MasterBrand (MBC) Q2 2026 earnings call transcript

I would now like to turn the call over to Henry Harrison Senior Director of Corporate Financial Planning and Analysis. Thank you and good afternoon. We appreciate you joining us for today's call. With me on the call today are Dave Banyard, President Chief Executive Officer of Master Brand and Andy Simon, Executive Vice President Chief Financial Officer. We should press the release early this afternoon disclosing our second quarter 2026 financial results. This document is available on the investor section of our website at masterbrand. com. I'd like to remind you that this call will include forward-looking statements and either are prepared remarks or the associated question and answer session. These forward-looking statements are based on current expectations and market outlooks.

They're 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 entitled forward-looking statements and the press release we issue today. More information about risk can be found in our filings with the Securities and Exchange Commission including under the heading risk factors in our full year 2025 form 10k and updated as necessary in our subsequent 2026 quarantine queues which are available at SEC. gov and at masterbrand. com.

The forward-looking statements and 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. Today's discussion includes certain non-GAP financial measures. Please refer to the reconciliation tables which are in the press release issued earlier this afternoon and 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 second-quarter 2026 financial results from Andy along with our second-half 2026 financial outlook. Finally Dave will make some closing remarks before we host a question and answer session.

With that we turn the call over to Dave.

Thank you and good afternoon everyone we appreciate you joining us for today's call. The second quarter marked an important milestone for masterbrand. On May 28th we completed our merger with American Woodmark bringing together two industry leaders to create the most comprehensive portfolio of trusted cabinet brands in North America. I want to start by welcoming our new associates from American Woodmark and thanking our teams for staying focused on executing and delivering for our customers through the close. This is our first earnings call as a combined company and the commitment we have seen across the organization in these first weeks has only strengthened our conviction in what this combination can deliver. Today I'll cover our second quarter results the state of our brand markets and the combined company's path forward.

Now turning to the quarter we generated net sales of eight hundred and fifteen million dollars in the quarter which includes a hundred and twenty six million dollars of American Woodmark net sales from the closed data. Legacy master brand net sales were six hundred and ninety million dollars in line with our guidance range following a mid to high single digit year-over-year market decline slightly offset by favorable net average selling price due to the flow through of tariff pricing.

Adjusted even thought for the quarter was sixty three million dollars including four million dollars of partial period contribution from American Woodmark and adjusted even though margin was seven point seven percent. Legacy master brand adjusted even though was fifty eight million dollars and adjusted even though margin was eight point four percent. The lower margin was primarily due to market driven volume declines and the related unfavorable fixed cost leverage unfavorable product mix and material labor and freight inflation partially offset by the flow through of tariff mitigation our continuous improvement efforts and previously announced cost action. For the quarter pre-capped flow was a hundred and twenty nine million dollars compared to sixty seven million dollars in the same period last year primarily reflecting improved working capital.

This quarter we are introducing second half twenty twenty six outlook for the combined company. Now that the merger is complete and integration planning is converted to execution we have better visibility into the combined business than earlier this year and have grown more confident in our ability to navigate the dynamic trade environment. The introduction of the second half guide reflects our improved line of sight and confidence in the actions and plans underway. It's not a change in our view of the market. Andy will walk you through the details shortly. Now briefly review our end markets in the quarter. During the second quarter as anticipated the broader single family new construction markets soften further down mid to high single digits driven by ongoing pressures on completions and persistent affordability challenges.

With inflation picking back up the higher for longer outlook on interest rates continues to weigh on both builders and buyers. Builder confidence remains near its weakest level since the housing crisis era and more than sixty percent of builders are offering sales incentives. Against that backdrop our new construction business declined at low single digits excluding the impact of partial period American Woodmark sales in the quarter continuing to outperform the broader market.

Shifting to the repair and remodel markets served by our dealer and retail customers we saw continued softness in demand consistent with recent quarters as end markets remained impacted by affordability pressure low existing home turnover and historically weak consumer sentiment. Consumers continue to defer large discretionary projects and the trade down trend we've been seeing persisted as consumers opted for value products and paired back features in made order categories a key driver of this quarter's next pressure.

