MAS - Earnings call transcript Q3 2020

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Operator

Good morning, ladies and gentlemen. Welcome to the Masco Third Quarter 2020 Earnings Call. My name is Maria, and I'll 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.

begin. may You

David Chaika

Masco's and third Maria, Keith Welcome Masco John to President Officer. Chief Thank conference good call. XXXX Sznewajs, and Masco; quarter CEO are President With Corporation's and and Financial you, of morning. Vice me Allman, today

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

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

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

financial statements also Our will metrics. include non-GAAP

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

Keith Allman

Good four. slide staying and to safe healthy you Thank for difficult you are families Please joining morning, turn thank Dave. everyone, and hope in you, your us today. and I times. these

increased few, we our to investing entertainment, for this commuting, maintaining of consumers in their and disposable to increased at a pandemic. tremendous During points incremental performance ability products in time share basis as per margins both on priority increased volume to use of their of XX%, homes our the cost pull lines. per XX%, million $XXX to I'm execution and ever-changing leverage safety. share. currency. more operating of profit top home our face the and consumers employee and impact our due the This extremely quarter on and they With third resulted how excluding leisure bottom XX%, demand homes. $X.XX XXX reevaluate customers, continued profitably to met quarter, for travel, our our growth, the as XX.X%. to expanded as delivered top the while or for Sales reduction robust of was income the levers. the and name reduced margins proud to result discretionary very are more of grew demand strong to strong responses served spending We right strong in gas XX% Operating a Earnings

each sales award recently omnichannel our growth across extremely currency. America half by were speaks partnership. Turning particularly our growth across second Plumbing record strong Home August Depot drove grew Plumbing partner the and greater retail, suppliers, Delta of Home quarter, achieving annual sales is sales of to expertise with Trade through recognized customers which commitment in in Delta strategic and innovation, marketing e-commerce increased strong than of its with the was as This all September. and in segments, trade and to trade both channels. drive XX% thought XX%, performance North partner to our American to an the year. excluding The of Depot Delta, at sales led XX%. North

to factories. and experience. and enhance living also of employees and Record with quarter in at-home rebounded the for nicely dealing its Spas demand the on their business despite in achieved Spa number third backlog look levels still backyard for limitations consumers our continued, Our government of as growth, ways

also led growth China. by currency, growth in excluding posted Germany Our and strong International X%, Plumbing business of

the as the product categories, third in challenged, all & we segment, such Europe, In in Decorative Lighting. sales growth a grew Hardware including our rebounded While Bath as exceptional Spain. whole, drove an certain remain XX% UK Paint, as and quarter, Architectural Cabinet markets and

DIY tremendous do thank in of quarter. upper a Paint single serving quarter. customers PRO to remained economical our themselves quarter efforts units, significant other Across range. growth remained improvement can from and the Our homeowners strong declined keeping all of robust it for an mid their very is each with XX% demand in paint all that the of like last safe. business project was exceptional as to a our improve again would home. the appearance Paint I simple, our employees it their has digits, sales in

outlook. Now X% moving approximately currency to remain quarter fourth segments. both XX% sales fourth expect and our strong excluding quarter to in be to into We demand anticipate growth,

expect points. this basis a quarter segment approximately year-over-year operating segment of we margins Additionally, operating quarter, expansion for operating for to be Decorative put XX%. be XXX Together, would Plumbing XX% and our approximately XX% margins margin at approximately fourth over the our to for Masco's

to in the sales, innovation As a a percent in we we brands, as value States to or points is facilities a no the world. service and ensure investment deliver distribution, our sustainable long-term This further concern shutdowns further many it which creation. in of relates anticipate COVID cases assumes parts continue of obviously SG&A United of to as spike and outlook

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

and incurrent the sheet share uncertainty balance on remains in plan our quarter. there program fourth environment, strong the in we do liquidity, resuming based repurchase our While on

and details execute now to - these I'll the John our change return thoughts during to in market the to variables, million and is repurchases With to finally, $XXX M&A have quarter the be And repurchases will transactions times. results. me, liquidity plan for of M&A. John? While that, many and sheet initial uncertain right it excuse balance in our active to is on the on remain strategic with quarter over fourth quarter. the subject turn our fit our towards third deploy We on approximately amount there additional no

John Sznewajs

morning, Keith. And you, Thank good everyone.

