Whirlpool Corporation

Q3 2021 Earnings Conference Call


spk_0: it morning and welcome to the world though cooperation third quarter two thousand and twenty one earnings release call to they call it being recorded or opening remarks and introduction i would like to turn the call over to senior director of investor relations corey calmer
spk_1: thank you and welcome to our third quarter two thousand forty one conference call joining me today or markets or or chairman and chief executive officer gym peters or chief financial officer and jelly a teeny or keep operating officer or remarks that a track with the presentation of the obama investors section of our what they were pulled pork that com before he began i want to remind you that has conducted talk will be making port looking statements to assist you in better understanding robo corporations future expectation or actual results to differ materially from these statements to the many factors discussing our latest ten k thank you and other pure ap reports we also on remind reminder that today's presentation includes not get measures we believe these measures are important indicators of our operations as they exclude i don't mean a be indicative a result from are ongoing business operations we also think the just measures will provide you had better be fine for analyzing trends and are ongoing operations listeners attracted to the supplemental information packets posted on the of that's relations section of her website that the reconciliation not get and the most directly comparable gap measures at this time off for to for their lives and only mode following a prepared remarks the call will be open for analysts questions as reminder we that that particular theres no more than two questions with that upper and caliber to mark
spk_2: thanks guys in the morning everyone today in addition to our third call the result i will be shown on you long term valley for go by operating in a supply constraints and inflationary barman we continued with sicily demonstrate song result at or above our previous month and targets
spk_1: a want to take the opportunity to share our inside an expectation for byzantine forward but first i turn it over to gyms to of your global third quarter results and think it when the one guidance thanks mark and good morning everyone now turning to our third quarter highlights on saw at five we anticipate that in the third quarter we would face baltic constrained supply chain alongside elevated inflation the exceptional execution of the actions we put in place and the sustained robust consumer demand delivered yet another quarter a very strong result we delivered revenue growth of four percent year over year which represents growth that eight percent compared to two thousand and nineteen
spk_3: next the decisive action we took early this year delivered strong double digit margins of eleven point one percent which largely offset the expected cost inflation of six hundred and fifty basis points additionally we generated positive adjusted free cash flow at one point three billion dollars a one point one day
spk_1: and dollar increase compared to a year ago cash generation was led by strong earnings and the successful completion of divestitures in the first half of the year lastly we opportunistically executed four hundred and forty one million dollars and share buybacks in the third quarter and added to our previous investments in a look at india by acquiring a majority interest in the company our ability to successfully deliver strong result in a difficult operating environment gives us the confidence to increase our games to approximately twenty six dollars and twenty five cents per share turning to slide six we showed the drivers of our third quarter even margin raw material inflation particularly steel and resins resulted in an unfavorable impact of six hundred fifty basis points this was fully offset by are combined price mix and that cost actions price index delivered six hundred basis points and march and expansion led by the execution of the previously announced cost base price increases additionally ongoing costs productivity initiatives deliver thirty basis points of net cost margin improve our ongoing cost initiatives more than offset increased logistics labor and other supply chain prevent we and many companies are facing lastly increased investment in marketing and technology and the continued impact from currency a latin america impacted margins by a combined seventy five basis points overall we are very pleased to be delivering above our previous one term a bit margin commitments and are confident that positive momentum will continue to drive very strong results
spk_3: route twenty twenty one and beyond
spk_1: now turning to slide seven i will discuss or revised for your twenty twenty one guides we remain confident in both the actions we have put in place to protect margins and in the strong execution capabilities we continue to demonstrate we expect to drive strong net sales growth of approximately thirteen percent and even margins of ten point eight percent additionally we continue to expect to deliver one point seven billion dollars in adjusted free cash flow or seven point seven percent of net sales finally we are raising our ongoing fps guidance to approximately twenty six dollars and twenty five cents a year over year increase of over forty percent turning to slide eight we show the drivers of our increased ongoing either merchandise we continue to expect six hundred basis points and marks an expansion driven by price mix we have increased our expectation for net caustic out to two hundred basis points as we realized further efficiencies and continue to focus on costs productivity we our net cost result we are fully offsetting the inefficiencies across the supply chain notably in distribution and labour while our expectations remain unchanged we continuously monitor cost inflation globally largely and steel and read and still expect our business to be negatively impacted by about one billion dollars with the peak increase already realized in the third quarter inflation is fully offset by our price mix actions we continue to expect increased investment in marketing a technology and unfavorable currency primarily and latin america to impact martin's by one hundred and twenty five basis points overall we are confident in our ability to continue to navigate in this environment and deliver ten point eight percent eat at margin representing or fourth consecutive year a march and expansion turning to slide nine we provide an update on our capital allocation priorities for twenty twenty one a commitment to find innovation and growth remains unchanged as we expect to invest over one billion dollars in capital expenditures and research and development next with a clear focus on returning significant levels of cash to shareholders we expect to repurchase over nine hundred forty million dollars of shares and twenty twenty one which includes over three hundred million dollars in the fourth quarter including dividends we expect to return a total of over one point two billion dollars to share
