Masonite International Corporation (DOOR) on Q4 2021 Results - Earnings Call Transcript
Operator: Welcome to Masonite Fourth Quarter and Full-Year 2021 Earnings Conference Call. During the presentation, all participants will be in listen-only mode. After management's prepared remarks, investors are invited to participate in a question-and-answer session. 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. Thank you. And over to you, sir. Rich Leland: Thank you and good morning, everyone. We appreciate you joining us for today's call. With me here this morning are Howard Heckes, President and Chief Executive Officer; and Russ Tiejema, Executive Vice President and Chief Financial Officer; Chris Ball, our President of Global Residential, will also be joining us for the Q&A session. We issued a press release and earnings presentation yesterday reporting our fourth quarter and full-year 2021 financial results. These documents are available on our website at masonite.com. Before we begin, let me remind you that this call will include forward-looking statements. Each forward-looking statements contained in this call is subject to risks and uncertainties that could cause actual results to differ materially from those projected in such statements. Additional information regarding these factors appears in the section entitled forward-looking statements in the press release we issued yesterday. More information about risks can be found under the heading "Risk Factors" in Masonite's Annual Report on Form 10-K to be filed to the SEC later this week and in our other SEC filings which are available at sec.gov and at masonite.com. The forward-looking statements in this call speak only as of today and we undertake no obligation to update or revise any of these statements. Our earnings release and today's discussion includes certain non-GAAP financial measures. Please refer to the reconciliations, which are in the press release and the Appendix of the earnings presentation. Our agenda for today's call includes a business overview from Howard, followed by a review of the fourth quarter and full-year results from Russ, along with our 2022 financial outlook. Lastly, Howard will provide some closing remarks and will host a question-and-answer session. And with that, let me turn the call over to Howard. Howard Heckes: Thanks, Rich. Good morning, and welcome, everyone. I'm pleased to be joining you today to update you on Masonite's fourth quarter and full-year results. 2021 was another outstanding year and I'm grateful to each of Masonite's more than 10,000 employees that contributed to the impressive results we delivered in this challenging environment. Their flexibility, creativity and resilience enabled us to grow volumes and deliver double-digit growth in both net sales and adjusted EBITDA. End market demand remains strong despite a number of well-publicized external headwinds. I'm proud of the way the team navigated the extreme levels of inflation as well as supply chain constraints and labor-related issues that we faced throughout the year. Amid these challenges our focus on maintaining a favorable price cost relationship, combined with disciplined capital management, allowed us to realize a 33% increase in adjusted earnings per share, and a five percentage point increase in return on invested capital for the year. And we accomplished this while continuing to invest in the important growth and strategic initiatives that will shape our future. I'm also very pleased with the progress that we made on our 2021 on our key environmental, social and governance initiatives. We published our latest ESG report in June that included our first ever carbon footprint analysis and we named Clare Doyle, the company's first Chief Sustainability Officer. As part of our continued focus on safety, our operations teams conducted over 1,800 safety related kaizen events, helping to reduce our total incident rate by 6% year-over-year with 10 of our facilities achieving our ultimate goal of zero safety incidents. We also launched our We Help People Walk Through Walls community grant program, with awards going to 15 amazing local organizations nominated by our employees. At our Investor Day in April, we presented our Doors That Do More strategy and our Centennial Plan. As you may recall, we called out three ambitious financial goals for 2025. Roughly doubling our annual net sales to $4 billion; achieving adjusted EBITDA margins in excess of 20%; and delivering sector leading return on invested capital. We made significant progress in 2021 and I believe we are well on our way to delivering on these goals over the next four years. Also, in our Investor Day, you may recall that Russ laid out a glide path to achieving our Centennial Plan goals that included three main pillars of growth. First, we intend to grow our base business organically by capturing fair value for our products and optimizing our supply chain and production processes to increase capacity and capitalize on the strong housing market fundamentals. Second, we intend to leverage our strong balance sheet and cash flow to pursue acquisitions, which have the right fit and value proposition and which will help us meet our long-term financial goals. And third, we intend to drive growth through our Doors That Do More strategy, which aims to unlock the significant potential we have to differentiate our company through a combination of delivering reliable supply, product innovation, and creative down channel marketing, making Masonite the supplier of choice and Masonite Door Systems the product of choice for architects, builders and homeowners. Turning to Slide 5, certainly in terms of Doors That Do More innovation 2021 was a big year. Among the new product launches this year was our Masonite M-Pwr Smart Door. The first residential entry door to integrate power, perimeter lighting, video doorbell and smart lock into a complete door system that can be controlled remotely through a proprietary mobile app. Last month, we showcased the new M-Pwr Doors at 2022 Consumer Electronics Show in Las Vegas, and the reception was phenomenal. Who would have imagined that the door company would ever be part of CES let alone win top accolades. But that is just what we did. The M-Pwr reveal at CES was highlighted in over 130 articles garnering over a half a billion impressions worldwide. Our goal was to make a splash at CES to lay the groundwork for engaging builders about this exciting new product. And I've got to hand it to our marketing team they executed beautifully. This effort certainly helped raise awareness and interest in the market and our conversations with builders have been picking up. We recently showcased the door again in the International Builders' Show and have already received preliminary commitments from six builders for installation in communities they plan to build this year. We're in active discussions with dozens more, which we are confident will lead to additional sales announcements throughout the year. So we're off to a good start. And while we understand the adoption curve will take some time we're very encouraged by the early indicators of purchase intent and overwhelming enthusiasm for a product from CES and social media to the leadership at top builders. Turning to Slide 6, when I joined the company in mid-2019, it was clear to me from customer conversations and market research that doors were largely commoditized and underpriced compared to consumer expectations. Innovation in the door space was primarily focused on style and design, while margin growth came primarily from cost management and productivity initiatives. Over the last two-and-a-half years, we've been on a mission to transform Masonite from a manufacturer of commoditized building products to a manufacturer and marketer of consumer durables of doors and door systems that solve life and living problems where we work and play. The M-Pwr Smart Doors is a great example. Our strategy was to begin closing the price value gap by implementing a significant price increase on our products effective January of 2020, followed by investments back into the business focusing on delivering reliable supply, driving specified demand, and winning at the last point of sale. As global pandemic was not originally part of our plan, and certainly the macro economic impacts of this phenomenon have resulted