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

We slide robust to Turning as quarter, six. sales outstanding currency. a excluding increased an had XX%,

international the by nicely American American $XX In local performance currency, quarter quarter from Gross volume local Plumbing strong by quarter sales and XXX mainly million. and currency, last translation in This margin over up North impacted by the In increased was driven exceptional by volume. cost XX%. rebounded driven in currency increased businesses. revenue increased our Foreign North sales increased points, growth favorably and year, DIY our basis in approximately was third Paint X% XX% prior volume leverage. driven quarter, third

XXX and fixed points decreased or was XX.X% containment. to operating a continued as last sales basis as cost points on cost basis income our million, focus up from XX% percent leverage XXX XX.X%. $XXX margins SG&A of $XXX Operating Our with to result a of year, expanding million

operating was environment. strong quarter volume, of XX% to a a XX% an due the cost were EPS incremental our on focus $X.XX, compared and the third for to the XXXX. exceptional a Our continued relatively quarter benign increase of commodity margins leverage Company-wide control on

performance and fund growth need this and such to leverage we tremendous investments future is service quarters. to also fuel and recognize operating to our to a Masco's brands, our plan the in testament innovation to While commitment invest in control, cost

forecasting demand the continued precise and solid a quarter. in do fourth is consumer remains uncertainty challenge, While we anticipate

margin currency consumer the stimulus the Uncertainties QX the the effect such points expect overall and growth, expansion expected results. impact demand and our XX%, of the from virus the sales impact programs as with in economy excluding X% approximately of government to on health We of and XXXX. of of of XXX market basis could

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

Turning of grew slide currency. Plumbing seven. excluding the XX% to impact

and Foreign currency, American led growth increased currency million in we the by and $XX third quarter, in at end e-commerce some channels, in driven in trade, continued local our the this impacted approximately translation by second restocking. Delta. segment's The consumer inventory favorably quarter. XX% by experienced the the North quarter demand of sales robust sales strong retail

and in compared currency. low Mexican operate X% capacity third these with relationship. sales facilities. $XX XX% of margin grew driven XX.X%. million, China, than quarter, European our This was and up experience Spain, continue and products, Operating quarter, government-mandated demand drove was in to very second both at productivity million Plumbing countries. year, basis recover. they by in by volume, partially walk-ins cost double-digit Despite ongoing other price The employee have continue record strong to growth XX% profit manufacturing a challenges, other limitations to to lower walk-ins While business in improved growth declines our and to the higher $XXX points in less the in XXX% from favorable growth due local margins International expanding in including increased for resulting offset a been economies slower continued their Germany where the with prior in or Hansgrohe UK incremental was to strong backlog. cost initiatives countries, the XXX Spa

the sales, of to We X% fourth XXX with to XX%, Turning be quarter. margins up prior approximately year. currency XX%, points excluding basis to from anticipate up

our by eight. proposition our performance resurgence growth DIY well in restocking single behavior. inventory paint. to Behr's strong shift offset compelling paint for positioned XX% this digit in remain partially consumer in decline a by quarter. Architectural Decorative this high in slide was on in to with Paint, performance. continued DIY growth driven value grew third We Turning outstanding the XX% mid and This Paint The high-teens pro some with drove and capitalize business quality

from the a While we saw quarter. third improvement the improvement declined sequential QX propane nice through demand quarter, in and

as and wins. consumer strong to from they categories Our builder's across contributed benefited exceptional new results hardware business demand growth segment's product and also delivered program

improve, Additionally, in control, business cost by incremental prior increased XX%, unfavorable price and over offset quarter an to by volume cost Operating by continued year. driven growth our achieving relationship. partially Lighting the profit continued

up in to cost growth to nine. with expect XX points Turning At from for year. a investment level slide demand fourth approximately X% prior the a the continue quarter, to segment more And we margins of sales of price paint basis of operating we and strong quarter. fourth in same anticipate time, approximately headwind normalized XX%, anticipate a to the XX%, turning

of levels cash sale from note important the and year of lower XX We cash the prior business. sheet XX.X% from that percent operations our taxes accounts reported September Working billion at debt-to-EBITDA payable, It reflects continue versus Kichler. balance on the capital as approximately XX full to as revolver. X improved due $X.X our in billion of a Cabinetry availability GAAP X.X working we points sheet net paid net an times to our inventory ended at resulting quarter, to capital largely $X our with improvements sales the with to which of million is basis months $XXX of liquidity ended includes balance to improvement strengthen

of gain on from Cabinetry reconciliation free the $XXX impact sale approximately conversion the $XXX adjusted year-to-date deck. on of our our of million flow cash $XXX of free year. net cash the be our of operations cash with cash found million. approximately is Excluding in can of approximately is This paid with the this taxes a flow XXX% business, appendix this expectation A million, consistent

quarter, During which low we debt the annualized maturity million historically $X result savings. approximately of at refinanced third will our also interest rates, expense in successfully XXXX

buyback reinstate in conditions. Lastly, call quarter, to in to to to now share back over I'll as our that, And repurchases the million currently turn the Keith share intend We fourth approximately market mentioned, the deploy Keith. quarter. we with plan $XXX to fourth subject activity

Keith Allman

consumer that, we between for to no exceed call and more to And living the this proud homes. better these Masco per environments. year the interact growth range how invest to made And are year an to our affordable providing classroom, $X.XX our $X XXXX. innovation of early continue for trend is ago, to I'll and in it Masco team. well have the we changes while their The their say our a At shelter. investment we and XXXX, our few products. way consumers our restaurant, With just and Day customer's long-term products to an support and of The continue commitment changing and achieve gym pandemic than ever-changing years, homes a the provide a earnings the our and by homeowners to a positions to possibilities execution become that the with believe of with for entire leading share brand, longer John. impact on enhance place up in Investor open pleased us and living will very past discover a we drive bit they support for outlook I'm to little committed increased the we I'm capitalizing has The continues COVID-XX office, you, that business value to culture Thank creation planned. over is our for the needs this center. reevaluate house It questions. market. entertainment to now definitive in in strong growth earlier than service Maria? in will the likely full XXXX their a as

