Masco Corporation

Good morning, ladies and gentlemen. Welcome to the Masco Corporation's first quarter 2026 conference call. My name is Jeannie 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 and the number one on your telephone keypad. To withdraw your question, please press star one again. Thank you. 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 2026 First Quarter Conference Call. With me today are John Newdy, President and CEO of Masco, and Rick Westenberg, 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 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've described these risks 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 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, everyone, and thank you for joining us. Before I discuss our quarterly results, I want to spend a few minutes talking about the continued evolution of our Masco Executive Committee, which we established at the end of last year. Jay Shah, Group President, Plumbing and Wellness, and Rick Marshall, Vice President of Masco Operating System, recently announced their intent to retire from Masco later this summer. I'd like to thank both Jay and Rick for their leadership and their important contributions to both our business and our culture. With Jay's retirement, we've taken steps to further streamline our organization. The leaders of our four largest businesses, Delta, Hansgrohe, Bayer, and Watkins Wellness, will now all report directly to me. These four leaders have over 80 years of combined service at Masco, have extensive experience in our industry, and are key contributors to Masco's performance and our culture. Furthermore, we are adding two new leaders to our executive committee with expertise in supply chain and procurement, The addition of these leaders and capabilities will enable us to drive additional efficiencies, leverage our scale, and enhance our speed of execution across the enterprise. The structure and leadership composition of our executive committee will help enable greater agility and tighter alignment between corporate and business unit priorities, all in the pursuit of delivering above-market top and bottom-line growth. In addition, we have continued the implementation of other initiatives that were announced earlier this year. our integration of Liberty Hardware into Delta Fossil companies on track, as we further leverage the brands, capabilities, and scale for Delta Fossil business. Restructuring actions to streamline our business, reduce headcount, and optimize operations are ongoing. We incurred approximately $8 million in restructuring charges in the first quarter, and we continue to expect approximately $50 million in total charges in 2026. The savings generated from these actions will fund additional growth initiatives and contribute to our future margin expansion. We're already experiencing the positive impact of these actions in our results. With that, let's dive into our first quarter results. Please turn to slide five. Overall, we are pleased with our performance in an extremely dynamic environment. Net sales increased 6% or 4% local currency, primarily driven by favorable pricing. Additionally, while still down slightly, this was our strongest year-over-year first quarter volume performance since the end of the pandemic. Operating profit was $324 million, an increase of 13%. Operating profit margin was 16.9%, an improvement of 90 basis points. Earnings per share grew 20% during the quarter to $1.04 per share. Turning to our segments, plumbing product sales increased 7% in local currency, exceeding our expectations, largely due to more resilient than expected volume. North American sales increased 9% in local currency, driven by favorable pricing as well as slightly higher volumes. Delta Faucet delivered a strong quarter with sales growth across all three channels, trade, retail, and e-commerce. Additionally, Delta Fossil was recognized by USA Today as a most trusted brand and by Newsweek as one of America's most trustworthy companies, demonstrating the significant strength of Delta's brand and service capabilities, which are resonating with customers and consumers. Turning to international plumbing, sales increased 1% in local currency, driven by growth across many European markets, particularly Germany, partially offset by the ongoing wheat market in China. Operating profit for the plumbing product segment grew 10% to $250 million, and operating margin expanded 10 basis points to 18.3%. Turning to our decorative architectural segment, sales were in line with the prior year. DIY paint sales decreased low single digits, while pro paint sales grew mid-single digits. Operating profit for the segment increased 19% to $105 million, and operating margin was 19%. Showcasing our commitment to innovative new products, Bayer Premium Plus EcoMix was recently named a 2026 Green Building Sustainable Product of the Year. Bayer continues its industry leadership in delivering both innovative and sustainable products. Turning to capital allocation, our strong cash flow allowed us to return $267 million to shareholders this quarter through dividends and share repurchases. We are pleased with the first quarter performance and the team's strong execution and operational focus. Additionally, I'm proud of how our teams are working quickly to implement various restructuring actions to ensure we have the appropriate cost structure for our business in this rapidly changing environment. Turning to our expectations for the full year, we continue to face a highly dynamic macroeconomic and geopolitical environment. Therefore, we believe it is prudent to maintain our 2026 earnings per share guidance in the range of $4.10 to $4.30 per share. Our guidance includes our expectation that our sales will now be up low single digits for 2026, but that we will also incur higher than previously anticipated commodity costs. Rick will share additional details of our guidance in a few moments. While uncertainty remains in the near term, we are focused on positioning ourselves for ongoing sales and profit growth over the mid to long term. The structural factors for repair and remodel activity are strong, including record high home equity levels, the age of the housing stock, and increasing pent-up demand for renovation projects. As consumer sentiment improves, interest rates decrease, and existing home turnover increases, we expect these favorable fundamentals to become a tailwind for our business. In addition, we are taking the right actions to optimize our business, leaving us well positioned to deliver above-market top and bottom-line growth. We are committed to our consumer-driven strategy, which leverages our industry-leading brands, expanded commercial capabilities, and enhanced operational excellence. We look forward to further sharing this strategy and our long-term goals with you, either in person or online, at our upcoming Investor Day on Wednesday, May 13th in New York City. With that, I'll now turn the call over to Rick to go over our first quarter results and 2026 outlook in more detail.