Masco Corporation

Morning ladies and gentlemen, welcome to the Masco Corporation's second quarter 2025 conference call. My name is Marissa 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 star followed by two. I will now turn the call over to Robin Zondervan, Vice President Investor Relations and FP&A. You may begin.

Thank you, operator, and good morning everyone. Welcome to Masco Corporation's 2025 second quarter conference call. With me today are John Nudy, President and CEO of Masco, and Rick Westenberg, Masco's Vice President and Chief Financial Officer. Our second 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 -792-5500. Our statements today will include our views about future performance, which constitute forward-looking statements. These statements are subject to risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements. We describe these risks and uncertainties in our risk factors and other disclosures in our Form 10-K and 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 in our earnings release and presentation slides, which are available on our website under Investor Relations. With that, I will now turn the call over to John.

Thank you, Robin. Good morning, and thank you for joining us. I want to start today by expressing my gratitude to all of our employees, customers, suppliers, and investors who have been so welcoming and supportive as I officially started my role as President and CEO of Masco as of the beginning of this month. I am humbled by the opportunity to lead such an outstanding company, and I intend to build on Masco's successful history of creating exceptional value for all of our stakeholders. During my two years serving on our Board of Directors, I came to deeply respect and admire this company. I strongly believe in the power of our brands, the strength of our people, and the opportunities ahead. I plan to use my first 100 days to actively engage with internal and external stakeholders to hear their views on Masco, our industry, and further opportunities for our business. I already had the opportunity to kick off my listening tour at the headquarters of Delta Fosset and one of their manufacturing facilities. I returned from that trip energized by the team's passion, shared sense of ownership, and desire for growth. As I visit our other businesses over the next several weeks, I'm excited to work closely with our entire Masco team to continue to strengthen our portfolio of brands, enhance consumers' lives, drive profitable growth, and deliver meaningful shareholder value. Now let's turn to our second quarter performance. Please turn to slide five. As I mentioned, I believe in the power of Masco's brands. During the quarter, our innovative products received several recognitions. Beginning with North America Plumbing, we are very pleased with Delta Fosset's performance in their newest product category of water filtration and a $1.2 billion market for undercounter water filtration products. Delta and Breeze's award-winning reverse osmosis systems are the most certified tankless systems based on leading competitors, National Sanitation Foundation certifications. These products are also the first reverse osmosis systems in the industry to earn the WaterSense certification label from the U.S. Environmental Protection Agency. In our international plumbing business, Hans Grohe continues to demonstrate their leadership in branding and design. This quarter, Hans Grohe won four Red Dot Design Awards, including the Best of the Best Award for their Raindance Alive shower and products. In our decorative architectural segment, Bayer received the number one rating for interior paint from a leading independent third-party rating agency for the 12th year in a row. This year, we swept the top three spots with their Dynasty, Marquis, and Ultra products. Two of Bayer's Woodstain products were also rated number one in the respective categories. These top ratings across multiple product categories show the depth and strength of products across our Bayer brand. Finally, Bayer introduced Chat Hue, an innovative AI tool designed to make choosing the perfect paint color even easier. I'm incredibly proud of the team at Bayer for evolving the way we approach color selection, providing our consumers with a more personalized and enhanced experience. I'll now shift to discuss our second quarter results and outlook for 2025. Please turn to slide six. We were very pleased with our operating performance in the second quarter, particularly as we navigated a dynamic geopolitical and macroeconomic environment. We have worked diligently to address the impacts from additional tariffs through various mitigating actions, including cost savings initiatives, ongoing changes to our sourcing footprint, and pricing where necessary. For the quarter, our net sales decreased 2%. However, in local currency excluding the Kichla divestiture, sales were in line with the year prior. Gross margins increased 10 basis points to 37.7%. Operating profit grew $14 million to $413 million and operating profit margin increased 100 basis points to 20.1%. Lastly, we delivered earnings per share growth of 8% in the quarter to $1.30 per share. Turning to our segments, plumbing sales increased 4% in local currency. North American plumbing sales increased 5% in local currency, driven by favorable pricing and volume. Delta Fossil continues to deliver strong performance through consumer driven demand for their innovative products and industry leading brands. International plumbing sales increased 1% in local currency as we continue to see stability in many European markets, while other markets such as China remain challenged. Operating profit for the segment was $276 million and operating margin increased 110 basis points to 21%. Turning to our decorative architectural segment, sales decreased 12% in the quarter, or 4% excluding our divestiture of Kichla. Overall, paint sales decreased mid-single digits. DIY paint sales decreased high single digits. Demand for DIY paint remained soft across the industry, driven by low existing home turnover and the dampened macroeconomic environment, and we expect this pressure to continue throughout the remainder of this year. In propane, sales increased mid-single digits. Our strategic investments in this category, and our close partnership with the Home Depot, continue to result in growth with pro customers. The strength of our brand and the quality of our products resonates with pro customers, and allows us to capitalize on the sizeable growth opportunity in the propane market. Operating profit for the segment was $157 million and operating margin was 21.3%. We are proud of the work of our teams across our business during the first half of the year, as they mobilize quickly to implement various mitigation actions in response to increased tariffs, higher commodity costs, and the macroeconomic uncertainty. Our teams are able to deliver strong financial results through focused execution and responding rapidly to the environment. While some uncertainty surrounding near-term market conditions persists, we are restoring financial guidance for 2025. Rick will provide more detail into the components of our guidance. However, given the overall macroeconomic environment, we now anticipate the global repair and remodel market to be down low single digits. We expect to continue to outperform the market. We anticipate our sales to be roughly flat, excluding the impacts of investment share in currency, with lower volumes largely offset with pricing. Based on our expected operating performance and capital deployment actions, we anticipate adjusted earnings per share for 2025 to be in the range of $3.90 to $4.10 per share. It is important to note that the 2025 estimates we are providing today include the impact from enacted tariffs that are currently effect net of our various mitigation actions. These estimates do not include impacts from any potential future tariffs or changes in existing tariffs. While some market uncertainty remains for the near-term, the structural factors for repair and remodel activity over the mid to long term are strong, namely the growing age of the housing stock and home equity levels. Nearly 1.7 million more homes will reach the prime remodeling ages of 20 to 39 years old by 2027. Homeowners are staying in their homes longer and home equity levels are near record highs. We continue to be focused on achieving additional growth and we are structured to achieve favorable incremental benefits from volume growth due to our available capacity, high levels of productivity, and disciplined cost structures. We believe we are well positioned to grow faster than our competition to evolve and lead while remaining true to the values that have been foundational throughout our nearly 100 year history. It is an absolute privilege for me to join such a high performing company but on iconic brands that are part of people's daily lives and I'm honored to help write the next chapter. With that, I'll turn the call over to Rick to go over our second quarter results and our 2025 outlook in more detail.