Earnings call transcript Q4 2022

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Operator

Good morning, ladies and gentlemen. Welcome to Masco Corporation's Fourth Quarter and Full Year Conference Call. My name is Emily, 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]

the Investor to Relations. turn President, Chaika, now and Treasurer will call David over Vice I

You begin. may

David Chaika

Thank you, call. Emily, Corporation's XXXX and good morning. quarter full Welcome and year conference fourth to Masco

and With are Sznewajs, Vice and me President Masco; Financial Keith President Masco's Officer. today Chief and CEO Allman, John of

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

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

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

will also Our include metrics. statements non-GAAP financial

references to under to noted. adjusted on which website profit these available will share Relations. earnings reconcile We unless per metrics as are earnings adjusted, in and be presentation otherwise our our release slides, Our Investor GAAP and operating

call the to that, now I'll With turn Keith. over

Keith Allman

everyone, Thank joining you, Dave. for morning, you and Good thank us today.

morning and view on our on this our to results year fourth with comments start some brief turn XXXX. I'll full quarter, and our I'll

missed, XX-year endeavors. been Board during the and investment the future partner announcement me, sorely at of a has and his that identify we Before I at He and the has working and Sznewajs over to his get May, years Masco, CFO the I'm John industry been started, invaluable we of are John however, wish replacement. for our all to an saw in best Masco his end retire you as decided sure from company. John be now, in our fixture has effective to will community XX and tenure our

most offset Now please X%, the significant partially categories, pricing we In our turn volumes actions X%. saw top-line fourth to quarter, by Slide X. decreased across as lower of

declined expense the operational profit million XX.X% in SG&A and This costs by actions control operating Our of quarter volumes, sales. due $XX was as lower partially and pricing to declined higher the offset currency. to

Our quarter earnings for of share $X.XX. as effective benefited count previously the well average per a per diluted Earnings lower XX%, share were our XX%. lower as rate guided tax than from share

in in Plumbing grew with market in share American Turning drove China, local X% International Plumbing. Germany decline markets, X% key Plumbing, a segments. to X% gains many by our North France. currency Hansgrohe growth in offset and including

the Our execute well, of the International backlog speaks to extended brands North range business team, run its more America, to ability through now sales its In of continued our to now its are spa to has than Hansgrohe gain strength worked tremendous which strong in three-year share. weeks market has six four business growth. normal the of backlogs and after XX% and a

double Sales digit digits, with Turning against PRO continued comp. sales performance low while declined a paint XX% Decorative strong against to mid-single comp X% DIY our paint declined segment. excellent XX%. over tremendous its of a Architectural growth

Despite our demand growth Masco Slide full-year these XX,XXX our by our the in was to our challenging and review across let's turn with the year first to employees well for in X. second in declines customers XXXX Please shareholders. globe notable conditions, responded a Now performance. volatile followed and strong deliver half the half.

and earnings with the in half the to profit X% half. increased Volume of of the impact second $X.XX share sales declines an a X%, grew X% growth declined volume first company comp of currency by X% by XX%. per pricing Operating in the XX.X%, for year, from two-year full Strong of $X.XX. X%. than stacked offset offset more of $X.XX operating by actions year declines increased the -- For sales volume was from and margin

commodity with for other year pricing Total was chain and full in the together supply inflation, inflation significant margins the lower resulted despite challenges, our low for actions. year. This double digits

our We are XX/XX as by focused continuing to our on to to improving pre-pandemic mindset margins levels. apply we productivity drive return our

Turning to segments. our

the Our DIY both segment, PRO Architectural was year, led Watkins. paint grew over by XX%. paint digits grew Plumbing at growth grew segment our and X% low growth excluding X%. year Decorative strong currency, full Hansgrohe single In for while

tremendous earned of million. the run XX% Depot. $XXX paint of second approximately for our Year for business strong and of paint PRO or a its has performance the Award Behr had This one-third over three-year growth, now Partner accounts consecutive Home

business continue to and paint the our to invest DIY will further both in in PRO capture markets. share We

Our to recently well launched XXXX. interior stores categories paint and as are performed the and offering additional such aerosols, expect have expanding adjacent caulks stains and further in share sealants gains and

number for our the of rated paint summer in expanding And season, invest Exterior capabilities serve and will the to We better the will to painter our and Dynasty continue line. performance. be painting PRO launching one continue we people PRO Dynasty Behr lineup strong

capital to Turning allocation.

approximately ample to sheet of us X.X billion shares. We deploy quarterly finished XX.X X% our of dividend flexibility. we paid $XXX to And balance approximately repurchased allowed with shareholders. the We and in financial million shares us dividends $XXX $X.X in year. net for the million, increased year our million times, providing strong capital Our during XX% representing outstanding leverage

in to and of capital allocation Our a XX%. disciplined approximately on balanced, resulted strong return capital invested flow cash approach

by the a crisis. of to the the Lastly, on the possibilities This to reduce have consistent target and our doing believe way commitment our XX% provide is with our front, the we established to community. be better XXXX, year emissions right science-based by our our ESG climate Therefore, with we to should business world's part business for and environment purpose our aligned targets. homes, living solution

team effort It continue to deliver shareholders. customers a to our for efforts is I thank throughout all want for our outstanding their employees to XXXX. and

to XXXX. Now, turning

we of in demand as softening XXXX digit to half pricing spending. extent, tighter anticipate volumes actions. trends low interest second range, XXXX double We by the rates, the a and into continue inflation markets to to small decline expect Overall, persistent our offset, to increasing adjust consumer in the

