Earnings call transcript Q1 2023

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Operator

Welcome to Masonite's First Quarter 2023 Earnings Conference Call. [Operator Instructions] Please note, that this conference call is being recorded.

I would now like to turn the call over to Rich Leland, Vice President, Finance and Treasurer.

Rich Leland

Thank you and good morning, everyone. We appreciate you joining us for today's call. morning Russ Heckes, and Tiejema, Officer. this Executive and Chief here and Officer; Executive me are President Howard Chief Financial With Vice President joining Ball, is Residential. Also for of President Global Chris today us our Q&A issued first XXXX our We yesterday quarter press earnings financial release presentation a reporting results. and documents masonite.com. website are our on These available at

could Each to to me in this contained materially let begin, this risks we projected statements. statement uncertainties you that in results call is forward-looking subject cause will from those Before remind include differ and that forward-looking actual statements. such call

regarding which annual Additional heading risks the entitled we on report can the factors issued information Statements release filed under found Risk no call these as section speak Factors appears or in press about to The be Forward-Looking at in from the yesterday. and Masonite's and sec.gov information subsequent undertake More masonite.com. recently only revise in this of form most statements. XX-K we forward-looking obligation our in And are available statements these update any today. XX-Q of at

presentation. and earnings the non-GAAP refer Please appendix measures. release which include the the the discussion reconciliations of earnings Our financial to are in certain in today's release press

Howard, Our Russ question-and-answer quarter session. includes business agenda and followed the begin will remarks the will then a for provide of by Howard financial overview today's review and from a from call first results some closing

let And that, me with over turn call Howard. the to

Howard Heckes

in Slide everyone. on to welcome, morning X; pleased start Rich. Thanks, is and that XXXX. Beginning off to I'm Good another solid report Masonite

first quarter our QX early given versus adjusted through our ahead down adjusted volumes last sales our net in supported initiatives softer the quarter XXXX expectations and demand the year. had year-on-year and further stable Order quarter end on First we EBITDA. remained and success playbook of exceptionally strong came although EBITDA

cash on Swift implementation head us reduction the free working initiatives capital gave for flow start also a of year.

seasonality impacts. and the flow prior over $XX generated the In flow, reminder, million to year quarter of able million flow lower QX, -- cash operating improvement of still our first healthy while typically position. Based worth in of due repurchased see million common cash liquidity As positive million maintaining sheet, repay our cash operating we we still the period. we stock to quarter bank $XX while in we a strong $XXX balance $XX a on and debt were

year to in out demand operations respect market playing highlights XX% starts I'd full to outlook. XX% the which been by far, are be trends the and the housing business for line quarter, March. down than marginally expected roughly expected our start financial that preparing XXXX noting U.S. overall thus we assumptions with when through we With down used year-on-year, have planning end better

average double on in While down was as in outlook full slightly to high weaker, America POS low digits our retail QX decrease. year a compared for North single-digit

projects demand. has see playbook In of starts XX segments, the that operations. market housing the for U.K. Demand have expecting, but encouraged above again segment our and XX% optimization and I'll increased fluctuated more the we in At than been in leaner could year-over-year somewhat is Billings the costs flexing to our on when about more address they will and to weaker were see down XXXX from execution this have align to network same to business Europe, fixed that all XX% execute efficient year. were slide. variable March. Across I with continued we builders commenting down Index between month-to-month Architecture next we reduction lead time, the speak cost full the completions XX% Architectural to and we with

Rounding in we the segment. Architectural saw performance the positive on this highlights our quarter is

price have team In faced has to to EBITDA While strategic QX, were operational has the continue deliver sequentially a to prior and levels of of over return challenges we improved to performance the We business adjusted million that alternatives, positive results output, higher of strong this management. cost believe on these $X actively profitability. business. in the this we explore been a potential combination are able indication addressing

to All this all, that outlook. positions us was good quarter in a in year the our results outlined well achieve full

gaining stakeholders balance long-term XXXX. momentum encouraged the More importantly, on value by year of increasingly flow and and margins, creation I'm all initiatives our organization that the cash through are we the across to related will into the benefit

plan discipline on staying benefits Planning great priority. to the remains did of realizing playbook Slide our to price margin-related continuing playbook thoughtfully doors these turn and slide. on our presented started activate in teams this growth cost while how to initiatives, manage side is summarized in expansion On we Among of to the costs, more The top X. already and of our job our margin earnings that illustrate for focused last initiatives our initiatives. to XXXX XXXX Let's do quickly a call, maintaining right-hand we some executing QX. a begin opportunities

pricing AUP benefit We up prior in the consolidated from year actions continue with quarter. XX% to first

