Welcome to Masonite's first quarter 2023 earnings conference call. During the presentation, all participants will be in a 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. 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. Also joining us today for Q&A is Chris Ball, our President of Global Residential. We issued a press release and earnings presentation yesterday, reporting our first quarter 2023 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 statement 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 most recently filed annual report on Form 10-K and our subsequent Form 10-Q, 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 in the appendix of the earnings presentation. Our agenda for today's call includes a business overview from Howard, followed by a review of the first quarter financial results from Russ, and then Howard will provide some closing remarks and will begin a question-and-answer session. With that, let me turn the call over to Howard. Thanks, Rich. Good morning, and welcome everyone. Beginning on slide four, I'm pleased to report that Masonite is off to another solid start in 2023. First quarter net sales and adjusted EBITDA came in ahead of our expectations, although down year-on-year given softer end demand and versus the exceptionally strong first quarter we had last year. Order volumes remained stable through the quarter, and early success on our 2023 playbook initiatives further supported our Q1 adjusted EBITDA. Swift implementation of working capital reduction initiatives also gave us a head start on free cash flow for the year. As a reminder, we typically see lower operating cash flow in the first quarter due to seasonality impacts. In Q1, we generated $56 million of operating cash flow, a $94 million improvement over the prior year period. Based on our positive cash flow and healthy balance sheet, we were able to repay $100 million of bank debt in the quarter and repurchase $15 million worth of common stock, while still maintaining our strong liquidity position. With respect to the business and operations highlights for the quarter, I'd start by noting that end market demand trends overall are playing out roughly in line with the planning assumptions we used when preparing our full year 2023 financial outlook. U.S. housing starts, which we expected to be down 20% year-on-year, have been marginally better than expected thus far, down 18% through March. While retail POS in North America was slightly weaker, down low double digits on average in Q1, as compared to our full year outlook for a high single-digit decrease. In Europe, the U.K. housing market is somewhat weaker than we were expecting, with starts down 28% year-over-year. Builders commenting that they could see completions down between 30%-40% for the full year. Demand in the architectural segment has fluctuated from month to month. We were encouraged to see the Architecture Billings Index increase to above 50 again in March. Across all our business segments, we have been flexing variable costs to align with demand. At the same time, we have continued to execute network optimization and fixed cost reduction projects that will lead to leaner and more efficient operations. I'll speak more about this when I address execution of our 2023 playbook on the next slide. Rounding out our highlights this quarter is the positive performance we saw in the architectural segment. While we continue to explore strategic alternatives, the team has been actively addressing the challenges that have faced this business. In Q1, we were able to deliver over $5 million in adjusted EBITDA on a combination of sequentially higher output, improved operational performance, and strong price cost management. We believe these results are a positive indication of the potential this business has to return to prior levels of profitability. All in all, this was a good quarter that positions us well to achieve the results outlined in our full year outlook. I'm encouraged by the momentum we are gaining across the organization on our initiatives related to margins, cash flow, and long-term value creation that will increasingly benefit all stakeholders through the balance of the year and into 2024. Let's turn to slide five. On our last earnings call, we presented our 2023 playbook to illustrate how we plan to thoughtfully manage costs while staying focused on margin expansion opportunities and continuing to activate our Doors That Do More growth initiatives. The playbook is summarized on the right-hand side of this slide. Planning for these initiatives started in 2022, and our teams did a great job of executing quickly to begin realizing some of the benefits already in Q1. Among our margin-related initiatives, maintaining price-cost discipline remains a top priority. We continue to benefit from prior year pricing actions with consolidated AUP up 10% in the first quarter. We are also keenly focused on unlocking savings on the cost side of the equation. Wages and benefits, rent, insurance, and energy costs continue to escalate and underscore the importance of securing savings elsewhere in the business in order to deliver margin expansion in the second half of the year. We are seeing lower rates for ocean freight, but have yet to realize broad deflation in our material basket. Our team is closely monitoring market indices for all of our raw materials and actively negotiating cost improvements wherever possible. Other important margin initiatives underway include flexing variable costs to match order volumes, executing on our restructuring program, and capturing expected cost synergies from the Endura acquisition. In North American Residential, for example, we reduced direct labor headcount by approximately 16% in line with the overall market decline. We've also reduced our SG&A headcount by approximately 10%. As part of the North American Residential restructuring, we announced the closure of one of our older and less efficient door facilities located