Our market XXXX for follows. are as assumptions current

For to American three-year the approximately of the approximately double market after be North down run strong expect remodel growth. digits. we market, very low and repair This is a XX%

digits. For the markets, our digits the by be markets the market, principally for to expect International digits. by high-single Europe, And decline to we PRO to we paint down paint DIY and mid-single high-single market expect market contract

Masco to XXXX anticipate in we approximately XX%. result, a decline sales As

minimize top-line be range to With margins. decremental typical this drive our versus in low lower XX% our the margins assumption, we decremental to will XX%

on normalization past We are With we recovering additional operational focused through XXXX. supply we inflation XX% chain experienced the focus, this in over expect years actions. approximately operating pricing productivity, and our margin significant be the cost to two

Turning to allocation. capital

unchanged. remains strategy Our

business First in our maintain our positions foremost, invest we grow will and leadership in win to and and recovery. the

sheet allocation maintain of EBITDA X.X The strong strategy debt of balance to is gross with second levels to pillar capital a our below times.

XX%. targeted Third, a we of have payout dividend ratio

Our $X.XX annual the will dividend consecutive XXXX, increase. marks which Board share to per for increase a declared tenth in and dividend bring annual our our X%

our conversion flow manage cash expect working XXX% we capital. XXXX, We be to in as our over

or dividends loan. XXXX, free $XXX to cash million of addition that in repurchases deploy remaining free or flow, We the projected to repurchases after approximately share our cash our will we share to acquisitions acquisitions. paying $XXX flow on term expect deploy million in to Based

Lastly, there is no strategy. change M&A our to

for right return fit Masco. We have that and the review and right the to continue strategic selectively pursue opportunities

capital actions deployment, the address share With more we coupled to taking for anticipate continued we earnings per of environment, $X.XX are be XXXX the challenging to our share. to per strong in this $X.XX with range

strong. markets the rates remain economy and the adjust near-term we as our we repair long-term challenging and environment fundamentals While prices, to interest and expect markets our remodel of believe the will higher are

turnover factors and such remain and challenged as XXXX. appreciation home Cyclical existing headwind for a price likely will

structural ways. such will and and home the longer, in increased equity several consumers high activity homes However, drive of in as levels stock factors, remodel staying repair housing age their

of and to to the three are withstand remain in and home and significant years likely of equity can in Many pullbacks homeowners more their remain taken XXXX ages years. homes mortgage old homes reach levels. over levels have prices X.X longer. next remodeling high XX advantage home low And still above million prime will the XX rates be

provide structural for after the business these our a of strong XXXX. tailwinds forces increase for remodel our and All in confidence economy and market repair stabilizes

for creation in in capital We on long positioned and will both the people outperform continue continue brands, and deployment, growth term. favorable term. the shareholder our drive continued flow to focus strong are composition fundamentals free the and With with to near together cash strategy, executing long invest to our value our to and we our capabilities the

over full Now, outlook more turn to year and to I'll John? over quarter, John call go fourth 'XX the in our detail.

John Sznewajs

good Thank morning, you, everyone. and Keith,

my take had begin than Board I company. an comments, with and I for to our years. opportunity to thank as more and I've entire amazing XX-year XX to the organization Masco Before serve for the fulfilling Keith, career a want CFO moment

wish look I retirement, I As my forward the to everyone best.

excluding other comments With of focus rationalization that, one-time the my as on impact adjusted mentioned, today and performance, Dave items. will

higher by by In X% offset Turning volumes Lower the decreased selling driven decreased X%. selling Lower prices, net X. by increased currency, sales which XX%. partially X%. by prices. to Slide selling local and, by net currency, quarter increased sales partially excluding sales by offset decreased XX%, prices, sales XX%, local sales North increased Sales in X%. American decreased decreased In International currency, sales increased X%, volume by which

as the channel sell-in equal As inventories had believe have and to destocking we we approximately in impact stabilized minimal it relates saw inventory, sell-through quarter. to

of in margin higher lower impacted gross the quarter. and year-over-year operational XX.X% Our volumes, costs by was

improved to cost sales of basis percentage through points a continued discipline. as SG&A Our XX XX.X%

in was volumes, prices. operational profit by lower costs and by offset profit was higher selling quarter currency, net higher operating fourth operating Our was margin $XXX XX.X%. partially million impacted and the Operating

our of three to guided Lastly, tax our based EPS was rate we of Slide like $X.XX. the quarters this on quarter of implementation was versus in I restated XX. XXXX would the the rate to a tax this previously of provided adjusted appendix for note strategies. the tax due EPS on that first numbers in XX% XX% assumption, Because planning the have performance

XXXX. full XX% year over increased year against prior XXXX. full the Sales X% comp a healthy of year for to Turning

partially sales Higher decreased prices International net X%. the by X%. increased In selling local which lower currency, sales North Excluding X% sales by X%, increased by X%. increased sales sales increased offset currency, and volumes, American

