MAS - Earnings call transcript Q2 2022

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Operator

Good morning, ladies and gentlemen. Welcome to Masco Corporation's Second Quarter 2022 Conference Call. My name is Bailey, 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.

begin. now may You

David Chaika

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

under earnings website Relations. second on quarter slides available and release Our presentation the are our Investor

at Following we will now, questions. we If Instructions] your our open question analyst remarks, can't call please (XXX) directly me [Operator the call XXX-XXXX. take for

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

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

joining Good and Dave. morning, X. Thank you, Please thank us you everyone, turn for today. Slide to

growth the a with segments. continue execute X%, both the environment, of We lesser year. our in half line extent, in and challenging increased In I'm this pricing performance in second to by first pleased with and volume the our top driven quarter, to

in as began to anniversary unfavorable other see beginning peak and market. supply input to was the we planned costs profit certain expense spot costs, in are and inflation the foreign last we increases in level, expect but Commodity operating we a by this currency. that higher and be declines quarter, inflation year chain Our impacted was mid-teens marketing

back in that cost continued to Importantly, half recover begun price experienced with pricing our we the of the actions, lag XXXX. have we

points These Additionally, of leverage contributed to XX.X%. XXX sequential to the to SG&A SG&A a quarter. points XX our to of continue as as actions basis percent for XX.X% improvement we basis sales improved margin

earnings quarter the which earnings. Our for was matched prior year's share per $X.XX,

our local segments. X% with comp, International XX% Plumbing growth to plumbing grew spa normalizing. in Architectural XX%, volumes to paint. across American PRO Turning Europe a strong price plumbing. growth see growth by markets growth X% strong with growth and and In its in in Decorative XX% approximately its quarter. was as paint mostly business to growth grew paint as products. DIY segment, Behr to was paint sales continues strong currency in performance, our DIY in North against for demand in continued remained our that with China North growth continue the American during teens solid, capitalize DIY and we due low on led international plumbing X%

that full developed gain we to volumes. year a by the interior along the paint in volumes this offering the demonstrating market expect XXXX in of market, as share range the We strong remained DIY paint be continue year compelling PRO third-party to with row, for Depot. in agency. leading that pleased I'm ninth testing have rated paint named we was Home very one number Behr the a also volumes

customer. Behr the and durability, are both the and ease the four proposition Behr coverage This that rankings. paint In top DIY to brings DIY quality addition and paint PRO for application, as paint all the value spot, a important of to selling points value the extremely and top of quality both PRO to is markets took including testament

repay shares or to outstanding as free the million the we fund the million the transaction. flow $XXX of at repurchases use accelerated used for over will the market This ASR. to brought to loan for total our capital $XXX our stock of our cash Turning year This quarter likely XXXX our open during completes of the our year. repurchases term repurchased beginning we repurchase an share X% stock through repurchases nearly $XXX to allocation. million We and

Now with let in we by volumes demand pricing. markets. what modestly demand me our in most half seeing moderated actual the expected, address for terms we of second or of second quarter. as our Across the products down be to growth Largely of are driven expect of our in year, sellout the many categories, during

side, the freight, and remain cost elevated. costs, labor certain as On such input

to Additionally, labor challenging operate freight and making it inconsistent, availability efficiently. be continues to

resulting strengthen, continues than to dollars we profit U.S. forecasted. the Lastly, in lower operating dollar

in per share $X.XX from earnings of per $X.XX With the our mind, between, $X.XX for expectations to to our these considerations expectations share to $X.XX. we year previous are be narrowing

We years, structural few and and remodel the positive numerous over there are is our we'll take repair activity if of short-term below housing slowdown. a falls we related closely next action factors believe market even plan dynamics, said, supportive That that economic will expectations. be increased there are if monitoring to

strong $X increased which households will expenditures. more for cohort on balance remodeling high. to housing increased the spaces, And the are and have the clearly all-time with person enjoyable reach consumers values pandemic XX large the desire We market. home prime trillion edge The equity and years. has homeowners demand savings more COVID-XX age XX at the of X.X home than sheets, three old remodeling led the has forming XX in and entering living and million million years next to of millennial over more homes

All of these business. our tailwinds repair forces and for structural provide remodel and

how full for outlook. additional call the over John? year quarter our second Now and results I'll John on detail turn to

John Sznewajs

Keith, you, everyone. morning, good and Thank

today comments of onetime impact on and will my excluding mentioned, rationalization the adjusted other items. Dave focus performance, As

against local drivers driven strong currency. XX% North delivered sales X. the offset impact This Slide higher in increased DIY was spas, net of X%. by higher These growth of this PRO The We increased X%. partially unfavorable increased XX%, American sales were well, the volumes, In to by showers. which sales of Turning main were growth and as prices, currency, XX% prices an increased and strong sales excluding selling XX%, sales and which and increased by XX%. paint as Net increased grew selling by quarter, increasing or currency, volumes sales In sales volumes impact selling X%, increased sales Net X% sales another comp. higher by X% with international sales a prices X%. increased robust currency increased excluding XX% local by X%. by faucets and Sales divestitures. performance by

by logistics year-over-year the improvement costs fourth pressure quarter. face in will of quarter, and margin gross XX% anticipate continue gross the third was expected with that to year-over-year Our margin higher impacted We the quarter. commodity in in

in of operating a second $XXX basis Our leverage percentage XX continued across businesses. XX.X% SG&A cost to as improved And million. points Operating was sales profit due our and quarter the to offset margin marketing XX.X%, supply partially operating and higher currency, by selling incremental chain of higher a prices sequential XXX was points. improvement costs, volume. and impacted net was basis profit by Operating discipline