Excluding the partial period contribution for American Woodmark our repair and remodel business decline mid to high single digits in line with the broader market and our expectations. Lared on top of these market dynamics the ongoing conflict in the Middle East continues to introduce added consumer uncertainty and broader market volatility that remain difficult the size of the stage including rising fuel costs that are adding further pressure to an already cautious consumer. Taken together our view of the 2026 addressable market down mid single digits is directionally unchanged from our previous view and our outlook assumes no improvement in demand conditions this year with the broader market expected to begin its recovery in 2027.

Now turning to the merger and why we're so excited about the combined company. As we said at the announcement this combination brings together two customer-centric platforms with highly complementary strengths strong broad portfolios of trusted cadence brands and streamline low-cost manufacturing profiles. Both are long established American companies with a vast majority of manufacturing operations based in the United States a differentiator we believe matters more than ever in today's trade environment.

We believe this combination will ultimately enable us to drive growth and improve margins beyond what either company could achieve on its own.

New construction in the home centers have been the two most resilient segments of the market through this downturn and we believe they hold significant potential when the eventual recovery comes. Together master brand and American Woodmark can build the most efficient cost- effective model for serving these large channels. In new construction the combination gives us the geographic reach with an industry leading model to better meet the customer where they are whether direct or through distribution. The combination also strengthens our position in key new construction markets and enhances our product portfolio.

We plan to apply the same discipline approach to the combined business that has helped legacy master brand outperform the new construction market and we're confident in our ability to earn back a share American Woodmark has seeded in this channel prior to the merger.

In the home centers the avid scale across our combined network enables better inventory management more product options and an operating footprint that is well-positioned to bring the high service levels our partners expect.

In the dealer channel the clearest opportunities cross-selling American Woodmarks products in the master brand's much larger dealer population allowing us to meet customers and consumers at every price point with the best value quality and design. Realizing the full sales potential of this channel will take more time given current market conditions. It also requires softly organizing a combined product portfolio and brand package including meaningful brand and price point white space for a highly fragmented market. We expect this work will simplify our offering for the channel over time. Across new construction home centers and dealer these cross-selling white space opportunities were not built into our original deal model and we view them as upside to the transaction economics.

Stepping back the strategic logic of this combination comes down to two factors scale and flexibility. Our scale reduces inefficiencies and duplication and extends service across a broader geographic footprint.

The flexible operating model that we have championed over the past six years creates a simple connected product continuum the consumers can choose from the bees and because we're investing in a much larger platform our investments make an outside impact including increased investment in next generation automation product innovation and enhanced in-person and digital engagement all aimed at greater efficiency and a better customer experience turning to integration and cost energies.

Integration is off to a strong start with a line of senior leadership structure and we're now organizing the next layers of the business. Where processes overlap we're adopting the best of what each company is built where they differ we're implementing the strongest approach along with the systems that come with it. Additionally across the two companies we have overlapping capabilities and products as well as excess capacity in our manufacturing network. We intend to apply the same manufacturing network optimization and disciplined integration track record we've built over time to capture greater efficiency. We're already realizing early procurement and overhead synergies and we've initiated two plank closures to begin consolidating our production footprint. We've also began the process of cross-selling our product portfolios into the dealer network.

As of the end of July we've executed approximately 30 million dollars of annualized cost synergies and we expect roughly 15 million dollars of savings in the second half of 2026. With corporate overhead and procurement the primary sources executed today. In total we now expect over 100 million dollars of annual run rate cost synergies by the end of year three post-close exceeding our original synergy target.

We continue to expect the transaction to be treated to adjusted diluted earnings per share in year two post-close. Importantly the stated hundred million dollar plus annual run rate synergy target excludes both the 30 million dollars of legacy master brand cost actions we announced last quarter and American wood marks previously announced closure of its monitoring Mexico facility which has already completed its mine down.

Both of those programs are incremental savings on top of the synergy target. Now turning to capital allocation. For the second half of 2026 we expect capital expenditures of 71 million dollars or 3% of net sales including integration capital. We are prioritizing high return projects and by eliminating plans spending in overlapping areas of the network we estimate four million dollars of capex synergies in the second half of 2026 alone. Beyond capex our priorities are clear the near-term focus is the balance sheet. We're currently targeting a net leverage ratio below two times by the end of 2028.