spk_4: there's the here
spk_1: now i'll turn it over to jail to review our regional results
spk_5: thanks jim and good morning everyone
spk_3: during flight eleven our view of the record original results in north america we'll ever five percent revenue growth with sustained in robust consumer demand in the region additionally we delivered another quarter was strongly that margin driven by disciplined execution of cosby's base price increases demand for a products and mean high as we operate in the constrained environment which we expect to persist into two thousand twenty two lastly the region dusting results demonstrate the fundamental strength and agility that our business one
spk_2: during flight twelve our view or third quarter results for europe middle east and africa region to region delivered stable revenue he earlier which represents growth of over thirteen percent between nineteen
spk_3: cosby's price increases partially offset the impact of inflation in the quarter we remain confident in the actions we haven't played or long term turnaround plan for the region remains on track
spk_2: bring slide thirteen our view or third quarter results for latin american legion
spk_3: net sales increased by seventeen percent by by cost base price increases in strong demand across mexico the region delivered very strongly that margins of eight point seven percent despite supply constraints inflation and continued negative impact from currency
spk_2: from fly fourteen our view or third quarter results for asia region
spk_3: the region revenue decline was entirely driven by the whirlpool china divestiture excluding this division grew by thirty percent year over year or ten percent the pretty torn nanking as expected the reason continue to recover from covered related shutdowns experience in the first half of the year the region delivered very strongly that margins of eight point six percent driven by but cost base price actions and positive impact from i will pull china divestiture
spk_5: lastly or increased investments in l a p b india and he into their book in cooking product offering strengthens i just tradition network and is expected to be margin accreted to the region
spk_2: now implied sixteen alternative back over to mark to discuss our new long term value creation goals thanks joe and before i look forward to our take a moment to the back we are hundred ten year old company with a legacy of success and emission angered on improving live at home
spk_1: lamar deduction of the first elected wing of offer and first then mix in the early nineteen hundred tolerant of the first french built in refrigerator and i'll need to be connected applying to today we will endlessly reinvent ourselves with consumer at the heart of everything we do these new long term value creation gold build and are strong foundation but reflect the fact that they are very different go for than ten years ago operating in a very different vote today will operating at supply constraints and inflationary baramidze budget negatively impacting most industries across the world yet we're on track last year of record performance and twenty thousand people was that impacted by the go in nineteen pandemic and before that numerous ever unforeseen global challenges with a many significant a challenging environment yet we're on track for fourth consecutive year of record result we have an agile and resilient business model which and able to succeed in any operating environment i increased that equation go to demonstrate are confident in our long term success not supported by stone underlying driver such as part of outlook on housing strong abatement demand and evolving consumer habits additionally out demonstrated evaluating though the market approach lower cost date and compelling innovation pipeline position of for continued success
spk_2: on new long term value creation go to reflect our continent in the different global emit different good
spk_1: i'm turning like seventeen he will see that we have exceeded our existing targets we first them to do to target and funded them team that a clear focus on valley creation and balanced approach ago profitably we've been consistently be living at or above all of you started libel case of our products we're not done yet i'm turning to slide eighteen i will have you are new long term by question goes
spk_2: we now expect revenue to grow the rate of five to six percent almost doubling up previous goal of approximately three percent
spk_1: next we are increasing our even margin exploitation from approximately ten percent to range of eleven to twelve percent
spk_2: with to the level of performance than our business is absolutely capable of cheating
spk_1: additionally we expect to continue to convert cash at a level and have increased our guest that free cash flow the present of netted from six percent plus the range of seven to eight percent lastly we expect to deliver return and in that the capital fifteen to sixteen percent an increase from a previous target of twelve to fourteen percent we are competent enough future success and but teething be go to continue to dive significant share with a return attorney to slide nineteen up and it got why we expect let me go for five to six percent imagine modern our industry seconded into three primary purchased one hundred housing replacement and discretionary we're entering appeared with strong growth cabot across all three category first that again that knew how the construction housing remain well below is target structurally needed level for over a decade
spk_2: it has compounded by pent up demand for millennials that were only now beginning to be lawfully interest rates remain it his dog a low level
spk_1: can let me just get replacement
spk_2: we're entering appeared in which the natural replace inside tiger the new from ahead went to tail and
spk_1: this is written by elevated you that rate and a larger install base for behind it which will need to be woodley also the va installed base of connect to the blind that we have cleared data on our consumers are using up on it and they're using them more for example consumer are using all connected wall of and pretending ranges twice as often as before college he more important hybrid work models become more watch but we do expect a blind you that level two main significant the i have and prequel it ultimately driving for their replacement cycle third letter you discretionary purchases call it has brought a fundamental we aren't a ton of a consumer towards home
