Whirlpool Corporation

Good morning, and welcome to Whirlpool Corporation's first quarter 2023 earnings release call. Today's call is being recorded. For opening remarks and introductions, I would like to turn the call over to Senior Director of Investor Relations, Corey Thomas.

Thank you, and welcome to our first quarter 2023 conference call. Joining me today are Mark Bitzer, our Chairman and Chief Executive Officer, and Jim Peters, our Chief Financial Officer. Our remarks today track with the presentation available on the investor section of our website at whirlpoolcorp.com. Before we begin, I want to remind you that as we conduct this call, we'll be making forward-looking statements to assist you in better understanding Whirlpool Corporation's future expectations. Our actual results could differ materially from these statements due to many factors discussed in our latest 10-K, 10-Q, and other periodic reports. We also want to remind you that today's presentation includes the non-GAAP measures outlined in further detail on slide three of the presentation. We believe these measures are important indicators of our operations as they exclude items that may not be indicative of results from our ongoing business operations. We also think the adjusted measures will provide you with a better baseline for analyzing trends and our ongoing business operations. Listeners are directed to the supplemental information package posted on the Investor Relations section of our website for the reconciliation of non-GAAP items to the most directly comparable GAAP measures. At this time, all participants are in a listen-only mode. Following our prepared remarks, the call will be open for analyst questions. As a reminder, we ask that participants ask no more than two questions. With that, I'll turn the call over to Mark.

Thanks, Corey, and good morning, everyone. As you will have noted now, earnings released we did start the year with a very solid first quarter. It was a first quarter which demonstrated significant improvement from our Q4 of last year. And it was a quarter which puts us firmly on track towards our full year guidance. If you look at the drivers of this improved performance, we did not get a lot of help from a macro environment. The global industry demand was down, but frankly, that is what we expected. It was instead our consistent and disciplined execution of our operational priorities that drove this improvement. We were able to achieve meaningful cost reductions, we improved our supply chain, our product innovations drove strong consumer demand, and we gained market share both sequentially and year-over-year. In short, we did what we told you we would do. This first quarter further strengthens our confidence in our full year guidance. While the macro environment remains challenging and volatile, we know we have the right operational priorities and demonstrate that we can execute them with rigor and discipline. Our market share gains, in particular in the U.S. builder segment, will continue throughout the year. Coupled with early signs of a stronger U.S. housing market, we expect to see an improved revenue top line as the year progresses. Beyond our Q1 operational and financial performance, morning, we will also give you a short update on our portfolio transformation, which is fully on track. Turning to slide six, I will provide an overview of our first quarter results. Across the globe, we're still seeing lower demand due to softer consumer sentiment impacting discretionary appliance purchases, which resulted in a revenue decline of 5.5%. Our Q1 operating margin of 5.4% is 200 basis points ahead of Q4. And our North America margin improved by 420 basis points to a 10% EBIT margin. Overall, we delivered first quarter ongoing earnings per share of $2.66, in line with our expectations, and are reaffirming our ongoing EPS guidance of $16 to $18. Now, turning to slide seven, I will share more details on our 200 basis points of sequential margin expansion. Our overall Q1 price mix was in line with our expectations. The year-over-year price mix margin decline is largely driven by our limited participation in promotions during the first half of 2022. For a full year, we continue to expect the promotion environment to be at similar levels as the second half of 2022. On a sequential basis, our price mix is slightly improved versus Q4, but frankly, this is simply a reflection of the normal seasonal promotional activities tend to be higher during the fourth quarter. Looking at both net cost takeout and raw materials, let me first remind you what we told you during our last earnings call. We anticipated that Q3 and Q4 marked the peak of our cost inflation, and we would expect this to now turn favorable. And that is exactly what you see in the sequential cost progression, where the total of net cost and raw materials show a half a point of favorable cost development. As the year progresses, We do expect net cost takeout and raw materials to be the key driver of margin improvement. Our cost actions are on track. We will see more seasonal volume leverage and raw materials will continue to improve, even though at the low end of our raw material expectations. Finally, we had a negative impact from foreign currency of 25 base points year over year, ultimately delivering Q1 ongoing EBIT margins of 5.4%. Turning to slide eight, I will provide an update on our supply chain operational priorities. We aim for flawless supply chain execution. And while our historical supply chain model has served us very well over many decades, what the last few years have shown us is that in order to succeed moving forward, we need a more responsive and adaptive supply chain. We have significantly expanded our dual sourcing of critical components and prioritized high-value strategic parts and components to de-risk this part of our supply chain. Additionally, over the past two years, we have also made significant progress in reducing our parts complexity. In the first quarter, we further reduced our active parts by approximately 5%. This is a key driver in increasing our supply chain resiliency. As a result, our overall product availability is significantly improved versus 2022, even though not yet fully to pre-pandemic levels. Turning to slide nine, we provide an update on our cost takeout. First, I want to put this in context. Our business saw unprecedented levels of inflation with $2 billion of cost inflation in 2022 on top of an incremental $1 billion of raw material inflation in 2021. Coming into this year, we were aiming to reduce our cost base by $800 to $900 million, of which $300 to $400 million were raw material benefits. and $500 million were internal cost takeout actions. In short, we're on track. More specifically, recent material cost trends will put us at the lower end of this range, while our internal net cost takeout actions of approximately $500 million are largely on track. We continue to reduce supply chain inefficiency and premium costs. Our proactive headcount management delivered an additional one-point reduction in our global salaried workforce in the quarter, bringing our aggregate reduction to approximately 5%. Additionally, we're seeing benefits from reduced discretionary spending and other indirect costs. To summarize, our net cost actions are on track and commodity prices have eased, but at a slower pace than initially expected. As a result, we're trending towards the lower end of our 800 to 900 million total cost takeout range. Now, I'll turn it over to Jim to review our regional results.