Whirlpool Corporation

Good morning and welcome to Whirlpool Corporation's third quarter 2025 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 results from ongoing business operations. We 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 reconciliations of non-GAAP items to the most directly comparable GAAP measures. At this time, all participants are on 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.

Good morning, everyone. Over the next hour, we will discuss our Q3 results and we will provide you with plenty of data and detail. However, if you ask me to summarize the Q3 message in just one sentence, it is our Q3 results demonstrate organic growth while our margins are still impacted by tariff preloading in the industry. Let me first talk about our organic growth. We have two sources of growth in our business. One, our KitchenAid small domestic appliance business, which achieved a double-digit revenue growth. Two, market share gains in our North American major appliance business on the back of our new product launches, despite an intense promotion environment. As discussed in prior earnings calls, we have the largest number of new product launches in North America in over a decade. These new products have already secured strong flooring gains And we are beginning to see very encouraging sell-out performance. Now, let me address our operating margins. Our North American operating margins are a point below our expectations, which is not where we want to happen. So why is that? During our last earnings call, we presented three catalysts for value creation and margin improvement in North America. One, our new product launches. They are fully on track. Two, the housing cycle. which will undoubtedly benefit us, but not in 2025, which leaves the tariffs as a third catalyst for margin improvement. Tariffs come in various forms and have been slowly ramping up during Q3. In fact, the full burden of reciprocal tariffs, which were announced on August 7th, only became effective as of October 5th and are now finally fully in place. This ramp-up brought extensive preloading of inventories ahead of tariffs, And while this is not a surprise, it lasted longer than we anticipated. Regardless of these temporary impacts, the fundamental perspective on tariff remains the same. We are the domestic producer with more than 80% of our U.S. sales produced in the U.S., while our competitors are largely importers. Tariffs, by definition, support the domestic producer. The question is not if, but when. And we do believe we are close to a turning point. Container import volumes suggested deceleration of imports in August and September, following the peak in July. This is also supported by 17 consecutive weeks of container rate declines from mid-June. We do strongly believe in our value creation upside, in particular in our North American business. not only because of our promising new products, but also because of our U.S.-based manufacturing footprint, which will, without any question, emerge as a competitive advantage. And our recent announcement of a $300 million investment in our U.S. laundry facilities is evidence of our confidence in our North American business. With this, let me hand it over to Jim, who will discuss the Q3 results as well as our full year guidance.