SG&A decreased Our a as basis XX of XX%. percent sales points to

profit $X.X XX.X%. margin the full was for billion operating and year Operating was

guided our $X.XX. by EPS increased EPS of a a amount also rate previously assumes XX%, full which versus XX% Lastly, year impacted This to tax X% $X.XX. favorably

continue EPS rate. adjusted XXXX to calculation tax for XX% Our a will assume

dedication and work thank to results achieve for year. to across want I our hard the employees challenging a these globe solid their during

sales Turning X%. the Slide decreased X. to in Plumbing quarter

Excluding to X%. currency, the sales impact of X% sales growth and X%. by contributed Pricing decreased grew volume

in demand France. Plumbing sales X% American currency. demand sales categories Hansgrohe North driven local was International was most local their to and notably started X% across Lower we experience third This by in based decreased channels. quarter. key markets, lower in Plumbing broad currency. many the China, grew and product fairly increased in sales of Germany

in higher million quarter offset net the currency, profit operating higher operational by by and lower impacted operating was was Segment Operating margin prices. costs $XXX XX.X%. was and volumes, selling profit fourth partially

Plumbing sales full the X%. XXXX, year to Turning increased

North by sales X%. selling International X%. $XXX Full sales operating sales partially growth, which to offset Plumbing prices increased operating In lower million, volume mix, increased an XX.X%. margin X% currency, by currency, of with X% contributing net with sales year grew was local profit and Plumbing decreased X% American Excluding

quarter XX. against Slide fourth comp. Decorative decreased X% a sales Architectural to for Turning XX% the

strong high-quality sales mid-single for continue paint as robust paint of PRO products. offering, fourth quarter PRO over in XX% see and against Our our solid increased digits XXXX, comp to the a we demand brands

Our DIY versus double prior low declined year. digits sales paint

a Additionally, quarter mid-teens our hardware businesses, solid declined digit the builders' and in mid-single in lighting aggregate, against comp.

net selling $XXX operating impacted volumes costs, was by partially higher Operating by profit Operating margin profit was prices. XX.X%. lower million and in and quarter higher offset the was material

XXXX, growth increased by million in and over DIY our sales XX%. Turning was paint was paint margin year PRO $XXX full to X%, operating Full of and the XX.X%. digit operating outstanding growth low business single year income driven

XX. Slide to Turning

at the with balance billion Our We liquidity, year-end sheet to times. $X.X strong of of approximately EBITDA balance full availability our debt includes with sheet which ended is quarter billion $X revolver. net X.X

XX.X% of percent year-end. sales volumes supply a at XXXX, a sales In approximately capital expected anticipate Working year-end. working XX.X% improve disruptions, at lower chain less as to and capital be was we percent with and as of

the of second paid XXXX, the million also borrowed down of million In we the we $XXX in term $XXX year. loan that quarter

we and $XXX shareholders repurchased shares dividends. million XXXX, million XX.X through $XXX returned for to during million Finally,

Slide to these to let's times, reminding our makes by everyone outlook for Now, challenging. our review that extremely like turn I'd guidance XX preface XXXX. forecasting uncertain and which are

we overall, to minimal by offset be in Based XX%. is partially projected to with planning XXXX range, approximately our Masco we digit For are volumes XX%, pricing. Currency digit to operating down on this the results. assumption, for low double low of approximately have XXXX expect decline margins on single impact sales

Our during a the below percentage trended SG&A our as levels of sales pandemic. normal

around invest back our to while to XXXX. more growth a businesses for we maintaining to in pre-pandemic cost However, future discipline, increase XX.X% percentage as we for expect continue level normalized be to this

the based year As always, will market take to we as actions our costs conditions. on develops appropriate address

in lower Architectural more of year-over-year in comps, the strong segment. the half and sales be impacted due margins Operating volumes year first Decorative to the particularly will

discussed, by operational also we QX year, starting we in the experienced will segment. particularly be higher quarter last Plumbing in the profit previously first operating As in costs the impacted

As to expected similar look to we the QX we improve XXXX our margins cadence year, about expect for expanding year-over-year our thereafter. margin each QX think operating quarter and -- sales profile with the

margins XXXX partially at these In with impact first our sales price the approximately We costs increases favorable year XX%. anticipate and, in selling decline volumes with full higher we XX% expect will XX%. to XXXX Plumbing will the segment, Plumbing quarter, range margins offsetting headwinds. of margins, flat segment the roughly operational Lower be in to

In our to X% segment, range to Decorative XX%. decline the of expect we sales XXXX in Architectural

in decrease Looking We digits anticipate over we business margin the paint inflation. our margin segment approximately XXXX. digits, only we currently full to XXXX, to that XX%. mid-single significant decrease this largely growth of cycle dollar due at and specifically anticipate year to as for This actions Decorative to the Architectural recover XX% paint our in DIY PRO be the PRO typically is high-single pricing our business amount

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

We are capabilities paint our future in also and people in to increased an investment PRO drive growth playing business. XXXX in

half to have repurchases, spend million the of to relates being $XXX it year. repurchases with begun more we second As share approximately share the on modest this repurchases, activity expect share weighted and towards

a earlier, assumes to a diluted mentioned our and estimate for effective Finally, rate. EPS the is average count as Keith $X.XX tax XX% year This XXXX share $X.XX. XXX million

found Additional for modeling assumptions Slide XXXX can deck. be on XX in our earnings

I'd that, like Operator? open to up for With call Q&A. the

Operator

Instructions] [Operator with Michael first you. Michael. Thank question Please comes from Morgan. Rehaut J.P. Our ahead, go

