MasterBrand Q1 2026 Earnings Report

MasterBrand EPS Results

• Actual EPS: $0.06
• Consensus EPS: -$0.04
• Beat/Miss: Beat by +$0.10
• One Year Ago EPS: $0.18

MasterBrand Revenue Results

• Actual Revenue: $618.00 million
• Expected Revenue: $591.35 million
• Beat/Miss: Beat by +$26.65 million
• YoY Revenue Growth: -6.40%

MasterBrand Announcement Details

• Quarter: Q1 2026
• Date: 5/5/2026
• Time: After Market Closes
• Conference Call Date: Tuesday, May 5, 2026
• Conference Call Time: 4:30PM ET

MasterBrand (NYSE:MBC) Inc. is one of the largest manufacturers of cabinetry and home storage solutions in North America. The company specializes in designing, producing and distributing kitchen and bath cabinetry for both new construction and the remodeling markets. Its offerings span a broad spectrum of styles and price points, serving homebuilders, home improvement retailers and independent dealers.

MasterBrand’s product portfolio includes framed and frameless cabinet lines, bath vanities, closet systems and other organizational accessories. The company markets its products under a diverse set of regional and national brands, each tailored to specific customer segments—from entry-level and builder-grade cabinetry to premium and semi-custom collections. This brand architecture allows MasterBrand to address varying consumer preferences and project requirements.

Headquartered in Jasper, Indiana, MasterBrand operates a network of manufacturing facilities, distribution centers and design showrooms across the United States and Canada. By locating production close to key markets, the company aims to optimize lead times, reduce freight costs and maintain tight quality control. MasterBrand’s sales channels include direct shipments to professional dealers, partnerships with home improvement centers and distribution to large residential construction firms.

Originally formed as the cabinetry division of a larger home products enterprise, MasterBrand has built its reputation on product innovation, manufacturing scale and a commitment to service. The company continues to invest in process improvements and design capabilities, seeking to enhance its competitive position in the evolving cabinetry market. MasterBrand’s management team draws on decades of industry experience to drive growth and operational excellence.

MasterBrand Q1 2026 Earnings Call Transcript

Key Takeaways

• Negative Sentiment: The company reported Q1 net sales of $618M (-6.4% YoY) and adjusted EBITDA of $28M (margin 4.5%), with a $146M free cash outflow driven by seasonal working capital and lower earnings.
• Positive Sentiment: Management says it fully executed a $30M cost program this quarter, is on track to realize $28M of Supreme integration run-rate synergies by year 3, and plans ~$90M of run-rate synergies from the pending American Woodmark merger.
• Negative Sentiment: Gross tariff costs were about $25M in Q1 and the company estimates unmitigated gross tariff exposure of roughly 5%–6% of 2026 net sales, while warning the trade environment remains volatile and could change further.
• Neutral Sentiment: Outlook calls for Q2 net sales down mid‑ to high‑single digits but sequential improvement, Q2 adjusted EBITDA $51M–$61M, and 2026 free cash flow expected to exceed net income, though leverage (~3.7x) is elevated and share buybacks are restricted until the merger closes.

Presentation

[Operator]

Good afternoon. Welcome to the MasterBrand First Quarter 2026 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 like to now turn the call over to Henry Harrison, Senior Director of Corporate Financial Planning and Analysis.

[Henry Harrison, Senior Director, Corporate Financial Planning and Analysis at MasterBrand]

Thank you and 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 of MasterBrand, and Andi Simon, Executive Vice President and Chief Financial Officer. We issued a press release early this afternoon disclosing our first quarter 2026 financial results. This document 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, neither our prepared remarks or the associated question-and-answer session.

[Henry Harrison, Senior Director, Corporate Financial Planning and Analysis at MasterBrand]

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 titled Forward-Looking Statements in the press release we issued today.

[Henry Harrison, Senior Director, Corporate Financial Planning and Analysis at MasterBrand]

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 2025 Form 10-K and updated as necessary in our subsequent 2026 Form 10-Q's, which are available 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.

[Henry Harrison, Senior Director, Corporate Financial Planning and Analysis at MasterBrand]

Today's discussion includes certain non-GAAP financial measures. Please refer to the reconciliation tables, which are in the press release issued early this afternoon. They 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 first quarter 2026 financial results from Andi, along with our second quarter 2026 financial outlook.

