- Net Sales: $676.5 million, a 2.7% decline compared to $695.1 million in the same period last year.
- Adjusted EBITDA: $105.1 million, with a margin of 15.5%, 20 basis points higher than the same period last year.
- Gross Profit: $231 million, with a gross profit margin of 34.1% compared to 34% in the second quarter of last year.
- Net Income: $45.3 million, an 11.5% year-over-year decrease compared to $51.2 million in the same period last year.
- Free Cash Flow: $66 million, lower than the same period last year.
- Operating Cash Flow: $96.1 million for the six months ended June 30, 2024, compared to $194 million in the comparable period last year.
- Capital Expenditures: $18.3 million for the six months ended June 30, 2024, compared to $11.4 million in the prior year period.
- Net Debt: $499.5 million, resulting in a net debt to adjusted EBITDA leverage ratio of 1.3 times at the end of the second quarter.
- Adjusted Diluted Earnings Per Share: $0.45 compared to $0.44 in the prior year quarter.
- Acquisition of Supreme Cabinetry Brands: $520 million, expected to contribute mid-single digits to net sales growth percentage for the full year.
- Revised Full-Year 2024 Net Sales Outlook: Increase of low-single digits.
- Revised Full-Year Adjusted EBITDA Range: $385 million to $405 million, with related adjusted EBITDA margins of 14% to 14.5%.
- Interest Expense: Expected to be approximately $73 million to $76 million.
- Tax Rate: Anticipated between 24% and 25%.
- Full-Year Adjusted Diluted Earnings Per Share: Expected to be in the range of $1.50 to $1.62.
- Capital Expenditures for Combined Company: Expected in the range of $65 million to $75 million.
Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- MasterBrand Inc (MBC, Financial) delivered adjusted EBITDA of $105 million in the second quarter, with a margin of 15.5%, which is a 20 basis point increase from the previous year.
- The acquisition of Supreme Cabinetry Brands is expected to enhance MasterBrand's portfolio with complementary products in the premium kitchen and bath categories.
- MasterBrand Inc (MBC) successfully restructured its debt, resulting in improved financial flexibility and lower cost of capital.
- The company reported strong free cash flow of $66 million for the quarter, despite a year-over-year decline.
- MasterBrand Inc (MBC) continues to benefit from its strategic initiatives, particularly the Align to Grow program, which has helped the company perform at or above market conditions.
Negative Points
- Net sales in the second quarter of 2024 were $677 million, a 3% decline compared to the same period last year.
- The repair and remodel market showed continued softness, impacting overall sales performance.
- Personnel inflation and strategic investments negatively impacted margins, despite cost-saving initiatives.
- The company anticipates certain costs to increase for the remainder of the year, leading to the implementation of price increases.
- MasterBrand Inc (MBC) experienced choppiness in orders, particularly in the repair and remodel market, indicating consumer hesitancy.
Q & A Highlights
Q: In light of the choppier end market, what actions are you taking on the manufacturing side to adjust to slower organic demand?
A: Richard Banyard, President and CEO: We are managing through the choppiness by maintaining our current capacity levels. There may be slight throttling down in some areas, but no significant actions are planned until we see a material change in the market.
Q: Can you expand on the impact of trade-downs as prices move higher? Do you anticipate this becoming more exacerbated in the current macro environment?
A: Richard Banyard, President and CEO: The trade-down impact has already occurred, with robust patterns in lower-end products and decent pace in premium products. The pricing action is within normal ranges and is not expected to materially change consumer behavior.
Q: Can you speak to the seasonality of Supreme Cabinetry Brands and how it should be considered in the second half of the year?
A: Richard Banyard, President and CEO: Supreme typically follows a similar seasonal pattern to us. However, this year will be different due to the timing of the acquisition. Both companies have new product launches and programs in the fourth quarter, aligning their seasonality.
Q: What are you assuming for Supreme within the updated adjusted EBITDA guidance for the year?
A: Richard Banyard, President and CEO: We are reporting as a single segment, so the legacy company is at the low end of the previous estimates. This gives an idea of where Supreme fits within the overall EBITDA guidance.
Q: Why are you not raising prices in the retail channel?
A: Richard Banyard, President and CEO: Our retail pricing model is reviewed quarterly and adjusted based on an index-based pricing arrangement. Inflation impacts will flow through to the retail channel via this mechanism.
Q: What are the specific costs that are moving higher?
A: Richard Banyard, President and CEO: Ocean freight is a significant component, along with general inflation in various materials. These costs are not large increases but are enough to affect the overall P&L.
Q: Can you elaborate on the cadence of demand in the quarter and any differences between the dealer and retail channels?
A: Richard Banyard, President and CEO: The choppiness in order patterns and backlog is predominantly in the R&R space, affecting both dealer and retail channels. The orders are not coming in at a regular cadence, indicating consumer hesitancy.
Q: What feedback are you getting on the size of jobs moving forward and project leads?
A: Richard Banyard, President and CEO: The feedback suggests a slight slowdown in demand, with some categories experiencing slower weeks. We are tuning our factories to a slightly lower level to manage this choppiness.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