spk_3: between not just go away
spk_2: in addition put you remain healthy this increase disposable income and more equity my home it's ultimate advice hi investment in the home to recap with strong positive demand for the across all three seconds next turn it was like twenty i want discuss additional revenue calif during a pandemic we all witnessed a significant infrequent all ecommerce activities which we do not expect to revert back to preclude with level
spk_1: over the past years with that our own book with to consume a business that represent the today proximity one billion dollar a multiyear investment in our strategic digital transformation has been and will continue to live a growth rate of over twenty five percent lastly we continue to enter and expand upon you ecosystem with present significant new revenue opportunity they don't demonstrate when we entered the consumable detergent segment business with a lot of are ultra concentrated so often urgent we often into and expand never consumer confidence is of her detergent for both expensive in the you'd be alert and then replacement is needed an order flower app for convenient at home good every
spk_2: they did one of many applications that we have earned the right to win
spk_1: moving for like twenty one i would like to dress why were position to capitalize on me that the jews and grow profitably and we exited the great recession of them to a nine to two eleven took many difficult action enabling below fixed costs position we have today we're move over one billion dollar in caught by reducing our fixed after made by over thirty percent and just last five years next we have a the valley creating approach a promotions and are relentless focus on cost and complexity reduction all of either evident by crunching a demonstration financial success and we're not done yet to present the day we are absorbing significant cost associated with operating manipulation environment lastly will continue to prioritize that to drive innovation growth now turning for like twenty two i'm with yard just free cash flow and returning that the capital expectations large acquisition related items are behind us additionally if leave made bound to poach and have been working capital management position of to glide fire cash commercial next we will opportunistically big boat on acquisition target and our he be at the greeted to went off the acquisition and that are significant would do with acetate were position to continue to deliver stone return on it not turning for like twenty three let me recap what you heard of to me q feet again impressive read them afraid ability to operate in a very challenging environment and deliver very strong offering result the staying healthy market demand and strong operation execution give us a competent think treat our ongoing earnings per share to approximately twenty six dollar twenty five cents by delivering adapted for cash of one point seven billion dollars
spk_6: next we are unwavering and our commitment to drive don't show devalued as expect to deliver record ongoing idiot
spk_1: and return a one point two billion dollar to share and twenty twenty one as we look beyond twenty twenty one with firmly believe with demonstrate that are bit with is structurally different well positioned to and gambled on our record result lastly on new long term bad equation go to reflect the fact that were different whirlpool opening a different world and in early twenty twenty two plan to hold and and at the day and which time we look forward to discussing our view of a better think way to death
spk_0: now we'll we'll end up former remarks and okay up for question at this time i would like to remind everyone in order to ask a question played trench dar one on your telephone keep her and at any point you like your neighbor yourself from the kill place tristar one again
spk_7: he wants or a question come from david mcgregor along though
spk_3: this come on your like my david
spk_8: and nice to see the long term digression was being updated obviously an expression of confidence in you're going to continue growing that performs to the company so thanks for that i want to talk about a more media condition again cause deflation you're dealing with a pro substantial level now
spk_3: actually looks like he'll continue to twenty twenty two and to just talk like your plans to mitigate the impact profitability extent to which feel for the price increases are achievable offset that pressure
spk_2: good morning david it's mark on the first one got inflation you know and you know we ever comes out you want earnings got we got to a significant cost inflation we would put out one billion at a golf inflation in april and met same one billion which we have today though probably one of a few company to kind of didn't change the guys we we saw it coming in with dealing with it
spk_1: in this que free or that's expected we've probably dog with the highest inflation included every year over year and six point five percent because i'm sitting in the queue freebie an al franken twenty two years of i never had a thing called the that kind of inflation but we dealt with it and i would say queue for you to it's certainly approve point strong proof point that we can deal with exceptionally high inflation so going forwards on you know we we don't expect that been facing the quickly fall off and and will be short term there's by definition very carry over into next year
spk_2: but by definition you and all that by can carry over into next year so i would they bomb and you know longer time of year when i get giving kind of in place for next year would do but in january
spk_3: but i would love a pointer to free up the poop on even an extreme spike of inflation you have a year like you're adding concrete would get him with it without on without without even a blip on a modern so i'm i'm pretty confident but the can be of this the care your which would the to some extent from inflation
spk_2: just on that point you feel like you still have room to go on pricing before you reach any kind of demand plasticity issues with the consumer a fallen
spk_3: yeah david in there as usable were not commenting on not in the go for pricey but i can if you spit in several pieces on you know it's kind of i think if there's anything which was the last eighteen months is basically the consumer
spk_2: calling the cag reply felicity the it very little on typically body seems like a little more but you see promotional cough by to it be in store but the consumer on the eat very limited pride the lifted the actually in fact over years we've been running consumer research where we as consumers before they into still how much
