MAS - Earnings call transcript Q2 2020

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Operator

Good morning, ladies and gentlemen, and welcome to the Masco Second Quarter 2020 Earnings Call. My name is Beverlin, and I will be your operator for today’s call.

As a reminder, today’s conference call is being recorded for replay purposes. [Operator Instructions] I will now turn the call over to David Chaika, Vice President, Treasurer and Investor Relations.

You may begin.

David Chaika

good and Beverlin, you morning. Thank Corporation’s Welcome Quarter Call. Second to Masco Conference XXXX Allman, today CEO Vice and me are President Sznewajs, President Officer. Financial With Keith Chief Masco’s John and and of Masco;

today the quarter second that refer our Relations. earnings under and are Our presentation on available release we slides will Investor website to

me one open your follow-up. one If can’t take Following will for questions. with the our remarks, XXX-XXX-XXXX. Please question analyst now, directly please call question call we limit at yourself to we

statements. Securities include about Factors views XX-Q will performance, our future statements forward-looking forward-looking in Form subject constitute today describe disclosures and uncertainties results we XX-K and that our and which statements and with filed Our actual from our Exchange are our These and differ our the could that statements. materially Risk Commission. cause the these to in to uncertainties We risk other our Form risk

financial include metrics. also will statements non-GAAP Our

earnings Our as and references call our will otherwise under the which GAAP and to adjusted earnings to Keith. that, unless to are We in release be With our now presentation I’ll adjusted, operating reconcile Investor website on metrics over turn slides, these profit per available share Relations. noted.

Keith Allman

I'm another, Masco communities proud of support us. Despite support the and the the customers difficult joining a Good time and for Dave. created serve. numerous This our for that are challenges we for pandemic, ones morning your of Thank you, families has COVID-XX loved certainly I thank for all us demonstrated the team by you everyone, hope for today. and and safe. you support one healthy is and thousands

Masco fight passionate change, their we're and the challenge, our racial Our racism, sidelines to to responsiveness injustice and team on inequality. the pandemic, part. for about to throughout the shown about creating against concerned grateful systemic committed has dedication. in doing has the risen Similar and We're not standing I'm the that lasting

accelerate we enterprise-wide diversity us But included laid and company to communities. our Masco, within treated and where our dignity we creating included, five At our opportunity employees environment last all the more to with have an enable and all thrive. the are a opportunity actions that an that has all do. equal are inclusion years, and progress to are will Over employees have strategy work recognize -- foundation fully employees in solid future. we've committed to respect, We an

the in Please incremental operating excluding on products strong impact strong in segment. expectations. Decorative currency, This significantly strength while sales quarter of continuing refer Now, points better earnings quarter extremely reopened. control turning million, highlighting income channels and production four. Operating grew demand restrictions XX% move. margins well record in with for of the XX per $X.XX our second to our We resulted expected focus cost results. and our decrimental in paint sales improved quarter and along our than margins the as our eased to on a our for Plumbing demand our executed in distribution for quarterly our slide and business allocation just and expanded to segment $X capital Combined, the operations share portfolio per from increased decrease XX.X%. our decreased margins X% outperforming and basis to Net share, X%, resulted

production closures. Plumbing, Sales extent mainly of widely driven facility Turning distribution varied and excluding by Plumbing the across businesses declined to segments, our XX%. our sales currency, in

the closures. due experienced in largest business facility the spa Our decline segment sales to

a able However, in of to than quicker and half this quarter, what sales achieve we business. resumed were than the of expected forecasted production we decline less during originally

our spas, to industry-leading of speaks to enhance at-home experience. demand to backlog of our which and We living consumers their the continue to see and record brands levels for desire

positive saw throughout improvement significant largest been such market, June, while reopen. growth as to sales the Our international saw have and European business slower U.K. Plumbing quarter. Italy, in the countries, other our Germany,

improvement with business quarter, its saw e-commerce with channels American Plumbing trade, also North June, significant strength Delta retail throughout of sales achieving Our and strong distribution. in the month a in record

the than May Plumbing, bottom in together of control Decorative teens anticipated expected. with for than in and significantly resulted the for DIY up to in large on stronger stronger and the Home With DIY drove performance did the double-digits our we we Our in continue with pro notable quarter cost along see performance. of Depot sales volume both to invest, well-positioned June. In our sales the to June. quarter, strong but and high Behr extremely XX%, the margins market, top opportunity. we are Sales disciplined declined improvement our segment, committed our even strength Architectural were leading capitalize low in better decrimental brand, and remain paint line partner

of we in quarter, predicting of last impact discussed and dynamic and the this are best. difficult is we pandemic duration As at the uncertain depth and times accurately

me Plumbing up X%, the to X% range withdrawn in are year have down here's of and how currently X% Decorative in to full to While range range currency Architectural be third We thinking we to XX%. XX the -- growth up quarter of in sales flat quarter, XX%, the of we third expected our -- excluding our about anticipate be excuse sales guidance, with performance. to

for last company expected margins are of each operating and segments quarter year. both our similar Third be to the to

in a points this Importantly, as facilities which or cases assumes the obviously distribution, of spike no country. concern COVID is parts outlook of of shutdowns many further

quarter, products, if the pandemic worsens. backlog seeing While lessen quarter stimulus the we based on in for the the and reduces and appears third if economic impact demand robust the concerns be fourth government to could of are that our we have demand the