in some volatility quarter-to-quarter but overall, I'm very pleased with the financial results that our strategy has delivered over the past two years. Since 2019, net sales are up 19%, adjusted EBITDA is up 46%, adjusted EPS is up 123%, and return on invested capital is up 560 basis points. Our strategies put us on a new growth trajectory and we believe we have the momentum to follow this path through to achieving our Centennial Plan goals. Turning to Slide 7, I'd like to give an overview of some of the highlights from Q4. I'm pleased to report that we delivered year-on-year growth in both net sales and adjusted EBITDA. The 3% increase in net sales was driven by higher average unit price or AUP offset by volume declines caused primarily by the 53rd week in 2020. AUP was up year-over-year across all three segments as we continue to benefit from previously implemented pricing actions. Adjusted EBITDA margin in the quarter increased 190 basis points year-over-year as pricing actions and SG&A savings more than offset inflation and operational inefficiencies. Russ will discuss this in more detail in just a few minutes. Also in the quarter, we reported $83 million in pre-tax charges related to architectural goodwill impairment, and the annuitization of our Legacy U.S. pension plan to remove the liability from our balance sheet. With respect to business and operational highlights for the quarter, end market demand fundamentals remain generally healthy across our residential and commercial end markets, with several unpredictable manufacturing disruptions impacted our ability to efficiently operate in constrained capacity. Among these disruptions was the well-publicized winter spike in Omicron cases in both North America and Europe, which impacted our suppliers and customers as well as our own operations. In our plants worldwide, COVID-related absenteeism increased approximately 40% in the last three weeks of December versus the rest of the fourth quarter. You will note that we saw significant and unanticipated underperformance in our Architectural segments in Q4, resulting from a number of factors that increasingly constrained production. Russ will discuss some of this in more detail. But we're clearly disappointed with these results and we're evaluating additional actions to restore the business to profitability. Finally, I'm pleased to report that the capacity expansion and Mvantage process optimization and sourcing initiatives are moving forward to help lay the foundation for continued growth in 2022. All in all, this quarter was not as strong as we've planned. But I believe the issues are primarily transient in nature and that the fundamentals that have driven the success of our business over the past two years remain solid. Before I turn the call over Russ, I also wanted to highlight the announcement we made yesterday regarding our additional commitment to enhancing shareholder returns. The increased repurchase authorization and announcement plans for an accelerated share repurchase program reflect the confidence that the Board of Directors and management have in the growth potential for Masonite and the results we expect to see under our Doors That Do More strategy. With that, I'll turn the call over to Russ to provide more details on our financials. Russ? Russ Tiejema: Thanks, Howard and good morning, everyone. Turning to Slide 9, I'll provide an overview of our fourth quarter financial results. We reported net sales of $636 million, up 3% as compared to the fourth quarter of 2020. The growth was primarily due to a 14% increase in AUP which was up year-over-year across all three segments on favorable price. We also benefited 1% due to favorable foreign exchange. These increases were partially offset by base volume declines of 10%, as well as a 1% decrease from the sale of components and a 1% decrease from the impact of a divestiture. The year-over-year decline in volumes resulted largely from the absence of a 53rd week in 2021, as well as Omicron-related labor shortages, destocking among certain UK merchants and production challenges in the Architectural segment. Gross profit decreased 5% to $135 million and gross margin decreased 170 basis points year-over-year to 21.2%. As expected, our strong AUP growth was sufficient to more than offset inflation, which was slightly higher than anticipated in the quarter but factory and distribution inefficiencies related to labor constraints and volume declines contributed to the gross margin contraction. Selling, general and administration expenses were $66 million down 31% compared to the same period last year, primarily driven by lower incentive compensation, as well as the absence of charges related to the settlement of U.S. class action litigation that were included in the prior-year period. SG&A as a percentage of net sales fell 500 basis points from the prior-year to 10.3%. We recorded a net loss of $25 million in the quarter as compared to $27 million of net income in the prior-year, due to the combined impact of the goodwill impairment in the Architectural segment and the pension settlement charge that Howard mentioned. These two items represent approximately $83 million of discrete pre-tax charges in the quarter. Absent these items, net income would have increased almost 80% versus the prior year. Diluted earnings per share were a loss of $1.06 compared to earnings of $1.08 in the fourth quarter last year. Excluding the goodwill impairment and pension settlement charges, adjusted earnings per share increased 60% to $2.01 in the fourth quarter, compared to $1.26 in the fourth quarter of 2020. Adjusted EBITDA in the quarter increased 17% year-over-year to $95 million with adjusted EBITDA margin up 190 basis points to 15%. On the right-hand side of this slide, we have more detail on our adjusted EBITDA performance, which was largely driven by strong year-over-year gains in price as well as SG&A savings. Cost of goods sold remained elevated in the fourth quarter, with material cost up $47 million year-over-year. Raw material inflation, higher inbound freight costs and global supply chain disruptions all contributed to material costs which remain elevated in the fourth quarter, yielding year-on-year material cost inflation slightly higher than the mid-teens rate we had expected. We also incurred $16 million of higher factory related costs in the quarter due to increased wages and production inefficiencies caused by our limited ability to flex labor and overhead costs in line with short-term volume fluctuations. Distribution costs were $12 million higher year-on-year, primarily due to inflation on freight rates and packaging materials including wood pallets, as well as an impact from sub-optimized payload and freight lane mix. Let's turn to Slide 10 for our North American Residential segment results. Net sales increased 9% from the prior year to $495 million driven by higher AUP, which benefited from multiple price increases implemented throughout the year. Base volume declined 6% year-on-year principally due to a 53rd week in the prior year. Volume was also constrained somewhat by discrete weather events that led to temporary plant closings, as well as the Omicron-related spike in absenteeism that Howard noted. Despite the volume drop in Q4, full-year volume increased 5% driven by strong end market demand and previously announced new retail business. Adjusted EBITDA in the North American Residential segment was $88 million in the fourth quarter up 1% from the same period last year, with an adjusted EBITDA margin of 17.9% down 140 basis points. While we achieved favorable price costs in the quarter, this was more than offset by the impact of manufacturing and distribution inefficiencies presented by the challenging labor and supply chain environment. As Howard mentioned, we continue to look toward the future and invest for long-term growth. In the fourth quarter, we made significant progress on capacity expansion initiatives, such as our Fort Mill South Carolina facility. This new facility will fully leverage our Mvantage operating system and targeted automation. It's location in the southeast is ideally suited to serve at some of our strongest markets. We have other initiatives underway targeting exterior door production capacity. They're scheduled to come online in stages starting in Q2 of this year. Turning to Slide 11, and