[Henry Harrison, Senior Director, Corporate Financial Planning and Analysis at MasterBrand]

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.

[Dave Banyard, President and CEO at MasterBrand]

Thank you and good afternoon, everyone. We appreciate you joining us for today's call. Our first quarter results reflect the disciplined execution of our near-term priorities against a challenging backdrop. Despite persistent demand softness and ongoing macroeconomic uncertainty, we delivered net sales and adjusted EBITDA in line with our expectations.

[Dave Banyard, President and CEO at MasterBrand]

We continued to advance our tariff mitigation efforts, fully executed our previously announced $30 million cost actions, and remain focused on the actions within our control as we navigate near-term headwinds and position MasterBrand to emerge stronger when the market recovers. In the first quarter, we generated net sales of $618 million, a 6.4% decrease compared to the same period last year. Our performance reflected a mid-single digit year-over-year market decline and a slower pace of housing completions, partially offset by the continued flow-through of previously implemented pricing actions.

[Dave Banyard, President and CEO at MasterBrand]

Adjusted EBITDA for the quarter was $28 million compared to $67 million in the prior year period, and adjusted EBITDA margin was 4.5%. The lower margin was primarily driven by lower volume and the related unfavorable fixed cost leverage, as well as unfavorable product mix across channels as consumers continue to shift toward value products and forgo features in made-to-order categories.

[Dave Banyard, President and CEO at MasterBrand]

At current volume levels, these mix dynamics carry an outsized impact on margins as reduced fixed cost absorption amplifies the effect of even modest product mix shifts. Compounding these pressures, weather-related disruptions during the quarter resulted in more down days than typical across certain facilities, driving unplanned production downtime that created additional drag on our fixed cost absorption.

[Dave Banyard, President and CEO at MasterBrand]

These headwinds were partially offset by previously announced pricing actions, operational tariff mitigation efforts that progressed ahead of schedule, and savings from our ongoing cost reduction initiatives. As is typical for our first quarter, free cash flow reflected seasonal working capital outflows. This, in combination with our net loss position, resulted in free cash outflow of $146 million compared to a $41 million outflow in the same period last year.

[Dave Banyard, President and CEO at MasterBrand]

Looking ahead, we expect these dynamics to normalize as we move through the year, and we continue to expect free cash flow for the full year to exceed net income. Turning to our end markets, demand remained pressured through the first quarter as affordability concerns, elevated interest rates, and cautious consumer sentiment continued to constrain activity across both new construction and repair and remodel markets.

[Dave Banyard, President and CEO at MasterBrand]

The ongoing conflict in the Middle East introduced an additional headwind to consumer confidence late in the quarter and further contributed to broader market volatility. In new construction, U.S. single-family new construction was down mid to high single digits in the quarter as weak consumer sentiment and elevated mortgage rates continued to weigh on buyer activity. To stimulate sales, builders sustained elevated incentive and rate buy-down programs.

[Dave Banyard, President and CEO at MasterBrand]

The market also continued to work through a reset in the spec and quick move-in inventory cycle, with completed spec inventory down meaningfully year-over-year. Adding to these headwinds, housing starts outpaced completions on a seasonally adjusted basis for the first time since the Q4 of 2024. This dynamic creates an outsized near-term impact on our business, as cabinets are typically purchased later in the construction cycle, closer to completion.

[Dave Banyard, President and CEO at MasterBrand]

Against this backdrop, MasterBrand's results largely tracked broader market trends while outperforming on a completions basis. Looking ahead, we expect new construction demand to remain under pressure as mortgage rates stay elevated and affordability challenges persist. In repair and remodel, demand remained soft through the first quarter as low existing home turnover and weak consumer confidence continued to suppress larger discretionary remodel activity. Consumer sentiment towards large household purchases fell to 40-year lows during the quarter.

[Dave Banyard, President and CEO at MasterBrand]

While rising home prices have supported homeowner equity, this has not yet translated into meaningful remodel spending. Housing turnover remains structurally constrained as well, driven in part by the significant share of homeowners locked into sub 4% mortgages, limiting the remodel activity that typically accompanies a home sale. Where there is remodel activity, we continue to observe trade-down behavior across our portfolio, with consumers gravitating toward lower-priced options.

