjusted EBITDA includes the full trailing twelve months adjusted EBITDA of the acquired entity. Net debt to adjusted EBITDA is used by management to assess our financial leverage and ability to service our debt obligations. As required by SEC rules, detailed reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measure are included in the financial statement section of this earnings release. We have not provided a reconciliation of our fiscal 2026 second half adjusted EBITDA, adjusted EBITDA margin and adjusted diluted EPS guidance because the information needed to reconcile these measures is unavailable due to the inherent difficulty of forecasting the timing or amount of various items that have not yet occurred, including restructuring and other charges, which are excluded from adjusted EBITDA, adjusted EBITDA margin, and adjusted diluted EPS. Additionally, estimating such GAAP measures and providing a meaningful reconciliation consistent with the Company’s accounting policies for future periods requires a level of precision that is unavailable for these future periods and cannot be accomplished without unreasonable effort. Forward-looking non-GAAP measures are estimated consistent with the relevant definitions and assumptions used for historical non-GAAP measures. About MasterBrand: MasterBrand, Inc. (NYSE: MBC) is the largest manufacturer of residential cabinets in North America and offers a comprehensive portfolio of leading residential cabinetry products for the kitchen, bathroom and other parts of the home. Delivered through our exceptional distribution network, MasterBrand products are available in a wide variety of designs, finishes and styles and span the most attractive categories of the cabinets market: stock, semi-custom and premium cabinetry. Additional information can be found at www.masterbrand.com. Forward-Looking Statements: Certain statements contained in this Press Release, other than purely historical information, including, but not limited to estimates, projections, statements relating to our business plans, objectives and expected operating results, financial outlook and cost synergies, and the assumptions upon which those statements are based, are forward-looking statements. Statements preceded by, followed by or that otherwise include the word "believes," "expects," "anticipates," "intends," "projects," "estimates," "plans," "priorities," "may increase," "may fluctuate," and similar expressions or future or conditional verbs such as "will," "should," "would," "may," and "could," are generally forward-looking in nature and not historical facts. Where, in any forward-looking statement, we express an expectation or belief as to future results or events, such expectation or belief is based on the current plans and expectations of our management. Although we believe that these statements are based on reasonable assumptions, they are subject to numerous factors, risks and uncertainties that could cause actual outcomes and results to be materially different from those indicated in such statements. These factors include those listed under "Risk Factors" in Part I, Item 1A of our Form 10-K for the fiscal year ended December 28, 2025, Part II, Item 1A of our subsequent Forms 10-Q and other filings with the SEC. The forward-looking statements included in this document are made as of the date of this Press Release and, except pursuant to any obligations to disclose material information under the federal securities laws, we undertake no obligation to update, amend or clarify any forward-looking statements to reflect events, new information or circumstances occurring after the date of this Press Release. Some of the important factors that could cause our actual results to differ materially from those projected in any such forward-looking statements include: Our ability to develop and expand our business; Our ability to develop new products or respond to changing consumer preferences and purchasing practices; Our anticipated financial resources and capital spending; Our ability to manage costs; Our ability to effectively manage manufacturing operations and capacity, or an inability to maintain the quality of our products; The impact of our dependence on third parties to source raw materials and our ability to obtain raw materials in a timely manner or fluctuations in raw material costs; Our ability to accurately price our products; Our projections of future performance, including future revenues, capital expenditures, gross margins, and cash flows; The effects of competition; Costs of complying with evolving tax and other regulatory requirements and the effect of actual or alleged violations of tax, environmental or other laws; The effect of climate change and unpredictable seasonal and weather factors; Conditions in the housing market in the United States, Canada and Mexico; The expected strength of our existing customers and consumers and any loss or reduction in business from one or more of our key customers or increased buying power of large customers; Information systems interruptions or intrusions or the unauthorized release of confidential information concerning customers, employees, or other third parties; Worldwide economic, geopolitical and business conditions and risks associated with doing business on a global basis, including risks associated with uncertain trade environments, changes to U.S. tariff policy and retaliatory tariffs imposed by other countries; The effects of a public health crisis or other unexpected event; Our ability to successfully integrate American Woodmark’s operations, systems, personnel, and business processes and realize anticipated synergies, cost savings, and other strategic benefits within expected timeframes or at all; The impact of our current and any additional future debt obligations on our business, current and future operations, profitability and our ability to meet other obligations; Business disruption, operational inefficiencies or increased costs resulting from integration activities following