Our matched quarter of EPS of second the the in $X.XX XXXX. quarter

their increased living. Slide in the contributed the almost Watkins to chain acquisitions was a Delta the International the was X% Homes all as growth excluding XX% currency, Segment increased second X% X. by delivered grew growth X% and trends net volume comp. offset costs, by key currency XX.X%. to local continue X% of contributed sales Wellness robust U.K. excluding they across against marketing in they divestitures. capitalize performance Segment increased and of was growth and was last drive and $XXX also grew against quarter partially impacts to double-digit prices. North local sales and Plumbing Turning by in quarter operating as X%, and the Germany, divestitures. markets to profit continuing supply sales the higher exceptional currency, Operating in towards XX% in the sales markets, France led operating a second year. sales X%. net plumbing results. currency American China, million outdoor or Pricing local selling to higher currency. This of margin comp was impacted profit on contributed wellness in quarter with

XX% second X. the for sales to quarter. Decorative Turning Slide increased Architectural

delivered the grow quarter, continued customer. our of ability our to PRO demonstrating strong penetration paint XX%, our we in investment, and customer. continue execution the with high-quality operational PRO approximately products our with outstanding PRO retain and Our paint offering are With to with share another business growth with gain PRO

Our grew teens. low DIY business sales

second margin performance and up was volume, in normalized the marketing. DIY net anticipate commodity and volumes modestly. supply second And or decline by and higher partially in was costs profit incremental quarter. we prices half offset X%, the paint DIY higher by $XXX was chain This Operating However, operating and $XX million XX.X%. now selling sales to driven million quarter,

to Turning Slide XX.

we borrowed of transaction sheet Working during fund We quarter with times, share strong, is ended even the X.X accelerated with approximately additional quarter. balance million debt-to-EBITDA balance we Our at $XXX billion $X.X sheet with repurchase the executed the the capital to liquidity. as levels our net was sales our and levels and of material. delivery a by demand was cost of XX.X%. Working focused in balance of Through we percent higher customers, delays impacted with receipt meet to inventory inflation, execution, capital continue demand. inventory to

to We XX.X% as at percent be of expect approximately sales a year-end. working capital

focus share million million Year-to-date, further almost and beginning this of repurchases million share approximately our the XX.X half $XXX to We on year. as repay have repurchases $XXX use the during free $XXX the repurchases we at outstanding loan. shareholder by continue deployed share also shares to or quarter. our year creation to approximately in million our cash not expect value the will We X% second do we returned the second deploying flow of shares term

let's XXXX. XX, for Slide our to turning Finally, review outlook

growth to the margins guidance higher year Given XX%. headwinds, lower volume foreign costs, chain our to moderating year Due to Masco X% versus be XX%. currency to we full full previous now approximately X% now operating anticipate X% sales and sales of demand range in supply and be to of expect we additional for

now weighted expansion second the in year, X%, guidance we X%. of our foreign will range of to sales growth half do be be anticipate XXXX in between our the versus the to we Plumbing While margin of previous fourth currency, the segment, quarter. In including to expect X% this

Plumbing we segment, Given and XX%. XX%, versus guidance approximately current XX% rate, in our unfavorably lower Architectural the our now guidance expect currency from supply volume by approximately X% range exchange In X% be XX% XXXX slightly chain inefficiencies previous year We Decorative million. Plumbing foreign to full expected will of of to margins grow higher revenue previous to sales impact anticipate due $XXX to or assumptions. to lower is

Looking paint to to margin Architectural paint We be for increase our paint our sales mid-single now we double XXXX, strong XX%. year sales to approximately currently growth digits Decorative PRO digits. at increase and full DIY anticipate specifically expect

As only recover pricing typically dollar we previously actions of discussed, in amount this segment, the inflation.

operating profit compression. cost recovery equal, else result to all actions dollars remain in result, margin neutral a As from pricing

as range. mentioned midpoint our assumes Keith at count estimate $X.XX, the updated EPS average EPS of which for share million Finally, earlier, This to a year. the diluted $XXX the represents XXXX XX% growth $X.XX is

deck. can open to Additional like would modeling XXXX on assumptions the call Operator? in be Slide With for that, I XX Q&A. our found earnings for

Operator

first of [Operator ahead. Kim question Evercore Instructions] go from today the Please Stephen line comes ISI. Our from

is open. Your line now

Stephen Kim

a the believe, that just I about I us Maybe breaking DIY info what half Hopefully, bit I could review down paint modestly. expected give was I right. got specific was within wanted so business? it if Arc curious that of see lot -- there. clear. of a PRO your in for you PRO to if you the out versus just decline segment, you is outlook volume when you I you you could But sense talked know could inclusive just gave second about we're said maybe a all little talk paint, Dec -- volume to the and you