[Dave Banyard, President and CEO at MasterBrand]

Reflecting this environment, our R&R business declined mid-single digits, consistent with the broader market. Looking ahead, we expect consumer sentiment to remain the primary driver of R&R demand and affordability constraints and low housing turnover to remain the primary headwinds. In Canada, first quarter conditions remain challenging, mirroring the trends in the U.S. Our Canadian business declined low single digits, consistent with the broader market.

[Dave Banyard, President and CEO at MasterBrand]

With the Bank of Canada holding rates steady, we expect these dynamics to continue weighing on the market through 2026. Stepping back, we continue to view 2026 as a transitional year, with end market demand softness persisting across both new construction and repair and remodel. Affordability pressures, low consumer confidence, and the complex and evolving trade environment remain primary headwinds.

[Dave Banyard, President and CEO at MasterBrand]

Federal Reserve is expected to hold rates steady through 2026 amid persistent inflation concerns, limiting the rate relief that it would foster a meaningful improvement in housing activity. The ongoing conflict in the Middle East introduces further layers of consumer uncertainty and outlook volatility that are difficult to size at this stage.

[Dave Banyard, President and CEO at MasterBrand]

The near-term outlook remains challenging, we remain confident in the underlying long-term fundamentals that we believe will ultimately drive a recovery across our end markets. The approximately 3 million homes under built, the millennial generation entering prime home buying years, an aging housing stock primed for remodel activity, and rising home equity levels all support our expectation that pent-up demand remains intact.

[Dave Banyard, President and CEO at MasterBrand]

We continue to manage the business responsibly through this period, while we do not expect the market to begin to recover until 2027, we are focused on ensuring MasterBrand is well-positioned to capitalize when conditions do improve. Turning to the trade environment. Since our last call, the trade landscape has continued to evolve. Following the Supreme Court's ruling that invalidated tariffs imposed under the International Emergency Economic Powers Act, a 10% global tariff was implemented, which effectively returns us to a similar tariff environment as under the reciprocal tariff regime.

[Dave Banyard, President and CEO at MasterBrand]

This tariff is time-limited and is set to expire in late July, at which point we anticipate further changes to the tariff landscape. While wood and wood product tariffs remain the primary driver of our overall tariff exposure, tariffs continue to stack across categories, the broader environment remains highly volatile and fluid.

[Dave Banyard, President and CEO at MasterBrand]

We are actively monitoring further developments and remain prepared to adjust our mitigation strategy as the landscape continues to evolve. In the first quarter, gross tariff costs were approximately $25 million, and I'm pleased to share that our teams executed exceptionally well against these headwinds, delivering mitigation efforts that exceeded our expectations for the quarter. This outperformance was driven primarily by the speed and effectiveness of our supply chain actions, including sourcing flexibility initiatives and supplier engagement efforts that progressed ahead of schedule.

[Dave Banyard, President and CEO at MasterBrand]

While supply chain actions were the primary driver of our first quarter mitigation performance, pricing remains an important and necessary component of our overall mitigation strategy, and we will continue to lean on both levers as we move through the year. We continue to monitor the potential indirect impact of tariffs on consumer demand and housing affordability, which remain inherently difficult to size.

[Dave Banyard, President and CEO at MasterBrand]

Operationally, our teams navigated a challenging first quarter, managing through demand volatility while working to maintain service levels across our network. We took further actions to align our cost structure with current demand conditions, including targeted line and shift adjustments and workforce actions across our manufacturing network, as well as facility closure consistent with our ongoing Supreme integration efforts.

[Dave Banyard, President and CEO at MasterBrand]

On the Supreme integration, we remain on track to achieve our target of $28 million in annual run rate cost synergies by year three post-close. We continue to identify additional opportunities to expand the benefits of the merger over time as end markets recover. During the first quarter, we also fully executed our broader $30 million cost savings initiative, with benefits expected to phase in over the remainder of the year.

[Dave Banyard, President and CEO at MasterBrand]

Our continuous improvement efforts delivered strong results in the quarter, with notable contributions across our manufacturing network and standout performance from several of our key facilities. Our teams continue to make progress on core efficiency gains using daily management practices, standard work processes, and operating discipline.

[Dave Banyard, President and CEO at MasterBrand]

These efforts contributed meaningfully to our financial performance in the quarter, offsetting material, personnel, and utility inflation. We're encouraged by the impact of our continuous improvement system, and we remain confident in its ability to drive further gains throughout the year.