Thanks, Mark. Good morning, everyone. Turning to slide six, I will provide an overview of our third quarter results. We delivered 100 basis points of revenue growth year over year, driven by our new product launches in MDA North America and a strong double-digit growth of our SDA global business. Global ongoing EBIT margins of 4.5% were unfavorably impacted by the ramp-up effects of tariffs and foreign competitors' preloading of Asian-produced inventory. This resulted in a continued highly promotional environment through the third quarter of 2025. Ultimately, we delivered ongoing earnings per share of $2.09, which was also supported by an updated adjusted effective tax rate of 8%, resulting in approximately $1 of favorability. Our free cash flow was unfavorable versus prior year by approximately $320 million, driven by the timing impact of tariff payments and the inventory bill to support both new product launches and the incremental cost of tariffs. Turning to slide seven, I will provide an overview of our third quarter ongoing EBIT margin drivers. Price mix favorably impacted margin by 50 basis points. We are seeing positive momentum from the cumulative effect of our new product launches and benefits of previously announced pricing actions. At the same time, these benefits have been dampened by the effects of inventory preloading, resulting in continued promotional intensity. Our cost takeout actions delivered as expected, resulting in margin expansion of 100 basis points year over year, led by our manufacturing and supply chain efficiencies. Raw materials were essentially flat as expected. In the third quarter, we experienced incremental costs of tariffs of approximately 250 basis points. While marketing and technology was flat versus prior year, we have continued to invest in our products and brands. Lastly, currency depreciation associated with the Argentinian peso and Indian rupee resulted in an unfavorable margin impact of 25 basis points. Turning to slide eight, I'll review the third quarter results for our MDA North America business. The segment achieved revenue growth both sequentially and year-over-year as new product introductions gained momentum and supported share gains. The tariff policy implementation delays and on-the-water exemptions led to continued preloading of Asian-produced products in the third quarter. While our tariff costs are near steady state, some of our competitors are operating with largely pre-tariff inventory, which has resulted in a continued promotional environment, which negatively affected price mix. Despite these challenges, we are seeing positive signs that import volumes by foreign competitors are likely decelerating, giving us confidence that we will operate in a more level playing field as we enter 2026. Turning to slide nine, let me review our new products supporting our growth in our MDA North America business. As previously mentioned, we have had a very strong lineup of product launches this year, with MDA North America transitioning over 30% of its products. A few highlights of our new product lineup include the Whirlpool and KitchenAid French door refrigerators. The true counter-depth size seamlessly fits into your kitchen, allowing you to maximize your kitchen space. while the full depth size offers increased capacity and elevated aesthetic appeal to meet modern consumer expectations. The new KitchenAid dishwasher will allow you to discover next level dishwashing with the automatic door open dry system, versatile third rack and filtration system that cleans itself. Finally, we have our new Whirlpool top load laundry, which combines refreshed aesthetics with performance, allowing you to choose how to wash with the two in one removable agitator. These products are just a few examples of how we continue to position our business for growth in MDA North America by bringing new innovation into consumers' homes. Turning to slide 10, I'll review the results for our MDA Latin America business. In the third quarter, MDA Latin America experienced a net sales decline of 6% year over year, excluding currency due to volume declines. The challenging business environment in Argentina has negatively impacted the segment performance by approximately 100 basis points, resulting in an EBIT margin of 5.7%. Turning to slide 11, I'll review the results of our MDA Asia business. In the third quarter, MDA Asia saw a net sales decline of 4% year-over-year, excluding currency driven by volume decline. Continued cost takeout was offset by industry volume declines, resulting in approximately 2% EBIT margin for the segment. Turning to slide 12, I'll review the results of our SDA global business. The segment achieved double-digit net sales growth of 10% year-over-year, driven by the success of its new product launches. The segment continued to deliver a very strong EBIT margin of 16.5% as favorable price mix and strong direct-to-consumer business continued to deliver margin expansion. Turning to slide 13, I will highlight how our SDA global business continues to create consumer loyalty and excitement while bringing relevant new products to market. First, I want to highlight the highly sought after walnut wood accents now available in the espresso kit, beautifully crafted with the warmth and natural texture of real walnut wood. Our three-in-one pasta stand mixer attachment is designed to simplify the pasta making process, allowing the maker to roll and cut their pasta, enhancing overall kitchen experience with one easy-to-use attachment. We also recently held an exciting stand mixer sweepstakes where our limited edition tangerine twinkle color sparked interest across generations, earning approximately 2.5 billion media impressions in the first five days. These initiatives are just a few examples showcasing the success of our SDA global business and the strength of this iconic brand. Turning to slide 15, I will review our guidance for 2025. As Mark highlighted, the near record levels of preloaded Asian imports have unfavorably impacted our 2025 financial results. As a result, we are narrowing our full year EPS guidance and revising other components of guidance to reflect the timing at which we expect some of these headwinds to subside. Our net sales guidance of $15.8 billion is unchanged. As we continue to experience promotional intensity due to foreign competitor inventory preloading, we now expect to deliver a full year ongoing EBIT margin of approximately 5%. As mentioned, we are narrowing our full year ongoing earnings per share to approximately $7, supported by an improved adjusted effective tax rate. The One Big Beautiful Bill Act enacted in July 2025 includes the permanent extension of certain tax provisions and modifications to the international tax framework. As a result, we now expect an adjusted full-year tax rate of approximately 8%. Without the benefit of our updated tax rate, we would be at the low end of the previous ongoing EPS guidance. Lastly, we have updated our free cash flow guidance to approximately $200 million. This reflects the updated expected EBIT margin and the impact of cash payments related to tariffs. Turning to slide 16, we show the drivers of our updated full-year ongoing EBIT margin guidance. We have updated our expectation of price mix to 75 basis points to reflect the intense promotional environment continuing through Q4 of 2025. Net cost takeout is unchanged and reflects the expectation to deliver approximately $200 million. The expected impact of incremental tariffs is still projected to be 150 basis points. It is important to reiterate that these impacts represent currently announced tariffs and do not factor in any future or potential changes in trade policy. Marketing and technology investments reflect our continued efforts to invest in our products and brands, and the improvement of 25 basis points demonstrates our ability to deliver more efficient marketing assets. Currency and transaction impacts are unchanged. Turning to slide 17, I will review our revised segment expectations. We have adjusted EBIT margin in North America to reflect the lower-than-expected price mix due to competitor preloading. we expect a full-year MDA North America margin of 5% to 5.5%. With unfavorable currency impacts and continued macro volatility in Argentina, we now expect an EBIT margin of approximately 6% in MDA Latin America. We expect MDA Asia and SDA global EBIT margins of approximately 5% and 15.5% respectively, unchanged from our prior guidance. Turning to slide 18, I will review our free cash flow guidance. We've updated our cash earnings and other operating items consistent with full year EBIT guidance to reflect the impact of tariff costs. We now expect capital expenditures of approximately $400 million as we continue to prioritize and optimize our capital investments. We expect to build approximately $100 million of working capital, primarily driven by incremental tariff costs in our inventory. Additionally, the timing of tariff payments is negatively impacting our working capital as tariff payment terms to the government are much shorter than our existing supplier payment terms. The full effect of tariffs is now reflected in our free cash flow expectations. Our restructuring costs due to previously announced organizational actions are unchanged at approximately $50 million. Overall, we expect free cash flow of approximately $200 million for the year. Turning to slide 19, I will review our capital allocation priorities. As demonstrated through our 100-plus new products launching this year, investing in innovation that meets our consumer needs is a critical priority to drive our organic growth. Secondly, we are committed to reducing debt levels. We continue to expect to pay down $700 million of debt, taking a significant step toward our long-term target of two times net debt leverage. As the ramp up effects of tariffs impact our 2025 financial results, our debt pay down will be delayed into 2026. Lastly, we have declared a fourth quarter dividend of 90 cents per share, continuing to return cash to shareholders through funding a healthy dividend. Turning to slide 20, I will give an update on the anticipated Whirlpool of India transaction. As you may have seen announced earlier this month, we have now entered into strategic agreements between Whirlpool Corporation and Whirlpool of India, which include brand and technology licensing. These agreements, along with the transition services agreement, paved the way for how Whirlpool Corporation and Whirlpool of India will operate together over the next several years. This is a critical and prerequisite milestone to support the advancement of our expected transactions. With this structure in place, we continue to work toward an ownership reduction to approximately 20%. Ultimately, the proceeds from this ownership reduction will be used to pay down debt. We expect to announce a share sale transaction by December of 2025 and are targeting transaction completion in the first half of 2026. Now I will turn the call over to Mark.