our Europe segment. Net sales of $74 million were down 11% year-on-year, or 6% excluding the impact of foreign exchange and a divestiture. A strong AUP growth was offset by volume headwinds. Base volumes declined 20% year-on-year. In addition to the impact of the 53rd week in the prior year, we witness destocking in the merchant channel coupled with widespread shortages of various building materials and trade labor, which affected builders' ability to complete projects. Partially offsetting the volume decline was a 14% increase from AUP. Adjusted EBITDA was $11 million in the fourth quarter down 37% year-over-year. Adjusted EBITDA margin was 14.4% down 570 basis points, driven by primarily by our limited ability to flex labor and overhead in line with the sharp volume decline we experienced in December. We are keeping a close eye on channel inventories and demand signals in the market and stand ready to manage costs accordingly. But we have already seen order rates for interior doors improve in late January and early February. Demand for exterior doors remained somewhat soft due in part to trade labor constraints. However, given the age of the housing stock in the UK, and a limited new construction in the market in recent years, we remain bullish on the long-term remodeling market for exterior door systems. Our new exterior door facility in Stoke-on-Trent will allow for continued growth. And in the fourth quarter the team successfully began a stage transition of production to the new site. Full transition of production remains on schedule to be completed by the end of Q2. Overall, we are pleased with the full-year results for our European segment which included a 12% increase in COVID recovery volume primarily in Q2 as well as a 12% increase in AUP. This strong AUP performance, along with the structural work the European has done -- European team has done to streamline the portfolio, drove a year-on-year adjusted EBITDA margin increase of 240 basis points to 18.1%. Moving to Slide 12, and the Architectural segment. Net sales decreased by 18% year-over-year in the quarter to $63 million driven by an 18% decrease in base volume and a 6% decline in component sales offset by a 6% increase in AUP. The base volume decline was largely a result of three main factors: material supply outages to third-party sourced components; the impact of spiking Omicron-related absenteeism, which affected production in this segment to an even greater degree than in our residential plants; and inefficiencies related to the ramp-up of new systems and equipment that are part of our plan to better leverage our network of door plans. These production constraints coupled with sustained order flow in the quarter drove up back orders and extended lead times. Adjusted EBITDA was a loss of $6 million in the fourth quarter. While we continue to realize favorable price, this was more than offset by the impact of lower production volume. The order book for this segment is still strong, and we are now seeing additional price come through from actions taken as recently as December for the quick ship business as well as price realization from actions later in 2021 that are now being realized on quoted projects. To address material supply constraints, additional vendors have been qualified and we should start receiving shipments from them in late Q1. An intense focus on production scheduling in January, has allowed us to ship 80% of our rack orders. As for the ramp up of systems and equipment, we have assigned additional continuous improvement resources to support and train local operators. As you may recall, part of our Architectural restructuring plan involves increasing production flexibility between plants, giving us the option to service customers out of multiple locations. We are making progress on this initiative, but needed greater temporary support resources to facilitate change management in light of elevated absenteeism and turnover. Given the spike in Omicron-related issues that carried over into January and the time required to solve some of these supply chain and production issues we are not expecting to see a return to profitability in the Architectural segment until the second quarter. Let's move to Slide 13 and summarize our full-year financial results for 2021. Net sales were up 15% compared to 2020, due to AUP growth of 11%, base volume growth of 2%, and a 2% benefit from foreign exchange. Gross profit of $612 million represents an increase of 7% over the prior year, while gross profit margin declined 180 basis points to 23.6% for the full-year. The benefit of a low double-digit increase in AUP was more than offset by the combined effects of material and logistics inflation, which increased steadily across the year, as well as incremental tariffs, rising manufacturing wages and manufacturing inefficiencies related to an extremely volatile supply chain and labor environment throughout 2021. Selling, general and administration expenses were $308 million down 16% compared to last year, primarily due to the absence of charges related to the settlement of U.S. class action litigation in the prior year period and lower incentive compensation, partially offset by higher personnel costs in the form of both wage and benefit inflation, and investment in resources to support growth initiatives. SG&A as a percentage of net sales fell to 430 basis points from the prior year to 11.9%. Net income was $95 million for the full-year, an increase of 37% from the prior year. Diluted earnings per share were $3.85 in 2021, up 39% from $2.77 last year. Adjusted earnings per share increased 33% to $8.16. Adjusted EBITDA increased 13% to $413 million for the full-year, while adjusted EBITDA margin contracted slightly to 15.9% On the right side of this slide, we provide a full-year adjusted EBITDA bridge, a relatively straightforward causal for 2021, volume growth and strong AUP partially offset by significant inflationary pressures and higher factory and distribution costs. Slide 14 summarizes our liquidity and cash flow performance. At year-end, our total available liquidity was $601 million inclusive of unrestricted cash and accounts receivable purchase agreement and our undrawn ABL facility. Net debt was $484 million, resulting in a net debt to adjusted EBITDA leverage ratio of 1.2x. Cash flow from operations was $156 million through the end of the fourth quarter, down from $321 million in 2020. We anticipated lower cash flows versus the prior year due to higher cash taxes and cash payments related to the settlement of U.S. class action litigation, as well as a rebuilding of working capital from abnormally low levels exiting 2020. This working capital rebuild was exacerbated by the impacts of inflation and elongated supply chains, strategic increases in raw material safety stocks, and lower accruals for variable compensation. Capital expenditures were approximately $87 million in 2021. We continue to repurchase our shares in the fourth quarter purchasing over 276,000 shares approximately $31 million at an average price of $111.51. As of February 21, we have repurchased an additional 388,000 shares of stock for $40 million in the first quarter of 2022. Yesterday, we announced that our Board of Directors has approved a new share repurchase program, allowing us to repurchase up to an additional $200 million of shares. This new authorization plus approximately $156 million currently available under our existing authorization approved in August 2021, provides us with over $350 million for future share repurchase activity. We also announced that we intend to enter into a $100 million accelerated share repurchase transaction during the first quarter of 2022. We believe our strong balance sheet and steady cash flows allow us to take advantage of what we see as an attractive investment opportunity in our own shares, while maintaining ample resources to pursue both organic and inorganic growth initiatives. On Slide 15, we have provided our consolidated full-year outlook for 2022. As backdrop, we believe the demand fundamentals will remain healthy across the markets we serve, particularly in the North American residential market, where existing for sale housing inventories remain historically low, prompting continued strong demand for new housing and higher home values which are supportive of repair and remodeling