the acquisition of American Woodmark; The diversion of management attention and resources from ongoing business operations as a result of integration activities and strategic initiatives associated with the acquisition of American Woodmark; Our ability to maintain relationships with customers, suppliers, associates and other business partners following the acquisition of American Woodmark; Our ability to successfully integrate, migrate, or harmonize information technology systems, cybersecurity controls, financial reporting systems and other business processes across the combined company; Unexpected integration costs, operational challenges, disruptions or liabilities associated with the acquisition of American Woodmark; Our ability to retain key employees and leadership personnel and effectively integrate workforces and corporate cultures; Our ability to optimize manufacturing operations, distribution networks and supply chain activities while minimizing disruption to customers and operations; and Other statements contained in this Press Release regarding items that are not historical facts or that involve predictions. View source version on businesswire.com: https://www.businesswire.com/news/home/20260804517345/en/ Contacts Investor Relations [email protected] Media Contact [email protected]

Interested in MasterBrand, Inc.? Here are five stocks we like better. MasterBrand’s Q1 results weakened as net sales fell 6.4% to $618 million and adjusted EBITDA dropped to $28 million from $67.1 million a year ago, reflecting softer housing demand, unfavorable product mix and tariff-related costs. The company posted a net loss of $15.4 million and said margins were pressured by lower volume and fixed-cost leverage. Demand remains soft across key markets, with management citing weak new construction, sluggish repair-and-remodel activity and continued consumer caution due to affordability concerns and high interest rates. MasterBrand said its business is tracking broadly in line with market declines, including mid-single-digit weakness in U.S. single-family and R&R demand. Management is leaning on cost cuts and tariff mitigation, including pricing actions, supply chain changes and the fully executed $30 million cost-savings plan, while also advancing integration planning for the pending American Woodmark merger. MasterBrand expects second-quarter sequential improvement and still sees full-year free cash flow exceeding net income. MasterBrand (NYSE:MBC) reported lower first-quarter 2026 sales and earnings as soft housing demand, unfavorable product mix and tariff costs weighed on results, though management said the cabinet maker performed in line with its expectations and is taking steps to protect margins through cost cuts, pricing and supply chain actions. President and Chief Executive Officer Dave Banyard said the quarter reflected “disciplined execution” against a difficult macroeconomic backdrop, including “persistent demand softness and ongoing macroeconomic uncertainty.” The company posted net sales of $618 million, down 6.4% from $660.3 million a year earlier. Banyard said results reflected a mid-single-digit market decline and a slower pace of housing completions, partly offset by pricing actions previously implemented by the company. → Beyond NVIDIA: Picks-and-Shovels AI Plays with Strong Momentum Adjusted EBITDA fell to $28 million from $67.1 million in the prior-year period, and adjusted EBITDA margin declined to 4.5%. Management attributed the decline primarily to lower volume, unfavorable fixed-cost leverage and weaker product mix as consumers shifted toward value products and opted out of features in made-to-order categories. “At current volume levels, these mix dynamics carry an outsized impact on margins as reduced fixed cost absorption amplifies the effect of even modest product mix shifts,” Banyard said. He also cited weather-related disruptions that caused more-than-typical down days at some facilities, creating additional production downtime and pressure on fixed-cost absorption. → 3 Ways to Target the Resources Powering AI and Data Centers Executive Vice President and Chief Financial Officer Andi Simon said gross profit was $156.6 million, compared with $202.2 million in the year-ago quarter. Gross margin was 25.3%, down 530 basis points year over year. She cited lower volume, unfavorable fixed-cost leverage, unfavorable product mix, inflation in materials, personnel, fuel and utilities, and tariffs as drivers of margin pressure. Continuous improvement initiatives and targeted tariff mitigation actions partially offset those headwinds. SG&A expenses were $155.9 million, up from $154 million a year earlier, with the increase primarily driven by acquisition-related costs tied to the pending merger with American Woodmark and higher outbound freight expenses due to rising fuel costs. Simon said SG&A declined year over year when excluding acquisition-related costs. → Quantum Earnings Season Is Ramping Up—What to Watch From 2 Major Players MasterBrand recorded a net loss of $15.4 million, or a diluted loss of $0.12 per share, compared with net income of $13.3 million, or $0.10 per diluted share, in the first quarter of 2025. Adjusted diluted earnings per share were $0.06, down from $0.18 a year earlier. Free cash flow was an outflow of $146.2 million, compared with an outflow of $41.2 million in the same period last year. Management said the first quarter typically reflects seasonal working capital outflows, and the year-over-year variance was driven by lower net income, less favorable working capital timing and an increase in the company’s income tax receivable. MasterBrand said it continues to expect full-year free cash flow to exceed net income. Banyard said demand remained pressured across both new construction and repair-and-remodel markets as affordability concerns, elevated interest rates and cautious consumer sentiment weighed on activity. He said the conflict in the Middle East added to consumer confidence pressures late in the quarter