Masco Corporation

Good morning, ladies and gentlemen. Welcome to Masco Corporation's Masco Corporation's first quarter 2022 conference call. My name is Mary, and I will be your operator for today's call. As a reminder, today's conference call is being recorded for replay purposes. To ask a question, please press star, then the number one on your telephone keypad. To withdraw your question, please press the pound key. I will now turn the call over to David Chayka, Vice President, Cheshire, and Investor Relations. You may begin.

Thank you, Mary, and good morning. Welcome to Masco Corporation's 2022 first quarter conference call. With me today are Keith Allman, President and CEO of Masco, and John Snubice, Masco's Vice President and Chief Financial Officer. Our first quarter earnings release and the presentation slides are available on our website under Investor Relations. Following our remarks, we will open the call for analyst questions. Please limit yourself to one question with one follow-up. If we can't take your question now, please call me directly at 313-792-5500. Our statements today will include our views about our future performance, which constitute forward-looking statements. These statements are subject to risk and uncertainties that could cause our actual results to differ materially from the forward-looking statements. We describe these risk and uncertainties in our risk factors and other disclosures in our Form 10-K and our Form 10-Q that we filed with the Securities and Exchange Commission. Our statements will also include non-GAAP financial metrics. Our references to operating profit and earnings per share will be as adjusted, unless otherwise noted. We reconcile these adjusted metrics to GAAP, earnings release, and presentation slides, which are available on our website under Investor Relations. With that, I'll turn the call over to Keith.

Thank you, Dave. Good morning, everyone, and thank you for joining us today. Please turn to slide five. Masco was off to a great start this year with our first quarter results. Our top line increased 12% with growth driven by volume and pricing in both segments. Our operating profit declined slightly due to higher commodity and freight costs as inflation reached mid-teens for the quarter. Despite these higher costs, we achieved sequential margin improvement through pricing actions and expense controls, as SG&A as a percentage of sales improved 110 basis points to 15.9% of sales, even with higher marketing and growth initiative investment. Our earnings per share for the quarter was 95 cents, a 7% increase compared to the very strong first quarter of 2021. Turning to our segments, plumbing grew 11% in local currency with 10% growth in North American plumbing and 12% growth in international plumbing. This impressive performance was against a 27% comp. Our plumbing business remains well positioned for growth with our market leading brands, new product introductions, and healthy backlogs. Furthermore, international markets including Europe, remain strong and customers report continued pent-up demand and a strong backlog of projects. In regards to Russia and Ukraine, Moscow has very little exposure as we sold approximately 40 million euro of product into those countries in 2021 and have since ceased operations. In our decorative architectural segment, sales grew 17 percent as Bayer continued its tremendous performance with low double-digit growth in DIY paint and another quarter of over 50% growth in propane. Our paint business is performing extremely well, as evidenced by our strong results. We continue to work very closely with our partner, the Home Depot, on our paint strategy, and we are jointly investing with them to drive continued share gains in both our DIY and propane businesses. We also continue to launch new products, achieve industry-leading quality ratings, and are pleased with the performance of our recently launched Bayer aerosols, caulks, and interior stain programs. Turning to capital allocation, we repurchased $364 million of our stock during the quarter and an additional $50 million in April. Based on our positive outlook for our business and current market conditions, we now expect to repurchase approximately $900 million of our stock this year, an increase from our previous expectation of at least $600 million. To assist with this, we have secured an additional $500 million in short-term funding that we will likely deploy in an accelerated share repurchase transaction. Lastly, inflation has remained persistent. and we now expect double-digit cost inflation for the full year, up from our original view of high single digits as freight, metals, and paint input costs continue to face upward pressure. This increase in our inflation expectation will pressure margins, even though we fully expect to recover the cost and maintain operating profit dollars. Therefore, as a result of our strong first quarter performance higher sales expectations and likely lower share count, we are raising our earnings per share expectation for the year to be between $4.15 to $4.35 per share, an increase from our previous expectations of $4.10 to $4.30. Finally, let's turn to our longer-term view on our markets and our outlook. We are clearly in a period of rising interest rates and inflation. As we discussed last quarter and as indicated in our guidance last quarter and this quarter, we expect our sales growth to moderate from the rapid growth we have experienced over the past 18 months. However, times like these are the very reason we transformed Damasco over the past several years to be a focused business model of low-ticket repair and remodel products with product, end-user, and geographic diversification. We believe this model will outperform even through rising interest rates and inflationary cycles. We have a healthy mix of both pro and do-it-yourself oriented end users and estimate our end user mix to be approximately 50% professional and 50% DIY. Our low ticket products are used in both normal weekend repair projects as well as full home remodels. Our low ticket branded nature of products affords us the ability to raise prices to offset cost inflation. And our shift away from new construction means that our business is much less sensitive to changes in interest rates and more aligned with the health of the consumer and home values. We also believe, in addition to the changes we have made to our portfolio, there are numerous structural factors to housing, such as demographics, age of housing stock, and how consumers view their homes that will be supportive of increased repair and remodel activity, even in a rising interest rate environment. We're on the leading edge of a large 75 million millennial cohort forming households and entering the housing market. 2.7 million more homes will reach the prime remodeling ages of between 20 and 39 years old over the next three years. The COVID-19 pandemic has clearly increased the desire for more enjoyable living spaces, which has led to increased home demand and remodel expenditures. And the consumer and homeowners have strong balance sheets with more than $2 trillion in savings and home equity values at all-time highs. All of these structural forces provide tailwinds for our business. The changes we have made to our business and the structural factors supporting our markets give us the confidence to increase our earnings per share outlook and our share repurchases for the year, positioning us well to continue to drive long-term shareholder value. I'll now turn the call over to John for additional detail on our first quarter results and full year outlook. John?