Michael Rehaut

Great. working you. best a of can't It's believe been luck. real it's XX been so And with much. John, I pleasure Thanks years.

whole been time. the You've real pro a

best luck. So, of

John Sznewajs

Thank you, catching up Look Mike. later. with forward you to

Michael Rehaut

good. Sounds

include though far conservative the I on particularly I which guidance and -- question, recovery look But focus XX I and this comments volume the the versus done in margins peers last the First appreciate fact to and so that decline. your XX, and are price at inflation consistently XXXX margin. the more when think cost so that around assumptions, margin margin Decorative margins appropriate. XX%-plus you years, hence, at an wanted the season doesn't your price, the -- than has earning the least Decorative the

somewhat below. would be this So,

a or Or relative how structurally consider help that might perhaps 'XX, of, slightly with to factors the occur I 'XX, other reverse you're the lower sense about longer-term business deflation different later perhaps PRO that XXXX, perhaps margin if was there's average? this year? is margin the either contraction anything having for to to hoping a business not get if if cost might of about thinking some

Keith Allman

Keith. is this Mike, Hey,

As been of with the which you have past margins. anyway, unprecedented, times clearly years difficulties, pointed in coupled chain really regards to recent the two supply rate out, inflation our with impacted

focused absolutely of out where are and additional the We costs price taking our bringing needed. on operations

dollar-only when about about a our in you you we've performed but talk impact the overall this the erosion we level. coverage talked well significant this in when dollars, paint of margin before dollars, from business, the arises when to Now, look this increases you and significant that inflation, recover -- particularly at

take be year the that there business. we incremental our move parts So, we of as will pricing some through in

levels think expect build the base kind of of the you will leverage which on We to And regards margins. about we're in our actively that be these that we incremental that our going to when experiencing volume, additional XXXX forward. with improve would XX%

through reluctant I'm where go heading. where driving I about think historically we on are] that do (ph) relatively that's So, as the to, we feel you if is margins get a that think pre-pandemic, certainly recession. short-lived margin We expansion this we be can number to [and going anticipate nice is we to put this XXXX. but business a very experienced

John Sznewajs

comments as -- the more And the you Decorative give little in there. Mike, it addition I maybe to to can maybe Keith's margins specifically a color Architectural segment, relates

So, to you segment, your margin compression. a increase point a inflation. -- finer to And on raised, of that put obviously, consider XXX points that, you in will we and we price that the maybe basis cost dollar recover XX% point if the in result take roughly if

a maintain and And and flat we so, inflation. what operating guide what historical yes, big now we're performance so foreshadowing clearly -- that relates to to at we're cost recovery the that you we're while and our seeing 'XX dollars on making, were levels, point part versus for the our getting of XXXX,

business. that about going to prepared in Keith's incremental other some prepared Decorative -- in to, the remarks talked we're would PRO remarks, segment I investment particularly, the make in and around The you that my thing point the Architectural we

that's having XXXX an margins. also so And on impact

over, as concessions you margin commodities see input would also you the pricing some expansion to point -- fact cost commodities the rollover. there to we result give of a be that extent would the and that some would were there to roll could that that raised, due to Now, when be deflation,

work. that how would math that's So

So, helps your is margin. our I explain point historical think and think that well I XX% the taken versus

Michael Rehaut

before could it No, fold ask great in. a second you And my answer. I Okay. question, perhaps that's

You a year. highlighted the of in current be curious incremental be investment how PRO. this know might much drag upcoming that in I'd to

how helpful, things, also we're But than more and peers we're that for 'XX, that expectations secondly, thinking of low decline, being in you about I about mentioned ourselves earlier, conservative I much believe, volume if broke some missed on I of your the terms volume kind of and direction out in think, thinking certainly would the double that a you're be overall I you basis at top-line digit how sorry think least if it between, or two admittedly is or small, segments. Europe a markets thinking the And that I'd but similar I'm res, end in how the year which me progresses? in to play if you're end correct as from market But pretty that wrong. of markets also, low such digits? Thanks. perspective, double those kind other as repair/remodel if you down accelerate how about that an end assume demand, new play And different market expecting level, into you're that end

Keith Allman

it'd to principal market as of performance. maybe assumptions and Mike, it kind overall relates our talk through through helpful markets if I be go our

a at market digits. And down is business. to in and North the be terms and little and significant be high calling market one, we will then, American estimation of DIY obviously, PRO digits portion high markets, talked We're mid-single big we that to think in down market, our single be International, the of market, our The remodeling. would digits. be a DIY And double bit down already single obviously, obviously, digits. of is market the that we're that down low as general, the PRO repair the broadly paint in and two and, looking

filters at with, how in that estimations at our research how look performing we come to that roll evaluate get and on So, numbers And are R&R we they and up in were of look of we with half assumption to those we trends we look numbers, -- to out. an focus at and we our then, that we that and the where importantly, terms see research industry are. all we in 'XX back industry come

heard talked views. have Now, and obviously, we've many different to folks who

than you view in see take. that have like of the of it is And a And on when can we're that [Technical 'XX, varies, Difficulty] we So, incrementals. really we down consistently the of delivered pullbacks if view I think, point decrementals we that that see expecting we XX% XX%. better some point will matter that drop look

business. our variable volume that our cost are productivity we issues with to address and and flex supply through working for investing in in one, talked to and successful in up down growth ready only associated us. but control lining been in So, with demonstrated new have also regards levers of and PRO We've our not key the chains to investing to PRO China a business level, growth we've we're committed being Europe. about markets how paint, high

We in continue to North And business course, then, do America. the of core here that.