in California. The customers previously serviced out of this plant will now be serviced from other sites in our network, where we have increased capacity and throughput utilizing our M vantage continuous improvement initiatives. The restructuring actions across our North American Residential segment, Architectural segment, and corporate functions delivered approximately $3 million of benefit in the quarter. Additional restructuring actions are underway to deliver the full $15 million-$20 million of annualized cost savings that we are expecting from this program. The combined impact of these cost actions are enabling us to coil the spring, as we say, to maintain margins despite the current downdraft in the housing cycle before delivering margin growth from fixed cost leverage when volumes return. We're doing a lot more this year than just leaning out our organization. We're also moving forward with the implementation of our Doors That Do More growth initiatives that are enhancing our competitive advantage and category leadership with consistent and reliable supply, product leadership, and deeper customer engagement. With regard to reliable supply, our operations team achieved another significant milestone this quarter. In March, they completed the startup of a second interior door production line in our new Fort Mill, South Carolina plant, which brings additional technologically advanced capacity and flexibility to our production network in the eastern United States. In terms of product leadership, we continue to see the impact of educating our channel partners and homeowners about the value of upgrading their doors. Solid core doors are a great example of the life and living benefits you can get from upgrading to this quieter solution. In Q1, we realized another quarter of growth in the mix of solid core doors as a% of our total interior door sales. We also launched new nationwide distribution of barn door kits with one of our major retail partners. Barn doors have become very popular due to the added privacy and style they can add to a home as part of a weekend project that takes the average DIYer only 90 minutes to complete. The typical barn door kit retails for $200-$300, which also makes for a strong positive contribution to AUP for Masonite and our customers. This new barn door program is a great example of the win-win solutions we bring to the table to create benefits for homeowners, channel partners, and Masonite alike. This is the essence of the win the pillar, win the sales pillar of our Doors That Do More strategy and the reason why we are focused on developing deeper engagement with our customers. We believe there continues to be tremendous untapped demand, and we are eager to work with our channel partners to service that demand. To this end, we have started joint business planning initiatives with several of our largest partners to map out the most significant growth opportunities available to them and to identify how we can most effectively support them in capturing these win-win opportunities. Our 2023 playbook is detailed, comprehensive, and focused on reducing our cost structure and preserving margins while continuing to selectively invest in strategic priorities to fuel long-term growth. It was a busy first quarter for our team, and we have no intention of slowing down the pace of our progress. We will continue to work with urgency to achieve all the goals we have set up for ourselves this year, and we look forward to updating you on our progress as we achieve more milestones each quarter. Turning to slide six. Underpinning our initiatives across Masonite is a focus on sustainability and responsibility, which has been core to our company for almost 100 years. We recognize that our long history of success is directly connected to our commitment to taking care of our employees, our communities, and our environment. In April, we released our 2022 Environmental, Social, and Governance report, which outlines our ESG priorities and highlights the progress we made towards our goals during the year. These accomplishments reflect work done throughout our organization. I couldn't be prouder of the improvements we have made and the dedication shown by our employees. To the principle of doing well by doing good. I hope you'll take some time to learn more about our ESG goals and achievements by reading the full 2022 report, which you can find at masonite.com/esg. I'd like to turn the call over to Russ to provide more details on our first quarter financial performance. Russ? Thanks, Howard. Good morning, everyone. Let's turn to slide eight and start with a review of our consolidated financial results. First quarter net sales were $726 million, flat to last year, driven by a 10% increase in AUP that included positive impacts from both price and mix, and an 8% benefit from the Endura acquisition. These increases were offset by a 16% decline in volume and a combined 2% decrease from unfavorable foreign exchange and component sales. The year-over-year volume decline reflected soft end market demand in our North American and U.K. residential markets. Gross profit in the quarter decreased 7% year-on-year to $170 million, yielding gross margin of 23.5%. As we anticipated, higher AUP was more than offset by the combined impacts of volume deleveraging and inflation. Selling, general, and administration expenses were $102 million, up 22% year-over-year, primarily due to the addition of SG&A from Endura, as well as the absence of a previous year gain on the sale of PP&E. SG&A as a percentage of sales was 14% in the quarter. First quarter net income was $38 million compared to $68 million in the first quarter of 2022. The decline resulted primarily from a charge taken as part of our previously announced restructuring plans, the lower gross profit and higher SG&A noted earlier, as well as a step up in depreciation, amortization, and interest expenses. Lower tax expenses were a partial offset to these headwinds. Diluted