John Sznewajs

Sure, Steve.

think we we saw quarter. demand demand, strong you in about like As the said,

you going had about think expect comps comps PRO, side we've we're we versus in some face starting to strong PRO some As in might QX. business. forward, the And of the significant DIY pretty

QX XX% comp growth. of is PRO year like against our think last I

the obviously, the we back still So year, last be four we of posting the anticipate in strong three growth posted won't the comps in half that we've in quarters. while PRO, or the

we half of back As by yes, think year. we -- about double DIY digits, year. do declining said, think half the down, driven business down in business, back will digits with our That volumes our low in price, the the Will double be of the be probably DIY Steve. up

Stephen Kim

digits? double you. down Sorry, would What spoke over be I

John Sznewajs

low digits volumes half DIY Yes. the second in the paint will of be double year. down

Stephen Kim

on FX look business? a housekeeping business, was And sales then give the anticipate we guidance for on divestiture in the at when do And cost when And you business, the that simply I cover can just in than looking we for of you Plumbing you giving acquisition XXXX, be Or that your you more will looking sense, dollar the Plumbing dollar the what be business? inflation you're to impact in look half in that. the into able the and know wise, just us not that forward quarter? cost as recovering should we're back

However, the movements perhaps effect that to think positive and we in a we're actually with in would reasonable some little might it that be stickiness carryover see seeing price, in XXXX? commodities

Keith Allman

for right. Keith. commodities, do in you're And as well. would priced We that what's this tailwind a we us. Typically, in we there do -- be pullback Stephen, recover recover this is exactly expect segment. a margin to If is

John Sznewajs

the of had and FX. impact these X%. rough FX question are is get you And speaking, is of kind think revenue first roughly Maybe roughly do acquisitions Stephen. to in and with part I the the question -- acquisition your X%, of Yes, numbers. a

Operator

The comes of today next from Please Barclays. from question go the Matthew ahead. Bouley line

is Your open. now line

Matthew Bouley

through the your half the guide, about any I quarter. kind the the could speak there? a part guess, is in comparison additional I'm at really, I one, sort that of getting sell-through around and the inventory think sellout at top, -- two, basically assumption destocking of speaking to of there mentioned as think quarter? that second view sell-in around moderated you sellout, was Or what sellout? you of there number we And

Keith Allman

our think to did on I and a help catch did channel we improve service up second little to that the year-to-date the quarter. that through was inventory bit planned. And And the consumer. here our customer We to

forward the to guide, of fluctuations terms that. have it our impact as relates on much anticipating In look, we're inventory not to really

Matthew Bouley

sort could side energy energy the the speak there? and the business, I Germany in on trends you looking like business guess on and guess sounded currency. of clearly, I assumptions of around sort it costs effects around Hansgrohe, the one, consumer divestitures a your in Europe in lot and international half the to there, forward, knock-on to strong of Second international ex second the concern European both specifically.

Keith Allman

demand, to continue Well, make China that for economic ball, particularly I we the to see position perform certainly are in us, U.K., crystal France, for et an Hansgrohe. in to a call But the will well overall in key call we no Europe. continues it, you Germany, cetera. tell strong very markets Central

So it, good our really and has we're the energy that natural powering of have flow is to With the we terms and constriction secured counting into issue have We're That would the on to team a from energy, or converted that our in But be hard done our year. continued was terms job. shutdown and the energy in energy the we've solid I performance quite and majority into done of overall actions significant growth taking, of equipment. good renewable an And this challenging. -- from the job. Europe they've a work that year other proactive be of that about if said, sources of that there be feel regard would the and strong. to for from working majority a we're confident equipment has next energy team to manage, going good done, gas to convert of requirements

John Sznewajs

Yes.

in to So maybe just couple comments of addition a other comments. Keith's

assuming in We given year back costs of energy what's higher just taken place. are the the half input

guide. we baked -- need sure into we that's make So the feel to

Operator

Dahl next Mike Capital. from today comes ahead. The RBC question go from Please

is line now open. Your

Mike Dahl

here. Just couple follow-ups a of

year half the the quarter. of levels are seen? through relates the how compare embedding you half, second comments volumes implied most guide where but just assuming for half question, Matt's exited terms the in greater second moderation of expectations or you about talk declines little over recently to back I volume just past have and you or XQ? know declines the similar you've experienced the you can those of the month Or maybe about a Are what you so? the than In talked as you to

John Sznewajs

as going tell best And as as of back at I'd the this Yes. Mike, have think we half we the think say, quarter to of consistent be the trends it, things at kind herein. were the point. we with stabilized we we exited look year can

Mike Dahl

And split the your between my that then second fairly it about inputs, is seems some the dynamics. question inflation you you kind Because a this the to segments? around high peak. Can I of difference relief talked could little look it. side. that Steve's paint you relief XX% know the for question, at but of in clear us color plumbing is if we stickier you more there out if segments potential Maybe be give on and just line the the time a on horizon between inflation trends there. little see a two as But could on the level,

John Sznewajs

Sure. to do Happy that.

