MasterBrand Sets $315M-$365M EBITDA Target for 2025 with Cost-Saving Measures

Insights from the Earnings Call: MasterBrand, Inc. (MBC) First Quarter 2025

Management View

• CEO Dave Banyard pointed out that Q1 2025 net sales amounted to $660 million, marking a 3% rise compared to the previous year. This improvement was fueled by a 10% boost from the Supreme acquisition along with a 2% uptick in net average selling prices within the core operations. Nonetheless, a decline of 9% in market volumes for the established business somewhat mitigated these positive effects.
• Builder direct sales grew by over 4% year-over-year, benefiting from new business wins and steady new housing completions despite broader market declines.
• Adjusted EBITDA was $67 million, with a margin of 10.2%, down 220 basis points year-over-year due to lower volumes and fixed cost leverage challenges. Banyard attributed this to ongoing alignment of production with demand.
• CFO Andi Simon mentioned that the diluted earnings per share (EPS) for Q1 decreased to $0.10 from $0.29 in the previous year. The adjusted EPS stood at $0.18, as opposed to $0.31 recorded in the first quarter of 2024.
• The firm announced a negative free cash flow totaling $41 million, influenced by reduced earnings before tax, increased stockpiles because of fluctuating customer demand, as well as costs from debt interest payments.
• The cost-reduction initiatives encompass cutting down 500 roles within production, reducing personnel in corporate and administrative divisions, as well as decreasing non-essential expenditures. Plans for merging facilities located in North Carolina and Nevada aim at lowering overheads and enhancing services starting from the latter part of 2025.

Outlook

• Full-year 2025 adjusted EBITDA is projected in the range of $315 million to $365 million, with margins estimated between 12% and 13.5%.
• The company revised its overall market outlook, now expecting end-market demand to decline high to mid-single digits in 2025. This is an adjustment from the previous guidance of mid to low-single digits.
• The projected net sales for 2025 indicate a drop of just a few percentage points compared to the previous year. While organic net sales are forecasted to fall within the middle single digits range, this downturn will be somewhat mitigated by an increase in the high single digits due to the addition of Supreme.
• It is anticipated that the repair and renovation sector will see a decrease of several percentage points in the high to middle single-digit range, whereas the demand for new building projects is expected to fall within the middle single-digit percentages for this year.
• The firm expects a favorable cash flow for the second quarter and the rest of 2025, aiming to have the free cash flow surpass the net income over the entire year.

Financial Results

• Q1 2025 net income was $13.3 million, down from $37.5 million in Q1 2024, driven by higher SG&A expenses, higher interest expenses, and increased restructuring costs.
• The gross profit fell to $202.2 million, causing the gross margin to drop to 30.6%, down from 32.1% compared to the previous year. This decline was due to diminished sales volume and less efficiency in managing fixed costs.
• The SG&A expenses rose to $154 million because of expenditures related to Supreme as well as heightened investments in digital and technological advancements.
• Net debt at quarter-end was $944.7 million, with a leverage ratio of 2.7x adjusted EBITDA, up from 2.4x in the prior quarter.
• The company repurchased approximately 839,000 shares at a total cost of $11.4 million during Q1.

Q&A

• Garik Shmois, Loop Capital Markets: Questioned the impact of tariffs on pricing and demand. CEO Banyard explained that additional pricing actions are planned to counteract tariffs through a surcharge methodology. He noted that demand fluctuations in Q2 and beyond might result from pre-buying related to tariffs.
• Adam Baumgarten, Zelman & Associates: Asked about Q2 margin progression. Banyard stated margins are expected to improve sequentially from Q1 but remain under pressure due to inefficiencies and tariff-related costs.
• Tom Mahoney, Cleveland Research: Inquired about the company’s position amid a tariff-heavy environment. Banyard highlighted MasterBrand’s domestic production capacity as a strategic advantage, allowing flexibility to mitigate tariff impacts.

Sentiment Analysis

• Analysts expressed cautious optimism but raised concerns about the impact of tariffs and demand volatility on financial performance. They pressed management on pricing strategies and margin progression.
• Management maintained a pragmatic tone, emphasizing cost-saving measures and strategic investments but acknowledged uncertainties caused by market dynamics and tariffs.
• In comparison to Q4 of 2024, the management’s stance stayed unchanged, with an emphasis on sustained expansion alongside tackling immediate obstacles.

Quarter-over-Quarter Comparison

• In Q1 of 2025, there was an increase in net sales relative to Q4 of 2024, primarily because of the Supreme acquisition and rising Average Selling Prices (ASP). Nonetheless, the adjusted EBITDA margin decreased even more as a result of difficulties with managing fixed costs.
• The management adjusted their view of the market downwards due to lower-than-predicted demand in both the repair and renovation sectors as well as in new building projects.
• In the first quarter, analysts showed more worry regarding market conditions and the effects of tariffs than they did in the fourth quarter.

Risks and Concerns

• The management attributed the ambiguities in demand to macroeconomic factors and tariffs. To address this, they have implemented strategies such as adjusting prices, cutting costs, and improving operational efficiency.
• Experts expressed worries regarding their capacity to sustain profit margins and counterbalance expenses related to tariffs.
• The firm pointed out possible dangers stemming from declining consumer confidence and variations in the prices of raw materials.

Final Takeaway

MasterBrand is facing a difficult landscape characterized by tariff effects and inconsistent demand. Despite reporting slight sales improvement thanks to the Supreme acquisition and higher average selling prices, concerns over shrinking profit margins and adjusted market forecasts highlight future unpredictability. The leadership team continues to concentrate on reducing costs, enhancing operations efficiency, and making strategic investments aimed at fostering sustainable expansion.

Review the complete earnings call transcript here.

More on MasterBrand

• MasterBrand, Inc. (MBC) First Quarter 2025 Earnings Call Transcript
• MasterBrand, Inc. 2025 Q1 - Results - Earnings Call Presentation
• MasterBrand: A Leading Category Player with Robust Expansion Potential at an Appealing Price Point
• MasterBrand's Adjusted EPS was $0.18, with revenues totaling $660.3 million.
• MasterBrand outlines 2025 adjusted EPS target of $1.40-$1.57 amid cost reductions and strategic investments