and contributed to broader volatility. In new construction, Banyard said U.S. single-family activity was down mid- to high-single digits in the quarter. He said builders continued to use incentives and rate buydowns to stimulate sales, while the market worked through a reset in spec and quick move-in inventory. Because cabinets are typically purchased later in the construction cycle, closer to completion, the slower pace of completions had a direct effect on MasterBrand’s business. In repair and remodel, demand also remained soft. Banyard said low existing-home turnover and weak consumer confidence continued to suppress larger discretionary remodeling projects. He noted that consumer sentiment toward large household purchases fell to 40-year lows during the quarter. MasterBrand’s repair-and-remodel business declined mid-single digits, which management said was consistent with the broader market. The company’s Canadian business declined low single digits, also consistent with broader market trends, Banyard said. He added that with the Bank of Canada holding rates steady, similar pressures are expected to continue weighing on the Canadian market through 2026. Management said the trade environment remains volatile. Banyard said gross tariff costs were approximately $25 million in the first quarter, but mitigation efforts exceeded company expectations, driven mainly by supply chain actions, sourcing flexibility and supplier engagement that progressed ahead of schedule. Simon said MasterBrand continues to estimate unmitigated gross tariff exposure for the full year at about 5% to 6% of 2026 net sales based on trade policies currently in effect. The company continues to expect to offset 100% of tariff dollar costs on a run-rate basis exiting 2026 through mitigation efforts, though Simon said those efforts will take time to fully materialize. Banyard said pricing remains an important part of the company’s tariff mitigation strategy, along with operational measures. In response to analyst questions, he said fuel and logistics were among the larger areas of cost pressure and that the company has taken some action related to rising fuel costs, while continuing to monitor volatility tied to the Middle East. MasterBrand also said it fully executed its previously announced $30 million cost savings initiative during the first quarter, with benefits expected to phase in over the remainder of the year. Banyard said the company took actions including targeted line and shift adjustments, workforce actions across its manufacturing network and a facility closure tied to its Supreme integration efforts. MasterBrand said it continues to make progress on integration planning for its pending merger with American Woodmark. Banyard said the company still expects approximately $90 million in annual run-rate cost synergies by the end of year three after closing, based on assumptions at the time of the deal announcement. He said MasterBrand plans to reassess those estimates after the transaction closes in light of the current operating environment. The company said it is progressing through regulatory review and, as disclosed in an April 22 Form 8-K, now expects the transaction to close in the second calendar quarter of 2026. Simon said the company did not repurchase shares during the quarter because the merger agreement restricts share repurchase activity until the transaction closes. MasterBrand ended the quarter with $138.4 million in cash and $332.3 million of liquidity available under its revolving credit facility. Net debt was $946.5 million, resulting in a net debt-to-adjusted EBITDA leverage ratio of 3.7 times. Simon said the company proactively amended its credit agreement during the quarter to provide additional flexibility related to leverage and interest coverage covenants as it navigates the current environment and works toward closing the American Woodmark transaction. For the second quarter, MasterBrand expects end markets to be down mid- to high-single digits year over year. The company also expects its second-quarter net sales to decline mid- to high-single digits from the prior year, while improving sequentially from the first quarter due to normal seasonal volume uplift, modestly better product mix and additional flow-through from prior pricing actions, including tariff-related pricing. MasterBrand projected second-quarter adjusted EBITDA of $51 million to $61 million, representing an adjusted EBITDA margin of 7.8% to 8.8%. Adjusted diluted earnings per share are expected to range from $0.03 to $0.13. Simon said the wider EPS range reflects uncertainty related to the effective tax rate, particularly given low pretax income and non-deductible deal-related expenses tied to the American Woodmark merger. Looking at the full year, Simon said MasterBrand continues to expect its addressable market in 2026 to be down mid-single digits year over year. Management expects decremental margins to remain elevated in the first half of the year, then improve in the second half as tariff mitigation and cost rationalization actions phase in. Banyard said the company does not expect the market to begin recovering until 2027, but remains confident in long-term demand drivers, including an estimated 3 million homes underbuilt, millennials entering prime homebuying years, aging housing stock and rising home equity levels. MasterBrand Inc is one of the largest manufacturers of cabinetry and home storage solutions in North America. The company specializes in designing, producing and distributing kitchen and bath cabinetry for both new construction and the remodeling markets. Its offerings span a broad spectrum of styles and price points, serving homebuilders, home improvement retailers and independent dealers. MasterBrand's product portfolio includes framed and frameless cabinet lines, bath vanities, closet systems and other organizational accessories. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "MasterBrand Q1 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for May 2026.