As synergies build and the integration process progresses we expect our financial flexibility will grow. We anticipate that achieving our target leverage range will open the door to resuming share repurchases and opportunistic M&A. The path is straightforward and we have a clear line of sight to executing against it.

Before I turn it over to Andy I want to step back and talk about the earnings potential of this combined business because it follows the same principle focusing on what we can control.

After an initial assessment we believe there's a path to structurally higher profitability for the combined business independent of the market recovery meaning any improvement in demand would be upside to that path. There are four levers that drive it. First and our top priority is cost discipline. The last three years have taught us we can't count on a market recovery so we're removing that variable from the equation. Across the SG&A and our manufacturing footprint is clear that both companies carried excess costs from operating independently through a prolonged downturn and the merger closing process. We're aligning that cost base to a level appropriate for a combined company of our scale and that work is already underway.

Second, resetting our product portfolio and the supply chain behind it. Consecutive years of inflation and market decline forced fast pricing and portfolio decisions at both companies and not all of them are optimized for where the market is landed. Similarly, the need to rapidly mitigate tariffs required us to make quick supply chain decisions that prioritize speed over optimization.

Legacy master brand already carried the industry's most comprehensive product portfolio and the combination with American Woodmark presented natural opportunity to rebalance the portfolio of the combined company while maintaining complete coverage and a range of choices across the full price spectrum. In parallel, we're implementing the master brand way to optimize our sourcing and manufacturing configuration to ensure the combined business operates as efficiently as possible without sacrificing key service metrics. We have a strong track record here.

Over the past five and a half years we've closed 11 plants while consolidating production into our remaining network. All the while preserving capacity and service level and we intend to bring that same discipline to the combined footprint.

Third, leveraging the portfolio to support a healthier product mix across end markets and drive profitable growth. This opportunity is particularly meaningful and new construction where we believe our breadth of products and price limits combines our deep relationships and service expertise and enables the combined company to serve builders better and more efficiently. And finally, we're investing behind dealer fair games.

We believe the continued investment in technology, quality and service across the combined dealer network will position us to grow with our dealer partners even in a flat market and we expect that to meaningfully advance that path. Despite persistent challenging market conditions, the completion of this merger marks the start of a new chapter for master brand. The combined platform with a clear path to growth, tangible synergy targets and strong early momentum on integration. I'm pleased to announce that we will host an investor day in the first quarter of 2027 where we plan to size each of these levers and lay out the time down plan behind it.

We will also introduce the full combined company story including our strategy and refresh long-term financial partners. This is a company we are proud to be building and we look forward to seeing many of you there.

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

Thanks Dave and good afternoon everyone. I'll start with how we are reporting the quarter as a combined company then review our second quarter results and close with our outlook for the second half of 2026. First on reporting conventions.

Our results include American Woodmark from the May 28th close date, 32 days of contribution and prior year comparisons reflect legacy master brand only. It should be noted that purchase accounting estimates included in our second quarter results are preliminary and remain subject to finalization within the one-year allowed measurement period. American Woodmark's results have been conformed to master brand fiscal calendar and account categorization.

Article 11 pro form of financial statements were filed via form 8kA on June 26th, 2026. Now turning to our second quarter results.

Net sales in the second quarter were $815.2 million with a contribution of $125.5 million of American Woodmark net sales from the close date. Legacy master brand net sales were $689.7 million down 5.6% compared to $730.9 million in the same period last year driven by the mid to high single digit market decline and slightly offset by favorable net average selling price due to the flow through of tariff pricing.

Growth profit was $205.5 million with partial period contribution of $16.7 million from American Woodmark and growth profit margin was 25.2%. Legacy master brand growth profit was $188.8 million compared to $239.7 million in the same period last year. Legacy growth profit margin was 27.4 compared to 32.8% in the second quarter of 2025 down 540 basis points year over year amid a choppy spring selling season primarily reflecting market driven volume decline and the related unfavorable fixed cost leverage, unfavorable product mix and material freight and personal inflation partially offset by our continuous improvement efforts and favorable average selling price driven by tariff pricing.