earnings per share in the quarter were $1.71 compared to $2.89 last year. Adjusted earnings per share, which exclude restructuring costs, were $1.88. Compared to the outstanding quarter we had in Q1 2022, adjusted EBITDA in the first quarter of 2023 was down 15% to $106 million, and adjusted EBITDA margin contracted 260 basis points to 14.6%. Margin improved 110 basis points sequentially from our fourth quarter 2022 results. On the right-hand side of the slide, we have more detail on our adjusted EBITDA performance. Positive AUP growth from price and mix was muted by the impact of volume declines. As expected, material costs remained a headwind for us in the quarter, up high single digits as we continue to work through higher priced raw materials remaining in inventory. We expect that inflation levels will moderate in Q2, and our full year outlook remains for low to mid single digit cost deflation for the year, weighted to the back half. Factory and distribution costs were also a headwind to adjusted EBITDA in the quarter, primarily due to volume deleveraging and inflation on wages and benefits, energy and other overhead costs. Regarding SG&A, we did have a positive impact of about $3 million in the quarter from headcount reductions, which was enough to fully offset the inflation we incurred on wages, benefits, and other administrative costs. The $2 million increase in SG&A shown here in our adjusted EBITDA bridge comes primarily from increased advertising and other investments in strategic initiatives we made during the first quarter. The contribution from Endura, inclusive of headwinds from purchase price accounting and other integration costs, is reflected on the acquisition line. The integration team has line of sight to realizing the anticipated $8 million in annualized cost synergies, with over half to be realized in 2023. Let's turn to slide 9 for a review of our North American Residential segment. First quarter net sales were $569 million, or flat year-over-year, supported by an 11% increase from the Endura acquisition. Organic net sales, excluding the impacts of the acquisition and foreign exchange, were down 10% year-over-year, as 8% AUP growth partially offset a 17% decline in volume and a 1% decrease in component sales. Unit volumes were down in the quarter in both our wholesale and retail channels, in line with softer demand in both the new construction and R&R end markets. We saw very little inventory destocking in the wholesale channel during the quarter. Inventories in the retail channel are slightly elevated in certain areas, but our full year assumption of a high single-digit decline in the R&R market does contemplate the risk of some destocking in this channel. adjusted EBITDA in the quarter was $108 million, down 15% from last year. adjusted EBITDA margin of 19% was down year-over-year due to volume deleveraging and Endura dilution, partially offset by the positive impact of price cost management. As Howard discussed, the North American Residential segment has multiple playbook initiatives in flight that target both cost optimization and strategic growth initiatives. In combination, these projects are shaping the segment into an even leaner, more efficient market leader with the capability to increase production with minimal incremental fixed costs upon market recovery. Although we believe it is still too soon to predict when housing demand will return to historical averages, we are encouraged by sequential improvements in single-family starts and permitting activity through the first quarter, and we believe latent demand continues to grow as some buyers remain on the sidelines, awaiting additional for-sale inventory and a more stable interest rate environment. Turning to slide 10 on our Europe segment. Net sales of $64 million were down 21% year-over-year, or down 13% excluding an eight-point headwind from unfavorable foreign exchange. The organic decline in net sales was driven by a 15% decrease in volume and a 2% decrease in component sales, offset by a 4% increase in AUP. Adjusted EBITDA was $5 million in the quarter and adjusted EBITDA margin was 8.1%. While margin was down year-over-year, primarily due to volume deleveraging, margins were up sequentially from Q4 2022, thanks to ongoing improvements in price cost management. As in North America, our team in Europe is using a number of Doors That Do More initiatives to strengthen our competitive position and improve our share of wallet with customers. For example, we have resolved supply chain issues to improve lead times, and we are focusing our resources on promoting our high-value door kits, which contribute positively to sales mix. Our progress on these initiatives is helping to offset the weaker market conditions and gives us confidence in our original full-year outlook for the segment. Moving to slide 11 in the architectural segment. Net sales increased 24% year-over-year to $88 million, driven by a 28% increase in AUP, partially offset by a 2% decrease in volumes and a combined 2% decrease from foreign exchange and lower component sales. Adjusted EBITDA was $5 million in the quarter, up from a $3 million loss in the prior year and up $6 million sequentially from Q4 2022, driven by volume, strong price realization, and improved factor performance, as well as efficiencies generated by restructuring and other cost actions. The segment remains on track to deliver total full-year cost savings of $5 million from these actions. End market demand for the architectural business is expected to contract slightly in Q2 based on order patterns we have seen to date. Customer sentiment is still positive for the full year. In Q1, we announced a formal process to assess strategic alternatives for the architectural segment. That process remains underway and could include a divestiture of all or part of the business subject to our ability to realize fair value. We will continue to keep you updated as the process unfolds. Let's turn now to slide 12 