growth, invest during Additionally, the to while in focused we and we were brand, remain innovation will cost continue committed service ensure we to we control and short-term on long-term this in to driving recovery. win pandemic,

allocation. capital current Lastly, on update you to thoughts I'd like our on

in uncertainty approximately $XXX shares indefinitely repurchased we thoughts M&A. our liquidity you have suspended uncertain We these of during activity at to share no execute on I'll remain our suspending repurchase of million sheet have average of price the market to remind our current transactions and prior to We that balance share. due change per active the an the environment. times. $XX.XX There to M&A activity our the and is

expressing confidence Lastly, and in our sheet. balance prospects strength of our future the

to marks our detail Our second dividend I'll an intention over annual With fourth This now of to quarter its seventh announced increase. Board the year it results. John? raise X% dividend by annual our that, on for beginning quarter. per consecutive in additional turn share our John to $X.XX

John Sznewajs

Thank you, Keith, and good morning, everyone.

impact on items. one-time excluding comments and the my other adjusted performance, of focus rationalization of most mentioned, Dave As will

Turning the X% Sales excluding decreased slide and six. X% currency.

sales the Foreign which by second Gross local paint prior second In DIY approximately in growth impacted matched by our sales were performance revenue our quarter in currency This year. business. lower translation points. basis offset was million. In margins in due North quarter down, American to quarter, local international XX mainly was volumes currency, volume unfavorably lower the Plumbing decreased our strong XX% in XX.X% volumes. by business, currency, $XX driven

expect of costs of and related are expanding to our of as growth in last basis support new initiatives continued the points SG&A quarter. million this XX points displays, sales do, containment these brands, program year a of advance remainder wins in in back our XXX however, margins to portion additional focus impact result investments income strengthen and come further improves. e-commerce our the basis decreased to $X to The Our the channel. of costs cost the to was operating lower the These in the a volumes. year. We quarter, from XX.X% as as percent advertising XX.X% Operating despite down funding to $XXX rapid demand million

second compared of of XXXX. quarter, an EPS the Our in quarter $X.XX to was the increase XX%

throughout the down pent-up do the XX% we helpful and point, the sales in fulfilled. due Many you not in restrictions We similar get fulfilled eased normally this XX% to would numerous in margins, flat only demand June, sales X% restrictions. the continues pent-up in thought anticipate the May approximately can we the government with and XXXX. overall this as continued to to third as of health sales environment solid of the were with Improving the some of results, operating currency to and we it the trends, turning down was programs improvement effect XX% to quarter. demand impact April was these remain growth of stimulus and While of such to understand impact provide low for of demand economy on to expectations, excluding the monthly quarter, growth QX be consumer. uncertainties virus that saw the of

to closures Additionally, no to of it is assumes our related COVID-XX. QX note points our expectations of for that further manufacturing plants or important distribution

sequentially improve decreased Turning excluding performance. than to resulting seven. single expected with high during quarter, sales better Plumbing of but up June XX%, digits, impact the the in currency, segment slide

in $XX and channels American unfavorably Foreign wholesale in plumbing currency and our The our impacted million XX% solid in channel was by the approximately retail dealer translation closure the sales wholesale quarter. impacted was specialty and the North than sales channels. in more segment showrooms. trade currency. by e-commerce declines growth locations A local offset of decreased by more

in a saw significant month the in of improvement trade June. positive sales and we growth channel However, the

in a as month sales of facility digit. American in California at were closures did recover significant Our in to April the to Spa in a and single up well low quarter June the as X% in ramp unfavorably impacted spa restrictions decline manufacturing Delta were North in result sales due by business and also orders. government approximately were record our quarter exceptionally from sales down Mexico ease. We May a June.

third at continues home employee a in in and which Hansgrohe quarter. single digit continue the due constraints local we out limitations Watkins facilities, to throughout capacity decline International XX% quarter to in Germany. expect the its in However, currency. experienced than Plumbing to ongoing less low labor of market our decreased operate sales XXX%

to in saw the in growth. markets, those quarter. significant decline European the was countries. XX% Spain improved profit sales Operating China million, low margins and in easing $XXX restrictions declines the of Sales in improvement larger the declined also the June and approximately other in digits experienced in first XX.X%. quarter, slower the France, single due quarter single-digit for a in including U.K., with Hansgrohe Italy quarter mid a However, were from

containment. Our was decremental volumes than better margin on improved execution cost expected and of to solid due XX%

XX%, sales May, monthly April trends, sales X% growth in down were in June. in and of rebounded down Plumbing to to terms improved In XX%

Turning to the third quarter.

be year to as demand margins We currency, while demand slower of X% excluding to remains in sales, in products anticipate down to recover. the to will X% be similar of good margins America, expect prior range we North international see our currently up XX.X%. We for

growth in was for eight. for a X% quarter. pro Behr. growth with strong Turning The double-digit paint, double-digit quarter paint, grew business sales the in teens offset DIY Architectural for low Decorative to paint resulting in slide by performance decline partially high our low by driven record

painting. continued outstanding Our DIY DIY benefited results the resurgence paint from in

trend, While remained consumer to still call early we capitalize with to Behr's behavior. proposition it too and this value is compelling a shifts in quality on well-positioned

the paint down demand in sequential the improvement single declined low we saw quarter, second digits. While June only with pro sales within quarter,

builders solid lower also driven lighting performance in our Growth retail in by their business. business offset was by quarter, Our hardware experienced channels. growth the sales in e-commerce partially in

orders. Operating rebalancing of were such of we profit focused lighting closure in spending. volume the anticipated. customer, in advertising quarter earnings and were to containment, impacted were a improve results Lighting than but as driven Sales by the state lighting inventory program and quarter marketing quarter, portion the a As private also shelter-in-place the on XX%, by in sales loss and label negatively cost sales sales incremental a showrooms our first mentioned impacted increase June. growth call, better as reduced year-over-year by due with by sequentially it