[Dave Banyard, President and CEO at MasterBrand]

Turning to our pending merger with American Woodmark, our teams continue to make meaningful progress on integration planning and readiness, ensuring we are well-positioned to move quickly and capture value following close while maintaining the customer service levels and operational continuity our customers expect.

[Dave Banyard, President and CEO at MasterBrand]

We continue to expect approximately $90 million in annual run rate cost synergies by the end of year three post-close based on the assumptions underlying our analysis at the time of announcement. Following close, we plan to assess these estimates in the context of the current operating environment and provide updated guidance as appropriate. We remain confident in the strategic and financial merits of the merger and are progressing through the regulatory review process.

[Dave Banyard, President and CEO at MasterBrand]

As disclosed in our Form 8-K filed on 22nd April, we now expect the transaction to close in the second calendar quarter of 2026. Finally, turning to capital allocation. We remain disciplined in our approach to capital deployment, prioritizing investments that support our operational execution, integration activities, and long-term value creation. Capital expenditures in the quarter were in line with our expectations, and our balance sheet and liquidity position remains healthy.

[Dave Banyard, President and CEO at MasterBrand]

We expect our leverage ratio to remain elevated in the near term, primarily reflecting lower trailing 12-month adjusted EBITDA in the current demand environment. Andi will provide additional details in her remarks. In closing, the first quarter unfolded largely as we expected, a challenging environment defined by persistent demand softness, a complex trade landscape, and cautious consumer sentiment.

[Dave Banyard, President and CEO at MasterBrand]

While these conditions are not without difficulty, I'm proud of the way our teams have responded, executing our mitigation strategy ahead of schedule, advancing our cost savings initiatives, and maintaining focus on the operational and strategic priorities that will position MasterBrand for the recovery ahead. We have a clear line of sight to the long-term drivers of demand across our end markets, and we remain confident that the actions we're taking today are building a stronger, more resilient MasterBrand.

[Dave Banyard, President and CEO at MasterBrand]

With that, I'll turn it over to Andi for a detailed review of our financial results and outlook.

[Andi Simon, EVP and CFO at MasterBrand]

Thanks, Dave. Good afternoon, everyone. I'll start with a review of our first quarter financial results. I'll share more details on our guidance for the second quarter of 2026 and provide some thoughts on the full year. As a reminder, we provide formal guidance on a quarterly basis. Any commentary we make about the full year reflects our current expectations and assumptions and is directional in nature rather than formal guidance.

[Andi Simon, EVP and CFO at MasterBrand]

Turning to our first quarter results. Net sales were $618 million, a 6.4% decrease compared to $660.3 million in the same period last year, reflecting continued softness across our addressable market and a slower pace of housing completions. Anticipated flow-through of prior pricing actions was outweighed by unfavorable channel and product mix.

[Andi Simon, EVP and CFO at MasterBrand]

Gross profit was $156.6 million compared to $202.2 million in the same period last year. Gross profit margin was 25.3%, down 530 basis points year-over-year, primarily reflecting lower volume and the related unfavorable fixed cost leverage and unfavorable product mix. Material, personnel, fuel, and utility inflation, combined with the impact of tariffs, contributed to overall margin pressure. These headwinds were partially offset by continuous improvement initiatives and targeted tariff mitigation actions.

[Andi Simon, EVP and CFO at MasterBrand]

As Dave mentioned, gross tariff exposure in the quarter was approximately $25 million. Our mitigation efforts performed better than we initially anticipated, driven by the timing and effectiveness of operational actions taken across the business, a reflection of the strong execution from our teams.

[Andi Simon, EVP and CFO at MasterBrand]

While we are pleased with this progress, tariff costs continue to flow through the business, and we have more work to do, particularly as pricing actions remain a necessary and important component of our go-forward mitigation strategy. The more pronounced headwinds in the quarter came from product mix and continued trade down activity across certain categories versus historical norms, which reflect broader market conditions. Taken together, these factors have created a challenging operating environment, but we believe we are managing through it thoughtfully.

[Andi Simon, EVP and CFO at MasterBrand]

SG&A expenses totaled $155.9 million in the first quarter compared to $154 million in the same period last year, with the year-over-year increase primarily driven by acquisition-related costs associated with our pending merger with American Woodmark and higher outbound freight expenses reflecting rising fuel costs. Importantly, excluding acquisition-related costs, SG&A decreased year-over-year.