activity. While concerns about the impact of inflation and rising interest rates cannot be ignored, our current viewpoint is that baring any significant supply chain disruptions, housing starts and the RRR market will be flat to up slightly in 2022. In the UK, slight headwinds are beginning to materialize in the form of limited availability of tray slaver, which is impacting the construction markets broadly, as well as moderating consumer confidence. However, we remain constructive on the long-term fundamentals in that market due to the under-build of new housing which is persistent throughout the Brexit -- throughout Brexit and the COVID-19 pandemic. As for our commercial markets in the U.S., the ABI Index has moderated slightly in recent months, but has remained in positive territory since February of 2021, indicating the non-residential markets will likely continue to see some recovery in 2022. As an overlay to end market demand, we continue to monitor the health of supply chains and the labor market, as they may ultimately influence construction activity in the near-term. We ended the year with meaningful constraints on our own production related to the end of year spike in Omicron absenteeism. January deteriorated further. Thankfully, we saw these rates start to improve in February, but they remain elevated and put a governor on our ability to meet unconstrained demands thus far in Q1. In view of these factors, which potentially impact both demand and supply, we are assuming minimal volume growth in our consolidated 2022 outlook. In terms of pricing, we are assuming a nearly double-digit benefit at a consolidated level for the full-year comprised of both the carryover impact of mid-year pricing actions taken in 2021 and additional price increases implemented in early 2022. We expect the impact of these recent price actions to be somewhat muted in the first quarter, given timing of implementation and the impact of extended lead times on some of our products. In addition to volume and price, we assume our net sales will be impacted by a one point headwind from foreign exchange, and a one point headwind from the impact of the mid-year 2021 divestiture of our Czech business in Europe segment. Considering all of these factors, we expect net sales growth of 6% to 10% versus 2021 or 7% to 11% excluding foreign exchange. With respect to adjusted EBITDA drivers in 2022, we anticipate that inflation will remain a substantial headwind. We assume our raw materials costs will remain elevated and yield an annual inflation rate in the low to mid-teens, with year-on-year increases heavily weighted to the first half given the trajectory of inflation across 2021. Inflation on wages and benefits, as well as on logistics are expected to come in at mid-single-digits. And finally, we would expect SG&A to grow year-over-year roughly in line with net sales growth, as we also incur wage inflation that are somewhat higher than historical norms, and continue to invest in resources important to deliver growth and improved operational capability. Based on this cost overlay to our net sales outlook, we expect adjusted EBITDA to be in the range of $445 million to $475 million. Taking into account the price and inflation dynamics I previously mentioned, quarterly comps for adjusted EBITDA margin are likely to be particularly challenging in Q1 given the strong price and much lower relative inflation we saw in the first quarter of 2021. We're expecting margins to be down year-over-year in Q1, approach carrying Q2, and then approved in the second half with year-on-year margin improvement for the full-year. We expect that adjusted earnings per share in 2022 will be in the range of $9.10 to $10.05 based on an assumed tax rate of approximately 22.5% and an average diluted share count of approximately 24.5 million. This share count includes the repurchases made through February 21, 2022, but does not consider the impact of our planned accelerated share repurchase program, or other repurchases that may be conducted throughout the year under the remaining authorization. We expect cash taxes in 2022 to range from $60 million to $70 million and for capital expenditures to increase to between $100 million and $120 million reflecting our focus on strategic investments in capacity, service and reliability, health and safety and product innovation. On the basis of these assumptions for adjusted EBITDA and key cash flow drivers, we anticipate free cash flow of $150 million to $180 million for 2022. With that, I'll turn the call back to Howard for closing comments. Howard Heckes: Thanks, Russ. To summarize, we're pleased to have delivered double-digit sales and adjusted EBITDA growth in 2021 on top of what was already an extraordinary year of growth in 2020. The team navigated numerous challenges with perseverance and creativity this year. Well, we have some carryover issues that we need to address in the Architectural segment specifically, the investments we have been making in capacity, productivity, and new product innovation across all of our business segments leave us enthusiastic about our prospects as we enter 2022. A tight supply of housing stock and rising home values in North America are supporting both the new construction and repair and remodel demand and could provide upside for volumes in 2022. Margin growth will be a priority for us this year and we will be focused on cost management, improving our mix and continuing to capture fair value for our products. At the same time, we will continue to invest in our Doors That Do More strategy to further grow the company and help us achieve our ambitious 2025 Centennial Planning goals. For the past two years, we've been faced with plenty of macroeconomic volatility, and yet our team has found a way to focus on what we are able to control and generate results. So well, no one can say with certainty what's in store for us in 2022, I'm confident in our ability to step-up and deliver another year of continued momentum and exceptional growth. And with that, I'd like to open the call for questions. Operator? Operator: Thank you, Mr. Heckes. . The first question comes from the line of Mike Dahl with RBC Capital. Please go ahead. Chris Kalata: Hi. This is actually Chris Kalata on for Mike. Thanks for taking my question. Howard Heckes: Good morning, Chris. Chris Kalata: Just touching on -- good morning. Just touching on the margin outlook for this year obviously, you guys are putting through a ton of price double-digit increases this year, it should be a substantial margin tailwind but it doesn't seem that for the full-year, you guys are modeling significant margin tailwind off that, I mean understanding that raw materials are up a lot and labor and logistics are up but you would think the dropdown still be more meaningful. Do you think we have one meaningful earnings tailwind for you -- for you guys? So I guess is there something that we're not appreciating in terms of -- on the margin front in terms of price costs or some other levers that that's impactful and maybe particularly the 1Q drag, is that something that, what's the potential kind of quantification around that? Thank you. Russ Tiejema: Yes, Chris, it's Russ. Let me take a shot at that. And maybe I'll start with the question around Q1, hard to remember that in the prior year, we had much lower relative raw material inflation in both -- in the first quarter, it only ran at circa 7% before it really started to ramp up in Q2 and Q3 in particular. We also entered last year with an outsized benefit from price that we implemented pretty quickly in the quarter. And so I would characterize the relative price costs tailwind in the first quarter last year, as better than we expect in the first quarter this coming year. And so that's really what's driving that margin to be down and we believe year-on-year, probably more in line first quarter what we saw this fourth quarter, so flattish sequentially before we get to parody year-on-year, as I said, during my remarks in the second quarter, and then you really start to see the growth in the second half of the year, because we'll have a much more moderate year-on-year comp with respect to raw material inflation. Now, if you just step back and look at our margin guide or our EBITDA guidance for the full-year and what that applies for margins. Here's how I would unpack it. We