Stanley Black & Decker, Inc.

Welcome to the second quarter 2025 Stanley Black & Decker Earnings Conference Call. My name is Shannon, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will welcome you to the question and answer session. Please note that this conference is being recorded. I will now turn the call over to the Vice President of Investor Relations, Dennis Lang. Mr. Lang, you may begin.

Thank you, Shannon. Good morning, everyone, and thanks for joining us for Stanley Black & Decker's 2025 second quarter webcast. Here today, in addition to myself, is Don Allen, President and CEO, Chris Nelson, COO, EVP, and President, Tools and Outdoor, and Pat Hallinan, EVP and CFO. Our earnings release, which was issued earlier this morning, and a supplemental presentation, which we will refer to, are available on the IR section of our website. A replay of this morning's webcast will also be available beginning at 11 a.m. today. This morning, Don, Chris, and Pat will review our 2025 second quarter results and various other matters followed by a Q&A session. Consistent with prior webcasts, we are going to be sticking with just one question per caller. And as we normally do, we will be making some forward-looking statements during the call based on our current views. Such statements are based on assumptions of future events that may not prove to be accurate and as such they involve risk and uncertainty. It's therefore possible that the actual results may materially differ from any forward-looking statements that we might make today. We direct you to the cautionary statements in the 8K that we filed with our press release and in our most recent 34 Act filing. Additionally, we may also reference non-GAAP financial measures during the call. For applicable reconciliations to the related GAAP financial measures and additional information, please refer to the appendix of the supplemental presentation and the corresponding press release, which are available on our website under the IR section. I'll now turn the call over to our President and CEO, Don Allen.

Thank you, Dennis, and good morning, everyone. As all of you are aware, this will be my last earnings call for Stanley Black & Decker, given our recent announcement that Chris Nelson will become the CEO effective October 1st. I want to begin by sincerely thanking our shareholders, employees, and customers for your continued trust and support throughout my tenure. Your commitment has been foundational to our progress and success, especially over the last three years. I believe now is the right moment to initiate this leadership transition, as I'm excited about how the team will build upon the significant company-wide transformation progress we have made since the summer of 2022. So in full alignment and with the support of our board of directors, I will move into the executive chair role where I'll remain fully committed to supporting Chris and the company. I couldn't be more confident that Stanley Black & Decker is on a firm foundation for future growth and an excellent hand under Chris's leadership. As we move through the final year of our multi-year supply chain transformation, and I reflect on the progress over the past three years, We have significantly advanced the vision we set forth during the spring of 2022. We stabilized, simplified, and focused the organization. As a result, we have and are continuing to improve our cost position, capitalize on our core strengths, and prioritize investments designed to accelerate organic growth. We have assembled a strong management team with the right people in the right roles across the organization, blending experience in our business and the industry with an infusion of new perspectives from experienced dynamic talent. We streamlined our portfolio of iconic brands and businesses by divesting $2.6 billion of revenue. We have honed our focus on the core strengths of our portfolio of tools and outdoor and engineered fastening, which are both well positioned in very attractive industries that are forecast to grow over the long term. Finally, we have significantly improved our cost structure and strengthened our balance sheet through solid execution against our operational priorities set in mid-2022. Our simplified and more nimble supply chain is enabling us to deliver improved profitability, better service for our customers and end users, and sustainable market share gains with iconic brands such as DeWalt. And today, the capabilities we built through our supply chain transformation are supporting the company as we navigate tariffs with agility and speed. As we continue to return our company to sustainable organic growth, we are deeply committed to fostering a growth-oriented culture within the organization. By enhancing our strong foundation of operational excellence and building a sustainable productivity engine, we are enabling resource allocation to fund future growth. Our investments are designed to continue driving innovation within our categories, accelerate organic growth through targeted local market initiatives, and deliver new value-added solutions to our customers. Stanley Black & Decker has long been an innovator and a growth-oriented company. We have the team to take this company forward. I am thrilled to have the opportunity to continue supporting the company and to see this next chapter of growth unfold in the quarters ahead while we close out the final phase of the supply chain transformation in 2025, continue to drive towards our margin goal of 35 plus percent, and achieve our deleveraging goal in 2026 via additional modest streamlining of the existing businesses portfolio. Now turning to our second quarter 2025 performance. Revenue was $3.9 billion, down 2% versus the previous year, and down 3% organically. The quarter was impacted by a slow outdoor buying season and non-typical shipment disruptions related to our customers' reactions to tariffs, which contributed to a dynamic operating environment. Against that backdrop, we delivered solid second quarter revenue with continued growth of our DeWalt brand supported by relatively resilient professional demand. Encouragingly, U.S. tools and user demand was resilient. and stayed relatively consistent on a total dollar basis following our price increases. First half organic revenue was down 1%, and we believe it will remain relatively flat in the second half as well. The second quarter adjusted gross margin rate was 27.5%, down versus last year due to a three-point gross margin impact from tariffs and lower volume. This was partially offset by supply chain transformation efficiencies and the partial impact on our initial round of price actions, which became effective within the second quarter. Despite market volatility, adjusted gross margin for the first half was 28.9%, just 20 basis points behind the prior year. As you will hear from the team today, the organization is remaining focused on executing a robust plan designed to mitigate tariffs. We plan to leverage supply chain moves and targeted pricing actions to improve our gross margin in the coming quarters. We believe Q2 to be the low point for gross margins, barring any new large changes to government policy. We view these initiatives in conjunction with capturing the remaining supply chain transformation savings as the primary drivers to return our adjusted gross margin trajectory toward our goal of 35 plus percent. Second quarter adjusted EBITDA margin was 8.1%, down 260 basis points versus the prior year, reflecting the gross margin change and our growth investments, which were partially offset by targeted cost control measures. Adjusted earnings per share was $1.08, inclusive of a discrete tax benefit. Second quarter free cash flow was $135 million, a strong result considering the operational impact of new trade policies. Overall, a very solid quarter in a turbulent environment with significant credit to the global Stanley Black & Decker team, as together, We all continue to make meaningful progress on what is within our control. Thank you for your support. I will now pass it to Chris, who will review the business segment performance and provide more context on how we successfully execute our strategy in a volatile trade environment.