for a summary of our liquidity and cash flow performance. At quarter end, our total available liquidity was $542 million, inclusive of unrestricted cash and accounts receivable purchase agreement and our ABL facility. Net debt was $903 million, resulting in a net debt to adjusted EBITDA leverage ratio of 2.1x on a trailing twelve-month basis. Cash provided by operations was $56 million through the end of the first quarter, compared to a cash use of $38 million in the first quarter of 2022. A higher cash generation was partly attributable to enterprise-wide initiatives we have launched to optimize working capital across the business. I'll talk more about these initiatives in just a moment. Capital expenditures were approximately $28 million in the first quarter, in line with our spending assumed in the full-year outlook. Finally, during the quarter, Masonite repurchased approximately 169,000 shares of stock for $15 million at an average price of $87.33. Turning to slide 13, I wanna touch briefly on the working capital initiatives we have put in place to unlock significantly improved cash flow generation in 2023 and beyond. In 2021, our core working capital, defined as accounts receivable plus inventory minus trade accounts payable, was approximately 21% of net sales. Note this excludes accrued expenses, which represent a meaningful payable but can fluctuate period to period due to non-operating factors. In 2022, core working capital grew almost 200 basis points, due in part to inflation and the increases we made to inventory to preserve service levels in a volatile supply chain environment. As conditions have improved, we have now commenced a multi-year initiative to drive working capital percentages back down to levels well below 2021. To increase the focus in this area, working capital has been added to our variable compensation program as a metric this year, and our teams have several initiatives underway across all three components, including optimizing inventory across the network by normalizing safety stocks, standardizing components, utilizing centralized warehousing, and increasing the use of vendor-managed inventory. Implementing extended payment terms with our suppliers. In simplifying and standardizing our customer payment terms to accelerate collections. Although we are early in the process, year-to-date, these initiatives supported a reduction in working capital that has contributed $36 million to cash flow. The reductions will accelerate throughout the year. Longer term, we believe this will be a multi-year opportunity for Masonite as we continue to implement best practices and further reduce working capital as a percentage of net sales. With that, I'll turn the call back to Howard for closing comments. Thanks, Russ. In summary, we're off to a good start for the year and encouraged that market demand is trending generally in line with our original planning assumptions, with a few puts and takes. We believe the long-term backdrop for the housing markets we serve remains very positive. The early progress we have made on our 2023 playbook is already contributing positively to our financial results. Our margin and growth initiatives that are still underway have us on track to deliver the full year results we outlined in our initial guidance. Our operating philosophy of maintaining price cost favorability remains resolute, along with our focus on unlocking the mixed benefits from higher value products in our portfolio. This discipline will play a key role in our ability to offset inflation on wages, benefits, and overhead costs, as well as the impact of volume deleveraging, and positions the business to accelerate margin growth with higher demand. While we are working to implement cost actions, we are simultaneously focused on generating superior cash flow conversion from a multi-year plan for working capital optimization. We are fortunate to have an exceptional team that are doing a great job of executing so far this year. Their achievements and commitment to bringing the Doors That Do More strategy to life is enabling us to deliver solid results in this challenging market and position the business for sustained long-term growth. We continue to see tremendous opportunities to evolve our business with Doors That Do More, regardless of the economic cycle we are in. We are grateful to our employees and our partners for their collaborative efforts in helping us realize our vision. Now I'd like to open the call to your questions. Operator? Thank you, Mr. Heckes. If you would like to register a question, please press star one. If you are using a speakerphone, please lift your handset before entering your request. We ask that you limit yourself to one question and one follow-up. Ladies and gentlemen, as a reminder, to register a question, press star one on your telephone at this time. Thank you. Our first question comes from the line of Michael Rehaut with JP Morgan. Please proceed with your question. Thanks. Good morning, everyone, and thanks for taking my questions. Morning, Mike. Wanted to start off on the trends that have come out in the first quarter and, you know, I think you mentioned earlier on that the first quarter more or less hit your expectations, maybe some minor pluses and minuses. Against our estimates on the top line breakdown, at least, you did come through with better than expected price. And I was wondering if you could kind of give us a sense of how you're thinking about price contributing to results throughout the year and if there's been any volatility, let's say, or, you know, there's obviously been concerns going into the year around maintaining price against a down volume backdrop. Yeah. Thanks, Mike. This is Howard. As you know, and as we've said pretty consistently, maintaining favorability in price cost and being paid fair value for our products has really been a key component of our margin improvement and allowed us to deliver adjusted EBITDA margins in excess of 15% in each of