underscore the also in to in on of the second the cost the savings on keenly the focused side order Wages of and expansion rent, importance the savings costs year. to deliver business, of benefits, equation. continue are in elsewhere We half escalate energy insurance securing and unlocking margin and

lower broad seeing for realize in ocean basket. material are deflation freight but have rates to our We yet

on reduced market volumes, acquisition. by market capturing SG&A wherever XX%, example, program with line materials monitoring expected improvements closely for labor and costs of match in America negotiating Residential, North direct decline. margin all our head include the and count actively Endura from for is we reduced also overall initiatives our cost indices the approximately restructuring approximately our by variable In XX%. Other synergies We've raw important underway cost flexing possible. order team executing Our to headcount

of The now be less older located MVantage door we where this capacity and restructuring, network continuous our California. American improvement initiatives. of As other part of facilities out the our and will from residential efficient North in in closure announced our plant throughput serviced previously increased serviced utilizing the of we sites have X customers

$XX leverage actions across restructuring quarter to approximately to $XX million the Architectural from that more cost and savings as But segment moving functions organization. say, $X margins annualized downdraft in full current than additional Residential cycle to leaning cost the cost of in when forward combined fixed we're are maintain implementation from American segment, deliver out we That year our also the return. to engagement. million before delivering are competitive just margin a reliable growth expecting customer are and Do our the lot that and delivered We're deeper The restructuring these with leadership of The leadership us supply, despite are volumes enhancing our category product underway the million the Doors initiatives North and of actions we More corporate this spring of and impact benefit with our advantage housing program. enabling consistent this actions coil doing growth

network in With capacity Fort plant Eastern second In United production team the the significant interior achieved which regard our States. new South and operations supply, a quarter. reliable to technologically brings line Carolina door production another in March, advanced of completed milestone additional to our startup our Mill, flexibility they this

upgrading our terms partners channel of their the In continue to of we and product see value homeowners doors. of leadership, the educating about impact

example life to living from get you corridors this Solid solution. a and the quieter are benefits great can of upgrading

of we door of in QX, as of mix sales. growth our quarter In interior a another realized the solid percent corridors total

customers. the one of Masonite-like. kits the typical -- nationwide table homeowners, benefits program Door pillar Doors essence when $XXX we the the to to our XX to is launched partners which a home kit That to the due of retails with to solutions of DIY the or bring of a to great example of new also project they become new door when a This Door our partners. pillar retail AUP style is This the distribution and create win-win sales Barn for makes of Barn we We strong can The privacy as channel have for continues added part on there the to positive and that also Do More eager we Barn doors very partners We Barn popular weekend with untapped to service for that add complete. takes and demand are and channel average Masonite customers. engagement contribution for are our work why and tremendous our with only the strategy be to minutes $XXX our believe demand. reason deeper to focused a major developing

and started can to them out map this most joint to most largest these our significant opportunities available in how we support with partners to have capturing end, business win-win opportunities. of identify several initiatives growth To the we effectively them planning

strategic selectively first for of It focused on and while comprehensive down playbook long-term priorities the to structure XXXX growth. fuel progress. no preserving quarter to team our is our have in margins busy continuing a and slowing pace Our detailed, intention we of reducing and cost invest our was

set We progress will year and the each we on urgency ourselves you to as have updating to for to continue milestones achieve look we achieve work goals this all we with quarter. forward more our

principle accomplishments I made of and governance Masonite by about the responsibility of employees, prouder environment. time doing across is the We learn we our dedication released XXXX on directly hope the be to masonite.com/esg. recognize commitment and reflect and our well we XXX can connected focus social of our made our our XXXX by reading X; history and been the shown I almost our report during April, couldn't our full our to care which more which Turning you'll report outlines done we These sustainability towards goals our to company of the that ESG take throughout for our you year. success to progress our environmental, to and underpinning organization priorities the improvements which by goals work to a some our good. ESG is employees has have highlights our find taking and long communities In achievements and at doing Slide initiatives years. core

provide Now, on I'd our Russ? to like performance. quarter Russ to first over turn the to details call financial more