Find winning stocks in any market cycle. Join 7 million investors using Simply Wall St's investing ideas for FREE. MasterBrand (MBC) recently reported first quarter 2026 results showing sales of US$618 million, a net loss of US$15.4 million and softer demand, alongside guidance for another year over year sales decline in the second quarter. See our latest analysis for MasterBrand. Despite the recent earnings miss and guidance for softer sales, MasterBrand’s 1 day share price return of 1.56% to US$7.82 comes after a 90 day share price return of negative 42.46% and a 1 year total shareholder return of negative 24.44%. This suggests recent momentum has been fading as investors reassess the stock’s risk and earnings profile. If the recent pullback has you thinking about other areas of the market, it could be a good moment to broaden your search with 18 top founder-led companies So with a share price that has fallen sharply over the past year and a recent quarter marked by softer demand and a net loss, is MasterBrand’s current valuation a reset that opens an opportunity, or is the market already pricing in its future growth? On a P/S of 0.4x at a share price of $7.82, MasterBrand currently trades at a discount to both its peers and the wider US Building industry. The P/S ratio compares the company’s market value to its revenue, which can be useful for businesses like MasterBrand that are currently loss making. With revenue of US$2.69b and the stock valued at under US$1b, the market is assigning a relatively low value to each dollar of sales. According to Simply Wall St’s checks, MasterBrand is described as good value on several fronts. The current 0.4x P/S is below the peer average of 0.7x and also below the US Building industry average of 2.1x, which is a wide gap. It is also below an estimated fair P/S of 0.9x, a level the ratio could move towards if sentiment or fundamentals improve. This combination of peer, industry and fair ratio comparisons points to the current P/S multiple being on the low side rather than stretched. Explore the SWS fair ratio for MasterBrand Result: Price to sales of 0.4x (UNDERVALUED) However, the recent net loss, modest annual revenue decline and weak multi year returns suggest that sentiment could stay fragile if trading conditions or execution disappoint further. Find out about the key risks to this MasterBrand narrative. While the current 0.4x P/S looks low, Simply Wall St’s DCF model presents a very different picture. On that framework, MasterBrand’s share price of $7.82 sits well above an estimated future cash flow value of $0.23, which suggests the stock appears overvalued rather than cheap. That kind of gap can indicate either a cautious cash flow outlook or an overly optimistic market. The key questions are which side you think is more accurate and how much valuation risk you are willing to take on at this price. Look into how the SWS DCF model arrives at its fair value. Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out MasterBrand for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 51 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity. With such a mixed picture around value and sentiment, it makes sense to move quickly, review the numbers yourself and decide what really matters for your portfolio, starting with 1 key reward and 2 important warning signs If this valuation debate has you rethinking your next move, consider exploring a broader range of opportunities instead of limiting yourself to a single stock. Zero in on quality at a discount by scanning 51 high quality undervalued stocks to see which companies align with your risk and return preferences. Focus on staying power by checking solid balance sheet and fundamentals stocks screener (44 results) so you can identify businesses that pair financial strength with fundamental support. Look for potential future standouts before they attract wider attention by reviewing screener containing 23 high quality undiscovered gems to see which ideas others might be overlooking. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include MBC. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

Performance was characterized by a mid-single-digit market decline and a slower pace of housing completions, which created significant fixed cost deleverage. Management attributed margin pressure to unfavorable product mix as consumers continue to trade down to value products and forego premium features. Operational results were impacted by unplanned production downtime due to weather-related disruptions, further hampering fixed cost absorption. Strategic cost actions were fully executed during the quarter, including a $30 million savings initiative and a facility closure to integrate the Supreme acquisition. New construction results tracked broader market trends but outperformed on a completions basis despite a reset in builder spec inventory cycles. Tariff mitigation efforts progressed ahead of schedule due to rapid supply chain sourcing flexibility and proactive supplier engagement. Management characterized 2026 as a transitional year, focusing on internal efficiencies while waiting for a projected market recovery in 2027. The company expects 2026 addressable markets to remain down mid-single digits, with recovery not anticipated until 2027 due to persistent affordability constraints. Second-quarter guidance assumes normal seasonal volume uplift and a modest improvement in product mix compared to the first quarter. Management expects to offset 100% of tariff dollar costs on a run-rate basis by the end of 2026 through a combination of supply chain actions and pricing. Decremental margins are expected to improve in the second half of the year as cost rationalization and tariff mitigation benefits fully phase in. The pending merger with American Woodmark is now expected to close in 2026, with a target of $90 million in annual run-rate cost synergies by year three. Unmitigated gross tariff exposure is estimated at 5% to 6% of 2026 net sales, subject to a highly volatile and fluid trade policy environment. Geopolitical tensions in the Middle East are cited as a late-quarter headwind to consumer confidence and a source of broader market volatility. The leverage ratio is expected to remain elevated in the near term due to lower trailing twelve-month adjusted EBITDA and current demand softness. The effective tax rate is expected to be elevated and variable throughout 2026, primarily reflecting non-deductible deal-related expenses. Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Management noted that while the market is not improving, consumer behavior has remained steady rather than deteriorating further over the last two months. New construction demand is described as 'choppy' due to builders eliminating spec home inventory, which impacts the timing of cabinet orders. Management anticipates a slightly better mix in Q2 driven by higher seasonal volumes, though the overall year remains in 'trade-down mode.' Year-over-year decremental margins are expected to improve sequentially each quarter as mitigation efforts gain traction. The company has already implemented short-term mechanisms to address rising fuel costs, though specific details were withheld for competitive reasons. Management emphasized that the market is increasingly competitive, requiring a 'dual approach' of meeting consumer price points while managing the internal cost burden. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here.

Image source: The Motley Fool. Tuesday, May 5, 2026 at 4:30 p.m. ET President and Chief Executive Officer — Dave Banyard Executive Vice President and Chief Financial Officer — Andrea H. Simon Vice President of Investor Relations — Henry Harrison Henry Harrison: With me on the call today are Dave Banyard, president and chief executive officer of MasterBrand, Inc., and Andrea H. Simon, executive vice president and chief financial officer. We issued a press release earlier this afternoon disclosing our first quarter 2026 financial results. This document is available on the Investors section of our website at masterframe.com. I would like to remind you that this call will include forward-looking statements, in both our prepared remarks and 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 2025 Form 10-K and updated as necessary in our subsequent 2026 Form 10-Q, 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 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 Andrea, 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. Dave Banyard: 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 macroeconomic 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, Inc. 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 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 mix 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 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, Inc.’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 remained soft through the first quarter, as low existing home turnover and weak consumer confidence continued to suppress larger discretionary remodel activity. Consumer sentiment towards large household purchases fell to 40-year lows during the quarter. 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 remained 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. The 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, Inc. 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 am 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 a 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 standout 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 are 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-close, 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-Ks filed on April 22, we now expect the transaction to close in 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 twelve-month adjusted EBITDA and the current demand environment. Andrea 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 am 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, Inc. for the recovery ahead. With a clear line of sight to the long-term drivers of demand across our end markets, we remain confident the actions we are taking today are building a stronger, more resilient MasterBrand, Inc. With that, I will turn it over to Andrea for a detailed review of our financial results and outlook. Andrea H. Simon: Thanks, Dave, and good afternoon, everyone. I will start with a review of our first quarter financial results. Then I will share more details on our guidance for 2026 and provide some thoughts on the full year. As a reminder, we provide formal guidance on a quarterly basis. Any commentary we make about the full year reflects our current expectations and assumptions and is directional in nature rather than formal guidance. Now turning to our first quarter results. Net sales were $618 million, a 6.4% decrease compared to $660.3 million in the same period last year, reflecting continued softness across our addressable market and a slower pace of housing completions. Anticipated flow-through of prior pricing was outweighed by unfavorable channel and product mix. Gross profit was $156.6 million compared to $202.2 million in the same period last year. Gross profit margin was 25.3%, down 530 basis points year over year, primarily reflecting lower volume and the related unfavorable fixed-cost leverage and unfavorable product mix. Material, personnel, fuel, and utility inflation, combined with the impact of tariffs, contributed to overall margin pressure. These headwinds were partially offset by continuous improvement initiatives and targeted tariff mitigation actions. As Dave mentioned, gross tariff exposure in the quarter was approximately $25 million. Our mitigation efforts performed better than we initially anticipated, driven by the timing and