the last three years. Our theory is really pretty simple. We wanna protect price in inflationary cycles, and we wanna protect margin in deflationary times. That's when we talk about coiling the spring, and that's really about our ability to then grow margins when demand strengthens. As a reminder, and as we said in our prepared remarks, we've yet to realize any broad deflation in our material basket in Q1. So it's really not a one-size-fits-all strategy. We manage price cost really tightly by product and by segment and by geography. We're less interested in business that's really purely about finding the cheapest possible door. Our strategic customers, I think, understand this and appreciate our Doors That Do More strategy. It's about providing superior value through service and innovation and partnering with them to tap into opportunities that we can both grow. It's continue to be a very important tenet in our margin playbook in 2023, as we've discussed. Great. Thanks very much. I guess secondly, just staying on North America for a second. You know, the operating margins, or I'm sorry, the EBITDA margins also came a little bit better than expected, at least against our expectations, our modeling. I think last quarter you talked about on a full year basis, North American margins expected to be roughly flat year-over-year on a full year basis. I was wondering if that expectation still holds as well? Yeah. Mike, it's Russ. In a word, yes, it does. I guess if I just step back and think about the outlook for the balance of the year, Howard touched on the very important role that our disciplined approach around price cost management, is to the business. If I just step back and think about. General market conditions. They're largely playing out broadly as we had expected in our full year planning assumptions. That's what really underscores our confidence in delivering the full year results in line with that full year guide, particularly given the solid start that we have had, to your point, in the North American Residential business, you know, where the results were slightly better than we had anticipated entering the year. The North American business clearly is the large economic engine in the company, and it's continuing to run very well. We mentioned during the prepared remarks a number of the playbook initiatives that are specific to North America in creating a much leaner operating platform through some of the restructuring actions, manufacturing footprint actions, additional mix initiatives. That's what gives us this confidence around the assumptions. Just to step back as a reminder, we came into the full year assuming that overall net sales would be flat to -5% or -7% to -12% ex Endura. We've run at the top of that range in Q1. We said adjusted EBITDA for the year, again, driven largely by the North American Residential business, $415 million-$445 million. We're right down the fairway there. So we feel good about the business, and we feel good about the ability to continue to expand margins as we get into the second half. While AUP is going to be rolling off in North America given anniversary of price, we also expect that to benefit price cost-wise from inflation that's moderating. That puts us in a good stead overall to deliver, margins that while down in the first half will be up in the second half, and North American Residential is running right in line with what we would have expected coming into the year. Perfect. Thanks so much. Appreciate it. Thanks, Mike. Our next question comes from the line of Mike Dahl with RBC. Please proceed with your question. Hey, this is actually Ryan Frank on for Mike. Thanks for taking my questions. I wanted to follow up on the deflation. You said you're not currently seeing it. What, I guess, gives you confidence that you will get deflation this year? How does that impact the guidance if you do not see it this year? Ryan, it's Russ. What we are seeing is that costs are starting to roll over in certain material baskets, and they certainly are starting to reduce in inbound freight. You're not necessarily seeing that in our P&L yet, however, because we still were carrying inventory of raw material, in some cases elevated inventory, which was a purposeful strategy to make sure that we could offset a volatile supply chain and preserve our production and service levels. We're still burning through that inventory. The high single digit increase you saw in materials cost overall in the first quarter was driven in large part by continued material inflation as that higher cost material rolls off the balance sheet and into the P&L. That will moderate as we get into Q2, particularly given that inbound freight rates already are coming down, and we're seeing evidence that we might see some deflation as we get further into the year in some of our material baskets. That-that's what informs our view that inflation for the full year is gonna continue to run right in line with what we guided last quarter, which is low to mid single-digit deflation overall, but is going to be moderating to still be inflationary in the second half, but at a much lower rate, deflationary in the second half. Okay. That's very helpful. Thanks for clarifying that. Then I wanted to touch on the retail POS that you guys mentioned. I guess, what do you think drove the weakness compared to your expectations? Then what gives you confidence that they kind of will return to the expectations by the year end? Then any trends through the quarter and into April would be helpful. Yeah, Ryan, this is Chris. Let me take that one. First to frame it up on the North American business, I mean, we're relatively balanced between our new construction and Triple R business. You're asking specifically about what's happening on retail. It's more focused on Triple R. What we saw in the first quarter is on the new construction and wholesale side, largely played out in line with what we had expected as well as within Triple R. What we've seen