Greetings, and welcome to MasterBrand's Fourth Quarter and Full Year 2024 Earnings Conference Call. During the company's prepared remarks, all participants will be in a listen-only mode. Following management's closing remarks, callers are invited to participate in a question-and-answer session. Please note that this conference call is being recorded. I would now like to turn the call over to Farand Pawlak, Vice President of Investor Relations, Treasurer and Corporate Communications. Please go ahead, sir.

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; and Andi Simon, Executive Vice President and Chief Financial Officer. We issued a press release earlier this afternoon disclosing our fourth quarter and full year 2024 financial results. If you do not have this document, it is available on the Investors section of our website at masterbrand.com. I would like to remind you that this call will include forward-looking statements 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 2023 Form 10-K and updated, as necessary, in our subsequent 2024 Form 10-K, which will be available once filed 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 fourth quarter and full year 2024 financial results from Andi, along with our initial 2025 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.

Thanks, Farand. Good afternoon, everyone. We appreciate you joining us today for our fourth quarter, and full year 2024 earnings conference call. We released our fourth quarter and full year financial performance earlier today, and reported net sales of $668 million in the fourth quarter, a decrease of 1% compared to the same period last year. This unexpected decline was due to increased choppiness in our repair and remodel business, during the latter part of the fourth quarter. After our third quarter earnings call, we saw the swings in this portion of our business increase. Following Thanksgiving in the U.S. and continuing through the remainder of the holidays, our repair and remodel business was very slow, resulting in a year-over-year volume decline of 6% in our legacy business. These volume declines also exacerbated our existing average selling price headwinds. Our made-to-order offering, which is a higher price point product, was disproportionately impacted by the volume declines, compared to the rest of our product portfolio, causing a mix shift we had not seen earlier in the year. This negative mix - was a primary driver of the 4% year-over-year net ASP decline in our legacy business during the quarter. The volume decline, along with softer end market demand, also impacted our ability to realize previously implemented price. While slower price realization doesn't negatively affect our fourth quarter year-over-year performance, it was part of the reason we missed our stated outlook. Price increases are implemented and realized quickest within our dealer partners, who service the repair and remodel market. The miss to our volume expectations in this portion of the market, resulted in price coming in slower than expected. Additionally, other channels have taken longer to implement price, particularly in the lower price point products, although we have made some progress here…

Thanks, Dave. I'll begin with an overview of our fourth quarter financial results, and then I'll touch briefly on our full year 2024 financial performance. Lastly, I will provide our thoughts around 2025, and our full year outlook. Fourth quarter net sales were $667.7 million, a 1% decline compared to $677.1 million in the same period last year. Our top line performance was primarily the result of increased choppiness in our repair and remodel business, and the related volume decline we saw later in the quarter. This volume decline caused delayed flow-through of our anticipated net ASP improvements that we discussed on our third quarter earnings call. These headwinds more than offset the positive contribution of 9% year-over-year net sales growth from our Supreme acquisition, which continues to perform in line with our expectations. Gross profit was $203.3 million in the fourth quarter, down 9% compared to $223.1 million in the same period last year. Gross profit margin decreased 250 basis points year-over-year from 32.9% to 30.4%. This year-over-year margin decline despite the addition of 240 basis points from Supreme, was due to continued headwinds from a negative price/cost relationship as the price realization on previously announced increases has not covered the related inflation, lower volume, the nonrecurring $4.2 million of discrete items in the prior year quarter, which were primarily insurance proceeds related to tornado damage, and medical insurance-related rebates and increased depreciation expense. Given the swiftness of the market deterioration, particularly over the holiday season, it was difficult to take remediation action at the same pace. However, continuous improvement outperformance, and variable compensation reductions did help partially mitigate the market slowdown in the quarter. We continue to incur restructuring in the fourth quarter, but the amount was comparable from a year-over-year standpoint. Selling, general and administrative expenses were…

Thanks, Andi. Despite the continued market headwinds, we are confident that through the disciplined use of our business system, The MasterBrand Way, we can drive further efficiency across the organization in 2025, and continue positioning the company for growth. We believe incremental investments in our strategic initiatives, specifically Tech Enabled, hold the promise of outsized future returns for MasterBrand. Accordingly, we plan to continue investing in these initiatives, and look to simultaneously deliver improved financial returns for our investors in the near term through year-over-year margin expansion in 2025. Given the current market conditions, we aim to carefully balance near-term and long-term financial returns as we seek to ultimately create superior financial performance, throughout the cycle for our investors. And with that, I'll open up the call to Q&A.

Thank you. [Operator Instructions] Our first question comes from Adam Baumgarten with the Zelman & Associates. Please proceed with your question.

Hi everyone. Just on the 2025 guide, maybe if you could put a finer point on how you expect revenue and margins to trend throughout the year, maybe even first half, second half? I know you talked about the first half being a bit softer than the second half. But I know January, I think you said was off to kind of a continuation of what you saw later in 4Q. So anything to be aware of as we think about the progression throughout the year, outside of the regular seasonality that you mentioned?