Operator

Instructions] line of you. question Thank [Operator comes Barclays. first the Our of Bouley Matthew from

Matthew Bouley

Congrats morning. thank you Investor about guide this Good kind for just a the is the, Wanted on to up. I start mentioned year Keith, questions. results. setting taking guess, longer-term how margin. the with And out thinking the you question to Day and around of

growth. above And hear to the both I come around intentions also investing side, some for margin you segments. the in you On in ranges given had around

sort the back that you there remain ranges, bring an above you. about as can of extended long-term XXXX, those range? of to kind the period So, potential think into intentionally Or long-term going idea is that margins you're Thank those here? a we for is

Keith Allman

a think lower you we XXXX. that remember based that need when our to Investor on volume was significantly that, margin Matthew, for the targets expectations, setup about Day, at for we XXXX

Plumbing, nicely. low in Deco range, XX% on we And I volume this shy XX.X% as other guidance to was a based XX.X% And calls, think very just call to I we outlook. Masco, volume XX% this and in in along was had we've as that of and talked leverage said, overall XX%.

targets margin would service, variables. increased about, we our would like Investor innovation talked XXXX. margins fundamentals you and be And if invest R&R those and somewhat that of Day talk that expansion. be But think that with in continue brands, So at to strong And volume, about. and in I to would, there our we able exceed certainly is we a headwind, will to of lots we'll

Matthew Bouley

Okay. Understood.

sequentially Plumbing, guide typical maybe given than step zeroing Secondly, of QX. for in kind you XQ that's of bit margin a just QX, down a on ended the where complying larger

there don't nature that one-time or is that of guess, that I that step in anything Thank you. unsustainable So Plumbing down? QX is, margin I know, might drive type in

Keith Allman

our quarter. hit, There of are fourth as swiftly Plumbing in things think the is that Recall interacting, about cost-cutting pandemic on et as on once very with we cash in was we couple enacted impact we cetera, to quarter be what that demonstrated assessing And third demand of going robust. on a we that, the exactly throes measures, are significant believe, liquidity, our has and flow, demand. the the remained I results,

So, And increased we additional sure now our probably have as we chain. advertising additional investment to rebates, continue do with we make brands, air into fourth out that bit little back quarter, investment - see a a higher bonuses, in we continued of balance move we spend, and Certainly, do forward. little we'll be and I in as bringing expect going bit And costs. supply strong to to production talked about higher about, additional innovation. volume freight, keep win inventories talked the the up look some demand. to some in some We will as Commodities and anticipate, marketing, recovery. increased in less investment favorable, we as overtime, are

the Plumbing. but other at that's that pretty think well, similar definitely as about as So margins. dynamic QX, the segment looking for for we really, we're

Matthew Bouley

Okay. Keith. Thanks,

Operator

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

John Lovallo

you very performance? off the Thank for just, with wondering, well. questions with the was give my us an starting quarter, you how taking performance on, strong as guys. just Hey, can segment Kichler, update a if Maybe in

Keith Allman

I to or than better the would did there. with say, planned, better planned. job, down team great a than They execute, at really Continue impressed

very good doing solid. That was a growth. job is on achieved the or team And plan. we So

John Lovallo

quarter? then, going it it in factors the increased sense. maybe quarter, which other Okay. some lot investment forward constrained back a just of there's sounds that the Was was margins, how Plumbing Or you coming And that XX.X% much going like was of to about? factor? a just the the in But investment talked that be the to makes

Keith Allman

investment You Is reduction what much how QX? we say did you're the constrained that investments, of in a have John, asking?

John Sznewajs

maybe John, this one. I'll Yes, take

In - third quarter the on that yes, we down if them exited our start into terms QX, things quarter. you we in yeah, Keith going third the of the really about mentioned, pandemic expenses performance as mean, think I of plumbing, one of the in clamped at and kept we the constrained

quarter. travel And very the in SG&A so trade typically would and down virtually, as less Things down like you that expenses the attend think Because having we that a all about like shows significantly our in teams right? entertainment, travel we promotional the in we're lot be running, might much. Things expense not particularly were typical quarter. like area,

a that the enjoyed bit operating put so better expansion of leverage in the probably led And QX. little we top margin benefits on to

QX And trying we're expenses appropriately to as so Keith best we mentioned, grow have business. to as from to reinvest watching, the but into contain we we as can, roll our QX, we're

viewing of the into fact as so are some go costs And we may QX. to that in we layer we need back those

Operator

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

Mike Dahl

as around any How you're freight? guess, and and that impact head we you an see some I also already are 'XX questions, thought Hi. for margin? can Keith, could and we give about John, in question. potentially further input my think, next freight in reacceleration freight, thoughts what There's response costs think certainly vaccine you you XQ I to and some acceleration seeing? some inputs also us of potential when about creeping Nice also more are up in Thanks of mentioned much of remarks thinking global distribution taking of recovery and that as in pressures some inputs. the year. your into And the we color one the results.

