Stanley Black & Decker, Inc.

Welcome to the Stanley Black & Decker first quarter earnings call. My name is Shannon, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Following the company's prepared remarks, we will conduct a Q&A session. To ask a question of the management team, please press star 11 on your phone at any time. You will hear an automated message advising you are in the queue. To withdraw yourself from the queue, please press star 11 again. Please note that this conference is being recorded. I will now turn the call over to the Vice President of Investor Relations, Michael Worley. Mr. Worley, you may begin.

Good morning, everyone, and thanks for joining us for our first quarter earnings call. With us today are Chris Nelson, President and CEO, and Patrick Hallinan, Executive Vice President, CFO, and Chief Administrative Officer. 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 today's webcast will also be available beginning around 11 a.m. Eastern Time. This morning, Chris and Pat will review our first quarter results along with our updated outlook for 2026, followed by a Q&A session. During today's call, we will be making some forward-looking statements 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 actual results may materially differ from any forward-looking statements that we might make today. We direct you to the cautionary statements in the 8 that we filed with our press release and in our most recent 34 Act filings. Additionally, we may also refer to 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. I will now turn the call over to our President and CEO, Chris Nelson.

Thank you, Michael, and thank you all for joining us today. I am pleased to report that Stanley Black & Decker delivered a solid start to the year, outperforming our expectations on the top and bottom lines in the first quarter as we demonstrated continued progress on our strategic priorities. We are confident in our strategy and in the team's ability to continue to execute and deliver results. For the first quarter, revenue was up 3% overall and flat organically. This was ahead of our expectations, driven primarily by a well-executed outdoor products preseason. Our adjusted gross margin rate of 30.2% was down 20 basis points year-over-year, essentially unchanged. Adjusted EBITDA margin of 9.2% was down by 50 basis points year over year, slightly ahead of our planning assumptions for the period. Adjusted earnings per share were 80 cents, 20 cents ahead of the high end of our first quarter guidance range of 55 cents to 60 cents. Pat will unpack this further later in the call. Additionally, on April 6th, we announced the successful completion of the previously disclosed agreement to sell our aerospace fasteners business. This portfolio change is consistent with our strategy to focus on our core business and commitment to enhancing shareholder value. The vast majority of the approximately $1.6 billion of net proceeds have already been applied towards debt reduction. We are now positioned with a stronger balance sheet and have unlocked the ability to deploy capital to accelerate shareholder value creation. We expect our capital allocation strategy to be biased towards share repurchases, which the board has authorized. Turning to our first quarter operating performance by segment, I'll start with tools and outdoor. First quarter revenue was approximately $3.3 billion, up 2% year over year. Organic revenue was down 1% as a 4% benefit from targeted pricing actions was more than offset by 5% of volume pressure. Currency was a 3% benefit in the quarter. As we discussed in February, our base case assumption was that top line volatility, especially within the North American retail channel, would persist through at least the first quarter. Consistent with our expectations, competitors continued to take price and we honed our approach to promotions for select products. Also, as expected, our results this quarter reflected a decrease in volume, primarily driven by lower retail activity in North America. This was partially offset by a strong initial sell-in for outdoor products as we approach the peak selling season. International growth in prioritized investment markets such as Eastern Europe, United Kingdom, and Latin America was an encouraging outcome. Additionally, increased sales generated by professional end-user demand in the U.S. commercial and industrial channel indicates that our growth investments are building momentum in the market. Tools and outdoor first quarter adjusted segment margin was 8.7%, which was consistent with our plan. Now, for additional context on the top line performance by product line in first quarter. Power tools organic revenue declined 2%, and hand tools accessory and storage organic revenue declined 3%, which were both driven by factors consistent with the broader segment performance. Outdoor organic revenue increased 1%, driven by encouraging preseason sales for spring 2026, particularly for ride-on and zero-turn mower offerings. While we are still in the early stages of the outdoor season, our performance thus far reflects strong execution by our team, including effective order fulfillment. Now, tools in outdoor performance by regions. In North America, organic revenue declined 2%, reflecting trends we discussed for the overall segment. The U.S. commercial and industrial channel delivered high single-digit organic growth, demonstrating a strong return on our targeted investments in brand activation for the professional end user. I'll talk more about this in a moment. Point-of-sale performance in the quarter was aligned with our expectations and broadly consistent with reported home improvement consumer credit card data. In Europe, organic revenue was up 1%. Growth in prioritized investment markets, including the United Kingdom and Eastern Europe, was partially offset by softer market conditions in other parts of the region. The rest of world organic revenue was flat, with double-digit growth in Latin America offset by pockets of market softness in Asia and the Middle East. Turning now to engineered fastening. First quarter revenue grew 10% on a reported basis and 7% organically. Revenue growth was comprised of a 6% volume increase, 1% higher pricing, and a 3% currency tailwind. The aerospace business continued its strong performance, achieving 31% organic growth in the quarter. The automotive business delivered 4% organic growth, outpacing the market, driven by strong North America demand and strength in global fastener systems, or auto OEMs. General industrial fasteners' organic revenue declined low single digits. Adjusted segment margin for engineered fastening was 12% in the quarter. Year-over-year expansion of 190 basis points was primarily due to improved profitability in aerospace and favorable automotive volume and mix. Overall, through disciplined execution, both the tools and outdoor and engineered fastening segments delivered revenue on a reported and organic basis that was better than expected, despite the challenging operating environment. Segment margin rates were also in line with expectations this quarter through disciplined execution, operational cost improvements, and targeted refinements to promotional strategies. We believe the results are evidence of the momentum we're building We have conviction in our strategy and are confident that we are taking the actions required to ensure sustainable growth and shareholder value creation into the future. Thank you to our team for maintaining their customer-centric approach and for advancing our vision of building a world-class branded industrial company. Our ambition is anchored by three core strategic imperatives, purposeful brand activation, operational excellence, and accelerated innovation. I would like to share a few updates regarding how our efforts are taking root. Starting with DEWALT, you've heard us talk many times about safety as a core end user priority and value proposition of the products we deliver. Our Perform and Protect lineup is designed to provide product features to defend against dust inhalation, loss of torque control, and tool vibration without sacrificing the performance that professional end users demand. DeWalt has over 200 Perform and Protect solutions that are attracting professional end users and converting them into users of the DeWalt platform. These types of end user oriented solutions, combined with our ongoing investments to expand our field service and sales teams, contributed to the strong commercial and industrial performance in the quarter. including professional contractors fully converting from competitor offerings to DeWalt cordless solutions and lead construction contractors outfitting large new project job sites with DeWalt. In addition, last quarter, we indicated that the Stanley brand was positioned to return to growth in 2026. I'm pleased to share that our targeted investments are supporting new listings, largely driven by the initial phase of our product refresh and new product introductions. We are seeing green shoots and are on pace to return to growth with the Stanley brand by mid-year. Our expanded field team and trade specialists serving the professional end user are driving meaningful traction with our global channel partners, building demand as we grow together. I will now pass the call to Pat to discuss progress on a few key performance metrics and to outline our 2026 guidance.