JASPER, Ind. — MasterBrand Inc., the largest residential cabinet manufacturer in North America, reported 1st quarter losses, but despite this the company has raised its 2023 financial outlook. 

“We delivered stronger than expected sales in the first quarter, as we benefited from more resilient demand across our customers servicing the new construction end market. This top-line performance, along with the flexibility of our manufacturing network and further progress on our three strategic initiatives helped us expand our adjusted EBITDA margin year-over-year, despite overall softer end market demand,” said Dave Banyard, President and Chief Executive Officer.

“Our strong free cash flow generation in this environment has given management and our Board of Directors confidence in our ability to begin returning value directly to shareholders. Accordingly, I am pleased to announce that our Board of Directors has approved a new share repurchase program allowing the Company to purchase up to $50 million of its outstanding common shares.”

First Quarter 2023

MasterBrands ranks #3 on the FDMC 300 list, which is a ranking of the largest North American wood products manufacturers. It had $3.3 billion in sales 

for the first quarter of 2023, net sales were $676.7 million, compared to $777.1 million in the first quarter of 2022, a decrease of 12.9%. Gross profit was $204.6 million, compared to $211.0 million in the comparable period of the prior year. Gross profit margin expanded 300 basis points to 30.2%, compared to 27.2% in the first quarter of 2022.

Net income was $35.0 million, compared to $46.9 million in the first quarter of 2022, primarily due to higher interest expense of $17.4 million, related to bank debt issued in December 2022 at the time of our separation from Fortune Brands Home and Security. Diluted net income per share was $0.27, compared to pro forma diluted net income per share of $0.37 in the comparable period of the prior year.

Adjusted EBITDA* was $81.5 million, compared to $80.8 million in the first quarter of 2022. Adjusted EBITDA* margin expanded 160 basis points to 12.0%, compared to 10.4% in the comparable period of the prior year.

Balance Sheet and Cash Flow

As of March 26, 2023, the Company had $116.3 million in cash and $300 million of availability under its revolving credit facility. Net debt* was $823.3 million and net debt to adjusted EBITDA* was 2.0x.

Operating cash flow was $62.1 million, compared to $(2.9) million in the first quarter of last year. Free cash flow* was $59.2 million, compared to $(13.9) million in the same period of the prior year.

2023 Financial Outlook

For full year 2023, the Company expects:

Net sales year-over-year decline of mid teens, based on market declines of low teens
Adjusted EBITDA* in the range of $315 million to $345 million, with related adjusted EBITDA* margins of roughly 11.5 to 12.5 percent
The Company is increasing the midpoint of full-year adjusted EBITDA* outlook by $10 million following stronger than expected performance in the first quarter of 2023. Net sales outlook remains unchanged for the full year as the Company continues to expect softer end markets in 2023.

“We delivered stronger than anticipated financial performance in the first quarter of 2023,” said Andi Simon, Executive Vice President and Chief Financial Officer. “While the macroeconomic environment remains dynamic, we feel confident in our ability to consistently execute and deliver solid margin performance in any market condition. Coupled with the benefits from prior actions taken in 2022, we are raising our full-year adjusted EBITDA outlook for 2023. We believe we will be able to deliver this strong near-term performance while still investing in the business for long-term growth.”