John Sznewajs

John. Mike. It's Yes, sure,

terms costs, commodity some have In certainly, benefit. you and in yes of QX, -

I'd drivers performance were our drivers of bigger expansion and QX All volume productivity the in obviously, of of margin inputs. our cost say QX, much and commodity

our you to us the about our particularly did increase copper on said it's and it flow we've think - Looking in they material and And help as forward, for quarter. us bit Plumbing that zinc, gave before P&L. base - tailwind us start you think provided particularly quarter. the as metals, seen recall as through, in think zinc before a - we've and the other and the think of third But copper inflation in base about and copper hits I calls, quarters zinc I the two to raw second little

And so a headwind will tailwind, less as a we little bit be a bit QX. of go more of that into little a

rise to for year. price we bit commodity a increase input relates risen in that our prices a it into go up over a quarter. As the And expect paint, was to little costs started the of if headwind to quarter has because oil bit the the a present course relationship little bit fourth have as of we the

that's remained down stable, looking. where relatively has So up lot a say, or not TiOX, there. movements would of we're I

quarter, So fourth expect as stable. be to the to continue we go that into we

part Mike, As also of your question, I freight. think, mentioned you

seen We of relatively us And yet. sales is haven't I pressure that would logistics everyone as a percent distribution cost costs low. of and a freight lot remind for

spikes we though wouldn't in distribution that logistics, be much of saw an significant impact. even So if

is just So in on of little seeing bit trucks. freight a tightness of what supply we are

have eye that's a we it's said, an so great general commodity-based experience job I handling That on. inflation inflation. always teams And we of or and inflation, our done whether keeping we're our that something think

like on our to we've productivity We'll also our required. that's with pricing suppliers We'll if work And so and them, drive push do always it to those we'll back we'll to initiatives. accordingly. continue enact cost We'll continue done. handle

Mike Dahl

clearly helpful. international. that. Great. in My second a America great and North it's That's recovery Thanks both for question, in plumbing, really in

at a with and think Europe, local some least we've restrictions I US, of have ahead have rising few the seen there cases of wondering, the probably Just some to you third been there. tighter European the been probably weeks your talk seeing just in that gotten in have what Can those at quarter? to little about you're plumbing of the the bit fourth recovery this business relative impact point in quarter any whether a

Keith Allman

and growth us, take one, is is Hansgrohe's a which this also largest double-digit quarter. drove market below for which, in the I'll Well, you Mike. very each know, market third China Germany, large as

did growth. see we So good

extent that there We But recover. I other example. in also Netherlands, countries to been were as Spain for my have to European the saw slower growth Italy, remarks, countries, said but UK the a in as such also lesser other and

about was think quarter, the was us. we for it robust in when good. So Europe third It

As we little it quarter, open very of they're right, more there whether and what to to pinpointed certain on And cetera, has area theaters, employing, than the time fourth a bit like the meaning that certain can venues in the closely more metropolitan watching here. types city-by-city doing happens. relates focused, way They being closing some we're it's cinemas, yes, tightening, cities a in different restaurants you're movie that it cutting or in they're been tend et be basis. are restrictions they're be types of

being think world, I this. they're And on the more more So around experience work to there's like how just through surgical.

agile, appropriately have very pull the So we've what ultimate is and to to needed. and what levers that think we will, it I if ability be the to situations closely be remains you impact the will the But cost if be. demonstrated seen monitor

So now, over watching, we're right really in Europe. particularly

Mike Dahl

in Thank Good quarter. the you. luck

Keith Allman

you. Thank

Operator

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

Adam Baumgarten

questions. businesses? a to give did mention in you my growth how Hey, You restocking taking morning. added both guys. segments. Can Thanks for much Good for both sense customer us that across

Keith Allman

would QX, impact of were for was, expect, might the And second growth. relatively you restocking, inventory significant light the exited as of you the channels. because about in driver a growth by think the and low much quarter third more volume tell far, this restocking volume demand the inventories I quarter. that as quarter Inventory you drivers that as being was the in at of the we were Adam, strong we experiencing relatively Yes, end

Adam Baumgarten

and looking it. guidance, DIY growth or Decorative assuming And XQ that then, at Paint you what are in for just Got guidance? Thanks. Pro Okay.