spk_9: the expected a burst of of actually paid and they consistently over at mit how much may have to so i think it's it is tiffany to have an infrequent purchase that the consumer awareness of exact price point it's somewhat limited i'm on top of that that not all to forget the disposable income and did it right now probably at an all time high so i think
spk_2: from that perspective
spk_3: i'm less concerned but at one point promotional pressure market will get a little bigger yes and but right now we're not seeing it in the current environment and in along the border global supply chain constraint in a public this i think you will see very little of pressure from that perspective
spk_1: thank you for that as a fork question i guess just with regard to your earnings power at started the lower end of the cycle or what a minimum level or a car might look like me given all you've accomplished regard to cost reductions and acting under for it does or says a part of investments to talk about downside restarting so what gives you confidence in whatever that level support my be yeah david this is jen and idea i'll start off here and and i think you know you can take the second quarter of twenty twenty is really a good benchmark out there when we saw significant drop in volumes around the globe and significant disruption or overall margins for that quarter only drop the to five percent if you look at or north america business it was actually twelve percent during that so yeah i think that's one the beginning of proof point there i think the second thing that we boys pointed to as you know when we came out of the the recessionary period in two thousand and two thousand and twelve
spk_3: well that the a lot of improvements we made really brought our overall margins up to that pepper pointing and that are north america margins of eight percent at that time we kept those fixed costs out and taken more out so i think you know what you saw on a very extreme situation and twenty twenty proves that that you know we we can handle drops in volume as well as we can have
spk_10: from the shock that come with these type of the
spk_0: volatile environments
spk_1: your next question comes from send our cash and raymond james the morning march and joe are you give the more and and morning two questions first with respect to market share recovery within your long term goals obviously you talk about regaining market share in north america and i'm sure you're you're talking about a i'm just in our what working for your backlog
spk_11: at what point do you anticipate specifically defending your market shares that can gonna be fiscal twenty two and and what are the methods by which do you plan to do so is it or new product rollouts or is it it it it depending on price
spk_2: i'm suzanne
spk_1: maybe maybe first take a him and wp need are you he always that canada has it on the first of all on the long term you you've seen that yawn establishing a very healthy he did margin target in the long term of eleven to twelve percent we can fucking if again quit revenue growth i'm going to five to six percent
spk_3: that it as you pointed to him by both market demand and marketshare aspirations on the demand that and image comment on we're exceptionally paul didn't the to the outlook going forward on the mid and long term in edited by and you point out early in the housing market a differing will be a thing for your mouth market has been
spk_2: under the knife or decade
spk_1: opposition in the build a channel is a very strong one ahmed for the moonstone and hundred years there was a good about how the market replacements and i thought them there are many people get a wrong and they look at the market replacement has been as you point out had been headwind were not couple years because he muttered where you were cycling or camping again
spk_2: the sealed period of financial crisis it now starting to taleban because you know camping or are replacing against the stronger dog ears are stronger of years of post financial crisis on top of that and i can't stress enough this covert has god increase applying to use it though he want a to you have a significant hi were paired with with further driver bateman cycle and lastly were very bullish on the discretionary funds and and i'm actually forward hi disposable income consumer we aren't taken to work the home to put it all together it i think we rarely had of the nearby all free demand component point for right direction that is the fundamental background of i would be very good about the demand
spk_1: but beyond that one yet we do believe we can forbid expand our share my business i'm not just the north america around the globe
spk_2: the it is and then of it that joe common and because i'm kind of food lifting towards but the everything that will to point other than presentation is very different revenue streams and if he ever did he didn't he gives your high revenue per unit if you have additional revenue sources like the detergent business or ever kind of ecosystem number you've made it a day when you though it has gone beyond calling for natural other the traditional market shown a unique perspective
spk_3: do you think smart money to the couple point that zannino on our new product launches the world's been a volatile place in the last year and so really are dishwashers that we launched our our best in class have a lot of innovation in a really yet to be fully seated in the market was very excited about how their product is doing already and will continue to do in addition our laundry products in toppled we want some really fantastic products here just recently molester quarter oh and those are just getting seated now and will have to go trajectory into twenty twenty two super excited about build an unmarked touched on it is our products in the new areas around detergents young
spk_1: lee pro that we just recently launched as well that are just now day in the marketplace and our fancy new areas a good for us to we've not really participated in historically so you put that all together with the fuck up on the lentils barn demand what we're were very optimistic about know the overall demand profile my second question that guidance for the year implies that the fourth quarter march and stepped down pretty meaningful a sequentially like through three hundred basis points versus the third quarter despite the fact that sales will be up sequentially at that that's unusual from a seasonal a perspective historically i'm trying to get a sense of what the drivers of that march and step down like a at at know that price vs iraq is getting a little bit worse but it doesn't i don't think glad and explain the entirety of that margin stepped down in your guidance if you could help thanks