May, of up Decorative In in April, down sales, XX% outstanding in were were in approximately and up but terms X% June. an monthly sales XX%

Turning to quarter. third the

growth year margins expect of the prior segment margins We in to of and to demand X% in continue XX%, to XX.X%. strong be range paint anticipate for approximately to sales the

segment, the higher We a in investment in nine. to program related in to and quarter a also expense the third at additional business turning advertising our display customer. slide and And hardware builders retail anticipate in marketing win

due at levels full to tax the which sheet EBITDA revolver. quarter-end lower of with and a sale Our we Note balance an cash our to debt XX.X% on paid of the ended This year Working of deferral of includes payable. that to a inventory the due billion $X.X basis XX points accounts capital was times billion on $XXX quarter percent sheet business. remains very sales balance as balance taxes July prior was benefit XX. to improvement of improved strong, versus with as cabinetry our in availability includes liquidity, net $X our approximately million X.X

X.X to agreement, second quarter, share accelerated Lastly, of million share during million the our we repurchase cost no additional $XXX shares complete received $XX.XX. average at price and

our count shares. will we And As activity continue back remained the estimate be I'll share average suspended mentioned, to Keith. diluted buyback XXX our Keith share that, million with therefore, XXXX to turn over approximately call

Keith Allman

and The lead behavior to working their of economy, in on rates single-family has lead easy-to-do which of consumer and from could in sales. And to interest John. such may pandemic a distance house structural correlation our price space could remote homeownership, higher having remodeling assess. There which more with effects lack spending. the you, Increased projects, supply COVID-XX as low increased Thank continue especially strong all Homeowners record have may appreciation, the we more in and will projects, as to be housing home with lasting on to mortgage opposed people more painting could other homes. do-it-yourself take historically neighbors.

continue Masco these the of and positions With creation. commitment and repair in culture past open products. our brand, Operator? to to our our the few to well I'll customers, made value we of to that, up and innovation factors over our All questions. now service growth bode The long-term execution remodel lower ticket well drive to changes invest support have years, for call and us for

Operator

Bouley first line Instructions] Matthew comes Capital. [Operator the Barclays Your question from of of

Matthew Bouley

conservative kind give But be July curious QX. a color everyone how if I of I well. And guess, is providing trended on you keeping little for And Thanks range. for a the sort of perhaps you. start both starting segments? thanks the such good in monthly doing some Hope, what's around details quarter, range morning. on could a wanted on more cadence. guidance to the relatively the I'd questions. all the It's there? taking for and point wide you sales large for Thank Hey, the

Keith Allman

starting confidently. Matthew, July off the are was strong for we us. And quarter

the what's top when However, in happen range, clear is driven the think, we of -- thinking variability we can as it volatility the what's I with on think consumer. what line. relates terms look that our it's and And as fundamentally about drived large possible forward to there range that's

Matthew Bouley

to kind DIY What on like promotional least. strong? ability share seems underlying Understood. while really the or does more through you results at Obviously, the Thank or I And sort you Okay. sense grow continue summer specifically. is the there it kind through there some or the intent limit strong very of this? on maintain Is even -- just hear are of And make months market there? this to your an strong Or wave of secondly, and demand it share, the investment to underlying you. paint around kind what's and investments it's of going making QX. into doing, ride

Keith Allman

the Number as the very flow employees, is we about safety business share There's the from portfolio. two, stop. ensuring to result talked We with sure our we pro. Matthew, strong as just you DIY we eye our continue our make on we're A performance full focus. That's to Number gaining an that. of we've share and as close and continuity position of demand our brand, on a are and to when been strong look most a is question. three has No with strong that at and intent here, things. definitely related leading our doing the perspective, -- our of liquidity that's we're one, opportunity focus that. significant liquidity do change a have overlay to cash keeping DIY consistently, our And to gain

new in So, in this that about making that's innovation. strong. in investing displays, be we'll in. segment some in recovery. bit we've And appropriately recovery the winning we're number And three, part little also brand winning consistently about talked particularly John talked that sure spending a is Decorative of that Architectural the and

spend a So, we're that it's to the will. feel, we that's it. And a recovery. And committed win thinking ensuring we judgment call. are it's about But appropriately to how you if in

Matthew Bouley

Congrats results. Keith. on Thanks,

Keith Allman

Thank you.

Operator

Kim comes Your the from Evercore. Stephen question of next line of

Stephen Kim

dealer more much, to guys. maybe about wholesale/specialty little what with your levels you're probably bit to and restocking. very seeing U.S. you Good I channel. Thanks a happening could inventory impactful in the Yeah. imagine And quarter. wanted it's if long ask respect how Wondering would be it last? yet, that in I'd

confirm, down to that second want Just was as in high as like much quarter? teens

Keith Allman

of I portion didn't last I'm that sorry, Steven. your question. hear

Stephen Kim

down channel teens in high wholesale I'm that was much dealer Plumbing, sorry. was The specialty as XQ? as in and

John Sznewajs

John. points channels. good. channel has reopen, been once say good there. no. And Actually I would Steven, across seen sell-in we we've our is very like. we It saw probably of I trends Yeah. couple than No. -- trade to it's a -- saw sales a better Sell-through very the start

And so no.