[Andi Simon, EVP and CFO at MasterBrand]

As Dave mentioned, we took a number of structural SG&A cost reduction actions during the quarter. While it takes time for the impact of these measures to fully flow through our financial results, we expect our SG&A to net sales ratio, excluding deal and restructuring costs, to improve in the second half of 2026 as these benefits phase in. Interest expense declined to $18.4 million from $19.4 million in the same period last year as we continued to pay down our debt over the last 12 months. Net loss was $15.4 million in the first quarter compared to net income of $13.3 million in the same period last year.

[Andi Simon, EVP and CFO at MasterBrand]

Net income margin was negative 2.5% compared to positive 2% in the prior year, reflecting lower gross profit and higher deal-related SG&A expenses, partially offset by the initial benefits of cost actions taken in the quarter. Adjusted EBITDA was $28 million compared to $67.1 million in the prior year period.

[Andi Simon, EVP and CFO at MasterBrand]

Adjusted EBITDA margin was 4.5%, a decline of 570 basis points year-over-year, primarily due to lower gross margins, partially offset by reduced SG&A expenses excluding deal related costs, reflecting the cost actions implemented during the quarter. Diluted loss per share was $0.12 in the first quarter based on 127.5 million diluted shares outstanding.

[Andi Simon, EVP and CFO at MasterBrand]

This compares to earnings per share of $0.10 in the first quarter of 2025, which was based on 130.7 million diluted shares outstanding. Adjusted diluted earnings per share were $0.06 in the current quarter compared to adjusted earnings per share of $0.18 in the prior year period. Turning to the balance sheet. We ended the quarter with $138.4 million of cash on hand and $332.3 million of liquidity available under our revolving credit facility. Net debt at the end of the first quarter was $946.5 million, resulting in a net debt to adjusted EBITDA leverage ratio of 3.7x.

[Andi Simon, EVP and CFO at MasterBrand]

While net debt remained approximately flat year-over-year, our leverage ratio reflects the impact of lower trailing twelve-month adjusted EBITDA in this challenging demand environment. During the quarter, we proactively amended our existing credit agreement to provide additional flexibility related to our leverage and interest coverage covenants as we navigate the current environment and work toward the planned reclosing of the American Woodmark transaction.

[Andi Simon, EVP and CFO at MasterBrand]

We continue to prioritize debt reduction with available cash consistent with our track record. Net cash used in operating activities was $133 million for the first quarter of 2026, compared to $31.4 million in the first quarter of 2025, driven by lower net income, less favorable movements and working capital, and an increase in our income tax receivable.

[Andi Simon, EVP and CFO at MasterBrand]

Capital expenditures for the first quarter were $13.2 million compared to $9.8 million in the first quarter of 2025, in line with our expectations. As is typical for our first quarter, free cash flow reflected seasonal working capital outflows of $146.2 million compared to outflows of $41.2 million in the same period last year. The year-over-year variance was primarily driven by lower net income, less favorable working capital movements due to timing, and an increase in our income tax receivable.

[Andi Simon, EVP and CFO at MasterBrand]

We did not repurchase any shares during the quarter. Our merger agreement with American Woodmark restricts share repurchase activity until the transaction closes. Turning to our outlook. Our second quarter outlook reflects the current uncertainty of the demand environment driven by ongoing affordability concerns, recent geopolitical tensions, and the uncertain trade environment.

[Andi Simon, EVP and CFO at MasterBrand]

The outlook incorporates tariffs currently in effect, but does not reflect potential implications from other proposed or future trade policy changes. Further, our outlook does not reflect any anticipated financial benefits from the pending merger with American Woodmark, nor does it include expected transaction or integration related costs. For the second quarter, our end markets are expected to be down mid to high single digits year-over-year.

[Andi Simon, EVP and CFO at MasterBrand]

Despite the market backdrop, we expect a meaningful sequential performance improvement in net sales versus the first quarter, driven by several factors that give us confidence in the outlook. Net sales are expected to benefit from normal seasonal volume uplift, coupled with an anticipated modest improvement in product mix, in addition to the further flow-through from previously implemented pricing actions, including tariff related pricing.