Yes. I mean, I'd start there, Adam, with the regular seasonality, because I think that's what we're anticipating for the year. But to go back to kind of what we experienced in the fourth quarter and into January, it was really, things slowed down materially throughout late November through most of December and into January. But February has picked back up to a pace that was - that's on par with what we saw in Q3 and early part of Q4. So initially, it was worrisome to see that in the fourth quarter, but the fact that we've picked the pace back up to what I call normal here in February, albeit just one month of data, I think that gives us confidence that our market projections are going to follow normal seasonality, and are going to be able to follow the path that we've outlined.

Okay. Got it. Thanks. And then…?

Sorry, I'll just fill in one more. I mean I think it sort of puts a bit of pressure. The January pace kind of puts a little pressure on Q1, but that's actually normal seasonality. We typically will have a little bit of a step down from Q4 into Q1 and then Q2, Q3 are much stronger quarters. And then I think given the work that we're doing for share gain, and price and those kinds of things, I think fourth quarter next year will be better than this year materially as well.

Okay. Got it. Thanks. And then just on the pricing front, just on the increases, are they just delayed? Are they maybe ultimately going to be lower than anticipated, or some not going through? Just - if you could help us with how to think about that?

Yes, it's mostly delayed. As we highlighted in the prepared remarks, the dealer network is quicker. And we saw that. Unfortunately, that's where we saw most of the volume pressure in the fourth quarter. So we just weren't realizing as much price. It's also the higher end of our business. So it is definitely more competitive in the opening price point side of the business. So it's been - it's taken longer to push price through, but we did make progress, albeit slower than we expected. So we did have a negative price/cost situation. Fourth quarter will probably still be there in the first quarter, and then it will improve as the year goes on. So we're making progress on that, but it just wasn't at the pace that we expected.

Okay. Got it. And then just lastly from me. Just on Supreme, did you see a similar dynamic in the Supreme business in that late November through January period? Or was it more resilient?

It was more resilient. They do have a similar seasonal pattern to the rest of our business. In other words, their Q4 and Q1 were the lightest quarters, and then the middle part of the year is more robust. So - but they performed at where we thought they would. So they did hold up a little better. I'd say most of the pressure for us was in a slightly lower price point than the premium side.

Okay, got it. Thanks. Best of luck.

Thank you.

Our next question comes from Garik Shmois with Loop Capital Markets. Please proceed with your question.

Oh, hi, thanks for taking my question. Just on pricing. In the quarter, you highlighting negative mix. So I was wondering if you're seeing like-for-like price declines as well, or was mix - the majority of it?

Yes. Mix was the majority of it, Garik. I mean there was a volume decline, which was - that was the biggest part of the miss in Q4. But the mix was more heavily into opening price point. And what that does is a couple of different things. One is, as we talk about the delay in the pricing and the opening price points weren't getting price on the things that we're selling more, which again, we've rectified some of that through the quarter. The other part is that it sort of tilts our factory network a bit. And so in our make-to-order side of the business, we've had lighter volumes. And so, it's harder to keep efficiency in those plants. And so that was - it was mainly a slide over into a lower price point. The new construction business held up well throughout the rest of the year, as it had been for most of 2024. Some of the opening price point products in the retail channel, were more robust than the make to order. So things like that, mainly mix that really is driving it.

Okay. And then not to focus too much on one month worth of data, but you are indicating that February is returning to more normal cadence and that's underpinning some of your confidence for the remainder of the year in your guidance. I'm just wondering, just near term, what are you seeing here, just very recently that has shown the improvement back to normal, at the certain end market or a certain channel that - providing that improvement?

Yes. It's really - what's come back is the repair and remodel piece of it, which, again, it was virtually, it didn't seem like many people wanted to do kitchen remodels between Thanksgiving and the middle part of January. But that business has come back to a level that it was running prior to Thanksgiving. So I think it was a blip, but it's sort of the nature of this choppy market. Again, that's it's really hard to predict looking forward how these - this part of the business is going to behave. We think that this shows some confidence. We're also doing quite a bit on the commercial side with new products, with new specific tailored packages that Andi mentioned in our prepared remarks, to really go after trying to grow the business regardless of what the market is doing. And I think, we have a lot of confidence in those programs. I think we demonstrated a lot of that last year in the builder side of the business, and we're going to continue that this year in the dealer side of the business, but it's - it really is - it's hard to look further out, and say that this is what's going to happen, because it is very choppy.

Just to add to that, just to give you the confidence in February, why we saw it, it's not just that we've seen that volume come back. We've actually seen a bit of the stronger ASP as well. So that's giving us more confidence in the price starting to come through, just - albeit delayed.

Okay. That's encouraging. Last question is just on some of the cost projects. You talked to a number of initiatives, and then some new actions on capacity. I don't know if it's possible to quantify perhaps the longer-term implications, whether it's the overall savings that you anticipate, or how we should expect a more normalized environment these projects to offer EBITDA margin?

Yes. I mean, I think it's - the way I quantify it is it's - we're continuing with some Tech Enabled investments and the amounts are roughly equivalent to that. We want to be able to preserve the investments we made, because those are growth investments, some of which take a little bit of time. And so we're aiming towards that level of savings.

Okay. Thank you very much. I'll pass it on.

There are no further questions at this time. I would now like to turn the floor back over to Farand Pawlak for closing comments.

Thank you, operator. Thank you, everyone, for joining us. We appreciate your interest and support, and look forward to speaking with you in the future. This concludes our call for today.

Thank you. You may disconnect your lines at this time.