effectiveness of operational actions taken across the business—a reflection of the strong execution from our teams. While we are pleased with this progress, tariff costs continue to flow through the business, and we have more work to do, particularly as pricing actions remain a necessary and important component of our go-forward mitigation strategy. The more pronounced headwinds in the quarter came from product mix and continued trade-down activity across certain categories versus historical norms, which reflect broader market conditions. Taken together, these factors have created a challenging operating environment, but we believe we are managing through it thoughtfully. SG&A expenses totaled $155.9 million in the first quarter compared to $154 million in the same period last year, with the year-over-year increase primarily driven by acquisition-related costs associated with our pending merger with American Woodmark and higher outbound freight expenses reflecting rising fuel costs. Importantly, excluding acquisition-related costs, SG&A decreased year over year. As Dave mentioned, we took a number of structural SG&A cost-reduction actions during the quarter. While it takes time for the impact of these measures to fully flow through our results, we expect our SG&A-to-net sales ratio, excluding deal and restructuring costs, to improve in 2026 as these benefits phase in. Interest expense declined to $18.4 million from $19.4 million in the same period last year, as we continued to pay down our debt over the last twelve months. Net loss was $15.4 million in the first quarter compared to net income of $13.3 million in the same period last year. Net income margin was negative 2.5% compared to positive 2% in the prior year, reflecting lower gross profit and higher deal-related SG&A expenses, partially offset by the initial benefits of cost actions taken in the quarter. Adjusted EBITDA was $28 million compared to $67.1 million in the prior-year period. Adjusted EBITDA margin was 4.5%, a decline of 570 basis points year over year, primarily due to lower gross margins, partially offset by reduced SG&A expenses (excluding deal-related costs), reflecting the cost actions implemented during the quarter. Diluted loss per share was $0.12 in the first quarter, based on 127.5 million diluted shares outstanding. This compares to earnings per share of $0.10 in 2025, which was based on 130.7 million diluted shares outstanding. Adjusted diluted earnings per share were $0.60 in the current quarter compared to adjusted earnings per share of $0.18 in the prior-year period. Turning to the balance sheet, we ended the quarter with $138.4 million of cash on hand and $332.3 million of liquidity available under our revolving credit facility. Net debt at the end of the first quarter was $946.5 million, resulting in a net debt to adjusted EBITDA leverage ratio of 3.7 times. While net debt remained approximately flat year over year, our leverage ratio reflects the impact of lower trailing twelve-month adjusted EBITDA in this challenging demand environment. During the quarter, we proactively amended our existing credit agreement to provide additional flexibility related to our leverage and interest coverage covenants as we navigate the current environment and work toward the planned closing of the American Woodmark transaction. We continue to prioritize debt reduction with available cash, consistent with our track record. Net cash used in operating activities was $133 million for 2026 compared to $31.4 million in 2025, driven by lower net income, less favorable movements in working capital, and an increase in our income tax receivable. Capital expenditures for the first quarter were $13.2 million compared to $9.8 million in 2025, in line with our expectations. As is typical for our first quarter, free cash flow reflected seasonal working capital outflows of $146.2 million compared to outflows of $41.2 million in the same period last year. The year-over-year variance was primarily driven by lower net income, less favorable working capital movements due to timing, and an increase in our income tax receivable. We did not repurchase any shares during the quarter. Our merger agreement with American Woodmark restricts share repurchase activity until the transaction closes. Turning to our outlook, our second quarter outlook reflects the current uncertainty of the demand environment driven by ongoing affordability concerns, recent geopolitical tensions, and the uncertain trade environment. The outlook incorporates tariffs currently in effect but does not reflect potential implications from other proposed or future trade policy changes. Further, our outlook does not reflect any anticipated financial benefits from the pending merger with American Woodmark, nor does it include expected transaction or integration-related costs. For the second quarter, our end markets are expected to be down mid- to high-single digits year over year. Despite the market backdrop, we expect a meaningful sequential performance improvement in net sales versus the first quarter, driven by several factors that give us confidence in the outlook. Net sales are expected to benefit from normal seasonal volume uplift, coupled with an anticipated modest improvement in product mix, in addition to further flow-through from previously implemented pricing actions, including tariff-related pricing. Taken together, these dynamics are expected to position us broadly in line with our end markets on a year-over-year basis in the second quarter. Against that backdrop, we expect second quarter 2026 net sales to be down mid- to high-single digits versus the prior year. As I mentioned, to help manage near-term pressure on profitability, we took decisive action on our $30 million cost reduction to align our cost structure with current demand levels. We completed key implementation steps in the first quarter and expect the full