start off with base of 15.9% actual in 2021. If you look at price cost and for this comparison, I'm going to talk about cost just raws, say raw material. We talked about price on a consolidated level being nearly double-digits, what's for illustrative sake, say that's 9% for the overall company. And then if you look at material inflation first unpack our COGS about $1.9 billion in cost of goods sold in 2021. Little over half of that is material, so call that a billion. And we said mid-teens, low-to-mid teens material inflation again next year, let's call that 14%. So our material cost equates to about 40% of our sales against that low-to-mid teens inflation rate on raw materials, you get roughly a six percentage point as a percent of sales headwind on raws. So price cost right there is let's call that net three points plus. The offsets then are inflation that we're seeing everywhere else in the business. I mentioned during my prepared remarks, inflation that we're seeing in distribution, and in labor, that inflation we're seeing across really all parts of our factory footprints, including some of the overhead accounts, utilities are up, equipment, rental, et cetera, et cetera. So you apply a mid-single digit inflation rate against the balance of our cost of goods sold that served another point and a half for the headwind. And then the balance I'd attribute to SG&A growing, as we said, with the rate of sales, we need to replenish for incentive comp, which paid out at below targets in 2021. And we're continuing to invest in growth initiatives. And we're seeing higher relative inflation for professional staff wages and benefits. So all in all, call that roughly a point. That's how I would walk you from the 59% that we reported to circa 16.5% in 2022. Chris Kalata: Got it. Appreciate the color there. And then just moving on to the volume outlook I guess similar line of questioning, how should we think about, the relative impact of a weaker 1Q? And kind of netting that out what would you assume a more normalized volume growth outlook for this year would look like baring any incremental supply chain headwinds? Howard Heckes: Yes, Chris, this is Howard. You got to think about our segments. We think about our segments a little bit differently. We think that the macros generally are very favorable in the residential segment. We take -- our business just as a reminder is about 55% repair, remodel, and 45% new construction. We think that both of those are likely to be at least flat and maybe help a little bit. And so we think the macros are generally positive. We also think doors are going to over index. So all the things we've been talking about over the last several quarters, regarding people staying at home more often and wanting a private space, or an office or in down and people moving out of the urban core to the suburban areas, because they don't necessarily have to commute into work every day leads to bigger homes, more doors. So macro was good. We think volume in a residential as a result should be good and could be upside to our outlook. The flip side of that is in the UK and Architectural where we think there could be more challenges from a volume perspective. Russ mentioned that, we've had a fourth quarter volume challenge in the UK. Now interior door business has picked up a little bit exterior remains a little soft. And obviously trade, labor and other building supplies have been short there and have elongated the build cycle a little bit. So we're cautious on our outlook for volume in the UK. And then, Architectural we as a business that we need to fix. And that's going to be focused on our internal production capability and whatnot. But we're not finding any volume growth there. Generally, our biggest segments our most profitable segment NA res. We feel good about the potential there. I think there could be some upside to outlook with volumes in North America residential. Chris Kalata: Got it. In terms of the expected drag for 1Q, any of those cadence from there? Howard Heckes: Yes, I think that the first quarter we had a tough January; we talked about Omicron and a 40% increase in Omicron cases at the end of December that actually spikes at like 250% in January. Now the good news is back to sort of where we were stable through the fourth quarter, the rest of the fourth quarter. But there was a tough start. January was tough start. And so February has picked back up, but the comps will be a little tougher in the first quarter. Operator: Thank you. The next question comes from the line of Josh Chan with Bard. Please go ahead. Josh Chan: Hi, good morning, everyone. Thanks for taking my questions. Howard Heckes: Good morning, Josh. Josh Chan: Good morning. Maybe just to start off with the fire line of questioning about the volumes I guess how much do you think that disruptions impacted your volumes in Q4 within any resi? And then knowing that January was a tough start, how quickly do you think production rates can really normalize from all of the disruptions in the resi business? Howard Heckes: Yes, let me talk about resi specifically Josh. Volumes were down 6% in the fourth quarter of which the vast majority was the impact of 53rd week, like 5% of the 6%. So that leaves 1% volume decline. We can attribute that essentially to two primary things. One is the spike in Omicron, which hurt our capacity. And then we had what I'm calling unplanned manufacturing disruptions. Specifically, we have two plants in British Columbia. And you might remember the dramatic flooding they had in the end of November and early December, both of those plants were shut down for an extended period of time, because people couldn't get the work. Unfortunately, we didn't have any long-term damage in either of those facilities, but they were shut down. And then we had a tornado event in our factory in Tennessee, which also created some downtime. And so between those issues, the Omicron spike as well as those unplanned weather events our volume would have been up. Now we had a pretty big spike, as I said that Omicron absenteeism continued, and in fact, exacerbated much further into January. But we're back to normal levels now. The current news as we look about, this is a really a quarter-to-quarter game. We're bringing capacity online; our Fort Mill facility will be making doors in the second quarter. We're working on some capacity improvement initiatives in our exterior door space. And so we're very bullish about volume going forward and our ability to support that volume in the residential business. Josh Chan: That's great color there. Yes, thanks, Howard. And then I guess my follow-up question is on inflation. I guess, looking at the chart that Russ gives with the different components of inflation, do you think on the -- in dollar terms, if you add a material factor in distribution, that that inflation sort of peaked in Q4? And I guess, first that and then kind of what are you seeing in terms of sequential, raw material costs, any reliefs on that front? Thanks for the color there. Russ Tiejema: Yes, Josh, it's Russ. Maybe let's unpack that a little bit. I'll talk about raw material first of all. If you think about raw material just in year-on-year comps, it really peaked in the third quarter. On a year-on-year inflation basis, it moderated in fourth quarter, but frankly, was still a little bit higher than we expected. We would have anticipated raw material inflation in that call it mid-to-high teens, 16% it came in about a point higher than that in the fourth quarter. And as we look forward into 2022 those inflationary headwinds don't abate meaningfully, in part because our steel contracts reset. So we're seeing some outsized inflation in the metaphor basket. We're still seeing very tight supply chains with respect to wood and chemical. So those trends call it low double-digit inflation will probably continue going forward. If you think about the inflationary trends in the rest of the business, we'll continue to see inflation in wages in the factories; you would typically see our annual merit cycle kick in middle of the year. We manage that on a plant-by-plant basis based on local conditions. And in some cases, we've accelerated some of our merits and we'll see a little bit more inflation as we go-forward. So your question was around in terms of peaking? Yes, I think we certainly peaked on the