The net tariff impact in the quarter was relatively neutral with the tariff landscape developing largely as we expected. On a combined basis our exposure is currently offset aided in part by the IIPA refunds. Legacy master brand pricing and supply chain mitigation actions have now largely reached a full run rate offset and we will continue executing additional actions that American Woodmark over the second half of the year to reach that same run rate level. SGA expenses totaled $216.7 million with partial period contribution of $24.3 million from American Woodmark. Excluding American Woodmark and merger related costs of $38.4 million legacy master brand SGA was $154 million up 50 basis points as a percentage of net sales driven by the impact of increased fuel costs on distribution, partially offset by the initial benefits of cost actions in the quarter.

Fuel and freight costs were a significant headwood in the quarter driven by a shrinking pool of available drivers, stricter federal regulations and persistent operating cost inflation across the trucking industry. We are working to offset this pressure through pricing so these actions take time to fully flow through. Interest expense was $20.8 million compared to $18.9 million in the same period last year. The increased reflects but previously announced refinancing of American Woodmark's debt.

Our expected tax rate in the quarter was negative 18.8 percent and positive 13.7 percent year to date. I would like to spend a moment on the negative tax rate when the merger closed in the second quarter non-deductible merger related costs were incurred which as expected negatively impacted our full-year estimated tax rate. Because the first quarter was properly recorded at the pre-merger closed effective tax rate, in the second quarter we were required to record a catch-up tax expense related to the first quarter in the amount of $16 million. This catch-up expense will not repeat in future quarters and thus is an ad back in our reported second quarter adjusted diluted earnings per share.

However, the full-year expected tax rate is now estimated at 12 to 15 percent reflecting the impact of non-deductible merger related costs.

Net loss for the quarter was $57.6 million which includes $28.9 million, a partial period impact from American Woodmark and net loss margin was 7.1 percent. Legacy master brand net loss was $28.7 million in the second quarter compared to net income of $37.3 million in the same period last year. Legacy master brand net income margin was negative 4.2 percent compared to positive 5.1 percent in the prior year reflecting lower gross profit, higher SG&A expenses, and a higher tax expense as discussed, partially offset by the initial benefits of cost actions taken during the quarter.

Adjusted EBITDA for the quarter was $62.5 million which includes $4.3 million of partial period contribution from American Woodmark and adjusted EBITDA margin was 7.7 percent. Legacy master brand adjusted EBITDA was $58.2 million compared to $105.4 million in the prior year period and adjusted EBITDA margin was 8.4 percent down 600 basis points due to market-driven volume decline and the related unfavorable fixed cost leverage, unfavorable product mix, and higher material labor and freight inflation as fuel costs continue to rise, partially offset by the flow through of tariff mitigation, our continuous improvement efforts, and previously announced cost action.

The looted loss per share was negative 38 cents in the second quarter based on 153.6 million outstanding shares which is reflective of the proportionate to the timing of the closing within the quarter. This compares to earnings per share of 29 cents in the second quarter of 2025 based on 129.1 million outstanding shares. Adjusted diluted earnings per share was positive five cents in the current quarter based on 153.6 million outstanding shares compared to earnings of 40 cents in the prior year period based on 129.1 million outstanding shares.

Before turning to the balance sheet I wanted to spend a moment on American Woodmark's performance. Since American Woodmark last reported public results its fiscal third and fourth quarter performance came in below our expectations. More specifically the under performance was driven by excess fixed capacity and the related absorption pressure amid lower volume compounded by capacity decisions that were understandably delayed pending the close of the merger.

We saw American Woodmark's volume begin to improve in June moving more in line with our legacy business at the end of the second quarter. Addressing this excess capacity is a top priority in our integration efforts and we've already begun the work. We have announced two manufacturing facility consolidations since the merger closed the first steps and right sizing the combined footprint and we've identified further consolidation opportunities as we continue evaluating the network.

These closures will take time to work through and they are just the beginning of the actions that underpin our confidence in the earnings potential of the combined platform. Turning to the balance sheet we ended the quarter with 241.6 million dollars of cash on hand and 393.9 million dollars of liquidity available under our revolving credit facility. Net debt at the end of the second quarter was 1.15 billion dollars reflecting the financing associated with the American Woodmark acquisition. The trailing 12-month net leverage ratio including American Woodmark's full trailing 12-month adjusted EBITDA was 3.9 times. I want to take a moment to provide context on how our lever ratio is calculated for covenant purposes as a difference from the reported figure.