benefit will phase in over the course of 2026. We believe these steps, in combination with our tariff mitigation strategy, will help offset margin pressures, preserve liquidity, and position MasterBrand, Inc. to remain resilient through this period of elevated uncertainty. Given these considerations, we expect second quarter adjusted EBITDA to be in the range of $51 million to $61 million, representing an adjusted EBITDA margin of 7.8% to 8.8%. We expect second quarter adjusted diluted earnings per share of $0.03 to $0.13. The wider adjusted diluted earnings per share guidance range for the second quarter reflects a higher-than-normal degree of uncertainty due to potential variability in the effective tax rate. Against low pretax income, the impact of non-deal-related expenses relating to the pending merger with American Woodmark, as well as other potential discrete tax items, is amplified. As a result, the actual effective tax rate and the adjusted diluted earnings per share may differ materially from the guidance provided. Looking at the full year, we continue to expect our addressable market in 2026 to be down mid-single digits year over year, with continued variability across end markets. We continue to expect decremental margins to remain elevated through 2026, driven by year-over-year volume declines, mix, and the timing of tariff mitigation. We anticipate that our decrementals will improve in the second half of the year as our tariff mitigation and cost rationalization actions phase in further. For the full year, we also continue to expect interest expense to be flat to down as we continue to pay down our outstanding debt. Our effective tax rate is expected to be elevated and variable relative to the prior year, primarily reflecting the previously mentioned impact of non-deductible deal-related expenses relating to the pending merger with American Woodmark. Additionally, we continue to expect free cash flow for 2026 to be in excess of net income for the year. Finally, despite recent changes and based on the trade policies currently in effect, we continue to estimate our unmitigated gross tariff exposure for the full year at approximately 5% to 6% of 2026 net sales. Additionally, we continue to expect to offset 100% of tariff dollar costs on a run-rate basis exiting 2026 through our mitigation efforts, which will take time to fully materialize. We will continue to monitor the evolving trade environment while executing our comprehensive mitigation strategy and providing quarterly updates as conditions evolve. In closing, while near-term conditions remain challenging—the industry continues to navigate an extended period of softer demand and a complicated tariff environment—we are managing the business with discipline and purpose. We are executing against our cost reduction and mitigation initiatives, maintaining financial flexibility, and making meaningful progress on the integration planning work that is designed to allow us to move quickly following the close of the pending American Woodmark transaction. These are the right priorities for this moment, and we believe the actions we are taking today are building a more resilient and capable MasterBrand, Inc. Now I would like to turn the call back to Dave. Dave Banyard: Thanks, Andrea. While the first quarter brought its share of challenges, our confidence in the long-term outlook for our business remains unchanged. Affordability pressures, cautious consumer sentiment, and volatility in the trade environment are shaping near-term outcomes, but they do not change the underlying demand drivers that we believe will fuel a meaningful recovery over time. We expect macroeconomic and trade conditions to normalize and demand to recover, with the broader market beginning to improve in 2027. What we are navigating today is a direct reflection of the current market environment, not of our operating model or the underlying strength of the business. Our priorities are clear, and our strategy is built for exactly these kinds of cycles—designed to carry us through periods of uncertainty and position us to win when conditions improve. We are executing our mitigation strategies, progressing toward the close of our pending merger with American Woodmark, and managing the business with the discipline and accountability that defines the MasterBrand, Inc. way. With our strong portfolio, resilient operating model, and a team that has demonstrated its ability to execute through adversity, we believe we are well positioned to capitalize on the eventual market recovery and deliver long-term value for our shareholders. We will now open the call for questions. Operator: We will now be conducting a question and answer session. You may press 2 if you would like to remove your question from the queue. Before pressing the star keys, our first question is from McClaran Thomas Hayes with Zelman & Associates. Please proceed with your question. McClaran Thomas Hayes: Hey, good evening, guys. It looks like your outlook for the market in the second quarter is similar to the environment you saw in the first quarter—down mid- to high-single digits. But rates are a bit higher; it seems like there is more uncertainty now than there was a few months ago. Does that kind of market outlook tell us that, at this point, you have not necessarily seen any impact to your consumer, whether that is in order trends or foot traffic patterns? And then on pricing, can you give us some more detail on how pricing trended in the first quarter relative to the fourth quarter? Did it accelerate or stay in a similar range? Also, do you anticipate needing additional pricing, given some of the cost inflation over the past few months that might be impacting paints and stains at a minimum in your business? Dave Banyard: I think our outlook is a little bit tilted down. We were saying mid- to high-single digits down; I think it is more of a weight