Our teams you -- was that less it described, than that. not the sales were down

Keith Allman

Steven, inventory, it a lot varies really of terms In business-to-business.

demand, shutdowns had unprecedented our containers. know, a we're government you dent as inventory levels As for some an we one the seeing orders example, put QX, friendly And buy DIY products. paint, certainly demand our of that gallon driven particularly consumers for amount in continue in by to

businesses. in We're catching both perspective, were position believe And in we a the backlog. back as that to go months. we some as well here within facilities from customers on production there inventory But we're our are fluctuations serve up good ramping our So, business-to-business summer a through our as up.

Stephen Kim

Thanks Great. that. for Okay.

you do through XQ is be are in can that that or that catch-up you further? to even pretty think going talking much feel Or you occurred? XQ, whatever we're clarify, like so to something destocking about you Just on saying this

Keith Allman

No.

to think catch-up. I we're going

Stephen Kim

much. very Okay. Thanks

Operator

of Lovallo Bank question of line next America. John comes the from of Your

John Lovallo

guys. for you Hey, question. taking Thank my

one, very Matt's First was to year-over-year just more time. question I'll comparable that obviously June would basis? The say mean, you is strong, on plus trend maybe one July try a least I XX%. sales at

John Sznewajs

Yeah. Yeah. John, think similar. I think -- it yeah, very it's I was

John Lovallo

so year-over-year million helpful. you talked and I on absolute be forth. you XQ in turning How basis, XQ? Okay. maybe we SG&A upwards And SG&A. year-over-year I again? $XX or And about they should displays do on a in and basis or pulled of some actually just will and mean, trends investment about year-over-year know then The dollars basis a guys significant. That's very on so e-commerce think to a think is those down out

John Sznewajs

year-over-year. I down don't I'm will there'll -- think be they I'm sorry. sorry, be

I year-over-year, pulled in like have some advertising, think, had back additional the things SG&A going expect we some we'll you headcount back in. freeze. that really to described, We headcount. that John, coming investment a hiring might as we on And we're make

We to as the demand across have And freezes back has of we at came starting wage into the system. look putting back, come second the enterprise as we're those things some in quarter.

One goes Keith of support program win things and at of Liberty that that some to remarks my the the the as will prepared I displays in retail. that mentioned into going be mentioned, through that in SG&A, they had

So, some we'll I have investments. think, additional

Some significantly will pretty on pulled advertising in quarter. back the we third back that come

you good on I very, we we'll I closely. shape. our changes, SG&A quick to think, react we'll be be can we very So, monitoring any overall, are see think, And that very to spend. this extent in the tell I

John Lovallo

guys. you, Thank Okay.

Operator

question line Rehaut comes JPMorgan. of of Your from next the Michael

Michael Rehaut

the on work. and hard congrats all everyone Thanks. Good morning

-- again, July. bit. in additional appreciate I color around zeroing one, of And kind on little the XQ number Just a

the you're you a at a two maybe book I points order are a How spend? rather a When XQ what year margin of than some puts maybe similar sequentially, margins like the in side. anything in also a some anything maybe at of seasonality? ago, other those then, talking cost operating and forward high costs how and your -- few seeing last of coming you're operating but types from of about bit look or that down midpoint the of And June July, July? holding being much the back to of into XX of is some measures, of of back -- the below temporary you If that those being coming perhaps range points a end much that back months is on look seeing terms guess below, on advertising function you in just

Keith Allman

of that. part a is seasonality certainly, Well,

And look, quarter. QX If paint, heftiest it little off in Mike, backs you bit QX. our is a at then

would And liquidity, an there's overall you with of this are So, paint. and on be a continuity, focus element driver look back QX. was what into put business look at terms going I pandemic we did particularly business we had as I deal volume, we that we in in of when planning at think to seasonality when The costs to mentioned, not keen us know in this demand. biggest

And it's to cautious. were we this control to think, environment. able were do -- demonstrate is we we able to be that levers I that we unpredictable have because favorable So, an the spend, our

investment terms balancing it's and we today we're about start that program. We've advertising, And of of our need in that in that that in. investment sorts to talked continue costs support continuing back to we to to control spend things in brand that program to the we We're win build share layer this us to take promotions to and drive the to recovery. wins sit a good feel for thing. the So, where with those That's going put appropriate displays, in recovery. to continuing

the some relates costs as third costs, into there We quarter, to our over a as as bit also smooth supply have premium admittedly we're freight be out we of hiring will continuing chain. look time, to little increased it

call for So, when similar you in making year. why margins to and at look QX variability, last roll that be those all to the we're you that's

Michael Rehaut

on sales appreciate question, just again. then, it. I the And

John Sznewajs

order book, seeing? the On we what are

Keith Allman

And solid the mentioned, real strong, sell-through than we stronger John a been have has have very book. -- the We as sell-in. order

book some into put So, our continue we have is order back to channel, some ability inventory and to us strong. the for

Michael Rehaut

Thank you.