And you is what So, think that gives as it hopefully do what is times this how volatility and our to adapt our idea why of changes in most is important is is. they I come. to and to these an that ready about perspective business guidance

Michael Rehaut

Great.

Operator

comes question ahead, Kim go next Evercore. with Stephen. from Stephen Please Our

Stephen Kim

going of of but much this, guys. and again, sure lot I'm John, pleasure to you're best it's Yes, And a thanks luck. get very a been

of some well? the then margins actually year, would you get is the looking quarter-by-quarter through and the to by I much, sense could outlook that I a we -- you and uncertain margin of the First your high you quarterly your question on for commentary the growth for a when But helpful. lean sort as at on top-line are you improve FY want you guess, end it your the found the later whether did as certainly level. a I that said you to XXXX, about that make sales I was that very way things understand anticipate curious provide suppose, you, don't cadence, certainly be too 'XX. as in I at which some comparisons and to positive time on

John Sznewajs

year. we obviously, QX to the a of yes, guidance terms last said of in So, going look the Stephen, that QX like gave is we cadence, lot

So -- we what from year-over-year a thereafter. on basis then there, and margins quarter should each operating said, expand

given that sales should we're this on sales it's by in year-end, To count the say your to But probably we positive approximately positive the is see I decline, question develop for expecting double-digit comps whether at the stage, hard in QX. point. comps year, decline on how XX% QX going at just this wouldn't to

Stephen Kim

Thanks actually like your market, leading it's sort looks perhaps, to that, your helpful. strong. can worsened your the was that. you we expecting. all just -- And least surprisingly doesn't a timing when a or broader little and say bottom is in at which -- That's about where in housing -- were for of despite one Okay. the that then, about the think just know expectations is relative rates outlook, little you're a it me that in worsened could quarter growing maybe you that a right a actually would fact sort a XQ was of provided gotten you lighter question U.S. see bit to been And I the there's make October, say, sort What's perhaps when indicator but Obviously, in kind general, month I mortgage better? if sense late U.S. bit came that comment to in as than the I the we is, what housing the since market of to commentary of January were peaking is of expectations. interesting we've going

John Sznewajs

start I'll off Stephen, maybe, chime can Maybe, and you Yes. Keith, in.

that what at us and on we really kind now. construction market right what fourth housing It's But remind that the new also XX% our consumer the drove giving off to (ph) of is I in seeing doesn't the demand to want really with how us I market, housing So, behaving, things that [tying] know the all the of that's look call we're guide are the the much. that just everyone we -- you're impact quarter our revenue. about

think about other been prepared thing XXXX businesses, has some as how our about his Keith us which spa a do more more are that pandemic, you we our expect growth I as normalized growth its levels. about XXXX. backlogs as The product think that on strong think in would will heavily now Plumbing talked say, we just and during nature and of down in the about weigh go the into remarks we And high-ticket particular, in that business, probably engine to given product, XXXX, for of category

seeing something else to And so, don't around I relative But there's you if broadly what to now. consumer the right add? Keith, know want it's we're

Keith Allman

the thinking Stephen, fundamental if and drive decrementals. Sure. of we've the business, in if manage that down you our about think our and that think the better, what in dropdowns question on on would with of, things terms covered are I the incrementals how we

on halves can then in a up of yes, of industry particularly and things business last the point happening what a volatility change. two is doesn't finer and if our of tale And quarter you kind put notion in June our make quarter sure, and doesn't would about make think or I absolutely, year. of and this also have July a month year, a a ended

specifically change signals. can this things at and adaptability and is volatile a So, organization focusing time we're and our on looking

that's Now, industry may our how in rates, obviously, factor. you a improve, point or guide how to terms of the

We a new repair remodeling. company bit in repair of are and fundamentally, remodeling little -- a a we're new but construction, and and

prices change would better an for equity home help. example. be the us home for up increase would that So, holding could some home Certainly, things the assumption expected, than sales and of in existing

high that Europe We're U.S., and strongly saw if expected we single down International, related China, consumer in confidence. our digits, better about to clearly think you When GDP help. than would

and -- the than ability expected. So performance more share to gain on the us side, for then,

than that drive that there better perform could economy So, our are the guide. we're could things watching and -- to

a very brand Again, take We have our ticket projects. cover strong on on leader of us fundamental I'll message the big North small course, Europe in a America. to premium fundamental here and, in on here used base business, a used segment China, effectively -- projects, adaptable small back in is, we very

built areas, So, our that driving. these there that of and are sorts is overall Stephen, of and terms for business variability macro. could the But that's for better-than-expected what in on performance to we're things lead

Stephen Kim

guys. Thanks Great. a lot,

Operator

with comes please The Dahl go ahead. from next Capital question RBC Markets. Michael, Michael

Michael Dahl

ride for offline. been And congrats. my up catching a Thanks echo a forward It's taking morning. look heck John, more to Good others, I'll questions. of and

couple A ups follow of here.