on new construction than R&R. R&R is down; it is kind of hard to tell over a long period of time how far down is down, but it feels sort of steady in this current mode. New construction has been very choppy. The March starts number was a little higher than we expected, which is good, but with the reset of eliminating spec homes, it makes our business a bit more choppy. We are going into it with that in mind, and the spring selling season has generally shaped up how we thought it would. In terms of a material difference in behavior over the last month or two, we have not necessarily seen that. It is just not getting better; it is moving the way it was prior to that. On pricing, the bigger impact is directly on fuel and logistics, but there is pressure in a number of different spots. We have been executing our plan for pricing throughout the year. As we have highlighted in the past, it takes time for that price to get into the market, so we are continuing to execute on that. We are looking at other options with fuel. That is the one everybody sees every day, and it has come up significantly over the past month. We are continuing to look at that and using the mechanisms that we have. We have typical mechanisms for something like that which is near-term volatile, and we will have to monitor how that plays out over the coming months with the situation in the Middle East. Operator: Our next question is from Garik Simha Shmois with Loop Capital Markets. Please proceed with your question. Garik Simha Shmois: Thanks. Wondering if you could speak to your view on product mix improving as you go into the second quarter. I would love to get a little bit more color on that. And then as a follow-up, on incremental margins—you mentioned they are expected to improve in the second half of the year. Should we think about incrementals improving on a sequential quarter-on-quarter basis in the second half, or year on year? Any more detail on what kind of level of improvement on incrementals is possible? Dave Banyard: We are continuing to see the general trade-down behavior. When you go into the spring selling season with more volume, you tend to see a slightly better mix in all channels, so that is what is driving that. Generally speaking, though, the overall market on a year-over-year basis will continue to be in a trade-down mode, which offsets any benefit we are getting from price to some extent. Price/mix has been a challenge, and we are working on how to upsell more. Some of those efforts we are going to see here in the second quarter, but the consumer is under pressure, and you have to meet them where they are. With higher volume, we tend to see a slightly better mix, and that is what we are anticipating. On incrementals, we are not giving full-year guidance at the moment, but when we talk about improvement, we are talking year over year. You are seeing sequential improvement from Q1 to Q2, which is normal seasonality. Volume is the issue we have: going from lower Q1 volume into higher Q2 volume yields pretty good flow-through. On a year-over-year basis, because of mitigation on tariffs as we go through the year, we will see better decrementals as we progress. We do expect revenue to be down for the full year, but we are expecting those decrementals on a year-over-year basis, quarter by quarter, to improve. Operator: Our next question is from Steven Ramsey with Thompson Research Group. Please proceed with your question. Steven Ramsey: Hi, good evening. Thanks for taking my questions. I wanted to hear a bit more on the pricing actions that you are taking in response to tariffs and rising fuel costs. First, do you feel like the pricing that you are taking and that you are seeing from competitors is near parity, or is anyone using this time to take less price to gain share? And then connected to price actions on fuel, to clarify, the margin guide for the second quarter—does that include actions you might take for rising fuel costs? Dave Banyard: I will answer the last part first, and that is incorrect—we have taken some action already on rising fuel costs. For competitive reasons, I would rather not go into the details of how we do that, but suffice to say we have short-term mechanisms that we use for volatile commodity inputs like fuel. In terms of the market, it is very competitive. You have to meet the consumer where they are, and that involves a number of different aspects of what you bring to the consumer, which is why you see a lot of trade-down in our mix because we have many alternatives we can bring to the consumer and customer. The market is still very fragmented, and we are leaning into that. We also understand the cost burden we are facing, so it is a dual approach. On gross tariff cost—$25 million in the first quarter, about 4% of sales—that is a combination of things. Some of it is our mitigation—part of mitigating tariffs is coming up with ways to not have to pay them. It is also the mix of our broad portfolio, where there are different impacts from tariffs. I would not look at Q1 as the run rate moving forward; that is why we reiterated 5% to 6% for the full year, because that is what we think it will be. Tariffs have changed slightly, but those changes are not really material in terms of the impact to our P&L. You also see lower volume in Q1, so you are going to have a lower tariff dollar number as part of that. Operator: This now concludes our question and answer session. Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. Please disconnect your lines and have a wonderful day. Before you buy stock in MasterBrand, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and MasterBrand wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. 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As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. MasterBrand (MBC) Q1 2026 Earnings Transcript was originally published by The Motley Fool