Under our credit agreement the bank covenant calculation permits the inclusion of full trailing 12-month adjusted EBITDA for American Woodmark along with other certain additional ad backs as well as 18 months of anticipated murder synergies. On that basis our covenant leverage ratio was 3.4 times at quarter end within the 3.75 times maximum permitted under the post-close four quarter leverage ratio holiday in our credit agreement. Similarly our interest covered ratio which measures adjusted EBITDA relative to net interest expense was 5.1 times on a covenant basis above the three times minimum required.

Both measures reflect the full benefit of the combined business and confirm that we have headroom under our covenant at this stage of the integration. Our deleveraging path is clear we are targeting net leverage below two times by the end of 2028. That target reflects tariffs currently in effect including section 232 and its current 25 percent rate. As I'll discuss in a moment the scheduled increase to 50 percent on January 1st, 2027 remains in place.

Should that increase take effect it would extend our deleveraging timeline. Once we achieve our leverage target we expect to resume sharing purchases. From a liquidity perspective our post-close cash and revolver availability of $393.9 million and the absence of any near-term debt maturity while synergies and cost actions flow through to adjusted EBITDA we believe give us ample financial flexibility to execute the integration while continuing to reduce debt turning to cash flow and capital expenditures. Net cash provided by operating activities was $138.8 million in the second quarter compared to $84.8 million in the prior year period.

For the same period free cash flow was $128.6 million compared to $66.7 million in the same period last year primarily reflecting the timing of home center collections which we manage proactively within our existing contract terms.

Capital expenditures in a quarter or $10.2 million and for the second half of the year we expect capital expenditures of $71 million or 3 percent of net sales including integration capital.

On synergies and cost actions they've covered the framework so I'll be brief. Our updated $100 million plus annual run rate cost energy target is composed of footprint, SG&A and procurement opportunities roughly 60 percent and cost a good sold and 40 percent in SG&A and indirect. We expect one-time cost to achieve these synergies to total a one-to-one ratio of the run rate synergy target. For the second half of 2026 we expect those one-time cost a total approximately $30 million.

Revenue synergies are expected to represent upside over time. Turning to the current trade environment let me provide an update on our exposure as a combined company.

The tariff landscape has continued to evolve since our last call adding additional layers of complexity. On July 20th the administration announced additional section 338 tariffs on certain Canadian imports. On July 23rd the administration replaced the expired 10 percent global tariff with section 301 tariffs ranging from 10 to 12.5 percent on imports from approximately 60 trading partners.

Section 232 tariffs on wood and wood products however remain the primary driver of our exposure. Unlike the expired global tariffs these measures have no sunset date. The scheduled increase in the section 232 tariff rate to 50 percent previously delayed until January 1st 2027 remains in place. We have contingency plans and are prepared to act should it take effect. Similar to master brand American Woodmark answered the combination with a comprehensive tariff mitigation program already underway including pricing and surcharge actions, supplier renegotiations, sourcing optimization and manufacturing footprint initiatives including the closure of its moderate Mexico facility.

With that said in the second quarter combined company growth tariff costs were $41.9 million with a net impact essentially break even after mitigation and IIPA duty refunds. For the full year of 2026 we expect the combined company's tariff exposure to be approximately five to six percent of net sales inclusive of American Woodmark's total tariff exposure and net sales since the merger closed.

This figure also includes the newly announced section 338 and section 301 tariffs and the section 232 tariffs at 25 percent. We continue to expect to fully offset this tariff exposure on a dollar for dollar run rate basis by year end so further work is still required to offset the newly announced tariffs as we continue to adapt to the evolving landscape. Additionally following the Supreme Court's ruling in validating tariffs imposed under IIPA we have begun receiving refunds for $14.9 million in tariffs previously paid by Masterbrand and American Woodmark. In the second quarter we received $1.2 million of refunds which we recognized as a reduction in cost of goods sold.

Given uncertainty in the refund and administrative approval process we are recognizing these refunds as they are collected rather than accruing a receivable. Since second quarter end we have received an additional $9.2 million in refunds which we will recognize in the third quarter along with any further portion of the outstanding $4.5 million in expected refunds that are collected during the quarter.