So you of in yes, earlier, starting and midpoint XXXX. actually think said we said, year inflation, -- a obviously point. indicated, you and of a basically amount we the we as fair all hit experienced have as we the high But

from flow As look the impact impact, an various cost copper year. our plumbing quarters have into six costs Obviously, begun months about segments, our back some to financial it takes to and basket go zinc, we their on we in seen decrease. two at That which statements. to products, input earlier or the have off highs across

an of now prices, of the be that the much and part have the of to in impact going XXXX. first here the in timing the commodity that's XXXX. much timing decline That of not we impact inflation in consider an the of you if more experienced of will So some

go could a we provide into as XXXX. So that tailwind

because as costs quite high. continue of about continues fuel trucking high. freight talked to begin remain We're to basket our Ocean inputs, was parts to And be will see probably to though offset said, certain the calls. portion something of are moderate starting extensively moderate. the like inflation that other we on to and beginning road a that That prior well. of packaging components all pallets, over other The

of On and costs input are the upward paint stickier still pressure. paint some business, our we face be seeing side

we're other in Specifically, inputs. TiOX seeing is that

the put to evidenced we're to so of And any we we in so, monitoring the that additional quarter. fact that. we And offset actions second do by have pricing price if this inflation, closely will take through XX% as

position. we slightly second cost price the think, are good positive in we We're for So, quarter.

up and set situation, we'll we're continue if if with So monitor well. additional price the -- But be. to react we'll needed accordingly need

Operator

The next question today ahead. go Please Lovallo the UBS. John line for of comes from from

is open. line Your now

John Lovallo

The the the DIY very is actually quarter be you basis? think do outcome which in what the were clarification. flat, a relative point of a on just first that a And biggest good you maybe your drivers Did would so, volumes versus one of that say were if peers?

John Sznewajs

for DIY yes. the were flat, quarter relatively Yes. volumes

John Lovallo

I'm here.

John Sznewajs

question? John, did you have a second

John Lovallo

Yes. I'm sorry.

John Sznewajs

heard my You answer.

John Lovallo

that said flat. it. no. You relatively I They're missed

John Sznewajs

it in sell-out in, than quarter. remember, was the greater Sell

-- uncertain. I'm So hope your were answers yes, question. I there so that

John Lovallo

that better what if was factor than was curious of just the I is was some I of saying. thought because you competitors curious there? what kind And just differentiating your are

John Sznewajs

Yes.

against if our year, the the I you quarter of in year, freeze. are because DIY John, Texas think relatively of quarter it, performance second soft results last a second last had part we is --

catching the are you as we And that. year-over-year on about think so up comparison,

second sell-out and And quarter. why better the have in we so that's sell-in

Keith Allman

Speakers] it’s in flat volume, that growth in DIY. Revenue then we John, XX% relatively Dec price we're look XX% roughly at And volume. in second was Arc about and quarter, and Keith. [Multiple the the

John Lovallo

of any of inflationary terms seeing either consumers you your for any are trade in down segments? then And just pressures, in

Keith Allman

hard DIY, along reduce pretty really. example. the worked higher to price stable. movement been of lower for Not we've to the the from assortment, from to the and price And impact It's PRO

that there But exists haven't. kind So some as see we impact movement. still of we mix really of

China, would so we trade to see in China, about Hansgrohe items, on weeks where the receives which -- popped ticket growth higher-end our that look continue across see good there, remaining, in the strong volume than we seen very environment continues. and slowdown, normalized example, of we typically our focus Despite big we on -- a XX evidence greater really is backlog We a nicely. strong in a haven't products, that the back when like there that have of for market with spas, demand down of

demand good end good there. lower are seeing on seeing we demand we're of So the our And assortment.

expect year. any So not trade the seen forward overall, down, as don't evidence a we move of significant have and through we

Operator

The Susan line next from go Goldman Please of Sachs. ahead. comes question Maklari today the from

line open. now is Your

Susan Maklari

of building John's question My first is there. question off

to any to can you How categories? As consumer? a a are signs bit the their willingness across it on the housing? through the as during the talk And you state take What's the quarter? pricing step elasticity overall you back, about continues come changed is of product of seeing spend

Keith Allman

we like we moderation see Well, at a saw then. things those consistent look flat will, fairly indicators, was some it's the there sorts we did seeing our fairly And for And closely. categories, signals leading been a some are various moderation, across and then that that if specific the channel. we across and you moderation it's the consistent categories, as mid-quarter, demand. since watch And website of searches of slowdowns of and we

consistent a think of demand. I overall, So moderation

that strong. was about paint PRO categories us bucked very have for there's We some Now sales that talked trend. that

say we lighting, well have -- for would very Our spot felt sales moderation paint, strong. very we And continues us. we're perform DIY faucets seen demand. showers, to I But a that international of hardware were and

that As flattish I of has the been kind rest quarter. coming then of the and to happened said, mid-quarter