helpful. in cost On the Mike progress. your some quarter think of was around of coming -- I next discussion earlier couple paint the the peers side, deflation side have But about that quarters been talking the paint just as with follow-up there, through to

so maybe how up. thinking us it tailwinds back the costs you maybe can seems was a seeing it and going that now about some in And business? let's you're have Plumbing, how to expand like paint you're also, And copper sense costs give in of is

a look give color little So, on this we year? costs you're through what more Plumbing as seeing us on

Keith Allman

thinking in Thanks, on inflation raw Keith. and off seeing perspective that. what Mike. is basket of I'll to you -- we're this about I'll how terms the on give we're start paint a

sticky other feedstocks for we If baskets, specialty resin, for material relief at remain have chemicals TiOX, but very look and example, you elevated. raw our while are seen in and overall paint some

elevation. So, continuing an see to overall we in basket the are

costs, transportation, and labor remains like things challenge. indirect are materials a I'm seeing portion elevated. the process, And On big talking which raw is continued inflation, absolutely a we so pallets, still it manufacturing is our about of our

So, the continue to raws we've moderation, relatively remain sequential but elevated. seen some

past recovering increase of still that significant over are the years. cost we've from We couple incurred

expect for raw So, point, our see seeing market. base that's have plans and at And we this deflation built from currently into what on XXXX, the don't material supply it. we're from based really minimal to and our

John Sznewajs

And the side the of Mike, Plumbing maybe equation. I'll take

look base as that Plumbing some at you double So, our (ph) year, as copper, was significant in go obviously, the [up know, there you zinc low] digits. inflation pretty the of into metals, the products,

the We QX the If year quarter. they course the saw commodities. you some last look of prices in 'XX, probably at second and those QX in peaked in moderation through of

has those begun, bit a zinc. seen and the an since both of year said, uptick we've copper of in That little

their off input well. us is above but freight, then, historical, dealing it's obviously. And as with. inflation elevated, that And has on compared But normal which still, for obviously, levels. something that highs, still another ocean it's side, so, In they're is to moderated good we're wage still significant

segment, what's also in energy that in there, of as might like, cost the impacting are you Some expect, given over Plumbing us offset. things Europe, are that's on the going

or So, by in materials inflation things. any -- these the demand benefit have moderating some been offset of raw moderating partially of from the

input basket we've we this do we continue on our some to single-digit in increases couple expecting incurred cost we last we'll expect deflation where course net-net, over -- XXXX, the we're as years. Plumbing think of that of So, recoup of land low in the the

Michael Dahl

very Thank SG&A. my about question, wanted then, helpful. both. on That's And the That's Okay. follow-up great. you, ask to I

going the sales take, to million, it's guiding you're really $XXX what I year-on-year comment that mean, at some in million understand with So, is numbers, the that down implies down, maybe of you've or dollars needing look the qualitatively give when about. conceptually immaterial that XX.X%, of back But million. certainly, $XX the invest be to now $XX baskets the and SG&A to idea I talked business

seems of on us dollars. sticky of little bucket can reinvestment. that you've quantitatively understand SG&A outlook [Technical Maybe more bit things a you some of awful the discussed that in out help what's So like an lot Difficulty] terms

John Sznewajs

you I'll free Keith, and couple, add maybe give a Mike, comments. feel then, Yes, my supplement to to

So, Mike, you're right.

is a you it have what margin. on will a down percent up, XX% We an to. which year, of are sales the the Obviously, sales impact for big guiding to we're and of refer SG&A be as part foreshadowing

other some One the that in out. point forms. we're to of SG&A that making in couple two would a is I think -- I reinvestment point of and guess, comes out thing things, I the different

of Some sales PRO things investment some the job referred that more it that, like and be is and headcount, PRO that we'll to of adding the feet some street the on the delivery. site reps Keith

that shows QX, to, a pandemic. instance, trade went we're of really the like historically large we during but suspended in for Also, there's couple

to years. those So, that is in are the going this first we time back several

that be so for an expense will us. And

more were in also those come like I'd to projecting year, costs are for back levels to 'XX. the that variable and then, normalized And 'XX point certain out, we're just in instance, there in lower

would impacting that year. those two are next be our three for or So, things SG&A

want So, Keith, I to else anything don't know add? if there's you

Keith Allman

kind think the it, in the it's coming we markets. way growth about out the when and and that areas, is Mike, economy way you of markets, general be in approach the back in we those Yes. advocacy develop have you to

of Vegas. investments aware and the Show years, were ISH, products. big our Every a business. this that's this, an a there's where in in back of of show, brands across you're I of more that there national globe the normalized we're think Las we matter And other and in where way two as a example even new have presence investing Kitchen is year. significant that of four out you at I building in big advocacy happened course, our bigger Bath United And So, say for I KBIS -- That's of examples -- know States. would in and coming of there's hasn't and a years, launching similar, in what

We example, Now, always think the won't there. the significant competitor made look, a be ISH, not for there. reinvest had when do. Europe, we've to and They've big thing that's don't position at very you right our decision out to in in

with In bath showers great getting a with fact, brand. faucet our adjacent our to We're that into our investment. build into in and and products our Hansgrohe we're continuing showing product We're new we're assortment terms of furniture, leaning launch.