Operator

of line comes Zener Ken question the of Your from KeyBanc. next

Ken Zener

everyone. Hello,

Keith Allman

Ken. morning, Good

John Sznewajs

morning. Good

Ken Zener

have Focused a parts. Plumbing, two I on What quarter?

the -- up is rough retail SKU if kind seeing? of First, the on from mix fittings the trade. you're of about So, Plumbing of focused lot traffic gross U.S. and a the kind then thoughts what is picking

So, talked record I mean, retail. Stanley about

are in U.S. bad And to just and fittings, just the and question. retail is seeing then the trends first we So, the the so people between also it rough trade? going in wasn't

Keith Allman

generally speaking, tends think, the I to new rough bit a have to finish. more than it component little construction

can you remodel with -- stops do As plumbing. certainly job deck going a remodel working a cetera, faucet, or and and versus the repair under et with or working with rough

a So, earlier to away there the relates bit little it was saw as the a of on shift rough temporary from tougher quarter construction. we in impact new

rough. Now, to better we're quarter, a bit June for fared that last mix. starting question, see little to say I in of it to than in demand rough the would your the as that relates that answer build month But finish

and down. In have i.e. wholesale, closed think sale saying. pretty of been consistent retail us points When a terms of of plumbing goes versus points distribution I volume you showrooms, what others story have to that and

as a retail, saw channel And then, they're more a nice are actually some people showrooms So, with And June, shift reopened. first, to it, months in call back. we're starting quarter. that to that the we traction of there shift we're that seeing in two seeing was come in to very the start to as interface e-commerce

Ken Zener

insight? kind you. is behavior of it contrast in U.S. that Plumbing might difference a you And in specifically could versus offer big in some If Thank the if there consumer Europe? the

Keith Allman

to speaking recover than rates And what that seen here is to so consumer mix. And really the But broadly at say States States. know and behavior so that. I the of much is recovery Really, in to it say in something traffic and we're is United I'd channels much. I would about way look that really Europe, been haven't at best has Europe a United tell say, Europe. that it's that the channels don't infection our -- slower versus been seeing, look and frankly. We slower our little in here that may

at look U.K. the You

Just so thinking than States. approach Italy, where those say United difference consumer significantly say that's would I has I behavior. countries reopening here, more to Spain, say aggressive would a -- less been the there's And than

Ken Zener

you. Thank

Operator

line question comes from Your the next RBC Capital of Mike of Markets. Dahl

Mike Dahl

against and Thanks morning. quite taking fluid quarter my backdrop. Good for such that's a questions, good

question, I specifically. on just First had Arc Deck paint and

if I of of kind single coating back segment. -- being If was we total drag two like think trends. think low a the point about sounds paint based commented that that maybe pro You It the roughly business XX% in the got overall like down quarter on digits June. I to that in

So, XX%. when to how much just up continue frame results? segment that X% either drag Any or and on at on how the XQ, could looking for like guide you're pro to thoughts the to are, expectations what paint contribute

John Sznewajs

be just on growth on. look so, we QX, expect of what to Mike, -- business improvement modest a significant is all, at counting quarter. of Yeah. forward first from here we not slight improvement today, expect pro third from the is the And as we it but don't I we're about significant XX% our mean, in paint to where sales. -- we're

Mike Dahl

when margins on at a about XQ a if in I And investment the normally -- Or the not or come and some you'd investments investments is timing cost than deferred significantly kind Deck year-on-year is some in of than same on the Plumbing, back time, Just appreciate tailwinds on the I margins. be? on are cost Got it it's frame or for a question back the at Plumbing, environment. into of just catch-up mats of growth Okay. and certainly, -- have in through returning the about flat potentially. least larger second from Arc, truly to also sure And general, the it raw reason the it. overall? from whether you midpoint may more basis? year-on-year then to think but these how you little lever that at whether stacked XQ, normally Is just so guess, trying in

John Sznewajs

the the across of that the A just we're that we slowly had other similar, part. spend say much did putting the the not reinvesting or I'd because putting the the headcount of lot And QX for a mentioned hardware incur. Mike, more right? that of same on. we're hiring it's freeze pretty builders it's headcount, investment the of the It's Keith latter segments, business, it's more we're We're into loosening couple some from some as of the kind freeze story business. all that we in Yeah. back we of that catch-up had minutes displays a ago,

not far appropriate We we are to starting the retail We're brand this brands investment out our sense brands to our support in too appropriately. to get to brands partners. there. the think and trying at with point reinvest in continue But makes the

say, commodity terms been In a that apart, think so. of into the I that the risen as in or Zinc cost, we're relatively seeing, touch. Copper has price segments. break has two I'd guess, Mike, basket up -- last the month about now flat, you maybe

so, it's above a year today, And where was it ago.

hit future. for So about two of be headwind a P&L. takes deflation raw quarters flow-through in the a material it our that, that little could to and potentially bit Recall

for business. the our go year, has the continue look bit balance offset we and on to to impact. be year we on So, be do on we relatively we'll resins. to is of the through we of have of on material bit maybe the some Decorative QX one -- that will turn been -- little we that of as -- potential the expect year. the the stable it you the the stable feel tariff into little Then basket of the a bottom year. TiOX Plumbing we and Architectural of to a and little of a side the go the into side, be the of really And if to seen through maybe second raw the little that to at of And tailwind bit enjoy area seeing half as half commodity help a see The easing last we'll of inflation the side bit that into the are continue

some Decorative price second in headwinds side. potential of the on the for there's the cost Architectural half year So, the

Mike Dahl

That’s Thanks. Okay. helpful. really

John Sznewajs

Yeah.