material side, but we're not expecting in fact, the inflation rates are going to stay consistent in 2022 and 2021. And we see a little bit more inflation ahead of us on the factory side, particularly in wages. Does that help? Josh Chan: Yes, that's good color. Thanks Russ and good luck for rest of 2022. Howard Heckes: Thanks, Josh. Russ Tiejema: Thanks, Josh. Operator: Thank you. The next question comes from the line of Mike Rehaut with JPMorgan. Please go ahead. Doug Wardlaw: Hi, good morning, Doug Wardlaw on for Mike. You guys mentioned making progress in new product development and that was a big part of your strategy moving forward. Can you dive further into those new products and as well as kind of talk about how material constraints could impact the potential timeline of those launches? Howard Heckes: Sure. It is an important part of our strategy and we believe we have the right strategy to deliver on our Centennial Plans. That strategy just to remind people is delivering consistent reliable supply very important and fundamental to what we do. Driving specified demand with doors to do more on new product innovation and winning at the last point of sale and down channel marketing with dealers and others that sell our product. That specified demand is critical because over the years stores have become a bit commoditized. And we believe it's important for consumers to want and specify we're architects, building owners makes an eye product. So we're trying to differentiate our products, the M-Pwr Doors, I think a perfect example of that. We believe that 36% of homes are now connected are smart homes. And there's absolutely no reason that the front door should not be part of that environment. And so we've integrated video doorbell and electronic locks and lighting with power, because batteries happen to be very big dissatisfier in that case, through the front door control by proprietary app. That has fantastic mix margin implications for us as customers' trade up to these differentiated door systems. That's one example; we launched a product called DuraStyle this year, which is a wood door that has 22 times better water penetration, so wood exposed to the elements can be difficult, as you know. And we have a proprietary sealant application, sealant application process, which makes that door almost impenetrable from water. And so that's important, particularly around the lights, the glass. And so that's a product we introduced. We introduced in our Architectural segment a product we call the Thunder, which is an attack resistant door targeted at the education vertical, which deters or save seconds if you will, in a active shooter events. And that's very important. So we're trying to introduce products that literally do more. Now it's important to also note, Doug, that there are doors that do a little more. And we've made solid core doors for a long time for example, but hollow core door is the most standard in homebuilding. And we're trying to encourage homeowners and builders that there's life and living benefits to solid core doors 70% more privacy, for example, from a solid core door. And we've seen, we have advertised that down channel, we talked about some decisions, we talked about people being at home, and we've dramatically over indexed in selling solid core doors, the growth of solid core much higher than the growth of our standard doors. And so all those things are driving what we see as innovation in the space. And I think we're just getting started. That's what's really going to lead to our Centennial Plan goals of $4 billion and 20% EBITDA returns. Doug Wardlaw: Thanks. And just a follow-up on all of that thanks again. Do you view any of the current material constraints potentially impacting some of these new products moving forward? Howard Heckes: It's a great question. This power connected door uses chips, and there's obviously these chips are short. And so the good news is, our supply chain team has secured plenty of chips. But the response to this has been very, very encouraging. And we're working hard to secure more products. And we could be a bit constrained in chips in M-Pwr by the end of the year. But we're working through that. Generally, I'm really proud of our supply chain team that they've differentiated; they've tried to add alternative suppliers. And we've been able to sort of prove that we can pivot and deal with the significant volatility of supply chain. So far, we're covered. But we work at it every day. Operator: Thank you. The next question comes from the line of Jay McCanless with Wedbush. Please go ahead. Jay McCanless: Thanks for taking my questions. So the first question I had, any update on alternative sourcing for lumber, and any update on the tariff situation? Howard Heckes: I'll take that one, Jay. Our supply chain team for the last two years has been working on alternative sources and has done a really nice job. Unfortunately, the demand requirements as well as sort of this moving and rolling COVID outages across the globe have caused us to try to, we might find an alternative supplier in South America or an alternative supplier in North America from somebody in Asia and then due to COVID spikes or this continued demand, we have to go back and buy from the original supplier maybe in Asia and subject ourselves to the tariffs that we were trying to avoid. And so our tariffs were higher than we had planned throughout the year for that reason not because we couldn't find alternative suppliers but because we were forced to use some of the suppliers that we have found alternatives for due to demand or other outages. So that work continues. I think the team has done a remarkable job in keeping us in supply. And we have a lot more choices today than we might have had two years ago, relative to our supply base. But we're going to keep working on that. Jay McCanless: And then my second question, I guess could you guys talk a little bit more about these destocking efforts in the Europe segment? And is that a temporary thing? Is it going to be more permanent? And I think it's kind of like it was more on the new construction side. But it just seems like your tone around Europe and what's going to unfold this year, maybe a little less positive than what you guys talked about last quarter? Howard Heckes: First of all, let me start by saying that European team has done a remarkable job in growing margins, margins up 280 basis points last year, and that's due to continued mix as well as the portfolio work they've done. So a really nice business, the destocking is absolutely transitory, it was in one particular channel, the merchant channel, their inventories have grown to, we think about 12 weeks and typically, they're sort of closer to six to eight weeks. And as the building cycle elongated due to labor challenges in the building, and in the trades, these merchants destocked down to, we think closer to eight or nine weeks. So still maybe a little bit high. But once they get back to normal run rates that should be fine. So there's a little more uncertainty in Europe relative to Brexit and 90,000 contractors have left the trade according to our data. And so there's some things that some more uncertainty in that segment, however our base business is very strong, we're adding capacity in the Exterior segment, we've had bought that business in 2014, consistently growing that business, sort of 15% to 20%. And that capacity will come online later in the first quarter, early second quarter. And long-term, that's fantastic business, these are transport problems. Russ Tiejema: Yes and Jay it's Russ. I might just offer a little bit of additional color in what we've seen in the supply chain there. There are certain building materials categories upstream from us, where we've seen a lot of shortages. And by the way, I should just remind everyone in the Europe segment with the exception of component sales that we make to other markets it's exclusively the UK. And in the UK in particular, there have been shortages in some of the upstream building materials categories, like roofing tiles, and bricks and blocks. So we've seen that temporarily, we believe push out the build cycle in the new build channel in the UK. And that's what created the inventory, a situation where some of our merchant channels showed clear evidence of needing to pullback inventory in