Russell Tiejema

morning, everyone. Howard. Thanks, Good

to turn X start our with Slide consolidated and financial results. of review Let's a

benefit increases XX% net sales positive impacts in and quarter exchange decrease sales. from included These price First mix and X% were from a the a offset component increase AUP volume and an Endura a to driven flat acquisition. were decline X% last unfavorable that million, combined by XX% by in year, and from foreign both $XXX

demand volume reflected market end $XXX our XX.X%. Gross decreased to profit year-on-year in of million quarter year-over-year X% The U.K. margin North decline yielding American gross and soft in markets. the residential

combined of absence administration expenses a XX% and primarily the anticipated, addition general million, inflation. due offset Endura more SG&A as we XX% AUP the Selling, percentage previous sales on than of impact higher were by of As from of year of PP&E. gain year-over-year, the quarter. sale was deleveraging the as $XXX a and to SG&A volume well as the was in up

noted first $XX million last $X.XX we decline quarter the exclude our which income million Compared as quarter outstanding to basis per announced previously basis points had of these compared costs, First the XXXX headwinds. to step-up our the lower and to XX.X%. was profit part as adjusted XXXX, Adjusted quarter tax XXX resulted charge gross in year. results. plans. improved quarter net share $XX fourth expenses. The XXX Margin in EBITDA XXXX from interest was depreciation, a quarter restructuring $XXX and $X.XX a to Lower primarily to to SG&A sequentially restructuring per QX XX% of Diluted $X.XX. quarter margin EBITDA from earlier were were XXXX. in the earnings compared a in of down taken as in adjusted points offset expenses million and amortization contracted first The share were well higher earnings partial

more of adjusted have side on detail our the the performance. EBITDA right-hand On slide, we

AUP price was mix growth the declines. Positive of muted impact from and volume by

a material higher-priced inventory. as continue remaining raw up for through we expected, in headwind single As remained materials us costs work high digits to in quarter, the

and the to year and into outlook the moderate We Factory overhead inflation year, were for will due a volume weighted and energy and back to quarter, adjusted low levels full mid-single-digit in remains headwind inflation also benefits, to the wages costs. primarily on cost expect deleveraging QX half. deflation distribution for costs and other EBITDA in our that

comes integration other in fully offset of $X Regarding in quarter was reductions The price we shown synergies did has costs impact headwinds and to incurred Endura, and from realized from other first to other reflected the SG&A, over $X a SG&A positive which line. here administrative and $X XXXX. bridge The strategic line million quarter. initiatives we to the investments inflation have annualized advertising increased costs. million made accounting wages, during our benefits in purchase EBITDA headcount primarily acquisition from The we sight increase million in enough in about adjusted is the on of integration the be realizing anticipated contribution half from of inclusive with the in cost team on

Slide to American Residential our North for review turn of Let's X a segment.

quarter year-over-year, supported the exchange, year-over-year X% RRR AUP or demand Unit and First million both in markets. both XX% and from X% partially quarter our the a net a decline Endura at end volumes by of in growth flat and with in XX% $XXX sales acquisition acquisition. down channels, softer or impacts offset were in component wholesale excluding net decrease new Organic retail sales. the XX% were the foreign in the an construction sales, in were volume and down line increase

very XX% the high contemplate some the quarter. channel the slightly areas in the channel volume price XX% down inventory decline in are market EBITDA impact of and of destocking offset in little million, quarter but $XXX by was single-digit RRR assumption Adjusted during in positive saw dilution from last certain Endura the risk EBITDA year cost elevated Adjusted to Inventories this We wholesale the was partially channel. due destocking of our a year. management. deleveraging down does retail in full the of year-over-year in margin

increase flight minimal target both incremental optimization in cost segment In As even playbook an growth the initiatives. combination, shaping leaner, market has capability are initiatives with leader fixed the multiple North projects to these and upon strategic costs production segment American efficient that into more Howard Residential market with discussed, the recovery.

it we and starts believe will historical additional too on a believe return single-family environment. to and as latent inventory we the by soon demand first to to continues stable permitting activity sequential when in remain awaiting still housing some buyers rate we predict are and more encouraged Although is sidelines improvements interest averages, grow demand through the for-sale quarter

XX EBITDA X% to and sales adjusted organic was XX%, or down year-over-year driven segment. The by from X% by XX% a million Net in A&P. excluding in Slide was was of the foreign sales headwind a an million and $X in in in Turning were decrease decline offset down X-point XX% our $XX unfavorable Europe increase decrease in net margin a X.X%. volume component quarter Adjusted sales, EBITDA exchange.

down to price While margins thanks margin up was year-over-year deleveraging, XXXX, primarily were QX sequentially improvements in cost due to ongoing volume management. from

using in The number Do That team of But strengthen macroeconomic hit improve be Europe in markets as is our our position hard competitive we America, by factors. serve our customers. initiatives challenging Europe continue with a Doors More in North and to of wallet to share

to and door contribute we mix. positively sales chain lead times example, which we improve our For are have resolved high-value to promoting our issues focusing kits resources on supply

to Our full outlook in market weaker and year progress conditions confidence on the our the these original offset segment. initiatives gives us for is helping