John Sznewajs

We be go improving the demand X% to we more Paint an We demand on Pro continue think see again, we the are in demand XX% growth of side, DIY going into continued for indicated but QX. the sales our strong to side I and And on we're to strong forecasting quarter. business. as will muted think fourth

So comp I of remind a Paint we quarter a would in everyone, go got tough though, the we've - is. going bit into as fourth

fourth we As quarter you fourth pulled in about may recall, experienced of last last the in forward year, year. of $XX million of the sales quarter

us that bit so a into be for will we of QX. a And headwind comp as go

Adam Baumgarten

guys. Great. Thanks,

Operator

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

David Chaika

may be you mute. Susan, on

John Sznewajs

Susan, Hi, there? you are Susan.

Susan Maklari

first that. and about My years? getting That we you your a restarting sorry about outlook Or million? how kind seeing. good talking the that a question think just to should in back sorry. my is that about about which seen past program, you and exceed mentioned you to of I starting I'm little of you're was any sign you've repurchase confidence of is obviously maybe think couple in bit this share back in the $XXX to Yeah. levels fault, you're what potential talk the layer the Can

John Sznewajs

Sure, Susan.

to what the bit share. the drives think see activity. I conditions quarter. repurchase in now opportunistic probably and indicated, like for shares. subject in that It's more remarks, Keith around both to our the pullback worth repurchases earlier we market the share We'll shares to than decision for less we there's be year, we repurchased variables indicated extent go were into we indicated, I And targeting a of lot $XXX in we're this we per both when $XX $XXX going little a prepared million to our of our be As million right as that share

be devote So bit share probably a to to we run the judgment the see we'll work to much of extent We'll aggressive to call pullback, our extent we quarter. a more bit as that it's going $XXX the see high. that. not but through probably probably than Again, price little more million, greater a we the share way be continue

Susan Maklari

perhaps that then, That on expect us following given trends those there? that you're and can through seeing we start cost some just there, Kichler especially should the we XXXX? you efforts, give a right. Okay. All as sounds to And good. cutting little look of color up of to how come to some And

Keith Allman

that pop and is create relatively Lighting less some expensive house. look a your in a purchase new can you

So much of of products, sweet price spot that will, we the in are buck, our which also many saw if of for and the in you Lighting. point like bang that

saw good across growth. Kichler participated in So we channels, that our and growth

this to on mentioned is question, growth said, even And was how Kichler we grew. our before plan, growth past as of I to And little I'm earlier pleased As an and maybe with we're plan, team a Kichler quarter. objective ahead position bit had year, performing. the for next and we

like seeing. So, I'm what I

Susan Maklari

you, great. Okay, Thank both.

Operator

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

Truman Patterson

thanks morning, for and my everyone, Good taking question. Hi.

clarity, even on a businesses could trending how in just positive way? but how the - October the the you basis Seems two And like throughout demand among they through it XQ, of or First, in either trended were go ended in or segments, all still for your September rate? are exit year-over-year quarter? that just

John Sznewajs

record little in timing As we bit had of the spoke remarks, prepared last of the a Delta a months quarter. couple

to It going general, that's growth in in had and DIY consistent consistent. with strong excuse was fairly segment, nice Europe, in solid, in space the in remain - In the general, Paint Decorative, going somewhat Plumbing. the and good So me, in pretty through. over consistent strong quarter, in Plumbing acceleration and and

a So you bit dynamics. that in-quarter gives of little of kind the color on

Truman Patterson

issues then on of necessarily or that and the And paint heard Or paint have in building in filling in capacity any the side, demand. that. but Okay. your some specifically? you a there's seeing up need little product categories, not do? you we've And that in Thank it faucets, especially thinking little you And bit all more flip to capacity your build then, you over faucets in Are additional think are to or like for issues issues? build to supply winter? Do robust about other build seems you more own inventory? the than normally that looking there's Are inventory levels bit you how come a inventory retailers of your chain channels. you

Keith Allman

Right now, Truman, at months we're inventory. to have didn't and We and beginning to use that due QX going that managing build through in capacity. luxury the with the slower our would was early uncertainty Typically, everything restrictions on current the point. year that of and we

the of where in demand a over selectively or Now due have buy do need gallon more tremendous to where one than to DIY, to We paint little gallon the capacity talked to we one five. DIY plans we it. - to bit shift increase filling tend resurgence some they due the and add paint about one

So to and sort that filling capacity one thing. in gallon some we of additional lines, purchase buy had

So certain in issues. really, significant spot likely machinery in types we've point, areas, had But then, of horizon. At capacity add. certain capacity some there's going capacity we're in to to not where some there's, increase no immediate but

bit like position see channels, is partners In little the terms say and where for would to see to of probably where would it. we a would it the light channel I that inventory in inventory like our

as fill inventory year. of bit little a we move see may the through So

John Sznewajs

drive teams. always to I fantastic folks chain chain our and that, we've internally, job it's the like to add this done robust our one growth. supply plans has everyone fashion across increased a reacting Keith's comments take And I'd or the this in whether our to in acted Yeah. the it's have a suppliers, portfolio our our time that acknowledge thing whether really to of coordinated demand teams third to experiencing quarter. is They And been supply just

the quarter. pleased responded And so this really team we're has with how

Truman Patterson

upcoming on quarter. luck good and all the you Thank

John Sznewajs

you. Thank

Operator

next from Truist. line question Our Keith of of comes Hughes the

Keith Hughes

Thank Do issues. you're production feel of sounds Watkins, discussed like having the have to you. and it sort for some full A of still that you on question when earlier? you some get alleviate backlog any will back production

