Whirlpool Corporation

Good morning and welcome to Whirlpool Corporation's second quarter 2026 earnings call. Today's call is being recorded. Joining me today are Marc Bitzer, our Chairman and Chief Executive Officer, Roxanne Warner, our Chief Financial Officer, Juan Carlos Puente, our Executive President of North America and Global Strategic Sourcing, and Ludovic Beaufils, our Executive President of KitchenAid Small Appliances in Latin America. Our remarks today track with a presentation available on our 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 that 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 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.

During today's call, you will hear three key messages. First, our Q2 performance was in line with our expectations, despite the persistent macroeconomic challenges impacting our industry and the broader economy. Second, we delivered sequential margin improvement in Q2, and we expect margins to continue improving throughout the remainder of 2026. North America in particular delivered strong operational progress and a strong lineup of new products. While we recognize that there is more work to do, this is a clear step towards stabilizing our business. And third, we continue to take decisive actions to better position our business in the near term and capture the upside when consumer sentiment and the housing market rebounds. We are reaffirming our full-year operational outlook and adjusting EPS to reflect the updated interest expense expectation following our recent refinancing activities. Turning to slide 7, we will further discuss some of the decisive actions taken to better position our business. We have accelerated the cadence of our new product launches and are performing exceptionally well. We transitioned over 30% of our MDA portfolio in North America into new products. That is three times more than we would typically transition in a year and the largest portfolio refresh in the last 10 years. In 2026, we had an impressive performance at the Kitchen Bath Show, winning 23 awards and are on track to launch more than 100 new products. Our trade customers and consumers have reacted very positively to these new launches. Juan Carlos and Ludovic provide more details on how some of these recent launches in MDA North America and the SDA Global are performing. In our last call, we discussed our announced price increases to mitigate years of cost inflation and some residual impact of tariffs. I'm very pleased to report that our execution of these increases has been strong. The initial benefit is already showing up in our sequential margin improvement, and we anticipate further incremental margin gains moving forward. We also announced new pricing actions in Latin America effective in August, which, in combination with some of our strategic launches, in particular in refrigeration, are expected to restore margin in what has been a highly competitive environment. We continue to accelerate our structural cost takeout actions to help offset macroeconomic headwinds and to drive meaningful carryover benefits in the years ahead. Recently, we announced footprint changes that are expected to deliver meaningful cost savings starting in Q4 of 2026 across key manufacturing facilities in Amana, Iowa, Rio Claro, Brazil, and more recently, Ramos, Mexico. We're also optimizing our logistics network, reducing the number of local distribution centers by 25% while maintaining a strong footprint that places 97% of our customers within 100 miles of an LDC. This allows us to maintain high reliability, on-time delivery, and maintain lead times. As we optimize our global footprint, we're also investing in growth, including our new manufacturing plants in Harrisburg, Ohio. Together, these actions accelerate our path to vertical integration, automation, and supply chain modernization, reinforcing our competitive advantage as the leading domestic appliance producers. Finally, we have completed a series of strategic actions to strengthen our balance sheet and expand our financial flexibility, giving us the resilience required to navigate the volatile macroeconomic environment while continuing to fund our organic growth. A look at our balance sheet before and after these transactions shows a dramatic improvement in our near-term liquidity and capital position. Our strategic recapitalization strengthened our balance sheet. Our recent bond issuance successfully cleared our 2026 and 2027 debt maturity, giving us a clear operational runway. We completed a secured asset-based lending credit facility that provides us with the needed liquidity and financial flexibility to operate in the current volatile environment. Lastly, we completed the sale of our interest in Becker Europe VV, primarily for cash consideration, further enhancing our cash position. Importantly, our core capital allocation priorities are unchanged. Turning to slide 8, let me cover our second quarter results. We delivered net sales of $3.5 billion, which was impacted by software industry demand in North America and promotion intended in Latin America. However, we saw a sequential margin improvement of 50 basis points to 1.8%, resulting in ongoing earnings per share of negative 21 cents. As mentioned earlier, in line with our capital allocation priorities, we successfully sold our minority stake in Becker Europe BD for approximately $128 million, generating roughly $84 million of net cash consideration. Our free cash flow was a consumption of approximately $1.1 billion, and it was largely driven by lower earnings in conjunction with seasonal working capital. Turning to slide 9, I will walk through our sequential ongoing event margin virus. We delivered margin improvement of approximately 50 basis points quarter on quarter. Our previously announced pricing actions in North America favorably impacted margins, fully offsetting unfavorable price mix in Latin America and resulting in 225 basis points of improvement. Net cost was a tailwind of 100 basis points as we compared to the higher costs associated with our inventory reduction actions in the first quarter. Raw material inflation unfavorably impacted margins by 50 basis points, primarily driven by elevated steel and base metal costs. Net tariff impact was an unfavorable 200 basis points, driven by implementation of section 2 phase 2 and realizing credit benefits of AIIPA decision in Q1. Marketing and technology, as well as currency, each represented a headwind of 25 basis points partially offset by favorable transaction impacts of approximately 25 basis points. Now, I will turn the call over to Juan Carlos to review our MDA North America results. Thanks, Marc.