Slide sequentially market to partially in Architectural million, Net the combined X% million decrease segment. XX% in prior year a remains a driven deliver volumes price The loss cost by on full offset as decrease in as up year-over-year actions. and track strong factored EBITDA a based million is order the on XX% driven $XX restructuring X% XXXX, the $X slightly $X and business component Architectural seen in million million efficiencies to QX well Moving patterns have foreign by expected exchange sales. these was total year date. to generated increased and to actions. by XX and increase by and a from AUP, QX lower contract of realization performance improved volume, for from in cost other from in quarter, we $X the demand Adjusted segment to up End $X sales from savings

for positive full the sentiment is still customer year. However,

to fair to segment. subject process formal a and divestiture remains process underway strategic the all the part announced for of our or value. business, we include of ability alternatives QX, realize In to could That the assess Architectural

keep as will We to evolves. continue the process you updated

cash million, debt across Let's facility. our debt of moment. to quarter, performance. At unrestricted in were Slide higher net accounts attributable initiatives a to through end of we trailing of agreement ABL Capital our provided these and to more initiatives a to liquidity working with $XX XX-month the Net expenditures partly $XX in about liquidity launched turn use was was to EBITDA in approximately million was first resulting operations was of summary The a available cash our in compared million leverage business. basis. optimize XXXX. the cash ratio the receivable our the $XXX and year and total on capital Cash line the for cash have of XX in a now end, I'll $XXX million million, generation assumed adjusted first of flow quarter first quarter spending X.Xx purchase by $XX enterprise-wide full talk just the in a quarter outlook. inclusive

the XXX,XXX for price $XX.XX. quarter, repurchased shares an approximately average Masonite million of of during Finally, stock at $XX

levels chain capital, have XXXX, in grew XX; due Slide represent basis and a beyond. in but to touch want inflation In to to inventory a period-to-period the we meaningful generation supply due this trade factors. XXX cash Note, can non-operating initiatives service defined and payable inventory increases points accounts sales. working our made flow payable briefly place In environment. to capital was XXXX, core to expenses part almost excludes accruded the of XX% fluctuate which to preserve volatile to working capital unlock in Turning receivable XXXX put plus we improved significantly in on net as minus approximately core I accounts working

initiative commenced multiyear drive back XXXX. have As working percentages a improved, down levels to have well below we conditions capital to now

variable of To the normalizing capital in payment metric terms area, a and customer initiatives optimizing this standardizing underway increase utilizing our network and to our been suppliers stocks, the warehousing across increasing compensation Implementing collections. payment components, in program this use year has across vendor to our X safety simplifying including extended and as standardizing working accelerate the components, our focus with by inventory. centralized inventory several all added terms have managed teams

working $XX year. of Although the for term, throughout we continue contributed and capital net year-to-date, believe reduction percentage in best has capital accelerate to this we reductions sales. initiatives practices Longer early in the these a are opportunity to cash that will as will the reduce a flow process, working we multiyear and a further supported be implement Masonite million as

With call turn for the closing Howard that, I'll to back comments.

Howard Heckes

XXXX off early made summary, very have to line deliver positive. generally the puts and long-term have results with serve guidance. our us good is trending to market the for that demand underway and The our takes. track Thanks, remains planning already margin initiatives is we we in for housing results and markets a believe progress on we outlined financial our initial the start Russ. In original are still contributing with we're that backdrop on positively growth playbook our our encouraged to a full in assumptions the year few We and year

maintaining as as ability in of deleveraging key discipline to impact well inflation margin favorability our benefits demand. and products remains benefits operating our the overhead growth play value and Our from the business higher on in volume positions unlocking of to role higher will costs cost portfolio. mix accelerate offset with with This resolute along our focus a price on the philosophy wages,

cost working flow are working While cash superior multiyear actions, a we focused for we conversion to capital from optimization. implement generating simultaneously are plan on

the of solid strategy that so to growth. team in long-term life Their deliver great this bringing are and fortunate job an sustained is doing achievements to to are We More far exceptional enabling business year. this for That commitment market challenging to Doors the have executing and a Do position us results

That collaborative our realize More are to Do partners efforts We and are continue our evolve we our cycle of to employees tremendous us with we see and the in grateful economic Doors our opportunities regardless to helping their for in mission. business

call I'd to the questions. Now, your open like Operator? to

Operator

[Operator from comes Instructions] with Our Rehaut question JPMorgan. line first the Michael of

Michael Rehaut

come you more some against some the breakdown less and on on results concerns come I I the that there's think through you're a if let's I start And of wanted around contributing to was about minuses. the our could quarter. the how year you top trends throughout your price obviously in going on against specifically, down -- did the maybe volatility, you better-than-expected that there's the thinking or pluses out first volume expectations, kind earlier year? price us the been line sense if first of the hit give or price. And been But into to backdrop? estimates of mentioned least, wondering with maintaining minor And on off say, have any quarter at