[Andi Simon, EVP and CFO at MasterBrand]

Taken together, these dynamics are expected to position us broadly in line with our end markets on a year-over-year basis in the second quarter. Against that backdrop, we expect second quarter 2026 net sales to be down mid to high single digits versus the prior year. As I mentioned, to help manage near term pressure on profitability, we took decisive action on our $30 million cost reduction initiative to align our cost structure with current demand levels.

[Andi Simon, EVP and CFO at MasterBrand]

We completed key implementation steps in the first quarter and expect the full benefit will phase in over the course of 2026. We believe these steps, in combination with our tariff mitigation strategy, will help offset margin pressures, preserve liquidity, and position MasterBrand to remain resilient through this period of elevated uncertainty.

[Andi Simon, EVP and CFO at MasterBrand]

Given these considerations, we expect second quarter adjusted EBITDA to be in the range of $51 million-$61 million, representing an adjusted EBITDA margin of 7.8%-8.8%. We expect second quarter adjusted diluted earnings per share of $0.03-$0.13. The wider adjusted diluted earnings per share guidance range for the second quarter reflects a higher than normal degree of uncertainty due to potential variability in the effective tax rate.

[Andi Simon, EVP and CFO at MasterBrand]

Against low pre-tax income, the impact of non-deductible deal related expenses relating to the pending merger with American Woodmark, as well as other potential discrete tax items, is amplified. As a result, the actual effective tax rate and the adjusted diluted earnings per share may differ materially from the guidance provided.

[Andi Simon, EVP and CFO at MasterBrand]

Looking at the full year, we continue to expect our addressable market in 2026 to be down mid-single digits year-over-year, with continued variability across end markets. We continue to expect decremental margins to remain elevated through the first half of 2026. Driven by year-over-year volume declines, mix, and the timing of tariff mitigation. We anticipate that our decrementals will improve in the second half of the year as our tariff mitigation and cost rationalization actions phase in further.

[Andi Simon, EVP and CFO at MasterBrand]

For the full year, we also continue to expect interest expense to be flat to down as we continue to pay down our expanding debt. Our effective tax rate is expected to be elevated and variable relative to the prior year, primarily reflecting the previously mentioned impact of non-deductible deal related expenses relating to the pending merger with American Woodmark.

[Andi Simon, EVP and CFO at MasterBrand]

Additionally, we continue to expect free cash flow for 2026 to be in excess of net income for the year. Finally, despite recent changes and based on the trade policies currently in effect, we continue to estimate our unmitigated gross tariff exposure for the full year at approximately 5%-6% of 2026 net sales. Additionally, we continue to expect to offset 100% of tariff dollar costs on a run rate basis exiting 2026 through our mitigation efforts, which will take time to fully materialize.

[Andi Simon, EVP and CFO at MasterBrand]

We will continue to monitor the evolving trade environment while executing our comprehensive mitigation strategy and providing quarterly updates as conditions evolve. In closing, while near-term conditions remain challenging and the industry continues to navigate an extended period of softer demand and a complicated tariff environment, we are managing the business with discipline and purpose.

[Andi Simon, EVP and CFO at MasterBrand]

We are executing against our cost reduction and mitigation initiatives, maintaining financial flexibility, and making meaningful progress on the integration planning work that is designed to allow us to move quickly following the close of the pending American Woodmark transaction. These are the right priorities for this moment, and we believe the actions we are taking today are building a more resilient and capable MasterBrand. I would like to turn the call back to Dave.

[Dave Banyard, President and CEO at MasterBrand]

Thanks, Andi. While the first quarter brought its share of challenges, our confidence in the long-term outlook for our business remains unchanged. Affordability pressures, cautious consumer sentiment, and volatility in the trade environment are shaping near-term outcomes, but they do not change the underlying demand drivers that we believe will fuel a meaningful recovery. Over time, we expect macroeconomic and trade conditions to normalize and demand to recover, with the broader market beginning to improve in 2027.

[Dave Banyard, President and CEO at MasterBrand]

What we are navigating today is a direct reflection of the current market environment, not of our operating model or the underlying strength of the business. Our priorities are clear, and our strategy is built for exactly these kinds of cycles, designed to carry us through periods of uncertainty and position us to win when conditions improve.