Turning to slide 11, I will provide an overview of our MDA North America segment. In the second quarter, net sales were $2.4 billion, up 8% sequentially from the first quarter. We saw a sequential EBIT margin improvement of 240 basis points, driven by the strong execution of our previously announced promotional price increase and the progression of our structural cost takeout initiatives partially offset by higher raw material, fuel, and tariff costs. As expected, U.S. industry demand was down 3.4% year-over-year. Turning to slide 12, I want to remind you of the significant pricing actions we announced last quarter. We executed a promotional price increase of more than 10% relative to the first quarter prices. We also announced a lease price increase of approximately 4% effective in July, which we expect will benefit the third quarter results. We can see positive impact of these price increases on our sequential margin improvement as well as in the retail sellout price data. Turning to slide 13, let's review our sellout price data. This chart represents the aggregate view of thousands of price data points collected weekly based on publicly available data. The yellow line shows that our price are progressing as expected. The blue line shows that the competitor average pricing has also meaningfully moved upward since the beginning of 2026. We are seeing resilient demand despite the price increases. In the current software housing market, appliance demand is largely replacement-driven and relatively price inelastic, at least until consumers reach a point of sale and compare options. More importantly, we are able to hold our market share, showcasing the success of our robust product innovation. Turning to slide 14, I will review our newest kitchen suite, coming to market in Q3, in line with our strategy of driving premium meat. We are incredibly proud of the new KitchenAid Personal White Suite. The elevated neutral color tone can be paired with our interchangeable handles and knobs, allowing consumers to personalize their kitchen suite. This premium product is a great addition to our portfolio and one that fits squarely within our strategy to drive premium mix. On slide 15, we can see how some of our recent product launches are driving notable growth. Our Maytec top-low washer gained approximately one point of laundry share, a result largely influenced by our new pet hair removal impeller. The new KitchenAid suite has been exceptionally well-received and has driven an impressive 20% year-over-year brand share growth. Lastly, our industry-first Whirlpool UV laundry tower has rapidly captured approximately 10 points of share in this category. Turning to Site 16, improving profitability is not just a pricing story. That's why we continue to focus on our structural cost takeout. We remain on track to deliver $150 million in cost takeout in 2026. Of the $150 million target, we expect approximately $60 million in savings from our automation initiatives, $15 million from strategic sourcing, and $20 million from our targeted fixed cost actions in our corporate centers. On strategic sourcing, we are deepening our relationships with critical suppliers and creating a win-win opportunity that drives mutual operational growth and margin enhancement. The acceleration of our footprint, strategic sourcing, and corporate center cost reduction actions are expected to help mitigate the headwinds associated with higher fuel costs, volume deleverage, and inflation. This illustrates how we are laser-focused on delivering against what we can control. Turning to slide 17, we're maximizing benefits from our manufacturing and supply chain footprint to strengthen our structural competitive advantage. In our last earnings goals, we discussed key manufacturing footprint changes that we announced in Q1. First, the multi-year modernization efforts on Amana, Iowa, that will refocus our manufacturing on bottom-mount refrigeration and optimize our parts production and tool assemblies, generating an expected annualized EBIT benefit of approximately $70 million. Second, our $60 million investment in our new state-of-the-art production facility in Beresburg, Ohio, focused on accelerating vertical integration, which we expect to generate annualized EBIT benefits of approximately $30 million. And lastly, In the second quarter, we announced our plan to ship our Mexico refrigeration production from the SUPSA plant to our Ramos manufacturing facility in our existing supply chain. All of these moves drive significant structural cost benefits, with EBIT benefits starting in Q4 of this year and significant carryover benefits in 2027 and 2028. Additionally, the consolidation of our U.S. distribution centers, where we are reducing our local distribution centers from 126 Down to 94, alongside the consolidation of our regional distribution and return centers. It's expected to unlock another $60 million in annualized EBIT benefits while maintaining reliability and delivery speed. Combined with the structural advantage of the updated Section 232 TERRA framework, we're highly confident in the long-term profitability of our North America business. and now I'll turn the call over to Ludo to review MDA Latin America and SDA global results.