John Sznewajs

and like government tough restrictions. to And despite hard When best Keith, good the we place. my Mexican as they and insight night to is releases going any again, some these as said team the when mean quarter Watkins to Watkins working and don't fulfilling deliver prepared I fulfill team in that's the running remarks, to take of in have tell. it's the demand. growth the can. drove restrictions, day I But they is

pleased the really in and so QX we're QX. Watkins And how is here team with delivering

Keith Hughes

paint. PRO on question second And

quarter, like about to a in your with Why that the - is bit is on market? fourth get partner do sounds the that Is saw You retail better what you in something something to talked little we more expected or it on third. that?

John Sznewajs

the been Keith, continued in that just think, it's I progress seeing. trends we've

the allowing you since of through to come our on and paint sales. in we seen we've a each in contractors steady QX, expect, might not PRO homes, improvement in through QX, sequential a As lot improvement quarter saw their month QX, saw consumers and pullback we actually paint

trend And think we continue we QX. we're experiencing, could that, so, what here as based that on go into

Keith Hughes

Okay.

Keith Allman

the more in A fact the What lot towards moves to there, happens of consumer being that late what your it it in to home, Keith. the to as psyche and variabilities allowed happens year, relates pros interior. virus the

lot is there have a variables that So think about. we to of

Keith Hughes

Okay. Thank you.

Operator

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

Michael Rehaut

on everyone, morning, congrats and Good results. the Thanks.

Keith Allman

you. Thank

Michael Rehaut

just the the when wanted the side little from that to Plumbing roughly I on in bit some businesses to you you're sales the question, line, Decorative. rates, in a Plumbing back X%. top trends circle in XX% a X% on of to detail about still expecting understanding growth First of strong and bit little to think but the And expected, very sequential a

that all that earlier that during what's relatively if hand? you other in get you the trends similarly, you said things had observed to believe absence inventory earlier consistent driving if there's perhaps at or trying XQ. to restocking that Decorative, I And of the Just a is referred of sense of

just I looking understand XXXX, trying And X% growing XXXX into at John, down referred in to to the again, decel a So of know, XQ. X%, I'm also had at tougher but X%. comp, XQ somewhat you XQ

to what's So I just wanted better that try understand driving and well. as

John Sznewajs

feel you that transition Yeah, the from sequential. the think about Mike, as you of QX, growth

trying expect this little we extremely be good strong all, go as you a to really forecasting know, said, demand But QX guide as We as fourth bit little impact say a - to we might good current of the into have continue in in is to should hard And bit there demand QX third into I on be quarter - the the had dial you virus environment a results. or of may to in we're it's a our as dose that And say. challenge. what things results. of which First QX. drove of we conservatism and quarter,

I did We're as third go our restocking XX% as quarter. some to into in had So That quarter growth in at it. inventory we to looking fourth view have perspective, XX% we the that quarter. growth. significant X% said, Plumbing don't from third deceleration the in

probably restocking And probably see how plays that less we're into there's thinking We'll that as out. QX. so little a we go inventory

program in activity On we're the expecting pull question, - a impact of also has that one in to at say mean think, And third of currently type we the XXXX. we Liberty smaller a businesses go revenue Decorative of full on load-in not is quarter. your win had and an one to the to recur had due the made I'd the terrific retail our really, they I they here a here you point QX a strong had because definitely also in quarter stop. the rates smaller segment Hardware, they of had which forward side, really Architectural the fourth a growth as quarter customers. their in - that quarter,

to Mike, QX. of expect in place restocking inventory recur. don't restocking of that QX. we And the inventory talked to We to similarly bit little take so same segment, about we Plumbing that don't And activity a level in expect

yes, this little XXX QX a good all the That expansion in pull environment with think a X% basis are rates growth as or XX% QX muted from bit So and points it of transition we more still that the margin said to we to very strong in represents think QX. together, we quite quarter. growth is translates

Michael Rehaut

bps your margin trying we reinvestment regard? in And perhaps obviously, XXXX should the strategy see long-term to great kicking makes the up? able Or see you're and that. that do guess, to that before margin you targets, it it's stay high kind the XQ this perfect targets I your those above when about impacting margins is could guidance. levels XX long-term baked XXX the of appreciate Is top-line. being you in factor of or that had those talking that when secondly, you're into Thank a on the investment side, Keith, generating, with reinvestment you. How and Absolutely, in rate? sense to still think maintain that's Obviously, talked maintain about that for the a with about above higher a profitability? something could where spend reinvest of And margins or how terms type be reinvestment business.