Operator

line the Goldman from Susan comes of Your of Maklari Sachs. next question

Susan Maklari

Do you. over like what forward some has It recessionary are we've bit couple historically is morning. And of extent. think of that shift that of been from thinking seen? see your mix first that's in together Thank that come accurate? that higher the guess, My months level. the about feels same to we've shift sustainability is going mix how the last Good periods trends of that commentary really not the you some I the question you we seeing and a

Keith Allman

accurate I is think, Susan, statement. that an

mix, say, pandemic let's that would more affected the shift been haven't perhaps haven't by that terms And terms unemployment different several mix the been really a on maybe the of, typical In affected or is why of level affluent would theories seen. recession buy haven't that there's higher is, that of we you say far. customers is in so

spa business, record that's in backlog dollar We we quality demand. we're high aspect purchase. it. So, our very a that's and an solid have that about And segments. But at seeing high mix our it discretionary and talked of we are level high a good seeing across

think fair So, that's I a statement.

will think little, of in it's we much a rest factor. go the mix of to a material early really to going channel look full economy isn't anticipate through on that as as was going think a year had as little a where as bit of stronger pullback really really terms yet Europe look have headwind the we don't we mix mix. We has that when quarter to relates of the in call the year, be be it, impact retail to we that mix And In we but we at through, it trade. that than

Susan Maklari

talked helpful. pipeline it the are about breakdown? you you you. like for up returns sounds ticked you and a perhaps are is allocation. bit comments color shareholder how capital a little And there? Can little M&A That's about M&A of more And what relative perhaps give your seeing in Okay. on just kind Keith thinking you us that to

Keith Allman

has pipeline same. The about been really the

it. drive to and work to continue We

targets. interesting have We

people. in willingness of an clearly. I talking type less But environment, this think, we're there's sell, of still to a to probably

into I how terms we allocation. how that difference expect fits or much shareholder wouldn't M&A in return, activity So, and think our much and capital of about

no talked I As really about, change.

make to then that. to going stock be past. dividend. -- that businesses to also M&A going patient our And at our to more the is we as the patient. And or support and existing to sure respectable And be we've and shareholder of fund looking And first that and that our we're and little demonstrated by strategy we bit hasn't that to bolt-on idea targets, allocation M&A and our good creating we're foremost. in And large, business, as to buy maintain capital core think, it and and we'll share Our our grow heavily segments. dividend continue will we're take advantage I our there and to relates of episodic acquisitions, a buybacks value have times a healthy changed. And

Susan Maklari

you. Okay. Great. luck. Good Thank

Keith Allman

Thank you.

Operator

of next Clarke Your the Seldon from question comes Deutsche line Bank. of

Seldon Clarke

at know temporary I either morning. revenue you talked consistent? with of you decrementals at right the come growth, should But of or think some sales the X% cost the -- Plunging stay book there in Thanks end in if question. come for incrementals Are your higher Hey, to the Or base fairly for the What's about example, range? or XX% either about Decorative in way good those guidance? scale if end to the -- Decorative, fixed costs. either would

John Sznewajs

XX% should to segment Plumbing be range. XX% Architectural haven't would to I segment, company that, closer to you to in XX% same will The range an Seldon, that approximately Yeah. Overall, incrementals XX% that from our the we're the XX%, than range. little XX% tell a really changed bit perspective, much. less a that Decorative be

reflect fixed from of should experienced historically. significant some But change we've good our leverage cost. really that what So, no

Seldon Clarke

then And quick helpful. couple spa on just the of That's Okay. business. ones a

is First manufacturers seeing talked there the did standpoint? seasonality any from And all in a or of you about constrained business? demand. But share that quarter, second the market how production pent-up much just amount major a in you lose is significant

Keith Allman

at point. look is constrained the industry, at When this you everybody

no assertion on There's right you're for that sure. So, question about it.

In seasonal business. terms of seasonality, typically, this is very a

tremendous our that a and with forward and looking we're year. we through summer/fall the filling anticipate got into to order seasonality our it. backlog there frankly, not However, book winter, be and strong backlog, We've this to the

John Sznewajs

honest. Quite Yeah.

not not is I So clearly this permitted a is This was demand issue. a issue. -- to this manufacture. mean, -- and we were supply

seeing really point, good strength business. in And Keith's so, to this we're

Seldon Clarke

time. Okay. Thanks, guys. I appreciate your

Keith Allman

you. Thank

Operator

Your question comes next Suisse. of from the line Baumgarten of Adam Credit

Adam Baumgarten

question. taking Thanks Hi. my for

difference trended Just the in paint, quarter? you that sales between how exterior and growth meaningful if maybe curious any interior, throughout and in saw

John Sznewajs

Yeah. Sure.

stronger season, we year than sales second next Given the in generally in did we in the the quarter, nature paint. paint saw interior of the

the take During pandemic. than probably see would the second quarter, second the we in that's quarters, but a Adam I and normally nature current stronger -- little of the environment it bit versus historical

Adam Baumgarten

on business? Got Kichler guidance sales XQ sales. guidance in it. confirm will assuming the And for gave? Liberty to Are growth positive Decorative you be And pro for that and then, you also, just up on the that paint

John Sznewajs

expecting So, continue in the their they segment. be of Kichler business will the the modest pieces small we relatively growth and segment, are will for in so it the quarter. And Liberty growth, third modest because pro overall are then,

Adam Baumgarten

Appreciate Thanks. it. Got it.