continue loyalty that for to years. growth share, When has last and three the you momentum. Look continued the PRO, to John continued at mentioned, us. and an PRO where We've that's in, been building outgrow over look market. we're we as gained investment significant intend investing to

to our people So, products, customers, to the painting get new on customers when adding try it. successful new to that more street try they very be continue seen we've

our done a the maintain and was the question that. gain of lot ability we've stickiness, share to on There

and to on investment share do that. continuing focused gains, takes those an it we're to So, drive

up expanding the programs. like and PRO of working pick things buy online, fundamentally our force, is operations, strategy. our This sales of all terms I part as In loyalty in expanding store, expanding mentioned, delivery options,

our think of out while investing decrementals downturn, that's that we and equation end managing so exit the in the committed for this win at we're the the at our of the business. And time, stronger to same recovery. we coming And right day,

Michael Dahl

That's comprehensive. Thank both. great. Very you

Operator

from with comes Matthew question next Barclays. Bouley The Matthew, please go ahead.

Matthew Bouley

the also morning, wishes to extend Thanks John. I everyone. Good taking want questions. my best to for

I Apologies I talked XX%, Plumbing, for perhaps the looking on had to XX% if to some But you QX revenue about I for QX. whole results the think sales similar guide the missed issues. call this. down had business

So, I'm similar assuming Plumbing. that something you're for saying

can of I And segment so the would Plumbing wrong. assumption But the one, if I'm deceleration there? any me therefore, beyond sort us be cadence any specifics rather that two, out with correct moving guess, spa in assumed QX. whether number of sharp the you Thank Anything a help the guide? lines on Plumbing us business that's you. And those help to additional kind along needle destocking? or around it's number some

John Sznewajs

Sure, Matthew. Yes.

is question. in we backlog And on normalized -- year your a as due And partly in you it expect now item touched business, of it give the levels at prepared a I'll is is in mentioned to it's that. a in that, see you because So, happen and high-ticket little of remarks, color portion what back on to bit Keith his Plumbing one the backlogs. spa

And so that's a portion.

the a our if of the to I But you sales of at business you pullback had the guide think than about XXXX. would XXXX, did Plumbing in paint is, other portion that much cadence course look through less

we a as stronger business, to to to so, that perhaps due in Plumbing role a those they'll strong facing we more partly of result the due a little see see first comps the spa XXXX, bit little they're that partly expect going calendar bit to to the comps be year, some in as softness the segment of should And the of the -- part face. of soft

Keith Allman

moderate significant less and been we're call in moderate the It various see, out significantly not Matthew, talk in QX, a industry destocking retail. in North mentioned and us, Plumbing for destocking, wasn't destocking bit in material expecting you from of did in I XXXX. in headwinds it, channels. in know and American We little very I'll wholesale there's that really to

Matthew Bouley

not And All of guess, right. one, Thank entire the super business. mean seems you business in softer much terms end That's then, decrementals, on on it I the you I of year. the the assuming material like with Plumbing the mentioned for I margin for tailwinds just for the the and low on XX%-s guide the you're second there. And you earlier, raw the heard for side helpful. assumption say sticking that.

in are can kind the So, just Is of et freight, What areas Thank what there? kind like you. of manage decremental help on any are sort ocean some assuming you you you of that where cetera? feel of XXXX? it

Keith Allman

impact biggest planned The is the volume reduction.

we impact way the to chain. productivity supply drive reset our and is So, that to manufacturing and

and sure to direct line. as the to always We you drive focus hard on shifts we're and So, imagine, productivity variable shifting to make in equalize labor we're our drive that might overhead labor continuing working down. direct

build back really about, last starting getting And chain is supply challenges, year's talked and and our on the and really operational in and our what half had, synchronous expect as we it rhythm supply have we deliver a in us scheduled, delivered base have still efficient. can very of a way and how be we to That's challenge. we we with that's so

we're where have better. us Now we're will challenge have it through remain That to but QX, QX, out behind going be. to we productivity significantly expect of that coming our and

So, lower in margin early higher principal volumes year. the the and that costs driver through is pressure, work the of then we'll

Matthew Bouley

luck, right. Good All guys. Keith. John. it. Thank, Thanks, Got

Keith Allman

Thanks, Matt.

John Sznewajs

Matt. Thanks,

Operator

is from John, comes line question open. next John Lovallo with The UBS. your

John Lovallo

questions. luck Thank you for And guys. my of John, with taking morning, everything. best Good

point? The this pricing anticipating you additional just pricing are is largely carryover is, first question actions at guys XXXX, guess I in implementing it really or

Keith Allman

our our have we're Decorative I then, see mentioned looking we're in business No, commodity we'll as some And implementing to price. actions. we'll our there, business, Plumbing basket, watch of continuing that. and There spots elevation are and we'll that at, additional with be

John Lovallo

Got it.

And be Okay. weighted. you buybacks, for million think $XXX buybacks I would of sort think, back-half or then, outlook the either mentioned of I acquisitions

pipeline what mean, I acquisition front. in the curious terms seeing on you're more Just there? of

John Sznewajs

that, take I'll John. Yes,

environment, process our But are active is time, through the softening at the probably [flock] you corporate given back in acquisitions. as a -- of of course of this of productive, businesses performance are might there's of the we, just the some team 'XX. active development cultivation conversations team, management in as So, and the in (ph) as imagine, not the same half

said, that going never know people But to are when you transact.

there. so, have And out to we be

engaged. be to have We

hard we've repurchases and to out it's about that's the guiding got -- why may share more And so what and forecast so, to That's the at everyone 'XX, actively moment. this there for always course so we're team and think looking. through of develop

I Keith, there's... if don't But know

Keith Allman

Yes.

and and to right be leverage represents difficult could a we I remains the limitation that return. bit But the of but are little deal cost financial and more trying a seeing strategic very for capital in again, sure we cultivation of seen, buyers slower us. make active think the a to fit it that flow, but could drive and it that, little bit make help

John Lovallo

Makes sense. Thanks guys.