John Sznewajs

My about We at, call appreciation is price what significantly in comment you X% looking at we'll it, that the business, if and talk existing look early do And expect XXXX. consumer think sales. turnover. the We it's home price of appreciation, fundamentals swings it configured now, on and we're too next - million home growth you $X.X it's let's call housing XXXX, numbers, home our at drives really to again, that more look quarter. when that of those

those big So numbers. are

lot into but numbers, sustainable us aren't going those gives certainly of confidence that XXXX. Now a

continuing comments - we all to how to above to expansion, about always want that's So and to expand we continue my margins. here. grow grow want we we We - think driving And margin market.

were I factored comments into there. my So, our my investments made that thinking increased and

optimum say will to and that, when the continue mid-and think I to I'm sit XX.X% that say is drive here value creation. that. long-term, creation, more long-term the not spend value than optimum. to going going for SG&A you It's about, we're And Now

the do thing value SG& at be XX.X%, drive It's to sustainable not So creation. an not to there will increase A. in right because that's

to also those we much this how these the going go are commitment we we reduction going to we're where don't to months. more, maintain carefully the watching But one investments. cost And learn know, very we - So, we our increase, to what's no because going levers coming over But we're increase virus have. knows, future. is as

Operator

the Stephen of of from Evercore Kim Our next question comes line ISI.

Stephen Kim

because did related you're guys. much I very to for I'm to from virus, a if two kind as predict in be information anticipating different, a shutdown might we for to we business, your important there negative go are And lot obviously, were to thinking more that inventories a consider were - the - Yeah, asking little it's through a for perspective, other this would talked be to that think another first business? But I'm imagine future. areas. of of not we take different handled we impacts way of be giving instance? the stable some shutdowns, of terms effects Europe, you I'm it and its through the questions time. the to, Thanks good relates it particular, bit I effects to to And if what in about for US do but differences And your do you on on? the what up you're you, had may are do kind earlier time. would us both other a you you we think way wave, the - your going imagine between, you you curious like if imagine, as What little how again? hold in tighten the business,

Keith Allman

crystal way ball a of on of could One turns The kind couple about kind That's And think we I I negative, what positive question. is it wish the either had happen, spend. one. discretionary things. or of a

if like what discretionary got potentially and is to if to going reduction reduction cetera. rather the spend now, the downside scenarios. So a or at those was more there et of of high stimulus other areas, could relates the in And worse, going continue entertainment a out, spend happen, it no level in be, consumer to virus sorts as

to industry structural I've certainly mean. that to these the our can't about to and spike revert And the wallet, you Probably is back would being think will home. believe in it's we our share on entered of perpetuity. this that more than of continue. entered simply that, the in changes, of component deny their at and we've prudent at And spend discretionary big that think But probably talked or of millennials and to the to there And stay, elevated been I in is a time, into share we in research, have of DIY we levels don't market. is the talked less expected. spent of quarter in to has terms the in that other wallet some the same there people spent going own some seen is on spend? that be and Then Obviously, channel second last earlier the the significant partners research, home? some does what DIY. Is do the going go? where So discretionary consumer

earlier. We but it's expected it,

pie, could that you expanding a will. represent structural of if the DIY So

So evaluate those you, don't have and a crystal about we ball scenarios. but three positive things as we're answer for potentially negative thinking are that

John Sznewajs

in the the I the what think got And operation that they consumer and Stephen, seen, spring shutdown given on with consumer we as worked happens there. is still they keep we the that. The home. if like in my to color thing own to we've like given any we're And there I of our what investing be through and spending consumer we're Keith said, we've said, the demand think the seeing as mean, mean, demand maybe guess, trends affects I our that our were facilities. I their eye because research Keith there. I happened production, that think, on, and Watkins was saw will were be pandemic, will like contending we and

that's one back as in to of well. so got the the And thing keep our mind we've

Stephen Kim

Yeah. point. Thanks. Fair

of kind it's flip actually, - relates scenario. question Next a

outcome. say, bullish or a that's next more side, more get Let's actually future, a get more and say, vaccine the let's a reopening a like positive sometime rapid we on rapid in reopening we foreseeable

it One little are slowdown paint, of might talking maybe. that course, see you is before, folks things a the a business, and of your you of in about you've lot for that foreseeable a bit because now forward, had addressed DIY pull of

ahead you're areas a in with doing challenges that there could action your give address that where curious that. planning today I'm are you of are you're like? you if vaccine? would lot plan a you here, need you some - you're what operational you generally, suppose, could are event Arc, think what the business a might to about could potential in areas so the insight pull of what what And asking may but just And contingency of look If thinking anticipating specifics for not your Dec And areas I'm lever particular, some reasonably a you of I for? us slowdown how foresee? the into

Keith Allman

think I reductions. now. think I in it on would probably really utilization lined be structural When about where outstanding utilization up, cost had good pandemic, how and going significant you it's see our We good into we're have spending. mainly discretionary shape brick-and-mortar wouldn't there. pretty capacity and the is we

more thing better could down how how hard what and potential efficiency get to we obviously of see capacity flex very the road. downside, we do scenario, kind a our of we have, it. discretionary. on would have It's terms assets. the we then with And of I in some the think and investment down would use assets sort the of upside on We work we I that So out the see