Operator

Shmois question next the Capital. of Your Garik line comes Loop from of

Garik Shmois

Hi. Thanks.

there going a to secular we're you you that to want next trends DIY conversely, shift a due on in for and follow-up over do that question. just and quarters pro the expected guess several were years, potentially in interest? -- demand? think the the point Just that more see not, if I QX, of July the think seeing you're resurgence to Do given at that in you're pro levels category

Keith Allman

your to repeat when you the a Garik, the There's of I'm ask on to call little interference question. going you were question. asking bit

Garik Shmois

Sorry. No.

if that pro if this be starting a category could then, shift see secular the from resurgence due you're July and into And to in third the worry possible, not, paint interest? there wondering normalize Just quarter. sales to away in DIY do you

Keith Allman

The in their -- throughout mentioned inside. are strong was as lift pro prepared seeing quarter. on than outside in comfortable think are having we up are obviously pick seeing up saw people we remarks, I bit. of a -- the our the we little in as It people we And quarter, the more exterior, home the

resurgence -- of In of of concerned of pro, we're terms no, or lack if that, we're the -- the not. about resurgence

half in about DIY of we're it, painters have We continue we of time for painters. were a excited this, first that. spot, we to the pro look leading pandemic, those were the the and first we're brand, is we lack some DIY do peel solid a back, research timers for But fundamentally, millennials. sweet better plan of have XX% have word. particularly painted if you our call at and the of going when share our track that full, record gain about where to And that think a and And in

to have being and take is to will talking Now, a the coming ready poised we And that to been into shift. able for millennials some be it this relates a about that do households as we tailwind think thesis this And we cohort business. market, for and the structural our are a DIY that time big forming advantage that. be of

in a incredibly So, to it's be. in -- good solid spot brand and our think DIY I growing an business pro, strong -- having both and a a

Garik Shmois

follow-up to gallon Okay. associated incremental any Thanks five any in toggle with is, paint gallon? production from between how two there or -- the maybe for way sensitivity production? quickly A quickly costs one question is that. there And have you are a if in transitioning to

John Sznewajs

There's gallon with a not you Yeah. smoothly because obviously, running as your of little bit inefficiency, are plant rates over five. fill one

One trend. we this months of and in so here be we things be will in coming capacity in -- support one of doing the will is additional gallon investing the

back that efficiency there. feel track confident get on so, And can we improve we our and

Garik Shmois

Thank you.

Operator

of from of the comes Fargo. Wells Your question next Truman Patterson line

Truman Patterson

and Hi. Good Nice thanks for my morning, guys. taking results, questions.

tariff is tariff category there increased cover some moving First had that are push in on demand seems price your can that you in rebounding you that to And in parts actually costs. pretty July? the meaningfully But there, to Kichler, this environment? June. to margins previously just into are like business? you recapture normalize in costs continued to It discuss able Are the starting has

Keith Allman

Yeah.

here. in the and July improvement continued the demand throughout then seeing are into quarter We

a sign. good So, that's

business. this We closing to quarter last work we've worked workforce as DC to strengthen on about rationalization. we've about, And and continue, talked some talked restructuring. We a

on for it. we're to largely So, with advancing our track business. this we're that's And turnaround well. plan And continuing drive

progress they've about that good and made. feel down we there So, the the team

strategies, growth and advance invest can building in so to more, that on our continue strategies, plan. brand We cost it's assortment and XX-XX we strategies, simplification

Truman Patterson

Okay.

Thanks in following DIY anybody think Okay. deceleration few continue the more forever. on growth anything double-digit then, or been that. recently, months, consumer category? or a that expects you July, I few don't to for fatigue, up very past in just has plus. sort DIY have any And rates But of robust other questions. seen really

John Sznewajs

And Truman. strong. continue No. be point. to July this very at Not No,

Truman Patterson

Okay. you. Thank

Operator

next Phil comes line Jefferies. the of Ng from of Your question

Phil Ng

delta how the how out pandemic Hey, for international international impacting is business your this XXXX, impact are But good the plumbing profile Any and everyone. morning, year. growth versus zoom there? on out to Plumbing about thinking having your Appreciating is if the demand U.S. big U.S. an you we business? of

Keith Allman

DIY on effective of improved pro where as an to worked got margins way will, and -- Atlantic the have got significantly I if pro. and think, the strong We've we're here. the water, both relates it equally -- in in our of positioned we've you in well-positioned sides We've both ores Behr. franchise both to

the said, had we're that to much both So, business. and June. quarter in very in as that in Delta United we continues to grow a well, record tune growing sides of in States brand Leading

over strong. Hansgrohe. white momentum able a amount profitably to an share Europe, opportunities. because potential we're and quite that continues the significant And look And when to be is of of outstanding operate of with gain still then that and the world, got we nature have So space and brand, in around really we've brand

share feel in gain as we our here think, abroad. good growth well America, as feel equally both strong and opportunities, North I and about So, our

Phil Ng

logistics of things of recent months. That's kind you're from on given does Kichler on lighting be China in components really demand, whether terms in pandemic? and pose kind then the that concerns of plumbing the risk should that And Okay. with of in helpful. Plumbing up Any And just mindful strength a firming side? just to the that seeing meeting importing and it's due we

Keith Allman

I chain, say mean to tell that inventory factories, I hand that our and folks chain. our it have the in really folks plan to suppliers. supply our our I'd you I And supply work the when

very is month. XX to phenomenal work We and group. matter from of have then they in we supply significant environment. a go really not of a base we couple issues XX base do material And manufacturing there not our standpoint we the relates typically But have that supply setup and to any We're have a and in been factory there and as leaned that suppliers, professionals the this from is on chain chain. supply big our following job XX to not our not Clearly, And it going weeks chain jump to that a XX done a thankful to in, dynamic to our that. forget us. particularly the supply and anticipate from a for support or And do have. -- can And supply we're things change.

