Whirlpool Corporation

Good morning and welcome to Whirlpool Corporation's third quarter 2024 earnings call. Today's call is being recorded. Joining me today are Mark Bitzer, our chairman and chief executive officer, and Jim Peters, our chief financial and administrative officer. Our remarks today track with a 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 will 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 at the beginning of our earnings presentation. We believe these measures are important indicators of our operations as they exclude items that may not be indicative of our results from ongoing business operations. We also think the adjusted measures will provide you with a better baseline for analyzing trends in 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 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 Marc.

Thanks, Scott, and good morning, everyone. In the third quarter, we again delivered global sequential EBIT margin expansion largely in line with our expectations. I'm pleased with our team's execution of our operational priorities delivering 50 basis points of sequential global margin expansion. Our North American business even achieved 100 basis points of sequential margin expansion, led by our previously announced pricing actions. Before I expand further into the results, I want to acknowledge what has been and will, at least in the near term, remain a challenging macro environment in the U.S. Consumer confidence remains low and is impacted by the uncertainty ahead of the upcoming elections. Despite the recent interest rate cut by the Fed, the US housing market is still constrained by elevated mortgage rates. As a result of this environment, demand in the US has shifted significantly toward lower margin replacement driven purchases. And the higher margin discretionary demand continues to be weak due to historically low existing home sales. Although the timing of the US housing recovery is still uncertain, We are confident that the industry will have a multi-year recovery with the underlying housing fundamentals remaining strong. We are well positioned to benefit from this eventual housing rebound. While we await an anticipated multi-year U.S. housing recovery, we are focused on executing our operational priorities. We delivered ongoing EPS of $3.43, supported by our pricing actions, cost takeout, and a more favorable adjusted effective tax rate. Our strong working capital management improved inventory, generating approximately $130 million of cash within the third quarter. We expect to deliver approximately $500 million free cash flow in 2024. As a reminder, year-to-date free cash flow was negatively impacted by non-recurring cash outflows associated with a Europe transaction of $250 to $300 million. These cash outflows were one time in nature and will no longer impact our results in 2025, structurally strengthening our free cash flow delivery going forward. Our capital allocation priorities are unchanged and our free cash flow delivery enables us to further reduce our debt levels and continue to return cash to shareholders. We paid dividends of $1.75 per share in the third quarter and declared $1.75 per share in the fourth quarter, returning approximately $400 million to shareholders this year. Turning to slide six, I will review the third quarter ongoing EBIT margin drivers. Sequentially, price mix delivered 75 basis points margin expansion, driven by the pricing actions in North America. Year over year, price mix still impacted margin unfavorably by 125 basis points. We saw the balance of sales shift out of cooking and dish, which tend to be our strongest MDA margin categories, into replacement-focused laundry and refrigeration categories. The heavy replacement market in the US unfavorably impacted product mix in the third quarter. Our cost takeout actions delivered 25 basis points of sequential margin expansion and 50 basis points year over year. This was led by a fully implemented organization simplification, while raw materials, as expected, were essentially unchanged. Currency negatively impacted margins sequentially and year-over-year as the Brazilian Real and Mexican Peso experienced some weakening relative to the US dollar. The European transaction impacted the third quarter negatively by 25 basis points due to the equity and affiliates impact from Beko Europe BV. This negative impact was driven by the weak macro environment in Europe and the integration related efforts. Ultimately, we're pleased to have delivered 50 basis points sequential margin expansion. And now we'll turn it over to Jim to review our segment results and full year guidance. Thanks, Marc.