more recently is there's a bit of a weakening on the Triple R side. What drives that? You know, there's obviously the macroeconomic concerns. You've got the interest rates from a financing standpoint for consumers who want to go and remodel their homes. What I would tell you is as we look at how we've seen the first quarter play out and also what we're seeing early in the second quarter, while there might be a little bit of softening on the Triple R side driven by those factors, that really is already contemplated within the outlook and really feel good that the year is playing out largely in line with what we expected. Okay. Thank you. Very helpful. Thanks, Ryan. Our next question comes from the line of Joe Ahlersmeyer with Deutsche Bank. Please proceed with your question. Hey, good morning, everyone. Thanks for the question. Morning, Joe. Hi, Joe. Howard, you walked us through some of the near term margin initiatives, and Russ, thanks for the detail in an earlier question on the margin progression for 23. Could you guys maybe go into a little more detail about the margin opportunity beyond 23? I mean, you outlined the specific opportunities for 23, but it maybe feels like what you've identified as growth initiatives in 23 actually kinda turn to margin benefits beyond this year. Then maybe just given the strategic review, in Architectural, some of the challenges in Europe and the price cost progression, inflation, all these things that have happened in North America, including the acquisition, since you've given the target around margin. Maybe are you, are you willing to offer a North America specific goalpost for EBITDA margins? Hey, Joe, let me start with that, then I'm gonna turn it over to Russ for more detail for you. Everybody likely remembers our Centennial Plan that we introduced several years ago, where we said By 2025, we thought we could be a $4 billion company making 20% EBITDA margins. The last couple years has been hard on the margin side of things due to this rapid inflation, let me be clear that that Centennial Plan remains our North Star in the business. As Russ walks through some of the details, we fully expect to be able to achieve those kind of EBITDA margins by 2025, as we outlined several years ago. I'm gonna let Russ sort of walk through how we get there, that is important to remember that that's really the North Star for our business. Yeah. Thanks. Thanks, Howard. Joe, I guess, let me start here. You know, you hear us talking a lot about coiling the spring. It is a very purposeful strategy that we're executing within the business right now, and it's we view that saying as symbolic of the steps we're taking to really create a leaner and stronger base of operations in the business when the end markets are soft, that we can really unload into the market when demand returns. As we think about how that will inform margin growth as we exit 2023 into a market that we would hope by that time will be in recovery mode, we've guided to 30%-35% decrementals this year on volume in the North American Residential business in particular. That's, you know, a result of volume deleveraging that we are seeing in the current market. That rate of decremental and the actions that we're taking to address our cost base should flip to an incremental at or even greater than that rate as we move into a market of recovering demand. That's going to really allow us to strengthen the leverage that we've created in the business on the fixed overhead base that we have, again, particularly in the North American Residential business. You combine that with the continued investments that we're making to mix up the product portfolio into higher average unit products. Again, a lot of that focus in the near term focused on the North American Residential business. We see that as an opportunity for meaningful margin improvements exiting this year. we should also step back and realize that that 20% Centennial Plan margin target overall, you could argue that we're achieving it already within the North American Residential business. That business is already running circa 20% EBITDA margins. You turn your attention to the other smaller businesses in the portfolio. Europe is clearly near term facing a lot of headwinds that are macro market driven, but that team's done a really nice job tightly managing costs and putting the business back on a pathway to returning to low double-digit or even mid-teen margins, which they had achieved prior to the significant downturn in Europe. With respect to Architectural, that team's faced some challenges, but they've worked very hard, and we are seeing the recovery underway in that business that we have been telegraphing. With resolution of the strategic review that we now have in place, for that business, that provides the opportunity for an overall margin step up for the enterprise. I point you to all of those factors, but a lot of it, based on the initiatives that we have underway in North America that really poise the business for some margin acceleration exiting 2023. Yeah. Thanks a lot for all that detail, guys. Appreciate that. Maybe a different question as well. Endura, any learnings early on here as part of the integration in the quarter? Any positive surprises? Just maybe on the broader M&A landscape right now, at least one relevant transaction in your space, maybe just how you see the pipeline right now, if you're more focused on internal growth versus the external? Thanks. Thanks, Joe. As a reminder, our Endura deal just closed in January, the strategic rationale for this deal was really about acquiring, first, a really nice business, but one that's in adjacent and critical categories that allow us to deliver on our product leadership pillar of our Doors That Do More strategy. All this is still true, and we're very excited about the potential of the deal. The first quarter was about as expected. If you remove acquisition and integration costs, the adjusted EBITDA margins for the business