Howard Heckes

Mike. Howard. is Thanks, This Yes.

improvement As our know paid our you us really for pretty and key of of to value of consistently maintaining last each favorability X as fair EBITDA a the in margin we've adjusted being years. and allowed price/cost been products deliver in excess XX% margins in component and said has

times talk margins spring protect about to and and that's really demand We our theory we margin when when So coiling our pretty grow strengthens. in cycles deflationary ability to price to the that's then really we want and and inflationary want is protect about simple.

and -- our prepared QX. realize a we as basket get reminder, as said in to material our in in deflation remarks, we So broad any

one-size-fits-all strategy. a not really it's So

product and I our with to really innovation really we It's superior in costs door. And and price think, and through strategic both that service can we're More partnering them finding purely interested That our grow. into opportunities providing by understand segment tap this appreciate manage Doors We about customers, Do And value that's strategy. about and cheapest by the tightly less by and geography. business possible

it's our we've to tenant very a to going in -- continue important be discussed. So as margin playbook be XXXX, in

Michael Rehaut

least margins expected, the better -- our also little on bit or expectations, staying for second. North The to sorry, secondly operating against came modeling. EBITDA at guess than I I'm margins America our Great. a a

about margin full to year-over-year wondering a flat talked I think you as expectation was expected quarter, last I roughly full year still basis, North well? holds basis. that is be year on American if on a

Russell Tiejema

Yes, entering really the And start we in with our underscores guess on results just and guide, American of Residential in balance year that's the results what given business, I anticipated Mike, slightly yes, large word, outlook were run confidence think a the step North economic full year, if the very it's Russ. point, And touched the to the it's the The important had than continuing American company role it delivering the the Howard that back have business full that In I about does. is for our disciplined well. your approach line is back in and the that as where the around about I they're think largely year out better market and to we step to year just playing very had in year. our price/cost planning if particularly management clearly general in broadly engine the conditions, full solid expected but North we business assumptions. had,

We mentioned a specific actions, additional of remarks confidence us some prepared the of mix during platform footprint in to initiatives. much creating leaner are gives manufacturing the that's America And that the assumptions. restructuring initiatives what actions, North the playbook through number operating around this a

negative year, to X% We've range driven reminder, year, a ex in net we would said $XXX Endura. step there. XX% largely the We're to X% just as by or be top back assuming the for overall sales into Residential the the that full to business, flat of again, North QX. so to adjusted EBITDA We million came the fairway run at minus $XXX down million. American And right that

good benefit to given expand And to of margins second good expect North to continue from price/cost-wise about is we feel rolling be that's in moderating. we about ability the to price, So anniversary business AUP the off we feel inflation we as half. America, and also into get the while going that

up So we first half the down us be Residential expected would with American in North in the to puts in deliver will well is margins overall into stead a have second that year. in line the right what coming running half that and good

Operator

Mike from comes line Dahl of the question RBC. next Our with

Ryan Frank

is I for to Mike. follow on wanted Frank Ryan on This deflation. the actually up

You it. not seeing said you're currently

So then year? that it this gives what, not does deflation you you impact how do confidence get you guidance And year? if will the I guess, this that see

Russell Tiejema

that What reduce material are costs are Yes, starting over to and they baskets certain roll to in Ryan, it's in is freight. seeing starting inbound Russ. we certainly are

You're seeing that we volatile however, we P&L levels, sure production carrying preserve strategy we're were not raw a make to yet, necessarily offset cases, that of that in still chain was inventory some our and which in burning service still inventory material, elevated purposeful because a supply can and inventory. through our

the as balance the as QX, freight P&L. and given cost we're year was get some the coming get particularly of we and our cost are rates as inbound rolls seeing in that increase baskets. materials see sheet moderate material we overall evidence already first that that inflation single-digit we deflation into in material into saw into might some the large high in down off So the you material quarter That driven in part will higher continued by further

going still to inflation half. with be informs second to in our deflation it's much continue low the is but rate, full So view inflationary half a that's right to what that what year in but lower at mid-single-digit for last to be moderating in much second run going overall the line quarter deflationary -- we the is to guided which

Ryan Frank

will your And expectations touch wanted kind the what I then compared return And helpful. then guys Okay, of quarter guess the trends mentioned. on weakness year-end? any I the helpful. the that And would you April what expectations? that by POS that's gives do then and retail be through the into you very drove to to you to confidence the think

Chris Ball

this Ryan, is Yes, Chris.