[Dave Banyard, President and CEO at MasterBrand]

We are executing our mitigation strategies, progressing toward the close of our pending merger with American Woodmark, and managing the business with the discipline and accountability that defines the MasterBrand Way. With our strong portfolio, resilient operating model, and a team that has demonstrated its ability to execute through adversity, we believe we are well-positioned to capitalize on the eventual market recovery and deliver long-term value for our shareholders. Now, with that, I'll open the call up to Q&A.

[Operator]

Our first question is from McClaran Hayes from Zelman & Associates. Please proceed with your question.

[McClaran Hayes, Managing Director at Zelman & Associates]

Hey, good evening guys. It looks like your outlook for the market this second quarter is similar to the environment you guys had in the first quarter at down mid- to high-single digits %. Rates are a bit higher, and it seems like there's more uncertainty now than there was a few months ago. I guess, does that kind of market outlook tell us that at this point you haven't necessarily seen an impact to your consumer, whether that's in order trends or foot traffic patterns?

[Dave Banyard, President and CEO at MasterBrand]

I think our outlook is a little bit tilted down. We were saying kind of mid to high single-digits down, and I think it's more of a bit of a weight on new construction than R&R. R&R is down, so it's, you know, kind of hard to tell over a long period of time how far down is down. It feels sort of steady, if you will, in this current mode. I think new construction has been very choppy.

[Dave Banyard, President and CEO at MasterBrand]

You know, the March starts number was a little higher than we expected, which is good. It's still that market with the reset that they're doing of eliminating spec homes makes our business a bit more choppy. I think we're going into it with that in mind.

[Dave Banyard, President and CEO at MasterBrand]

I think, you know, the spring selling season has generally shaped up how we thought it would, sort of reflected in our Q1. I think it's, you know, in terms of a material difference in behavior over the last, you know, say month or two, we haven't necessarily seen that. It's just, it's not getting better, it's just kind of moving the way it was prior to that.

[McClaran Hayes, Managing Director at Zelman & Associates]

Okay. Got it. Well, that makes sense. On pricing, can you help give us more detail on how pricing trended from the first quarter relative to the Q4? Did it accelerate or stay in a similar range? Also, do you anticipate needing additional pricing given some of the cost inflation that we've seen over the past few months that I imagine might be impacting paints and stains at the minimum in your business?

[Dave Banyard, President and CEO at MasterBrand]

Yeah. I think probably the bigger impact is directly on fuel and logistics, but there's pressure in a number of different spots. I think the plan is we've been executing on our plan for pricing throughout the year as we've highlighted plenty of times in the past. It does take time for that price to get into the market, we're continuing to execute on that. We're looking at other options regarding fuel. I mean, obviously, that's the one that everybody sees every day, and that's come up significantly over the past one month. We're continuing to look at that and using the mechanisms that we have.

[Dave Banyard, President and CEO at MasterBrand]

We have a typical mechanism that you would have for something like that that's, I'd say, near term volatile, and we'll have to monitor how that plays out over the coming months with the situation in the Middle East.

[McClaran Hayes, Managing Director at Zelman & Associates]

Got it. Thank you very much.

[Dave Banyard, President and CEO at MasterBrand]

Thank you.

[Operator]

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

[Garik Shmois, Managing Director at Loop Capital Markets]

Oh, hi. Thanks. Wondering if you could speak to the, your view on product mix improving here as you go into the second quarter? Love to get a little bit more color on that.

[Dave Banyard, President and CEO at MasterBrand]

I think we're continuing to see the general trade down behavior. When you go into the spring selling season with more volume, you tend to see a slightly better mix in all channels. That's what's driving that. I think generally speaking though, the overall market still year, on a year-over-year basis will continue to be in a trade down mode, which again offsets any benefit that we're getting from price to some extent. The price mix, you know, we've seen that that's a challenge for us, we're working on how do we upsell more.

[Dave Banyard, President and CEO at MasterBrand]

Some of those efforts we are gonna see here in the second quarter, but I think just in general, the consumer's under pressure, and so you've gotta meet them where they are. Generally speaking, with higher volume, we tend to see a slightly better mix, and so that's what we're anticipating here.

[Garik Shmois, Managing Director at Loop Capital Markets]

Okay. Thanks. Then just some follow-up questions on incremental margins. You mentioned they're expected to improve in the second half of the year. Should we think about incrementals improving? Is that related to sequential improvement, quarter-on-quarter, in the second half of the year? Should we think about incrementals on a year-on-year basis? Any more detail on what kind of level of improvement on incrementals is possible?