Turning to Outlook this quarter we are introducing second half 2026 outlook. This shift in approach reflects that the combination is complete, integration planning has converted to execution and we are more confident in our ability to navigate tariffs though the broader macro and demand environments remain uncertain.

This outlook reflects the combined company with American Woodmark included for the full second half and includes our second half tariff impact and mitigation expectations for tariffs currently in effect. They all look also in beds approximately $15 million of synergy capture and approximately $11 million of IIPA duty refunds received and expected to be received over the period. As Dave mentioned the ongoing conflict in the Middle East adds another layer of complexity to an already uncertain consumer environment with fuel and related input costs representing a direct exposure that has already weighed on our margins this year. We are monitoring developments closely our outlook does not attempt to quantify any incremental impact to the market at this time.

With that said for the second half American Woodmark is expected to contribute approximately $730 million for 35 percent of the combined total with legacy master brand comprising the remainder. This reflects an addressable market down mid-single digits your year partially offset by the full period contribution from American Woodmark and price and mix dynamics. We expect second half adjusted EBITDA of $129 to $149 million representing an adjusted EBITDA margin of 6.3 to 7.1 percent. It is worth noting that key building blocks embedded in this range. Approximately $20 million reflects the contribution from American Woodmark's legacy business.

$15 million is derived from integration synergies already executed and flowing through and approximately $11 million relates to anticipated IIPA tariff refunds of which $9 million has already been received in July. We continue to expect decremental adjusted EBITDA margins to improve versus the first half as tariff mitigation cost actions and synergies continue to phase in. Additionally in the second half we expect interest expense to be approximately $50 million reflecting the newly arranged $375 million delayed draw term A loan used to retire American Woodmark's debt at close.

We expect second half adjusted diluted earnings per share of negative five cents to positive three cents. As a reminder the effective tax rate and the pro-rata increase in our diluted share count over the course of the year as a result of the merger introduced variability into this measure. We anticipate diluted shares outstanding to reach 203.6 million by year end an effective tax rate of 12 to 15 percent. Finally we continue to expect free cash flow for 2026 to be in excess of net income for the year.

Stepping back our focus in the second half is straightforward disciplined execution on costs and synergies and steady progress on the balance sheet. As integration progresses and our visibility into both the combined business and the broader trade environment continues to improve we expect to return to full-year guidance beginning in 2027 and add our investor day in the first quarter of 2027. We plan to lay out the long-term financial targets behind the path Dave described. Between the two we aim to provide a complete picture of the combined company. Now I'd like to turn the call back to Dave.

Thanks Andy. This is a transformational quarter for Masterbrand. We believe the combination with American Woodmark positions us to navigate through this cycle and outperforming the recovery and the early progress on integration gives us confidence that we will capture the full value of this transaction. As I said earlier we see a path to structurally higher profitability for this business.

One that doesn't depend on the market and executing against the four levers to achieve that path is central to our focus in the second half and beyond.

At the same time our confidence in the long-term demand fundamentals of our industry has unchanged. The structural under build of housing, the millennial generation entering prime home buying years, and aging housing stock prime free model activity, and rising home equity all support our expectation that pent up demand remains intact with a broader market expected to begin its recovery in 2027.

When that recovery comes our goal is for it to be upside to a business we've already made structurally stronger. The strategy is clear. Execution is underway and we're confident this combination positions Masterbrand to deliver meaningful growth. Now with that I'll open up the call to Q&A.

Yeah thanks McLaren. I'd say at start by saying the teams are working really well together. You know there is a we're in the same business in a lot of ways and so there's a lot of commonality. There's some maybe different language in a few different processes but the team has really come together very well and gotten after the work. I think both teams were ready to go. You know it was a long wait for the regulatory process and so I think everyone was just ready to hit the ground running on day one which was great. I think what I've observed and I've been to most of the legacy of American Woodmark factories now. There is a lot of commonality but there's also some best practices that those companies have come up with on their own and one of the main tasks for the team is to pick those best processes from each company and then spread those to the other side if you will.

Where there's differences that maybe don't make sense then let's kind of figure out what's better and go from there. So if you think about the work that the team is doing it starts with a lot of that. It's looking at how we do things. You know there's a couple examples where we've already adopted some processes that the legacy American Woodmark team implemented and they're working really well across the broader enterprise.