I'll And in Decorative comp. XX% a expect had was had, down you to little QX be it a modestly I a more volumes Plumbing, in think, in XX% comp second bit the Plumbing half. that in remind little We a Maybe Decorative. less and

in the on So quarterly you about a think you basis. factor that as can segments

John Sznewajs

the would consumer, us. look I thing the one maybe look healthy to to we consumer to Sue, Keith's at as add comments continues is,

Equity of continues repair/remodel to in look And price. in low-ticket about about if you our balance -- of Home portfolio, sheets. question products the this our elasticity, products break, continue your have our are see for to terms think lot purposes. flexibility fix consumers We to buy strong good a

And at so feeling that least our prices they're the consumer result for not seeing bend a of products. in the the we're as higher market,

Susan Maklari

think there shifting, I steps make the environment any that you're to are are macro do may Or guess some kinds as to early out? taking a looking that terms prepare of about of follow-up, indicate things or as changes the underlying to those watching business? the you're in for you need we what perhaps cost structures things

Keith Allman

us, a in At ultimately, end experience day, that's be business really ongoing dealing the with, for what And of we that we part contingency it trigger the planning would of have us the do. it's that of to this something is our demand plans. all and be implement And process. part and would for our

investments fixed certainly the and and or on So back front, SG&A variable discretionary to hires growth costs for that depending proven could pullback at we cost. and on variable as cost the we've example, into we do, well. get ability Decorative, cost looking could in that throttling as And the the execute

we plans indicators. mentioned website contingency have leading we So place, in and traffic. I watch

our of meeting where cost relates a we don't have with businesses We But those to contingency And leading the their leading goes. to channel And planning. review regular cetera. indicator. in -- on et watch fundamentally, the part demand standard execute wouldn't keenly on we're as as relationships process, and the wait tickets, watching to basis consumer a we see access very We we and it out deep that, indicators.

of experience this it, with said that, the So looking fact mentioned portfolio their lower in with view is that certainly the Having for and fix people buck, that we're as they're fundamentally fundamental aspects home, and with shifts coupled brake high our area of seen terms the how the portfolio. and the we at long-term where John home reconfigured we've part buy good their they bank this business. in -- feel have about how we ticket, we how an component, the our And of what it. that's for it's products

Operator

today go from question of Fargo ahead. Deepa from Please Securities. Raghavan comes Wells next line The the

open. is line now Your

Deepa Raghavan

question First cost. is on price

talked it price are positive slightly offset fully comments from in quarter. cost inter-quarter mentioned look you Plumbing because doesn't you costs. in You I'm both interested segments? it headwinds true Is -- the specifically like higher across price the

John Sznewajs

positive Plumbing and Deepa. segments, were Yes, slightly both price Decorative We cost Architectural. both across

focus would I quarter some that the had on his segment. little second And inefficiencies prepared Plumbing. operational bit referenced some the in the second have more created we Keith is thing did you and in specifically, for that think some a in might inefficiencies Plumbing as in more a shipping we have remarks, labor the quarter probably of headwind

Deepa Raghavan

-- I Just of surprised any the change that and talk looking of magnitude the possibly follow-up. the think through positively you that at Can you, some we negatively a that half have in surprised metrics of -- magnitude you of surprised might the -- changes the or some -- you in I'm if second year. quarter? I mean,

Keith Allman

that be in did we that We to was that's Europe developed. Europe we -- wouldn't it our to in much for surprise, continue we've that And but see able to like franchise was -- I well that perform to and say performance so good China. watched grow a

solid. talked share doing what how a gain as had business can is take hard and I to show really partner very about wallet our think evidenced now to response outstanding that our that with positive the growth and in number there. them with in that was very a part advantage opportunity demand an we've stickiness team opportunity chain an and to of working of share channel do, had our of supply some excellence together to we paint of we're the our job, new by the of had PRO that really acquire when Behr customers, drive paint that, We've continued about for quarters we

our and the continued think aspects Europe continued demonstrated the gaining PRO positive couple stickiness quarter of we're growth for I keep and of a sure. our to So in is capability business in that our

John Sznewajs

I that see just it's on anticipated. some a And we in obviously, -- say into of I'd as last mean the operational that were over would quarters. we some expected. the carry bit an in a dynamic very quarter more the mentioned Yes. the the probably in Plumbing we thought third we than know, environment, quarter probably been second of had those we I inefficiencies Plumbing the well Quite segment. we to negative And improvement. expect that the inefficiencies improvement persistent you couple didn't side, had see the improvement honestly, in

for go we So quarter. there'll the continue headwind get roll do into as to think we a quarter. as segment of the things But that we into be a fourth third better bit

Operator

next today from the comes of The Keith Hughes Please from Truist. go ahead. question line

is line now Your open.