[Dave Banyard, President and CEO at MasterBrand]

Yeah. We're not really giving full year guidance at the moment, Garik. I think when we talk about that, we're talking year-over-year. I mean, you're seeing sequential improvement from Q1 to Q2, which is normal seasonality. Again, it goes back to volume is the issue we have. When you go from Q1 lower volume into Q2 higher volume, you see pretty good flow-through on that, and that's, you know, that's the challenge we face on a year-over-year basis throughout the year.

[Dave Banyard, President and CEO at MasterBrand]

Because of the mitigation on tariffs as we go through the year, we will see better decrementals as the, you know, as we said, we see the market being down for the full year.

[Dave Banyard, President and CEO at MasterBrand]

I would anticipate, though we're not guiding yet for the full year, I would anticipate revenue to be down, through the year. We're expecting those decrementals on a year-over-year basis, quarter-by-quarter to improve.

[Garik Shmois, Managing Director at Loop Capital Markets]

Okay. Great. Thank you.

[Operator]

If you'd like to ask a question, please press star one on your telephone keypad. Our next question is from Steven Ramsey with Thompson Research Group. Please proceed with your question.

[Steven Ramsey, Analyst at Thompson Research Group]

Hi. Good evening. Thanks for taking my questions. I wanted to hear a bit more on the pricing actions that you're taking in response to tariffs and rising fuel costs. First, do you feel like the pricing that you're taking and that you're seeing from competitors is near parity with one another, or is anyone using this time to maybe take less price to gain some share? Connected to this, price actions on fuel, you have not taken any so far. Just to clarify, the margin guides for the second quarter does not include that you might take actions for rising fuel costs?

[Dave Banyard, President and CEO at MasterBrand]

I'll answer the last part first, and that's incorrect. We have taken some action already on rising fuel costs. I'd rather, for competitive reasons, not go into the details with how we do that. Suffice to say, we have short-term mechanisms that we use for any kind of, what I'll say, volatile commodity inputs like fuel. In terms of the market, I think it's no different than I highlighted back in the previous earnings call, Steven, which is it's a very competitive market.

[Dave Banyard, President and CEO at MasterBrand]

You've gotta meet the consumer where they are and that, you know, involves a number of different aspects of what you're trying to bring to the consumer, and the customer. I think ultimately that's, you know, it's more competitive now than it has been. The market's still very fragmented and, you know, we're leaning into that, but I think we also understand the cost burden that we're facing, and so it's a dual approach.

[Steven Ramsey, Analyst at Thompson Research Group]

Okay. That's helpful. On the gross tariff cost, $25 million in the first quarter, about 4% of sales and a little bit lower than the full year outlook for the gross tariff cost as a percentage of sales. Do you expect that you kinda, you know, get into that 5%-6% zone in the second quarter and it sustains or I know there's a lot of moving parts, definitely good to see a little bit better to start the year?

[Dave Banyard, President and CEO at MasterBrand]

I mean, it's a combination of things, Steven. Some of it is our mitigation. You know, part of mitigating tariffs is coming up with ways to not have to pay them. That's part of it. It's also the mix that we're You know, the mix of our portfolio is pretty broad and there are different impacts from tariffs. I wouldn't necessarily look at that as the run rate moving forward. It's why we reiterated that it's the 5%-6%, 'cause that's what we think it will be. Also, the tariffs have changed slightly, so we just wanna make sure that the changes are understood to not really be material in terms of the different impact to our P&L.

[Dave Banyard, President and CEO at MasterBrand]

I think it's a combination of part of how we're mitigating these things is coming up with ways to avoid and then other ways, you know, otherwise it's mostly mix. You do see a lower volume in Q1, so you're gonna have a lower tariff dollar number as part of that.

[Steven Ramsey, Analyst at Thompson Research Group]

Okay. That's helpful color. Thank you.

[Operator]

This now concludes our question and answer session. Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. Please disconnect your lines and have a wonderful day.

Participants

Executives

• Andi Simon, EVP and CFO
• Dave Banyard, President and CEO
• Henry Harrison, Senior Director, Corporate Financial Planning and Analysis

Analysts

• Garik Shmois, Managing Director at Loop Capital Markets
• McClaran Hayes, Managing Director at Zelman & Associates
• Steven Ramsey, Analyst at Thompson Research Group