Operator

The Capital next question with Please Markets. from comes ahead. go Loop Garik Shmois

Garik Shmois

Hi, thanks.

This Difficulty] up on category low has growth tough it with from has digits lower a paint side [Technical against down some double slowly been trending been the in curious but perspective. DIY XXXX. comps, Just

history would we how to be relative are any wondering, we for DIY levels at paint? great. Just pre-pandemic there And perspective of are

John Sznewajs

Yes.

XXXX So, DIY right slightly paint volumes, we if our not, as at them we now. roughly are under at just Garik, volumes, look

those has So XXXX of the we market levels. reverted kind to back --

Keith Allman

are more I painting. for own would And than based into tell how you supportive and on that pick particularly a their we've millennials. brush clearly a of we they're that influxing paint the That's to growth seen, They're housing and up research long-term do big that basic market cohort. at market. the fundamentals willing still the look our DIY,

those leadership when bode they a and I gains us that's So, with will look and that data as traction millennials brand we see. well a position for think the really position at that our more more

John Sznewajs

thing I projects the extent that mentioned see point projects, on for consumers more towards to done do tend have the as other more out, economy this you a shift themselves does should earlier, have the projects I DIY the And soften, would them. Garik, to and to take opposed

we as that XXXX. into tailwind So a could for be go us

Keith Allman

market cover shifts that variability in Depot, different potentially is in of Home able terms shifts, PRO in [Technical different that and Difficulty] to if as folks of partnership growth house shifts about DIY, pandemic with now. your with the to will, pandemic being very If and those brand, how our you PRO say I abated business strong significant one then pandemic the to a more to and end consumer relates that fear, our over We think growth. like with represents in that our the market, like early part outstanding the played position you our that PRO. of DIY as And as was we under brand as and to as the have it the both think what that coming professional. the control, into shifted we well the out from

Garik Shmois

Thanks great. the No, for color.

price On pricing Any the softening some just at all? pushback you're demand, impact you of increases. in on given curious I'm the on are pricing? mix some targeted you seeing side, any looking mentioned at

Keith Allman

in about planned price some for talking where price Again, We've targeted some international increases we're mainly got Plumbing. spots. our XXXX, in it's increases

North we on in some I certain of our assortment think have parts America.

So you a that color. gives little bit of

pushback, of terms In not to-date, really.

that costs bit ship direct the we only before paint all we packaging, freight well are material basket, we're way think our and labor but about a things. our the those the our referencing sorts bring, little talked price costs, service channels our costs, of not as front, aware really, I our that I and the relationship it's value the customers in and of experiencing,

more than So, see. you I not any normally would say would pushback

it PRO address paint in expect to relates little of seen to 'XX. that and in all of mix our able across trade in at nor and business I call really a but 'XX significant our as front, would do similar down it the to being coverage swings. Plumbing On we've in down. bit nothing we trade DIY that Slight spots, in part market that's And

have people. and also points, fit for we styles broad We we price And different and cover assortments. that have various technologies

really mix we're all. kinds shift at So, much changes they for but not those we're prepared very of come, if anticipating

John Sznewajs

that one you think as comment the newly XXXX. add for price 'XX, to would significant is, price of Garik, just price be I majority implemented about good And point the than carryover rather Keith's in will price

sure to distinction everyone. So, make very I that, is clear just to that want

Operator

Keith Our Keith, with final Truist. go today question please from comes Hughes ahead.

Keith Hughes

on to Thank you. I just go want guidance Plumbing. in the back

But to is big coming What is You well, done remodel highlighted your than decline you're numbers. some is forecasting than the else that business. or assuming. there? any that give your off several us? in greater They're detail decline there going you're equal you other The greater spa particularly on -- could things have some

Keith Allman

volume-wise, on touched little a think paint I -- bit kind of our John about if was you business the midyear. The bit Keith, little that. business, to is a adjusted Plumbing do later earlier, that this think

that's flex I of combination to backlogs, a So, think so bigger tended larger not projects much. that

volume more think So, on guide on carryover have I reduction than that helps to for a account we little bit Plumbing of paint. a

Keith Hughes

on be And be talked decline year will your earlier, the will you it about cadence based or all more same during forecast? the the ratably

John Sznewajs

get the similar in we given year, back I kind think, more the easier cadence would of comps the Keith, a the -- up against, into described where comps then the of little first that impact bit the half we of same part earlier, in we're that and year. stronger be it

Keith Hughes

you. Okay. Thank

David Chaika

and for joining on you your morning all today's I'd in This this of call. us interest like call thank concludes Masco. to for the

Operator

today. now call and disconnect us Thank everyone, may you, has your concluded, you lines. The joining for

Masco (MAS) 9 Feb 232022 Q4 Earnings call transcript