Keith Hughes

numbers highlighted of Questions getting continent? on various pace in in fear on the quarter, international going What of have around fall year could of off in other Are plumbing. any prepared business things you the the some coming? Strong statement. could be Europe. half energy it a and this lot the the in you Spent indications pressure second the that given of

Keith Allman

As bit and I a earlier, little environment, a it's ball. have we don't Keith, dynamic talked a crystal

from and taking our contingency not it's to not energy. natural of to was those to focused I significant But terms gas putting good a adjustments make being We've we robust on And as in from trade energy -- that plans reflected sure. continue the of we're mentioned, of Europe. other in see dynamic economic to there majority through of renewable of through if procured the And place And watching a sources. conversion, are some environment demand free we we're sources currently. ready 'XX in foot down. are changes. for we being and sort that and So And seeing seeing

and is terms in challenges might So a to for not the to are Europe seeing happen. team job of happen current be the of doing this might But what prepare forward. address turn good we seeing point. what in going at of down a working for indications any indications We're ready hard

John Sznewajs

that takes to place of going And from Keith, the Keith's project lot Hansgrohe, a a the good other of you hospitality countries outside or comes hotels revenue comments, thing a I in of in about if -- Europe. up, Think sales. add portion think about would

it's East. Asia, that Middle the So

in there. these there's consumer good projects market continue. finished. have of down, fundamental And be They to the demand Europe. a serve So We even do when baseline turns projects

And going that support will Hansgrohe provide so of for forward. some basis

Operator

comes today Longbow of Please David line from from question ahead. next The MacGregor go the Research.

is line now open. Your

David MacGregor

You that just the that little talked we'd under and profit than a are be margins, pressure you takes wonder dynamics. behind those for improve puts if XQ. gross the to the of expect fact and and us about XQ, in they're a little that some little talk going and unpack could more a I more about that to

John Sznewajs

Architectural of One Yes. Decorative inflation. where things Certainly. happening our There's the -- the couple that we are talked about of a there, business recovery we the element cost, is cost David. dollar recoup

inflationary margin thing impacting mid-teens mentioned -- to that in big in that, foreshadowing. we we've gross fact that feeling. so volumes our basis and a mean, second contributor talked I the And quarter, that some had if lower margins be second has it segment. I of the On that's the think about be think the we about And increase talked a obviously, would about historically X% XXX about the the slightly would points top impact on we of inflationary you we're we're impact that pressure

gross are So second big those impacting things the two, are half. I margins our two in think, the that

David MacGregor

seeing seen a partners the you've a your as just be just three what about inventory you're channel the you're you replenishing just over that to quarters. now the expecting if wondering levels guess right inventories. what fact then given that I'm talk to next terms two the around tapping I and channel bit, seems in of And brakes And little of extent in to softening up on fluctuations terms macro I'm wondering follow-up, can here what

Keith Allman

really light on where bag. a some channel inventories. to It's little cases, mixed we're we'd like have still our In a

our to in caught the A fiscal approach inventory. better some in pull For pull back up to in customers not and of place customer bigger little plumbing there'll a the requirements. I that their wholesale the are be think most in down the as good atypical of year-end -- to fiscal bit in some and and work quarter-end, as we've meet we serve get part, pretty inventories inventory shape

large, by pullback, bit and stable. little of say, and fairly But in would a wholesale. it's there's I So plumbing I think

Operator

go Baumgarten ahead. Our next Please question from of line today comes Zelman. from the Adam

open. now line is Your

Adam Baumgarten

I guess in paint. maybe starting

promotional given in in meaningful do way? you Just DIY second outlook expect the the any up slower pick half, to activity

Keith Allman

that's really our That is on choose channel partnership, we'll we choice the help a around to sit not customer. as mean, I now, based fund a expect promotion on decision partner. and participate change we discussions But cases, the would our levels. that. of strategy it. In I in in again, of our some But obviously a are some right of that the in material and that together

Adam Baumgarten

the some gears patterns to you maybe could showroom that us if just then around traffic Plumbing, switching the in order spa And color seeing business. you're just or give

Keith Allman

mentioned, or be XX been a Really, Well, that as I and orders haven't down staying movement there. have consistent, continues to around seen The robust. backlogs, our up there. pretty weeks material

say I would So consistent through quarter. the

Operator

go today from Please Phil The from next Ing ahead. question comes Jefferies.

line open. now Your is

Phil Ng

soften what some plan in think John? does that how next about year? demand levers decremental contingency talking then that if pricing demand And the you guess that a you margins I softer environment, about are should think we perhaps we guys about environment? bit, are for then when that, holding the in anticipate do in And of

John Sznewajs

of about mean, softening a the extent as different Phil, in you So belt I think simple couple do taking flavors, demand, a you the depending things plans, our we're some of of timing. on contingency right?

open on requests. headcount back pull You

on look persistent you aspects longer have and to You than travel is the advertising, decline entertainment then pull expect, of and back at deeper and you more that. and the the like structural business. things If

reduce headcount, things out shifts, take to like have that. You

out. see this we'll so And how plays

decremental with are should kind there. terms We have which of incremental In our fairly margins, they range. perfect our that that be consistent margins, XX% XX%, alignment may not in of

as to can. The if up of The manage those declines. -- try get decline, quickly always into decline. input cost we recession, as helpful best can't volumes is we first be typically, a out as costs going we're may to a the you go as But quarter one there that thing

bit those decremental be of So to offset some of that could margins. a little an

else So there's to we know don't add. anything about you'd the like I think it. way that's Keith,