spk_2: the same it's markdown first one i would like to point out with wait guidance for like you're on the fourth of fifth time on the road that will we feel very good about men have you read guidance on is a good sign of confidence the on at the bargain for the question don't read too much am exact mathematics of twenty six twenty five on full year it as around and i would probably describe to deal with having perspective tolbert
spk_1: i think the part mark the lower end of it we end of this the we've we're putting a friend again for twenty six twenty five under some some small a tactical magnitude we have to do into you for around capacity and in procuring and getting supply and but the got tactic that but i would see we made have stripped we might have thanks again for twenty six twenty five yeah and they be the one other thing i'd i'd call out as you talked about our historical seasonality i think you're starting to see that smooth out a little bit more specially when you look at whether it's are small appliance business or you know the the previous history we've had with with like promotional period being in the fourth quarter issue was more demonstration both from a free cash flow
spk_0: own and earnings perspective how our businesses it's not a seasonal as it used to be in and we do generate positive results and cash throughout the are consistently now
spk_1: your next question comes from michael we hot and jp morgan
spk_12: they say good morning everyone in the rugrats and the results
spk_1: ah first question i just wanted kid many hair down on a on a couple pylons and and in and see if you can you notice for it and make sure we understand and kings right i'm on the market share question or honestly appreciate the at the confidence in their their the five to six percent organic growth on and guy either the new products always is a a key component of that is one understand and on pack a little bit three key results
spk_12: you know a in north america the kicker early if you're probably benefiting from are you tell me nid believe in high single digit price increases
spk_6: they would imply maybe allowed single digit by a decline so am i thinking about that right and you know that that would imply little bit of continued brass market share on the if you might explain the driver he that
spk_1: it's a magnet than like extreme and over markets on
spk_2: the we did not make progress on regained markets are not an argument is correct on that would give you live in perspective that has nothing to do that products of new products to pointed out at nothing to do by thing entirely to do with how much can dial up production of the now also year to give you live limit back on we find that the producing to free more than a few feet twenty twenty or more winning to free twenty nineteen
spk_1: now you wonder why we didn't ship mark on not you for usually we still by reducing imagery i were selling of inventory and we're now we're because we had to rebound inventory with guard carefully built back up in missouri carefully because we we just have to make will flow work thought about extent libby different a frank frankly get we would
spk_2: have liked to dial up production more on we're facing similar constrained as as you hear from the private labor shortage component shortage and transportation bottlenecks on again as you can read away from production mind slowly getting better two feet and we expect that to often continue to still getting better
spk_1: but it's not going to disappear overnight the we will carry them have confronted the next year but right now that is the fundamental constrained again regaining third marketshare levels the i'm very confident and and hopefully you know that them do about our product range we food with from price perspective well positioned so it's just about how much we can forbid increase production
spk_13: okay so before it had my second question just to clarify you know i know this is a huge gash a bad to the extent that the backdrop on a stable you know you're saying you're starting to build building a little bit of inventory strategically
spk_1: if this
spk_2: creating a backdrop that huge had over the last couple of months where a process we do expect to be able to start to regain its share in the in there in the next quarter to or on the and again obviously a gif but assuming the things they kind of the same as they are today yet the is and again it's it's always a pleasure of demands of light and why not started the positive on the reason why we have an order backlog eight demand is so strong that become produce enough that's a fundamental reason that i could have a deposit having said that we all expected continue to increase production every quarter not it's not gonna dramatically increase and that very simple to him by the
spk_1: the shortage of constraints with we all available on the continued to expect to increase production bomb and even against a continue to increase demand we should be sequentially able to regain some marketshare but it's not gonna be a dramatic shift overnight and because recent budget you confidence in enough
spk_12: right now appreciate that and settle question just on our share repurchase to declare on a georgia guidance it appears that a fortune getting into the revised twenty twenty one god and does not include the three hundred million plus in the fourth quarter odd is why make sure i understand that right and separately when you talk about the now to share repurchase that you've done in our twenty twenty one
spk_1: a is that kind of a new benchmark for say to certainly you're expecting continued solid be careful a generation and i guess i would say avidly outside of opportunistic and emanate yeah i said michael it is june and maybe i'll i'll start with the he takes a three hundred million that we've given for for you know to be honest when you do the math on that that is a very minimal impact because you're buying shares rate doubly throughout the quarter in the back after the year so yeah i would say that that is as marx said earlier that you know we kind of the games we've given it's more the lower and so yeah but we don't see that as a significant mover within their i say that second thing when you think about where we are from from the perspective this year obviously if you look at our free cash flows been very strong this year and you know with that will increase the amount of cash we returned to shareholders whether it be to share buyback or dividends this year
spk_3: and you know we have five different help capital allocation priorities now we look forward share buyback will continue to be one of those and especially in environmental of right now where we don't have a different strategic purpose for the cash we would continue to do that