one. that take me Let

on relatively RRR it balanced between we're I the new our business. frame to business. construction mean in first, So up American North

is line So with largely wholesale happening the are on had we we've RRR. What macroeconomic that, RRR we weakening construction the expected is you're seen recently the what's concerns. on first What focused on asking drives specifically of as in about what is a saw side. side, in there played new on within a more What quarter as the and out bit there's well more retail RRR. obviously

You've homes. play got remodel tell is seen we've as we're want for early how seeing rates and and quarter also the a you first I to what second what the we look quarter. interest would at who in But standpoint consumers go the their financing out from

contemplated outlook driven the by softening expected. what there line of with out While little that those might bit playing and on is RRR side, the factors, in really largely year we feel is within the a really already good be that

Operator

next question with Bank. line comes from of Deutsche Our Joe the Ahlersmeyer

Joe Ahlersmeyer

Howard, and the architectural, maybe the of benefits strategic Europe kind turn just the given a margins? progression America, including the actually us things these the the specific the into year. North growth earlier through North then a could some for margin target the 'XX progression 'XX. EBITDA beyond in price/cost I some near-term the specific of detail offer about opportunity beyond margin are walked Russ, you've this to opportunities in what you've an And happened willing you thanks you since given question you've little challenges like that margin -- outlined inflation, guys But margin it on 'XX for go margin. review detail the maybe and you goalpost around identified more you of for all in in to initiatives but maybe Maybe 'XX? feels mean in as initiatives America for acquisition

Howard Heckes

introduced Centennial where return me but over Russ thought start making that we with could company by said we plan XXXX, be a Joe, likely we years everybody Hey for billion then margins. to $X EBITDA for more let detail will remembers several ago XX% you we our and that

those by Russ margin achieve of several been inflation. the has remains clear rapid it details, of to business. our able couple walked margins hard of of outlined some to Now last be be years expect due years, the we kind fully on of ago. to things Star as XXXX, through that Centennial the let plan the side North this And me that, as EBITDA But we

how through the is But Star that's to business. walk for let to going that there. we of I'm North important get So remember really Russ that, our sort

Russell Tiejema

Howard. Thanks, Yes.

Joe, guess So me let I here. start

a a is strategy symbolic that talking create steps right is business when end that we taking the of we're the returns. us within we're It the that operations demand coiling now. soft business about executing of into it's the view can purposeful really in hear And really a market spring. and base You lot saying the very when unload to stronger leaner the are markets we --

of would hope XX% that about particular. the growth time move think American in will result But in business that rate the rate we guided of that's in the as to we've or current that a into volume as should we flip market. actions until that that inform of this recovering volume exit to XX% And we we're market so deleveraging And mode, in address are by we North how decremental at will to cost year incremental a seeing residential as greater recovery be that the XXXX market margin decrementals taking on to and than demand. we an that our even base

higher products, American leverage term, in with us focus the to that this particularly North that opportunity Residential continued making we to unit that going again, the fixed of on in on again, allow focused really the that's an product strengthen year. a the exiting we've we're for created in meaningful American that business up you average the combine And business. that We North that see improvements as mix lot have, the base portfolio to the residential the near business. And margin into investments overhead

should we running margin already North business. is back that, could That within XX% American the Residential that plan step that business argue achieving realize it Centennial we're you already circa and margins. target also EBITDA overall, Now XX%

macro So low really even prior on is double-digit then, which done clearly headwinds near they nice job you mid-teen margins turn other business tightly or that but returning managing your to the Europe. portfolio. the has to in downturn to that back costs smaller lot the Europe to significant a of facing driven term a the had businesses achieved market a and attention in putting are pathway team

we that in for that they've of business underway recovery business, resolution with for review step-up now margin that Architectural, some seeing and And that telegraphing. has place the have team with the in that an faced the enterprise. challenges very then provides the are worked have to hard And we opportunity that respect overall strategic been but we for

some those to that I'd America of points the you acceleration So, underway all point lot that it based really XXXX. exiting in on business have factors but margin of a for the we North initiatives

Joe Ahlersmeyer

any growth landscape space, on positive least of now, quarter? learnings your question the in integration you're pipeline one different just in more versus internal relevant now the Any on well. as And right on as right Endura, the the early part external? you transaction M&A see at how if a broader focused the just maybe here surprises? maybe Maybe

Howard Heckes

Yes. Thanks, Joe.