Phil Ng

lot. a Thanks Appreciate the color. Okay.

Operator

SunTrust. Hughes line Your next Keith question comes from the of of

Keith Allman

Hey, Keith.

Operator

line Mr. is Hughes, your open.

Keith Hughes

Can hear now? you me

Keith Allman

Yeah. We you. got

Keith Hughes

I Sorry. issue. connection have

start again. me Let

decline third second quarter. the sort in give any you and the business, On affecting in that quarter? of the the the for business role will Can I Watkins a be us it played know feel how Plumbing much

John Sznewajs

there's at place, to a capacity -- has because significant. still headwind, job demand, of to the Keith, still it say will Yeah. be Because very not terrific that the there are in would quarter, though even XXX% responding strong a modest headwind a team bit a they I it still restrictions in but of got that of up some they've demand. the and done would be capacity third not

Keith Hughes

Okay. Thank you.

Operator

the comes question Ramsey Group. next Thompson Your from of Steven Research line of

Steven Ramsey

Good morning.

into of There's solid. come given single-family And are a talked lot positive. achievable. back results a mean, if would XXXX But the Just guess, guidance, shaping up question, strong about on still for the pontification. level, be get has given original, I uncertainty. But it's to you factors high factor XXXX thoughts your the year? taking are the for quick seems up I at to like bridging curious Investor still being -- to macro your I now that it expected pretty QX a Day, QX just setting off very just be R&R but and XXXX strongly now

Keith Allman

Yeah.

-- look that possible and at it's I Investor think very think there. we're original in Day we we so. that targets, reviewing We be could

Yeah, of recall, that XX.X%, Plumbing at that As margin. doable. in I Deco think overall is at XX.X% Masco to XX% I XX.X% to XX%, in terms

to pandemic our to sweet have, benefit at right the low the the where We items ticket the that. spend are be But portfolio DIY that want of of they the look orientation their doubt, into at resilience, Certainly, seeing played without fact when our you consumer reconfiguration. in point wants and spot money. this where a the

it not certainly overall and give for health DIY, consumer -- full of against we think not going be in the But not I guidance could to the us. ticket, will bodes we're XXXX. for for We're at feels and we're good. XXXX. well I that we a how as Steven, also pretty what that say, are dynamic positioned look XXXX that, environment, for that giving in here guidance specific small the year we're

Steven Ramsey

Great. you. Thank

Operator

Speer Your Zelman & line of of comes from Justin Associates. the next question

Justin Speer

Good you, guys. morning. Thank

could both? international the to does the or or business? Just Plumbing question see international, in markets then Just the a And your you the to that that disruption North for what into two? just out quick curious fall was between Could the American spa disruption. North on distinction the reiterate back American small if growth you

Keith Allman

Mexican California interruption of and a and order, the driven our spa order by for that's manufacturing. we where state majority by was national The headwind really the or a have

So, we of quite were time. period down, a couldn't for produce

John? international, accounting, the of terms In

John Sznewajs

Yeah.

in So, all results. American Justin, Plumbing that's our North

Justin Speer

Okay.

And trending you you is behavior differences of of in major bit any there disconnect Is the America Or at in explains the little geography see versus so, international North it? that a I'll in some geography. folks shelter-in-place get anything terms as of in markets growth? as the North else terms transcript. obviously, than But look two the that there geographies, as international better the distinctions from American the

Keith Allman

I think consumer more relates country a and U.S. much little it bit answer, as nationally associated reopening international cadence a I so oriented think on and as to I mentioned prior versus is behavior. it it's than -- closure it's

of -- we our demand demand enough percent well. Masco one spas business our Europe we have are volume in North most from to outside which strong for is as -- the in interestingly it America and We have as global relates of spa

Justin Speer

Okay.

John Sznewajs

And the was spa the save to some Justin, time, your business American X%. just impact of North

Justin Speer

versus And the of in perfect. sell-in, was, to the like That's sell-through sounds the then Okay. is last it to what it me the paint was you switching the is was it stronger that -- sale question but -- say business, fair for just your on -- or gears the than reported results? stronger it point sell-through

John Sznewajs

correct. That's Yeah.

Justin Speer

third, buy-in fourth quarter? a from for that the from it Is off how you trends sell-in a Is seasonality throw work to guess, -- that inventory I you channel going does this about standpoint, standpoint? typical of as think typical or

John Sznewajs

No. Justin. Not significantly,

Justin Speer

you Thank much. Okay. very

Operator

Ladies reached conference we have questions. allotted gentlemen, call. Thank you the and concludes our in today's time for This for call. participating

You may disconnect. now

Masco (MAS) 30 Jul 202020 Q2 Earnings call transcript