spk_1: but you know also some things that we've highlighted in there as we continue to invest or expect to continue to invest higher levels in our business specially coming out of this period right now are we haven't been able to and implement like product launches in some of our factories to city or cap x picking up along with we will continue to look at opportunistic emanate the
spk_2: that come along and i think the acquisition we did have the remaining or additional stake in with within india is an example of how we balance all those priorities and michael levine a be all that of the broader comments on and you've seen in our numbers we are right now having a very strong balance it and we have is pretty significant cash pounds on about she'd met a good because it gives you optionality as we look at these option for you can you can imagine with regular reviews with our board to discuss the capital allocation much all the money comes back to where can the great the big return for showed for each allocated dollar arm particular monsieur by that the ultimate him out
spk_1: how attractive share buyback on it's not a tactical decision will be basic look at it
spk_2: what is a discounted value of on long range plan vs market valuation my know for sure and right now we did we do see a fairly significant disconnect between you two numbers and that's why we have in accord with our board we made the decision to buy back significant amount of shares
spk_0: and as gym alluded to you for don't expect that into for
spk_14: your next question comes from faith in like what are you coming back
spk_0: thank you good morning everyone
spk_3: i get my question is thinking about the next shift you know any on and in the past you've talked about that has that that much really kind of includes for you would you say that you're still seeing that improve next up especially in the us and by you're thinking about that one a in relation to the longer term goal that you've put out for us this morning
spk_5: sure and as a job is done through the next shift wouldn't have seen continued improvement their part that is as a consequence of our new product launches that we refer to earlier which essentially know it more them as premium segment of the the business in addition as we know had different constraints will cost labor and and and suppliers of also prioritized know our business in a way that was most advantageous and has helped can see into the mix it's lot with me feel good about the tools we employ we've done this successfully the last thirteen years here and we expect with the a combination of a product launch and our go to market
spk_0: good to be able to continue to do that in the future are generally speaking that has been on a good baseline for isn't something we've kind of build the foundation of okay and then follow up you know like you you obviously outline for as how you're thinking about the business today and you know where you expected to operate on as we think about it from that hotline and margin perspective you know cash generation all those factors talk about you know when you think that you actually
spk_2: sort of our why that these levels when we think about why he twenty one obviously then you're operating at at a much higher level to december these goals in some quarters how do we think about all the different moving pieces and what they mean over time yeah not a few theory which the smiling breeze i expected to come into than the question now yourself if you step back eleven we establish the last time the valuation both and twenty seventeen and as you may recall of them have them call them very ambitious and can ever t them we delivered though
spk_1: but we delivered them off the four years i'm not being beaten humans will be delivered after four years but these are ago than and you know of course we have our internal plans were we there were certain time undermined but you know we're kind of refrain from giving a a exact the of i'm gonna hit them but i think as you point out or more more importantly
spk_2: on because a lot of a question came up about the not fife corps that margin can to keep them that should be the best indication we have all confident that we can deliver on these marginal and the real big change i think it's as as you pointed out it moving bow read new go with from three percent to five to six person and that is really i think the biggest stadium is now integration godesberg and that it's simply coming from longer term strong demand friends and
spk_0: again trying to stay away from timelines but i would lead with the five to six percent growth numbers you should the earlier
spk_1: would because we we do see that met the man strength both on short meat and on from
spk_15: the next question comes from can then f actually bank
spk_2: morning everybody
spk_16: one again and
spk_12: joe congratulations
spk_17: and i'm wondering if you can take that are
spk_1: the holiday rg climate on how supply chains have affected the north american landscape specifically canada sales guidance on your talked about changing perhaps obviously the impact on promotions and
spk_5: you know
spk_3: that the supply chain issues my in your mind actually be changing the cadence of how retailers address
spk_2: pat how they get product to consumers i eat it you don't have these big july fourth maybe don't have to black friday events and that's the first question things can ah yes of from a supply constraints standpoint mean if we just zoom on a little bit and go back to experience of the last eighteen months and we have had many different events throughout the last eighteen months we've shown a very good ability to deal with them although not always perfectly but but i would say deal with them successfully and so certainly
spk_5: that world i think is still going to be a bit on challenges we look forward cause all different factors labour could be components you know supply disruptions whatever it might be in so i think that is your inherent in the what we've experienced and what we will expect here in the ah the short term looking forward to the points gym made a little
spk_2: earlier terms of our or casual there is no as a consequence of these constraints we had been a little bit more even throughout the year and less seasonality around know your holidays or promotions or or even business segments so i think that has been a consequence of us been not even every month as opposed to something else that we've experienced just shortly how it impacts promotions with retailers and i really can't comment on that that naturally on kind of for them to desire but i would say generally speaking that is you know what we've experienced as a consequence of our managing your supply chain and how a manager production and and market are touched on it as well we we are seen an increase in production you go the quarter and your rear for us and it's a positive but certainly a delete relieve you everything completely on you know from the ah from the equation it can be only thing i want to act of it's been an hour and and only