order to match that elongated build cycle. And in some cases, protect some of their inventory dollars for buffer stocks in those other material categories. So as Howard said, we clearly see this as a transitory event. And in fact, we have seen order rates begin to recover in the UK. So we're very bullish on this market long-term. Operator: Thank you. The next question comes from the line of Reuben Garner with The Benchmark Company. Please go ahead. Reuben Garner: So, I guess first the clarification on the pricing embedded in the guidance. So is your outlook, I guess just inclusive of what's already been announced so far this year, and I guess maybe this is a difficult question to answer. But would it be likely that we will see more pricing actions later this year, even if we don't have further inflation just to catch-up on some of the margin pressure that you've seen over the last year with all the inflation? Russ Tiejema: Hey, Reuben, it's Russ, I'll take that. And obviously with our standard providers that we don't talk about pricing on a prospective basis. If you look at our guide for the year, it comprehends first and foremost, the inflationary factors that I outlined both in my remarks and some of the prior Q&A, as well as pricing that's already in market and that would include carryover benefits from pricing that we took across all sectors in 2021 as well as incremental pricing actions that were obviously going to effect here in the first quarter for the North American Resi business. So what is embedded in our guide is essentially everything that has been announced and implemented in markets. Now that all said as you know, our key focus is maintaining a favorable price cost relationship and being paid a fair value for our products. So just as we demonstrated in 2021, when external factors and inflationary pressures dictated that we'd be more nimble, and we go to the market more frequently on price, we would stand ready to deal with the inflationary environment whatever comes. Howard Heckes: And I'd like to add to that, Reuben. This is Howard. In the midpoint of our guide for 2022 implies sort of a mid-16 EBITDA margin, we outlined a plan, a Centennial Plan to drive a 20% EBITDA margins by 2025. We had a one-year setback due to rapid inflation that was at a price. But we're going to be right back on track in 2022 to get to that 20% goal in our Centennial Plan. So really proud of the margin performance in light of the very unusual year and I think we'll be right back on track in 2022. Reuben Garner: Thanks for that, guys. And just a quick follow-up, you still feel that maybe there's the value gap between what's being charged for a door and what consumers find the doors to be worth, correct? Howard Heckes: Yes, we do Reuben; it's not only a value gap, just a pure-play value gap. But here we talk about this difference in solid and hollow and making life and living actually better. The difference in price between a solid core door and hollow core door is different, particularly when you think about it in context with the value of the home, absolutely insignificant. And yet the privacy and the sound, the benefit that you get is significant. And so the more we can convince homeowners and builders, that those six or seven really important doors in the house, bedrooms, bathrooms, laundry room, for example can create a much better living environment, there's a massive trade-up opportunity as well. So not only do we think that there's additional value, just comparing the same door, but the trade-up to help solve some of these life and living problems is significant. Reuben Garner: Great. I'm going to sneak one more in if I could, given the focus on new products and innovation and that sort of thing, is there any way for us to kind of track the progress of this, is there maybe a new product metric, or targets for what percentage of revenue, these initiatives can make up over a period of time. And if that was in Investor Day, apologies, I don't remember that. Howard Heckes: We tracked at a macro level on Investor Day about the importance of the Doors That Do More strategy and the fact that we thought that that was going to contribute. So there's a billion dollar gap between sort of our organic business and our aspirational goal of $4 billion and some of that's going to be M&A and some of that's going to be new product. So we talked at a macro level. But when we talk about AUP, historically most of that benefit has been price. We would expect that more that becomes mix, as we launch new products. And so that's one easy way that you'll be able to see some of the progress that we're making there. Operator: Thank you. The next question comes from the line of Noah Merkousko with Stephens Inc. Please go ahead. Noah Merkousko: So first, I wanted to dig in a little bit on your volume expectations, at least in North America this year, it sounds like flat to be maybe up slightly. And I'm trying to think through sort of the timing starts versus completions, when we see starts, maybe pull back a little bit. It's well publicized that there's a massive backlog in industry with, we haven't seen a lot of completions or have given what we've seen some starts. So I guess, if we do see starts move down a little bit lower that you might be able to still see volume growth, just given the amount of completions yet to materialize? Russ Tiejema: Yes, Noah it's Russ. I think that's generally a fair statement. Here's how I would think about the drivers evolve. We touched on this a little bit earlier in the call, but if you unpack the dynamics happening across the three segments, I think Howard outlined this is that we feel very good about the macros generally of our housing in North America. So if you look at our overall revenue guide for next year, it's premise primarily on price is very little volume embedded in that. But the area for upside volume is indeed NA Res business. We think that there are some headwinds in Europe that are going to present some volume challenges in the UK business in particular. And we're simply not planning for any volume growth in Architectural until we can see a more steady trend of operational stability in that business. So it really comes down to what your volume assumptions are for NA Res. And we have some very modest growth in there. But we believe that there is upside volume opportunity, if we see that the housing starts, and more importantly, the supply chain dynamics stabilize in the year. And if you look at the cadence across the year, you would anticipate that volume will be down slightly in the first quarter. On the heels of some of these operational challenges and absenteeism spikes, as Howard noted, actually increased into January before depleting now so far this month in February. So we're managing through the supply chain issues. And I would second Howard's comments earlier, I think our operations and supply chain team have done a really, really nice job of managing what's been a really volatile environment. We'll see that volume stabilization, and operational stability improve as we get into the second quarter and probably the second half of the year. Howard Heckes: And just to add a minute, Noah. That's why our strategy is so important. When we talk about specified demand, we expect to be a growth company in any kind of macro environment, right? We happen to think the macros are good, but they won't always be. At some point in the future things will trend down. And as we can drive specified demand because customers say I really want that powered and connected door that makes sense for me, then Masonite can be a growth company in any kind of environment. And that's really our goal. Noah Merkousko: Thanks, that makes sense. And then for my follow-up it sounds like you've had a successful launch with the M-Pwr door system. I know you'll have some other higher priced products that you'll -- you did rolled out or will be rolling out here shortly. And I guess, is there any price mix benefit from that baked into the guidance? Or any way you can quantify that for this year? And then I guess, is it safe to assume that that mix benefit will accelerate in 2023 just based on, products that you might have in the pipeline today? Howard Heckes: Yes, I think the answer to the second part of the question is yes, certainly, and as far as the guide goes in 2022, very modest. The