John Sznewajs

our not mean experienced want and historically. with it right demand. double to a investment little faster, think or were the I down vaccine could business Stephen, got And we'll anymore And paint I PROs double-digit than I Yeah, would consumer grow description it they faster is, their several be we've way to in it, if franchise. maybe decides if PRO come to we've meet a there true pro that through investment approach we've last homes years. to to in in Pro do great that our been and growth the paint the your we our our growing channel on come partner business

think emerge. that's business going would I forward, scenario So to if the position your were a way I

Stephen Kim

guys. it. Great. lot, Thanks a Appreciate

Operator

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

Garik Shmois

capacity. you just to around Hi, thanks. I on the wanted comment just just made follow-up

away solid there's or add far in And paint? having to it XXXX. sounds step-up into the and capacity, plumbing demand, some perhaps with whether pretty Just how a in it's outlook like from are you

Keith Allman

We've color Keith maybe some talk been can first, - afterwards. add I'll

a add team within brick-and-mortar we efficiency such have our great facilities any job that, So don't term. the driving our done need to in near Garik, of capacity

of earlier, that at that's gallon course the current the the capacity estimate to been a said, investing We bit quarters. pace are last strongest frame. demand in our it. because side has Keith it we would - how might that at going in investment. to of over demand pain quarters. XXXX a XXXX That the the facilities couple some the time continues or mentioned demand is, But course are to the if definitely we the as XXXX where the the next be that the of have to X might out - little do of see I we It's over soonest go of not probably We'll plays need have couple be to expand

Garik Shmois

Okay. quick And just a question had on Plumbing.

sounded retail You just bullish August in called seeing across what particularly out good September. growth the you're board, on e-commerce. trade in and It

there? what of the in outlook kind Thanks just trade is driving acceleration channel? is the wondering what the and So congratulations. And

Keith Allman

we comfortable more really they go down of think becoming safe shut literally them. shut channel and of that sense to were I down feeling trade showrooms the into comfortable in being into for the and than to - not a in go those plumbing areas then while going more shutdown consumers

in as consumer we're to a engaging it the showrooms think showroom. that with plus. I very relates So the channel And the of part strong was big

set our So spot. into that right sweet

I So of all. big a that was component it think

and with to that component comfortable in a degree, bit breaks, to is plumbers fixed. their consumer of it where repair having like be more a there's So the little something a home, when has

dryer washer our So in a or faucet whether or system. or a it's shower a case,

are that trade. dynamics drove think those I the So the

Operator

comes from Baird. Tim the of Our Wojs next line question of

Tim Wojs

your some catch-up next Nice think I investment point? to things ask XXXX customers that incremental customers you're curious kind about really maybe - environment? one normal what for about guys. around you do and Or Thanks maybe in. me type job. kind squeezing hearing year? question this of investment promotions or of think at Hi, a you think Do just revert just there's your had as might back promotional promotions

Keith Allman

normal were we the We it's don't retail about time it And driven to extent limit may this their by We the there's year out into But at Tim, as on cadence will more our we're working it this it's aggressive the promotional they year. subsequent they with play partners. a extent back to of about would going they're is them there that is out. and year a right would typically and our cadence participation our promotional to activity - expect like where going for the pull more thoughtful be want that. and now, is your through virus of point I think a the guess to virus see cadence to stores, necessarily point, more to work try - that consumers promotional I muted. that. they how

XXXX. play out But to to in most going decide work run. how best it's to to it's we can participate they and out determine for going our channel So with hard partners promotions now very we're exactly figure how right to closely effectively whatever

Tim Wojs

Okay.

great, Okay, guys. Thanks. luck. See good you

Keith Allman

question? more one there is Operator, Okay.

Operator

Jefferies. ladies of come of gentlemen, final and Phil Ng will And line from our question

Phil Ng

Hey in guys. John thanks the for squeezing me here.

to good comps, one, DIY quick side. to look got really when some pretty one, propane you've XXXX, tough Just out recover, see on we the

you you have see year next where DIY, do just up Or in enough pro on side the curious, a actually the in just Kichler? Deco stronger standpoint? I'm momentum across have growth maybe So board being we from growth

Keith Allman

It's too here. Keith Phil, early to 'XX. call

in have growth a we And we said, expect consumer. do I As XXXX. strong

a We strong have brand.

service. about partner. DIY great talk best paint, When the a have we channel We you have our

about we always And teams So that's and we're how invest drive we it. for growth. would, do, our and thinking

Phil Ng

Keith. lot a Thanks

Keith Allman

you, Phil. Okay. Thank

Keith Allman

I you to Thank participating the Thank And it. really quarter. in everyone appreciate call. will talk safe. you we for to Please next you. stay

Operator

does conclude this gentlemen, conference and today's call. Ladies you. Thank

disconnect. You may now

Masco (MAS) 28 Oct 202020 Q3 Earnings call transcript