spk_1: we spoke about these before it from consumer perspective i think the consumer will look at applied to the very differently gone for than of attack first of all in terms of how often they look at it and you know just want to repeat but at at me and in bed earlier remarks as we know from are connected applying for that we have a significant debate seven and
spk_18: pardon unit we know actual usage data not research not reported that i'm not
spk_1: real usage data and on preventing ranges and oven we seek to x the usage of grieco it on washers with twenty seven percent higher increase hugely the or and i didn't go away quickly because the five at work people would spend more time at home so first of all the consumers will keep a product more often and use it more of
spk_0: and second of all because of all be nesting trained in investing the home consumers care more for about bought name that the home and and what kind of park behaving so i would strongly argue that in general terms you will see hire a bateman cycles and probably all the high willing to spend because people aren't
spk_1: betting though understanding that think i'll add that issue with my my appliances as it relates to the
spk_2: you know the and yet the to give them the place adapted a new construction that the discretionary that interesting as at it you know what in the past we talked about how much about discretionary it's actually family walk in the alley replacing and appliance a cab broke and because they what new features but also on that discretionary is larger a model bra
spk_5: objects as much during a kitchen can us updated on color
spk_2: yeah how you consider your swedes rightly we all it's clients to together yours looks to go into a kitchen remodel there's you know one off purchases could you give us any commentary you feel comfortable disclosing on that thank you
spk_1: yeah i can go in terms of discretionary and remodeled you're essentially allowed he's capable trend that merkel the junior the nasty been at home using your appliances more and really resulted in consumers caring more about that experience and in that carry more results and than one to invest in those bases customize those spaces really get
spk_2: exactly what they want to meet their families needs and so we generally see that as a favorable turned into space on terms of their role models and likely even sleep in and ensuring that they have all the right features and functionality so it will have perfect data here but i would to the general trend in the sentiment is one it improves ah that position
spk_1: boss it makes consumers really wanna invest more time and money to get exactly what they need for their family and so i think we're going to continue to experience that of in the in the midterm to march point you know people are still remain in a hybrid environment here and so that you can only bolster a deposition and can you anything that up frog would want that it's an inordinate
spk_0: interesting dynamic machu you highlight here if you know him as consumers are look at buying new home i mean because ground is very with the hallmark of a new houses are still completely under the bag happiness about for ten years and you and result of that despite on demand you had been the very high price increases i think you would you would see me
spk_19: more more consumers who are absolutely from called the house of bounty capable of buying home to be preferred about a home prices of a lack of availability who may shift some of his investment into that's remodel the kitchen fit arms i would not be surprised if you see more more that have been going forward in which the met him prior appeared so
spk_0: daw i think that segment on carbon that discretionary whole kitchen with the remodeled i think bill been attracted beckman going forward and i think people we haven't between i'm pretty good our traditional retail is and and the home improvement centers on we have been very practical friends there
spk_16: your next question comes on my donald of rbc capital market
spk_20: frank better take my questions
spk_2: unlike
spk_1: mark i wanted to follow up on a comment you made in response to a bike real question each and in you mentioned that is strategically built up a little inventory i guess i'm kind of wondering if you've got such extended backlogs
spk_21: could you get a photo more color on you know the decision to prioritize all inventory bell vs kind of shipping out the door and servicing but the backlog
spk_2: like i and maybe not on a high level
spk_1: version of and you look in particular and and think into question refers to the us market the us market you will have or believe you have a large on factories abuses and regional distribution center but york and he could have mana distribution centers down the field for meet you serve particular below channel bedard consumer business on but also
spk_0: oh you know many of the home improvements and so on it's ads we reduced inventory last year it became a perfect a big spent up for smaller distribution centers which paid the ultimate translate into consumers irritate with the we had to rebalance them of an inventory college downstream in order to better serve consumer and with you some of you wait times
spk_16: now couple that if you know transportation from one coast the number of getting club he stays in jeopardy baby tie a little bit more a mentor in transportation venue would do a normal circumstances and that's exactly what you would have finished you free but of course of the respiratory for trying to reduce the backlog of ordered which we have met with the pop
spk_1: yeah i think michael this is jim the other thing to point out when you look at the him into a number there's a big component in there to that cost raw material costs have gone up another thing so the portion that marcus talking about that we've repositioning that it's only a part of this the biggest driver and increased in the toys if the increase in and our input costs okay and i get the just a quick fire station on and then i had a or in question is and like your implied fourth quarter died with which is kind of flattish for a total rams woodward still suggest that and a pause and price environment that that volume dynamic is likely to continue and and for kids ages and clarify that of then the second question is a more around your confidence in the inflationary environment that has been such a dynamic environment for her every company as if he acknowledged that just one what is he not giving you the confidence or the visibility in terms of you know this kind of the in the peak and as you look up yeah and i'd say you know mike if they i start with the the first question here