adoption curve, this is a dramatically different product. It's -- and the adoption curve is going to take a little while now. I happen to have an executive in purchasing for one of our big customers who saw it and said something like; this is going to be standard in every home. Why wouldn't people want it? No, I hope he's right. I tend to believe that too. But that's going to take some time, right? This is different. And we believe the guidance is, as Russ said, very modest, yes throughout 2023, 2024, and 2025, our Centennial Plan, it becomes important to our goals. Operator: Thank you. The next question comes from the line of Steven Ramsey with Thompson Research Group. Please go ahead. Steven Ramsey: Thank you. On European Q4 headwinds, you've discussed merchant destocking also the product shortages, those moderate, kind of fully in the first half? Or is there visibility to how that potentially gets better as the year moves along? Russ Tiejema: Yes, Steven, it's Russ. I'll take a shot at that. What we saw in the UK business, in particular in the fourth quarter, is that the volume declines were really exacerbated in the month of December. And that's where we saw this clear trend of destocking on the part of the merchant channel. And as I mentioned a moment ago, we saw that trend reverse somewhat in January, and order flow starts to return on the interior door side of the business. And just as a reminder if you look at interior versus entry door business for us in the UK we are primarily serving the new build channel with our interior products and the repair and remodel channel with our exterior door systems. And we've seen a little bit of softness in both of those given concerns around consumer confidence and this issue with upstream building materials in particular. So we are starting to see some nice recovery on the interior door side. So that leaves us again firmly in the camp, that this is a transitory inventory management dynamic that we're seeing in the channel. The -- I just remind everyone, the long-term fundamentals for housing in UK are fundamentally very strong given that we have been underbuilt in that market really beginning with Brexit and now all the way through COVID-19. So while supply chains have been fragile, and they've had spot outages, a number of different building products, materials that have elongated this build cycle and hurt the builders ability to actually put some housing stock into the market, there's demand for it. And we think that demand will continue and that's why we're positioning the business for continued growth in the future. Steven Ramsey: Okay, helpful. And then further thoughts on the Architectural segment, the loss in Q1, still there, but maybe more modest than Q4? Can you discuss the ramp to what the full-year could look like? And then is 2023 going to hit the pre-issues margin levels, or do you think you need greater volumes, or is that kind of purely internal production issues being resolved in Architectural? Howard Heckes: Yes, it's really a combination of both, Steven. Volumes are important, obviously, because we have certain fixed costs. And that's really what served us since the global pandemic. But let's remember, this is a good business that needs work. Historically, it's been a three, it is $300 million business approximately, and made $40 million in 2020. And so there's real potential there, when volumes dropped off that expose some of the inflexibility of our network, which we're trying to fix. In the fourth quarter, we got hurt really by three things. This labor shortage issue we've talked about, as most people have relative to the Omicron spike; we've had a nagging material challenge on one particular material that's made it difficult to produce enough doors but we're working through. And then this Phase 3 of our plant, remember, we closed the Mill plant last year; we closed plant. Phase 3 was the -- flexibility of our flush door plants require some new equipment and systems to be installed. And both of those well installed successfully, there were some incremental learning curves and some labor that were hired sort of ahead of the production that increased the costs. And so the fourth quarter was absolutely disappointing to us. Now we're working through those challenges, trying to get that volume back or demand continues to be pretty solid. So that's fine. We would expect that we're going to work through those in the first quarter and as Russ said our return to profitability in the second quarter. And that curve then should improve and increase to historical levels would be our objective. So this is a nice business that can add some incremental EBITDA for us on a consolidated basis. Operator: Thank you. Ladies and gentlemen, we have reached the end of question-and-answer session. And I would like to turn the call back to Mr. Howard Heckes for closing remarks. Thank you. Howard Heckes: Thank you, Operator. And thank you all for joining us today. We appreciate your interest and your continued support. And this concludes our call. Operator, please provide replay instructions. Operator: Thank you for joining Masonite's fourth quarter and full-year 2021 earnings conference call. This conference has been recorded. The replay may be accessed until March 8. To access the replay, please dial (877) 660-6853 in the United States or (201) 612-7415 outside the United States and you can enter the conference ID 13725958. Thank you for your time. Thank you. You can disconnect your lines now.DOOR Ratings Summary
DOOR Quant Ranking
Related Analysis
Masonite International's Rating Slashed at Stifel
Following Masonite International (NYSE:DOOR) fourth-quarter earnings release, Stifel analysts downgraded the company from Buy to Hold, while raising the price target to $133.00 from $119.00. Despite Masonite's earnings aligning with expectations and a positive surprise in North American business performance, ongoing weaknesses in Europe and the Architectural sector led to the downgrade.
Elliott highlighted the ongoing acquisition of Masonite by Owens Corning, expected to close in mid-2024, and emphasized the importance of mergers and acquisitions in the building products industry for achieving scale. The adjustment in Masonite's rating reflects the anticipated successful close of this acquisition without regulatory issues.
Masonite International Announces Restructuring Changes
Wedbush updated its estimates on Masonite International Corporation (NYSE:DOOR) for restructuring moves. The company announced on Dec 29 that it will incur one-time restructuring charges during Q4/22 that will result in incremental cost savings in future years. Masonite indicated in the Q3/22 conference call that it would be looking for cost-saving opportunities, especially in the Europe segment.
Management did not indicate in the release where the cost cuts were focused, and the analysts will look for more color on the Q4/22 conference call, presumably mid to late February 2023.
The analysts maintained their fiscal 2022 AEBITDA estimate of $456 million and lowered their 2022 GAAP EPS to $10.09 from $10.74. Their 2023/2024 AEBITDA moved to $481/$516 million which represents cost savings of approximately $15 million pretax in 2023 and $20 million pretax in 2024. The analysts maintained their Outperform rating and $115 price target on the company’s shares.
Masonite International Announces Restructuring Changes
Wedbush updated its estimates on Masonite International Corporation (NYSE:DOOR) for restructuring moves. The company announced on Dec 29 that it will incur one-time restructuring charges during Q4/22 that will result in incremental cost savings in future years. Masonite indicated in the Q3/22 conference call that it would be looking for cost-saving opportunities, especially in the Europe segment.
Management did not indicate in the release where the cost cuts were focused, and the analysts will look for more color on the Q4/22 conference call, presumably mid to late February 2023.
The analysts maintained their fiscal 2022 AEBITDA estimate of $456 million and lowered their 2022 GAAP EPS to $10.09 from $10.74. Their 2023/2024 AEBITDA moved to $481/$516 million which represents cost savings of approximately $15 million pretax in 2023 and $20 million pretax in 2024. The analysts maintained their Outperform rating and $115 price target on the company’s shares.