Obviously some of when you're changing a large process it takes time so you know I wouldn't say there's a ton of those yet but we've certainly identified quite a few. When it comes to the synergies you know obviously we had a really strong plan from what we could look at as as an independent teams prior to the close. Once we close that team really hit the you know the entire integration team hit the ground running and really just sat down and started you know putting numbers down on the page to compare to what we thought versus the reality and I think we found more opportunities there and I think none the least of which is we've recalibrated our view of where we think the market is over the last nine months and I think it's unfortunately different and so we have you know more capacity that we need to take out.

I think we're just looking at the business holistically here and being realistic about what we can afford and the teams are going through that methodically to right size the cost of the entire business and that's that's the primary mission of it in the next couple of years.

Yeah I've met with several customers through this period and I you know I think that it's the conversations have been good I think you know it does take time for things to develop they want to understand what we bring to the table as a combined enterprise which we're in the process of building those that picture for them.

I think you know early days I think in the new construction has to market that we have I think we've demonstrated over the past couple you know I'd say a year year and a half that the master brand approach that allows for a broader set of paths to market has been successful and I think that there's opportunity there to take what is a great team from the legacy Woodmark side great products work with those products perhaps introduce different products selection into that into their model but also take a look at how they're going to market and really using them what we call a more flexible model of how you address the customer needs and I think that's that's really a big area of focus for us because I think they they have not performed as well as the market in that particular portion of the market and we want to go and gain that back and I think that's that's going to be job one elsewhere I think things take time the home centers don't move really fast I mean they have both both companies in their stores we want to help them organize and make that easier for the consumer that's that's a primary goal and help them sell more and then in the dealer network it's really much much like with Supreme bringing our product portfolio together in a mode in the most logical way takes a lot of time it takes time to train your sales force we've already started that but that those those will develop more over years rather than months but I think that's the order in which we're thinking it makes sense thank you once again if you would like to ask a question please press star one on your telephone keypad our next question is from Stephen Ramsey with Thompson research group please proceed with your question hi good evening everyone I wanted to start with the core master brand's performance in in the builder channel said you're outperforming there which is good to see can you talk about how you're able to do this and is there any connection to wood marks struggles in the channel being connected to your success yeah I think if you if you remember we go to market with a combination of direct to builders and distribution and I think that for a variety of reasons builders like that model and I think that's we're going to lean into that with the combined enterprise and I think there's also some product differences and again if you talk about things that we we knew but we didn't know all the details I think there's opportunity there with with the master with the timber lake product as an example where it's there's been a lot of trade down in the market and that's you know you have to move with that I think our team has done a nice job of flexing with that albeit they're a lower price point product obviously and we have some work to do there to to bring the performance of that product line and that group of products back to where it was several years ago but I think there's a lot of lessons we've learned over the last 12 months on how to navigate the current market conditions that I think that combined enterprise can really benefit from okay okay that's uh that's helpful if you think two three years down the road and maybe this is an investor day topic but when you think about the potential sales benefit do you think the new construction market offers more opportunity than through the dealer channel as you get a couple years down the road I you know I don't know if it's more I think it's sooner so maybe we'll address that in more detail as you said in investor day but I think it's a it's a less fragmented market so those are you know you can target things easier when there's less fragmentation but by the same token the dealer rnr market is larger and so there's you know the the population opportunity is larger so I think I wouldn't I'm not in a position today to scope the size of each but I think it's more of a timing question okay and then lastly for me make sure I'm heard you correctly and understand this correctly the second half guide uh for woodmark was seven hundred thirty million of sales and give it a around 20 million that points to a margin that's a little bit lower than what they contributed in the second quarter uh maybe you can connect the dots here make sure I've got my numbers right and kind of the margin gains you expect in the second half for for woodmark yeah maybe I'll uh I'll say a couple things in the midi andy can fill in we only disclose the June effectively the last 32 days of the quarter where we were a combined entity and if you look at that margin about 126 million sales four million of eva die it's roughly on on par with with what you're seeing in the second half and that's uh that that's where we think we are with and then we got some work to do there it's it's uh not what we expected I think the the business can perform better than that but we've got some work to do there is there anything else?