were in the high single digits, and they had the same sort of margin... Or excuse me, volume pressure that our NA Res business had. We weren't able to get sort of the same head start, if you will, on flexing variable costs out because we didn't close on that deal until early January. We're well on our way there now to, you know, adjusting some of our costs to support that soft volume. We continue to expect low double-digit margins for the business, and we had a much improved April. The other encouraging thing is the integration team, we identified $8 million in cost synergies, and our integration team has certainly found a way that we'll be able to deliver those savings. As we've said, more than half of that will be delivered in the 2023 year. We love the Endura deal. We think it's a natural fit with our business, and we're excited about the future. As far as other M&A, we're constantly in the pipeline looking for deals that could support our strategy at the right value. Obviously, the debt markets are interesting and have been over the last several months. It'll absolutely be an important part of our growth should we be able to find deals that we like for prices we like. All right. Thanks a lot. Good luck. Thanks, Joe. Thanks, Joe. Our next question comes to the line of Noah Murkowski with Stephens. Please proceed with your question. Good morning. Thanks for taking my question. Hi, Noah. I wanted to follow up on the R&R side of demand. You know, clearly there's some macro headwinds beginning to show up there. I think you mentioned that there was maybe a lack of destocking in the quarter. I was hoping you could share, you know, what level inventories are at in that channel. I know you also said, you know, there's some risk of destocking baked into the guidance, but can you help us understand the timing of that when you might begin to see some destocking and how long that could persist for that channel? Yeah. No, let me start and see if Russ wants to add anything into it. I would say as we sit here today and we see the trends as we're walking into the second quarter, as we mentioned in the prepared remarks, there is some softening. From a timing standpoint, you know, if that continues, we'd expect it to be in the near term. Let's say within Q2/Q3. One of the things if you look more broadly in the marketplace is whether you look at the pent-up demand we see on the new construction side or also, you know, people who are in their homes that aren't wanting to give up their low interest rates. We do expect that on a mid-to-long-term basis, there's still gonna be a lot of demand on the remodeling side. There are a lot of consumers who are gonna look to invest in their homes as well as some pent-up demand on folks who are waiting to get a home and either move out of a rental situation or to actually be able to upgrade their home on a permanent basis. As you talk about the timing of when we would expect inventory reductions, it probably is in the either a Q2, Q3 timeframe. Again, it's in our outlook and there's also a lot of things that we like about how even in this depressed economic moment and in the housing side, you know, having a lot of starts that are lower year-over-year, there are a lot of good things that are gonna be happening that we expect coming out of the back half of the year and into next year. Yeah. No, I think Chris covered it very well. Not a lot to add. I'll just underscore the point that he made that when we laid out our guide for the year, and that included the assumption of a high single-digit retracement in Triple R, it did accommodate for this potential risk in destocking. We think that it's fully baked into our outlook. You know, Chris also touched on a theme that you've heard us talk about in the past, this renovate in place phenomenon that we've seen, you know, some evidence from and think that there will be continued demand for renovation activity with existing homes given the relatively limited for sale inventory. To Chris's point, the mortgage rate environment that makes it much more challenging to move into a new home and afford the mortgage payment at rates that are significantly elevated over what they were just a couple years ago. Just one more thing for me, Noah. This is Howard. Along with that guidance of high single-digit decline in R&R, we guided to a 20% decline in new construction. As we said on our prepared remarks, that's running slightly better than we expected. With all these guidance things, there's gonna be a few puts and takes. As we sit here today in early May, R&R is just a little bit worse than we thought it might be, and new construction is just a little bit better than we thought it might be. Essentially, we're right in line with our guidance assumptions for the year. Yep. Got it. That all makes sense. Appreciate the color, guys. You know, following up, I did wanna touch on the new res side. It sounds like as we've moved through the spring selling season, there's been overall, you know, increased optimism. I guess, have you noticed a change in tone from your wholesale customers? I guess, is there a potential as we look towards the later part of this year to potentially see some upside to volumes there? Thanks, Noah. I certainly hope so. That'd be great. We're pleased with the start of the year. Demand has sort of reset at a lower level as we said, generally in line with our planning assumptions. Volumes have remained stable month-to-month, we're not seeing any real declines. We too are seeing some of the positive signs of green shoots that point toward an eventual pickup of demand. Obviously, very early in the year and the market continues to remain uncertain for a lot of reasons. Our teams are really focused on maximizing the performance of our business in any operating environment. We're gonna stay cautious, remain cautious about forecasting sort of an imminent upswing in demand. I will say, though, when it happens, and we believe it's going to happen, we will be