Good morning, everyone. Turning to slide seven, I'll review third quarter results for our MDA North America business. Net sales were down 4% year over year, driven by unfavorable price mix as a result of the strong replacement environment and weak discretionary demand. We are seeing further deterioration in the underlying discretionary demand than what we experienced in the first half of 2024. However, price mix improved significantly compared to last quarter due to our pricing actions. We delivered margin improvement with our pricing actions and our cost takeout program, which is expected to deliver approximately $300 million globally for the full year. Our actions delivered 100 basis points of sequential EBIT margin expansion. Overall, the segment delivered 7.3% EBIT margin for the quarter. and we are very pleased with the margin expansion of approximately 170 basis points delivered since the first quarter. We continue to focus on margin expansion as we head into the fourth quarter and expect cost takeout opportunities to support further margin progress. Turning to slide eight, I'm excited to take a moment to showcase a few of our new product launches. Product innovation is critical to enable our future growth and margin expansion expectations. In MDA North America, we had two notable product launches in our laundry category. Our newest Whirlpool brand laundry pair fights common causes of front load odor with the fresh flow vent system. The innovative new fresh flow vent system is the first fan powered system designed to help keep your clothes and washer fresh. With the successful launch of Maytag Pet Pro top load laundry in 2023, we've brought the winning and innovative Pet Pro filter to the front load. The PetPro option utilizes the PetPro filter lifting and removing pet hair from clothes for a clean you can see. Recently, KitchenAid launched the brand's first four-door refrigerator. The KitchenAid refrigerator has a modern aesthetic with sections to keep fresh and frozen ingredients organized and easy to locate. The four-door design combined with the storage flexibility lets consumers customize the refrigerator to their needs. These innovative new products demonstrate our commitment to being the best kitchen and laundry company, improving life at home for our consumers, strengthening our leading position in North America. As we look forward to 2025, we have an even stronger lineup of new product introductions that we expect will positively impact price mix and share. Turning to slide nine, I'll review the very strong results for our MDA Latin America business. The segment continued to demonstrate strong net sales growth of 9% year over year, excluding currency, driven by industry in both Brazil and Mexico. We delivered a solid EBIT margin of 6.9% in the quarter, with 110 basis points of sequential margin expansion from improved price mix. We expect sustained solid EBIT margins for the full year as we focus on continued growth and price mix improvements. Turning to slide 10, I'll review the results of our MDA Asia business. We saw another quarter of double digit net sales growth of 10% year over year excluding currency. Sequentially, sales contracted due to the seasonal decline as we exited the summer period. Our continued share gains delivered volume growth and we are pleased with the progress made in the segment. We delivered 2.9% even margin from improved price mix and fixed cost leverage. Turning to slide 11, I'll review the results for our SDA global business. Net sales decreased 3% year over year, impacted by industry declines in the US. Strength in our direct-to-consumer business and new product launches were more than offset by a softer industry with weak consumer sentiment. We delivered EBIT margin of 14.2% with the quarter impacted by continued marketing investments in our new products. Our SDA business is well positioned for the holiday season and we expect sustained strong EBIT margins. Despite industry softness seen year to date, we are confident in delivering the guided net sales growth of approximately 7.5% supported by our new product pipeline. Turning to slide 12, I'm pleased to review our exciting new lineup of KitchenAid small appliances. Our iconic KitchenAid stand mixer launched the unique evergreen design, which has been a hit with enthusiasts everywhere. We launched new additions to the KitchenAid Go cordless system. A removable and interchangeable battery powers all KitchenAid Go appliances, providing you with the power you need for every creation, no cord needed. The new top-down chopper, citrus juicer, and hand blender with accessories unlock even more possibilities, both inside and out of the kitchen. These new product launches will continue to fuel our growth expectations. On slide 13, let me review our reaffirmed full-year guidance. Our net sales guidance of approximately $16.9 billion alongside approximately 6% full-year ongoing EBIT margins are unchanged. Additionally, we are reaffirming our ongoing earnings per share of approximately $12 and free cash flow guidance of approximately $500 million. Our guidance includes updated expectations for our adjusted effective tax rate. we now expect an adjusted effective full-year tax rate of approximately negative 18 to 22%. We have further refined the estimated benefits of our tax planning strategies since closing the Europe transaction. With the unique tax impacts of the significant legal entity restructuring we were able to execute with the European transaction behind us, we expect our adjusted effective tax rate to be approximately 20 to 25% starting in 2025. However, our cash tax rate will be significantly lower. We are confident that we have the right actions in place and are reaffirming our full year guidance. Turning to slide 14, let me recap our commitments to our capital allocation priorities. We've completed actions to strengthen our balance sheet in 2024. In the first quarter, we completed the sale of 24% of Whirlpool of India's outstanding shares while retaining a majority interest. Additionally, the planned divestiture of our Brastemp brand water filtration business in Brazil closed on July 1st. Combined, these two actions generated more than $500 million of cash. Coupled with our beginning cash on hand of $1.6 billion and free cash flow generation of approximately $500 million, we are well positioned to continue our debt reduction initiatives and pay dividends of approximately $400 million in 2024. With the $500 million of term loan repayment in April, we have made significant debt reduction progress since the acquisition of Insincrator with approximately $1 billion debt paid down. Inclusive of the term loan, we have a total of 1.8 billion of current maturities in 2025 with a weighted average interest rate of approximately 6%. We expect to pay down a portion of our current maturities and refinance a portion at a lower interest rate in 2025. As we look ahead, we have ample space in our flexible debt ladder to optimize our refinancing plans. We are fully on track to deliver our 2024 capital allocation priorities and position Whirlpool well to strengthen our balance sheet. Now, I will turn the call over to Marc.