deliver As business reminder, first, deal was just but one categories our leadership in and really true this is strategic pillar More this of rationale strategy. potential critical that about and deal. and we're the the acquiring still adjacent to very product That -- on really closed us that's a our deal allow deal of in the Do a Doors excited our January nice for All Endura about

first expected. as about was The quarter

had, high remove me, were and margins -- in start, out volume EBITDA of January. variable NA single we adjusted will, because early deal get you our on the pressure head until business the acquisition close business or margin cost the you of Res for we digits If excuse same the they that costs, that the have flexing same able on weren't and didn't sort integration sort if to

of there that to now volume. on we're soft support well cost some our adjusting So to way our

April. expect improved to double-digit business we a and So we for continue low margins much the had

a delivered integration $X And other we half deliver as the team XXXX synergies savings. thing team, found be has than certainly in million in encouraging more way we to that our of is said, And identified integration the will and year. able cost that be we'll those

with So future. business the excited think fit we're it's about Endura a and deal. we our natural We the love

an As far it as like be and strategy other we M&A several at prices able debt the find we're are the deals months. growth constantly been will that value. But in for have to Obviously, our part the important over pipeline, looking last we for right deals of be markets absolutely should like. our that interesting the could we support

Operator

of line Noah the from Stephens. with comes question Merkousko next Our

Noah Merkousko

the RRR up side of headwinds there's to demand. I macro follow beginning wanted to Clearly, some on show up there.

maybe of I the mentioned lack that think you destocking was a quarter. in there

hoping guidance. for risk said of into know that of some So -- could at how you destocking begin understand you can I what channel? persist to And inventories level could I long also us timing channel? you the when there's in was you help But some that baked see and are that share the might that destocking

Chris Ball

it. we're say, Yes. second me I and Russ there we we the sit to walking would softening. into But as add if and today wants here we No, trends quarter remarks, see mentioned prepared let see some into start anything as the the is in as

So from that be if continues, to standpoint, the it a near timing we'd term. expect in

aren't the the that let's who are look well pent-up a basis. long-term whether and of a to look lot homes going their is their you demand that to in still give new either side. to invest are rates, see to side as in the low on a to are do or up a are of demand upgrade actually There on out wanting lot on a marketplace mid- their we within construction their also if you of rental as on permanent of to get folks situation who to move a home be remodeling pent-up demand the waiting going home some consumers be who in able to expect homes interest things X QX/QX, the say, people at there's broadly So basis, more look or we on

talk and you lot in either QX, is probably even would it like But that in that year. into also of reduction, and things lot inventory we are lower this that side, the we again, expect next about year lot there's moment when of our housing things in timing a the coming there are year-over-year, the in the outlook frame. are happening of and back a as economic that about good expect a we of it's half be having going how depressed -- it's time QX the So to of out starts of

Russell Tiejema

Yes. RRR, accommodate well. and point a it out I'll included Chris just in destocking. No, that did we guide add. lot for to that single-digit potential underscore year it I made when the assumption very risk Not our a for laid in think that the high he of retracement this covered the

past, inventory. you've phenomenon it elevated some rates move what fully homes demand from were point, afford given are mortgage makes a ago. there over a about that outlook. continued limited evidence our So this that the us Chris seen be at talk with existing and they renovation a and payment touched years also we Chris' significantly into challenging activity And more couple relatively will sale the that environment that the place it's to baked for think rate of just much think to that on And theme that the mortgage for home new into in renovated heard we've

Howard Heckes

that to remarks, prepared Noah, our in XX% high we in new of as thing more is RRR, Howard. me, this construction. And than one a we guidance decline single-digit with for And guided decline better just slightly in running said expected. Along that's we

puts with guidance takes. these So be and all going there's things, to few a

today bit RRR here essentially, the line guidance in for year. thought construction just sit little a we it May, assumptions we're early be. is we be just than new we worse might little better it than As in our might a is thought right and with bit And

Noah Merkousko

the there did moved appreciate makes sense. season, new sounds That through selling potential to we from to I change like a wholesale touch customers? this there's the towards want in there? part optimism. guess -- I the increased look to volumes have spring we've potentially as year got noticed upside your It as up, the res all been on guys. some a tone you I is color, see Yes, side. following of overall I And And guess And it. later

Howard Heckes

as lower line start Thanks, reset we Yes. the but year. the a assumptions sort of stable our pleased I hope in level, so. said, Demand month-to-month. That at generally volumes planning We're certainly with be remained Noah. have has would great. of with

of And a too, remain an demand. But toward point market reasons. or shoots declines. to in not of we're are we, the obviously, up positive the and continues real So very signs for lot seeing seeing uncertain pick some any year early green of eventual that the

when that performance happen, up our of sort are maximizing So ramp be we imminent happens ready cautious, upswing stay operating meet focused and in it production fully to will it's about in to an going demand. really demand. say, forecasting will I of to environment believe though, the we're teams cautious to any on remain but our business going we

Operator

Research. Our of comes Ramsey Thompson next Steven the from with line question

Steven Ramsey

level this on full to part believe the segment Architectural first of Maybe result had on touch about I margins you in a at a talked mid-single-digit the XXXX quarter, the year that plan? of was basis. original kind

are now year full ahead your Architectural of tracking So plan you in the segment?