spk_2: him and say you know when when we look at at you for and all that is as mark alluded to earlier you know we believe that the run our games for the four years is in we do believe that that's on the low end of were will be so you take that into queue for under the assumption that we have around our ability to produce get product out out of the door continues to to increase and so you know you can pretty much back into from the guys were given on revenues where we expect our sales to be but as we said we'd expect to continue to see throughput within our our factories increase and and you know them when i look at just the dynamic of the market around us right now and and and say okay with me where we are today honestly would not have
spk_1: very good job of of understanding what the cost environment was going to do and offsetting that with with cost base price increases throughout the year and as we look forward as a mark alluded to this earlier we do see some carry over benefits that still will continue to come i think the other thing that i point to more historically even within our business in our ability to handle
spk_2: some of these dynamics if you look back to like the two thousand and eighteen nineteen timeframe we also had cost increases with and then and many them were driven by tariffs which we were able to offset would cost based pricing back then so again again the trends that we see right now we believe we're taking the right action stuff set the expected continue to do that and like it may be a different common i want to make of it on with inflation on yet inflation very dynamic but again i'm on it would be lot of it earlier we basically thought that coming we gave in april the inflation out of it's prague many people perceive as well that's technically but it turned out to be truth i think we were pretty accurate in are reading up about a market commodity market in order for the market on though
spk_0: and as such by that all of the prime reason why but you free which had a pretty brutal year over year increase of inflation thing happen but it didn't leave a dent in about an arm and but i would say is pretty remarkable job
spk_1: being able to read been placed not local a bit early been others have suggested deal with it earlier medicaid with them as a bench you free and to come for next year as mentioned before of course there will be carry over of a will be all to carry on from pricing and and i would again youth que free the prove point we are able to operate in pretty challenging dynamic environment and will continue to do so your next question come from there thought i played on research by gigabyte am i putting or heretic two things at two things in terms of about the longer term guide first of all in terms of the margin god if you just get a bit clarity
spk_3: guiding for margin improvement in the coming years but does that assume progress across all markets and i guess that the underlying question as that assume that the margin in north america is sustained are enhanced from here
spk_1: yeah eric here to ears what i would say it's a good look at our our long term goals which has laid out whatever suits as it does assume and our businesses outside in north america we continue to see margin improvement and especially within a mayor and we haven't really changed our targets in terms of our goals and turn to the overall margin in a profitability there when you look at our north america business what would it indicates that we believe that that business will stay at above a fifteen percent even marching type range right now and so we feel very good about where we are member a previous guns was thirteen plus for that so we do believe we've made a step change and the profitability with in north america but a big driver that that you shouldn't discount here is that the international our businesses outside the u s will continue to expand margin
spk_2: over the top of a mom and and secondly up with the increased revenue guide in of all the last i get five years as three percent and your she that goal and poll by a calico a few years where he didn't grow three percent is you look at this five the sex i guess what what i'm trying to understand is that in the last number of years
spk_1: when given an opportunity to focus on marketshare margin it felt like you the all the the margin and that may explain a few years you fall short about goal is you move forward
spk_22: is the accelerated revenue growth representing mostly confidence in faster market growth or does not imply a different performance focus commitment to market share
spk_1: at that
spk_2: their blood linda me to think that from on first while story athletic body be question nothing primary demonstrates confident in the market outlook on because the market demand we we just beautiful and very strong do it before and said that and stepping back lead that unites couple years ago them over operating and six or seven percent even margin on if you just look at the
spk_1: pure financials how you create economic value for the company you know you have a higher never i'm on the market to read me will we aren't operating on different levels on if you take the north america business now operating at seventeen or eighteen percent by definition be just look at beijing value creation you can create a more value economic value if live the growth though it it all depended on going to fit the just depending where you are and of in march progression and way we have gone forward to hide evil for economic value creation
spk_2: that picture of course is like a different in europe and year but will continue to drive a margin convention very hard on because we're we're not good done about turn around and and again it depends on the respective regions where we on the business and that's where we kind of on depending where we are have a particular for with margins item of education but again be older i adding theme is very highly confident on on a very strong market demand in the near and mountain
spk_0: the the that i think we're coming to the end of june a session on for what i'd appreciate everybody calling and dialing in there was a lot of matured absorb that a big at work with mob and earnings gorman what out about the noncombat agree to go than appreciate a lot of questions about been automatically from both

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