Keith Allman

in Yes. on cost place, the of I component variable depth and that it. really the have of depends the talked it about fixed and plans we

pretty So we good. hit that I think on

Phil Ng

And then that in environment? pricing

John Sznewajs

recovery Pricing by in in -- that do pricing. -- we typically environment, We If it reverses give I have Plumbing us was we Obviously, margins business. -- have think it instance, back see that's We depends, cost commodities our segment. that a Architectural doing Decorative in of a And actually, the to again, in we've typically in expand through marketplace. itself rare lot of a varies. there our if pricing on recession, segment, don't start deflation when that on environment. what the inputs, on inflationary side -- we're flat, in if you push were got seeing in the

Phil Ng

Any then sounds that how kind well. held heard I strong. like thinking in of lot quite the still impressed COVID of And a seeing lockdowns. was up that that business that world if it's the you you're back color on how managing been so and is correctly, Plumbing, part it half? China you Certainly, about through I've on of

Keith Allman

Yes.

for particularly very team well. That bright it. We're And know there us. nice the it I spot period been solid you that was China, executing think back real has think for gets shutdown a a us to the quarter. in was of given The I combination performance things. real really in there a three

matter are so no was at the focused is significant. that thrown And there them. good on And growth shutdown what folks

we you we're consistency. less end thirdly, then And segment, look focused in in of volatility we're to and tends think leader on I Secondly, use, share when are and selling to the higher-end that segment. as where or mentioned, that has jump into terms premium to have believe we multifamily, more And more and that in right business cetera, price point primarily, were shutdown, retail or in traffic. than, into et ability more hotels we it's that back if so after which on depended project John the the say, lower at

things So together story give have a very nice us come those really China. in to three combined

Operator

Loop today go question line Garik comes from the Capital. The of ahead. next from Shmois Please

Your line is open. now

Garik Shmois

Higher-level question for me.

surge volumes to are big at on comment DIY unpack that for you've but pandemic. paint XXXX during other this the XXXX hand, to coming in you hand, strong the demand levels. down business, got if back point trends, one that you're given, DIY just want the a baseline thinking is demographic on just I'm Just wondering the that had

that just of on what So just right for of a business. baseline mode the little be level bit kind higher could

Keith Allman

Yes.

gained. respect PRO good service on proposition and had our then able that we're with seen the of and exactly the We to lessened, we've it. I their it hit focus having put tremendous also And restrictions take how value with more PRO. and And some move the for demand as DIY quality of think performance, towards pandemic more and a how thinking shift that's has as had we're pandemic been to as of the about the share a but happy that business home we and capacity advantage chain with stickiness supply PRO’s that very and relates that to folks time. keep

to their is nice tailwinds of developed those some DIYers their we of equities houses, multiple view just in want they've So to that volume home not DIYers the in they're invest going coming and structural that that's the on when think factors. for how research, because their and for the the millennials and projects have think as based speak, we impact look that home COVID that those years, so savings and next with and going they're it and done, accounts very -- for sure, DIYers home to our of so DIY forming forward, couple the and know a relates I the we in

of say, see So let's as pandemic. now looking yes, growth of we further come And point We've terms level growth volume. in back a at for to, jump-off we're great kind DIY. during in the the this XXXX the

Garik Shmois

capital I follow allocation. I on that wanted I'll question. take up guess to

debt M&A payout Does in the loan on well as does due? of You're you'll paying off coming so focused that's pause the half the on me second just given forward? what that But moving the that a take pause term repurchases. mean year, for

John Sznewajs

continuing look M&A. I mean at to No, no. we're

environment up. I in have things balance for emerge we right choppy, the to continue fewer where strategic potential expect Though mean get this environment. you acquisition execute cultivate to candidates is our if a a might on M&A little candidates That We are said, our candidates. sheet this were in set sale. to teams position in

Operator

today from comes The next question ahead. of the KeyBanc. go from Kenneth Zener Please line

now line is Your open.

Kenneth Zener

questions there's two don't I Look, on paint, I -- to have. want get

just maybe same then If second you're could all think that see stuff kind about you level half, was ask DIY COVID bigger exceeding factors maybe not of this that. it’s of versus just yang are regional I that I situation in how thinking so is, could the going that versus we say 'XX, how 'XX my comment, guys, think like And can view, talking set year working you you because the this small paint -- through, about just first ying half total or you're But it there's you your seasonality volumes? and question I'm to have of a is lot share. if competitors, at

you And where not talk of your today came, and are exceeding availability, little have PRO Can coming maybe [indiscernible]. a context share it's you. staying give that Because, because raw you initiative, as obviously, guys regional of -- are about companies people doesn't material So share. you now smaller gain maybe they're really just that you private, bunch There's kind a us you with be have XXXX? can that? to around versus

the between the broader sometimes, data is than dialogue just think points two please. I picture, rather