fully ready to ramp up production to meet that demand. Got it. That makes sense. Appreciate the time and good luck with the rest of the year. Thanks, Noah. Thanks, Noah. Our next question comes from the line of Steven Ramsey with Thompson Research Group. Please proceed with your question. Hi. Good morning. Maybe to touch on the architectural segment margins at mid-single digit level in the first quarter, was this a part of the original 2023 plan? I believe you had talked about that kind of result on a full year basis. Are you now tracking ahead of your full year plan in the architectural segment? Yeah. Steven, it's Russ. Thanks for the question. I guess I'll start with a proviso that we hesitate getting into specific guidance for each of our segments. I would say that we're pleasantly surprised with how quickly the business is starting to accelerate into 2023. It is generally in line with the objectives we had for the overall full year profitability of the segment. I think the team's done a really nice job getting off to a quick start in Q1. As we mentioned during the prepared remarks, it's possible that we might see volume fall back just a little bit in Q2 based on inbound order demand. That doesn't diminish in any way the hard work the team has been doing to improve operational throughput in the business and continue to drive AUP. That gives us some confidence that this margin trajectory that we're seeing in the business is going to maintain or only grow as we progress through the year. Okay. Helpful. Shifting to builder plans for new homes, thinking about what's coming up in 23 and over the next few years, are there positive trends you're seeing on the number of doors and mix of doors, from that customer group and how that can favorably play out through the next two or three years? Yeah. Steven, this is Howard. It's been a number of months- Since we've sort of dusted off that research and we go out to the market and periodically try to determine changes in house plans. Obviously, there's a lot of things to consider, one of which is the general inflation in houses are starting to make houses smaller again for affordability reasons. There was a time about a year ago that houses were starting to grow. We are seeing, anecdotally, where consumers are choosing to add doors to those open bonus rooms so that they can have a home office. And we are actively marketing to builders things like solid core doors, where we believe that the rooms in your home that are noisy, should have a solid core door. For the modest premium that costs a homeowner, there's a real significant difference in how you enjoy and live in your homes. There are some tailwinds. We believe more private spaces, making those private spaces more private and quieter all help with the mix initiatives in the business. Great. Thank you. Thanks, Stephen. Our next question comes from the line of Jay McCanless with Wedbush. Please proceed with your question. Morning, guys. Good morning, Jay. Morning. Happy to see both debt reduction and stock repurchase happening this quarter. Maybe could you talk about capital allocation through the rest of the year and any type of year-end targets you might have for either net debt to EBITDA or debt to cap? Yeah, Jay, it's Russ. I would characterize our capital deployment strategy as essentially unchanged. You've heard us talk many times in the past about our number one priority is gonna continue to be organic investments into the business. You saw that in the capital investments that we made in the first quarter. Up year-over-year, in line with the spending that we have in our full year outlook. Prioritizing investments in new products, new manufacturing capability, capacity where it makes sense in some of our lower cost operations, that's always gonna take precedent. Secondarily to that is gonna be M&A, followed by returns to shareholders in the form of share repurchase. We added last quarter, you might recall, a nuance to that in that we indicated that in the current environment, we thought debt reduction was a responsible fourth element to add alongside share repurchase. That's exactly what we did. The strong cash flow generation in the first quarter, driven in part by this intense focus that we're applying to working capital optimization, helped us fully clear $100 million of debt that we took against the ABL to help fund the closing of the Endura acquisition in early January. Borrowed, repaid, and you'll continue to see the Term A Loan that we put in place to facilitate the balance of that transaction continue to amortize. We'll slowly see some de-levering over time. I'm not gonna put a target out there relative to year-end debt ratios. I would just say that we feel really good about the cash flow generation profile of the business right now. We came into the year knowing that there should be a relatively meaningful benefit possible in working capital as inflation comes down and as the business slows, and we're doubling down in that area with all the initiatives that I talked about earlier. Our full year free cash flow guide of $220 million-$250 million, you know, that conservatively forecasted about $50 million of working capital reductions. We think we've got line of sight to more than that. By the way, it's in our variable incentive comp plan this year, so the team is intensely focused on driving to targets well above that. Okay, great. That's all I had. Thanks. Thanks, Jay. Thank you. Mr. Heckes, we have no further questions at this time. I would now like to turn the floor back over to you for closing comments. Thank you, Christine, and thank you for joining us today. We appreciate your interest and continued support. This concludes our call. Operator, can you please provide the replay instructions? Thank you for joining Masonite's first quarter 2023 earnings conference call. This conference call has been recorded. The replay may be accessed until May 23rd. To access the replay, please dial 877-660-6853 in the U.S.