MasterBrand Reports Fourth Quarter and Full Year 2023 Financial Results

4Q and full year 2023 net sales decreased 14% and 17% year-over-year to $677.1 million and $2.7 billion, respectively

4Q and full year net income increased 134% and 17% year-over-year to $36.1 million and $182.0 million, respectively

4Q and full year adjusted EBITDA ¹ margin increased 20 basis points and 150 basis points year-over-year to 12.7% and 14.1%, respectively

Full year operating cash flow was $405.6 million with free cash flow ¹ of $348.3 million

Introduces 2024 financial outlook, including adjusted EPS

MasterBrand, Inc. (the “Company,” or “MasterBrand”), the largest residential cabinet manufacturer in North America, today announced fourth quarter and full year 2023 financial results.

“We delivered another solid quarter, finishing off a strong first year as a standalone public company. With net sales at the high-end of our internal expectations, and our operations performing well, we were able to achieve our fifth consecutive quarter of year-over-year adjusted EBITDA¹ margin expansion, despite market headwinds,” said Dave Banyard, President and Chief Executive Officer. “These results are a testament to our continued execution on the Company’s strategic initiatives, our disciplined use of The MasterBrand Way and the dedication of our associates across the organization.”

“Our full year 2023 performance demonstrates the power of our business model and culture. As we enter 2024, we believe we can continue to drive operational efficiencies, allowing us to invest for growth at an even higher pace and achieve the long-term targets introduced at our 2022 Investor Day,” Banyard continued.

Fourth Quarter 2023

Net sales were $677.1 million, compared to $784.4 million in the fourth quarter of 2022, primarily due to lower volumes, driven by softer end-market demand. Gross profit was $223.1 million, compared to $215.0 million in the comparable period of the prior year. Gross profit margin increased 550 basis points to 32.9%, as year-over-year savings from strategic initiatives, specifically supply chain efforts, continuous improvement, and cost actions more than offset the negative impact of market-driven lower volumes, trade downs, and personnel inflation.

Net income was $36.1 million, compared to $15.4 million in the fourth quarter of 2022, primarily as a result of higher operating income, due to $20.4 million of asset impairment charges in the prior-year quarter that did not reoccur. Diluted earnings per common share was $0.28, compared to diluted earnings per common share of $0.12 in the comparable period of the prior year.

Adjusted EBITDA ¹ was $85.8 million, compared to $97.8 million in the fourth quarter of 2022. Adjusted EBITDA ¹ margin increased 20 basis points to 12.7%, compared to 12.5% in the comparable period of the prior year.

Full Year 2023

Net sales were $2.7 billion, compared to $3.3 billion in 2022, a decrease of 16.8%. Gross profit was $901.4 million, compared to $940.5 million in the prior year, a 4.2% decrease. Gross profit margin expanded 440 basis points to 33.1%, as higher average selling prices, savings from strategic initiatives, specifically supply chain efforts, continuous improvement, and cost actions more than offset the negative impact of market-driven lower volumes, personnel inflation and investments in our Tech Enabled initiative.

Net income was $182.0 million, compared to $155.4 million in 2022, an increase of 17.1%, primarily due to asset impairment charges in the prior year that did not reoccur, higher amortization and restructuring charges in 2022, and a lower 2023 income tax expense. This was partially offset by higher interest expense for the full year 2023 related to the debt necessary to fund the dividend to Fortune Brands Innovations, Inc. (f/k/a Fortune Brands Home & Security, Inc.) at the time of the spin-off.

Adjusted EBITDA ¹ was $383.4 million, compared to $411.4 million in 2022. Adjusted EBITDA ¹ margin expanded 150 basis points to 14.1%, compared to 12.6% in the prior year.

Balance Sheet, Cash Flow and Share Repurchases

As of December 31, 2023, the Company had $148.7 million in cash and $480.2 million of availability under its revolving credit facility. Net debt ¹ was $559.1 million and net debt to adjusted EBITDA ¹ was 1.5 x.

Operating cash flow was $405.6 million for the fifty-three weeks ended December 31, 2023, compared to $235.6 million in the prior year period. Free cash flow ¹ was $348.3 million for the fifty-three weeks ended December 31, 2023, compared to $179.7 million in the same period of the prior year. The increase in cash generation is a direct result of our operational performance and execution of our working capital reduction plans.

During the fourth quarter and full year 2023, the Company repurchased approximately 527 thousand shares of common stock and approximately 1.9 million shares of common stock, respectively.

2024 Financial Outlook

For full year 2024, the Company expects:

• Net sales year-over-year decline of low single-digit percentage to flat
• Adjusted EBITDA ^1,2 in the range of $370 million to $400 million, with related adjusted EBITDA margins ^1,2 of roughly 14.0 to 14.5 percent
• Adjusted EPS ^1,2 in the range of $1.40 to $1.60

The Company expects net sales performance to be in line with the underlying market demand, and initiatives designed to gain share to more than offset trade down and continued soft market demand. The ability to flex manufacturing, due to the success of the common box initiative, coupled with further execution on strategic initiatives and continuous improvement efforts should allow for flat to slightly higher full year adjusted EBITDA margins.

“We are well positioned to address the varying dynamics we expect across our end markets in 2024. We launched new products and channel-specific packages late last year, tailored to capture share in portions of the market best positioned for growth,” said Andi Simon, Executive Vice President and Chief Financial Officer. “We also expect The MasterBrand Way to drive continuous improvement savings and our flexible manufacturing capacity to deliver results in 2024.”

To view the full fourth quarter results, click here.

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. 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. These products are delivered through an industry-leading distribution network of over 4,500 dealers, major retailers and builders. MasterBrand employs over 13,600 associates across more than 20 manufacturing facilities and offices. Additional information can be found at www.masterbrand.com.

Source: Masterbrand, Inc.