Keith Allman

in value quarter-to-quarter We're business. of as our our about, proposition that segment. at growth have two, it kind I look And focused any with competition, I've question think, talked with in terms market, partnership as accuracy. now the strong of rates, But And done the some the on gaining with we've with quarters we row stickiness. targeted have challenging, determination of to And Home in competition Depot. on there's where regards for customers it's and works our demonstrated, consistently our part size, very we best PRO. that PRO, you three no that in share And when particularly we're a

for regards don't I share. market. an very I think is better, We're With gaining respectful we're coming us from, of really them. it our the that. We to have volume where outgrowing answer know makes

right. a can a regional difficult the customer. on And share clear throughout we while serve I pretty best relatively about competitors with together that quarter-to-quarter on channel There's fact the the exactly are our talked we're moving low And good we're But our business in structural we really DIY about, is market think now. and gaining we're focused how understand we You're then basis, partner. sizing country. grow feel ability forward, the aspects demonstrating that to of we PRO, share the and it's

So do it. we how that's

Operator

line The next the Rafe Jadrosich question of today comes Bank Please from ahead. from of America. go

line now is open. Your

Rafe Jadrosich

you of changing at for XXXX, the any your macro CapEx demand investments moderating environment? First, or as look are you reflect your adjusting

Keith Allman

have and the that to spa this look full won't we start and up reach begin after will When ramp No. plumbing is projects our they're investments major focused, capacity where business, business, say, you in at XXXX to that. European till

a slowdown what's or environment in that keenly pullback, our we have and relates as term aware certainly that has contingency several leadership we're are an about, times. in team we operated here have potential while So short watching and place this talked experienced it we and the base to a happening and plans in

we fundamentals also business and what of we're positive But PRO that. low-ticket and tailwind. think term. So to strong And in long strong the we’re the the of are and it confident our repair correlations remodel has for our DIY, aspect confident in fundamentals

to not we're have in, and they're are, us, important these going of in, business what pull because our for overall confidence the the on where business. capacity geography back no, they they're we increases in term long So what

in So no change that.

John Sznewajs

company. good we Keith's our And I compared to only of to light amount high And dollars -- we that is have flow. cash CapEx would we're thing the the free generating a comments Rafe, cash to allocate add relatively is that flow

that across the cash have back we on business. pulling to any need we really without these the flow investments other free So fund to make

Keith Allman

begin new can equipment amounts staffing. various where look with factory the this we at cases and of they're to where most in step-wise say, capital, And we capacitize,

to So plans now it's relates -- CapEx total we But not right thing capacity as the no have an investment. all-or-nothing back our rather. it pull on to

Rafe Jadrosich

margins, the year? in side -- implies the the And hikes the second half. guidance you've the I first versus then is or us the that understand of additional realization price Can help on versus think lower improvement you in the year in inflation the announced price of additional of half half how Plumbing that first from metal much an maybe just

John Sznewajs

improvement in of QX, be would is year. Yes, it, about half very QX significantly going Rafe. last and If guess I back margins, QX of to year similar the be think -- Plumbing -- to the the to compared QX improve will my

So the quarters back given I the impact performance XXXX of really to fourth is about our fourth the to position the of going hit last the quarter through improvement half length in fundamental the year. And improvement and in the chains our of two difference for in benefit relative supply that's be flow that and just in P&L. the of it takes a quarter, event year. the think be -- really The to pricing much an not commodity will fact

Operator

Our final ahead. of the question from Rehaut today JPMorgan. from comes line Mike Please go

now is line open. Your

Doug Ward

you guys know just supply Mike. has guys mentioned I inflation give you could for more believe that Doug you if color the Ward on currently. on have was I chain earlier peaked. wondering

forward and terms I'm in yourself last of terms it maybe supply to and parts year, comparing of of just where earlier you So chain see year battle. guys the wondering, the in in moving that

Keith Allman

think -- TiOX, day we an as are also spots copper we seeing in have and zinc specialty But when the some other the we thing. in of question, pullback that business. mentioned and it terms about and we're and earlier think our seeing sort we're business, seeing, -- we in chemicals I of pricing, John brass in of some pressure paint

staying about of tougher And sitting the And a chain very ago frankly, Where has not the the all we're we customers. less product in labor to as when personal expected relationship quarter did need where quarter. reliable, supply aware So supply little when it, even delivery rhythm costs is of keenly attuned we as we fill to for rates, those Plumbing times, that availability cost freight input. that of puts manufacturing inbound the we -- predictable, freight still of our the the pricing to and aspects that we see it's are lead is and this times the two this costs. than think are it in here that challenged, have terms that. importantly, the thinking more commodity a pricing of a is And lives you past is the quarter of But we're the I rhythm of our to really beyond delivery and of the have the seeing to inbound our our challenge types were chain.

that's So would highlight that I what I really has changed. think

Operator

all conference Thank participation. for you call. XXX second Corporation you. Thank today's your quarter This concludes Masco

disconnect You may now your lines.

Masco (MAS) 28 Jul 222022 Q2 Earnings call transcript