Russell Tiejema

for in volume start that QX really been throughput team NUP. the diminish on just quick QX. mentioned as for each that proviso we the the a fall possible getting has But done nice that demand continue Steven, operational that our I we for quickly overall back It of year Thanks start bit with to with to is inbound has line to during a way with I remarks, but think little objectives surprised full profitability pleasantly is hard And I segment. prepared business generally and Yes, we might accelerate based hesitate the specific question. the to in job Russ. the team in the the the order doesn't doing I'll would the it's segments. XXXX. in the it's had guess say any into improve in guidance we're a getting into off we how business drive of starting And see work

going gives So progress grow confidence seeing as that only business margin or the maintain year. that we us to trajectory some through we're in is that this the

Steven Ramsey

and seeing thinking positive out Okay, trends and years. doors plans that next coming Are homes helpful. X customer the group what's of there of next in And years. or doors on new then, the shifting over builder for play you're few through 'XX number mix how from and to X that about favorably the up can

Howard Heckes

in of a time one house dusted since things to been lot to marketing believe of rooms seeing rooms which costs may year where there's noisy the of that to we've corridors There starting solid your so again It's to enjoy about real actively consider, in a to the Obviously, how office homeowner But off that a we we builders we to and a a plans. open in market we're whole the general a cost are live anecdotally inflation to -- they difference And your a doors modest that ago add homes. are choosing to there's home of Howard. is are that and this you premium that changes in bonus us periodically try those out are number for that significant -- it's like the should for are Steven, home research. that, months can and determine have go corridor solid consumers smaller have was where is houses reasons. we grow. starting things sort affordability a

private private with more mix help private more those We believe tailwinds. are business. spaces quieter, the all some spaces and there making So the in initiatives

Operator

the with next Our Wedbush. McCanless comes question of from line Jay

Jay McCanless

through debt allocation you either the both repurchase talk of the debt and EBITDA could and to targets to might capital debt you type of to have or reduction So see for happy cap? quarter. any stock net Maybe happening gearing this year about rest

Russell Tiejema

essentially strategy precedent. talk number always new the we with Russ. going Yes, investments of manufacturing prioritizing that many continue capacity unchanged. to take business. that's have outlook, up the is it characterize line would priority we sense in And our in where in going Jay, about first in new that the you capability, quarter, makes full some X investments into in our I past deployment times us to saw heard capital is year-on-year, you've And made the lower-cost in the capital investments products, be spending to year operations, that organic our our in it's

last repurchase. shareholders recall, to And indicated to to you environment, going Secondarily be the followed fourth alongside is the in was returns share might and reduction add debt that we that of We exactly added responsible, repurchase. that element to in share thought that's current we to by what did. form M&A quarter, that nuance the we

strong we're first to us of we focus driven in in ABL The acquisition million optimization fully part working against the intense quarter, took of that flow $XXX early closing January. generation helped in help applying cash the the by Endura this clear to that capital fund the debt

see of transaction, borrowed, Loan put amortize. in that and continue facilitate the the continue A to So to balance to repaid place we that you'll Term

that We possible not So the the over a year-end target really we'll good the flow profile right year relative that benefit we now. slowly talked came generation about into area that that and put there in going the there down to I'm delevering I initiatives we're to about capital business and in see out I of some slows knowing say relatively feel meaningful debt ratios. earlier. should down as working would all be just cash inflation as comes with business doubling the time.

year, of free $XX this capital intensely in that. the working of year the of variable million to guide way, full think so comp $XXX above more million our incentive line than $XXX focused on And cash conservatively is we've it's -- to well million, the about targets forecasted So We plan team got that that. by our reductions. driving sight flow

Operator

questions no over would you time. floor for have turn comments. this the further closing we Heckes, back I to to like at now Mr.

Howard Heckes

joining you support. your and Christine you, please thank replay appreciate Thank continued provide concludes This instructions? can Operator, us you for interest and today. the call. We our

Operator

First XXXX conference Thank be the Thank in ID or dial Earnings XX. may Quarter until The call U.S., XXX-XXX-XXXX XXXXXXXX. Conference recorded. been the joining for outside This please accessed you. replay, replay To enter May Masonite's access XXX-XXX-XXXX conference you the Call. has U.S.

this time. may You disconnect your lines at

Masonite International (DOOR) 9 May 232023 Q1 Earnings call transcript