Q3 2023 Whirlpool Corp Earnings Call

Thank you and welcome to our earnings Conference call. Joining me today are Marc Bitzer, our chairman and Chief Executive Officer.

Jim Peters, our Chief Financial Officer, our remarks today track with a presentation available on the investors section of our website at Whirlpool Corp Dot 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 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 our ongoing business operations. We also think the adjustment measures will provide you with a better baseline for Anil.

And trends in our ongoing business operations.

Nurses 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.

Our prepared remarks, the call will be opened for analysts' 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.

Before we discuss our Q3 results in more detail I want to acknowledge the great news that we received earlier this week.

On Tuesday, the European Commission announced the unconditional approval of our European transaction with <unk> with.

With this decision and earlier clearances from Austria, Germany, and China, We passed a major regulatory hurdle and are now fully focused on obtaining phase II approval from the Uk's DMA.

By a transaction closure within this year is unlikely we're confident that we can close by April next year.

The transaction closure will unlock significant value for us largely coming from an improved free cash flow of $250 million per year.

Later during this call we will give you more detail about the expected regulatory process and the value creation of this transaction.

Looking more short term in our Q3 results. We are pleased with our operational progress and our topline growth.

What is still a very challenging environment, but bottom line showed solid progress over last year.

It is essentially flat from prior quarters.

Our operational progress during the entire year has been sustained and even accelerated during Q3.

We improved our supply chain execution, we accelerated our cost takeout actions and are fully on track towards our full year cost targets.

And we launched several innovative products across multiple categories as.

As a result, we were able to gain market share in almost all of our major businesses.

As I mentioned earlier the market environment is still challenging.

Market demand in the Americas has been solid but this is entirely driven by a very strong replacement demand.

Related to increased appliance usage at home.

A trend, which we expected and which we expect to continue.

The other side of demand discretionary purchases have been even softer than anticipated as a result of increased mortgage rates and low consumer confidence.

Hello, discretionary demand sparked a more intensive promotion environment in particular, North America Sn.

Essentially we're back to a pre COVID-19 promotional environment.

Back to pre Covid promotion environment, its not surprising however, we expected this to occur at one or two quarters later.

Looking into the fourth quarter, we do not anticipate this environment to fundamentally change and we do expect our business to perform on a similar level as Q3.

As a result, we are updating our full year guidance. We now expect full year EBIT margins of six in the quarter to six 5% at.

At the same time, we're able to achieve additional tax benefits.

Putting both together allows us to remain at the lower end of our original guidance of approximately $16, but with a lower free cash flow of $500 million.

Turning to slide six I will provide an overview of our solid third quarter.

We delivered 3% of topline growth both year over year and sequentially.

Promotions, which were normalizing sooner than expected or more than offset by over a point of share gains in North America strong in growing the replacement demand.

Build a channel benefiting from a shortage of existing homes and <unk> acquisition.

We realized $300 million of cost takeout benefit in the quarter and are fully on track to deliver over $800 million of cost takeout in 2023.

Our actions drove 100 basis point margin expansion year over year with solid EBIT margin of six 5% and ongoing earnings per share of $5 45.

Now turning to slide seven I will share more details on a 100 basis points margin expansion.

Sequentially price mix negatively impacted margins by 150 basis points, and 375 basis points year over year.

Driven from a normalization of our promotions, which was largely absent in recent years and reemerged in the third quarter of 2022.

The promotional environment is now reflecting a return to historic levels faster than previously expected and normal seasonal patterns, which are weighted more towards the second half of each year.

In addition mix was negatively impacted in the quarter due to over index share gains in laundry.

As our laundry share was disproportionately impacted by supply chain disruptions during the pandemic, our strong cost actions delivered both sequential and year over year benefit of 106 hundred 25 basis points respectively.

Both year over year and sequentially, we invested more in marketing and technology.

Ultimately, we delivered ongoing EBIT margin of six 5%.

Turning to slide eight you will see operational priorities are fully on track.

Our resilient and adaptive supply chain has delivered share gains throughout the Americas.

We have addressed recent supply challenges significantly reducing the risk of supplier driven disruptions by expanding dual sourcing and reducing parts complexity by more than 50% into 2021.

We're fully on track to deliver over $800 million of cost reductions in 2023, even with some raw material cost benefits coming slightly later than originally expected.

And while we're not providing guidance for 2024, we're increasingly confident about sustained cost progress well into 2024 due to a number of factors.

Significant cost take out during the second half of 2023 will obviously create sizable carryover benefits.

The recent trends in raw materials in particular steel and freight rates that have been favorable throughout the year are likely to continue to create tailwind.

Now I will turn it over to Jim to review our regional results.

Thanks, Mark good morning, everyone.

Turning to slide 10, I'll review results for our North America business. The region saw mid single digit revenue growth, both sequentially and year over year with improved supply chain execution, and new product introductions delivering over a point of year over year share gains coupled with resilient replacement and builder demand.

The addition of <unk> and strong cost actions, partially offset by normalized promotions negatively impacting price mix.

Operator: Thank you and welcome to our earnings conference call. Joining me today are Marc Bitzer, our Chairman and Chief Executive Officer, and Jim Peters, our Chief Financial Officer. Our remarks today track with a presentation available in the Investors 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 for it looking statements to assist you in better understanding Whirlpool Corporation's future expectations.

Overall, the region delivered double digit margins of 10%.

Turning to slide 11, I will discuss how North America is well positioned to grow and expand margins.

We continue to invest in product innovation with a 25% increase in new product introductions this year compared to 2022.

Leading to premium products share gains.

Our strong portfolio of brands targets over 90% of consumers with three of those brands delivering well over $1 billion of North America sales annually.

Operator: Our actual results could differ materially from these statements due to many factors discussed in our latest 10K, 10Q, and other periodic reports. We also want to remind you that today's presentation includes the non-gap 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 our ongoing business operations. We also think the adjustment 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-gap items to the most directly comparable gap measures.

We are the number one choice for U S National Homebuilders, and our strong direct to consumer business has been growing at 20% annual compounded growth rate in the U S. Since 2018.

Additionally, we have a relentless focus on delivering the best cost position and reducing complexity within.

With an industry demand of over $56 million annual units between the United States and Canada and.

And approximately 75 to 100000 replacement units are purchased everyday and an under supply of houses continues to exist in the U S.

Operator: 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.

Our brand and product leadership, coupled with our operational priorities as North America business, well positioned to deliver margin expansion in 2024 and beyond.

Operator: With that, I'll turn the call over to Marc.

Turning to slide 12, you can see a few recent examples of our product leadership.

Marc Bitzer: Thanks, Kari, and good morning, everyone. Before we discuss our Q3 results in more detail, I want to acknowledge the great news that we received earlier this week. On Tuesday, where European Commission announced their unconditional approval of our European transaction with Arschlich. With this decision, an earlier clearance is from Austria, Germany, and China. We passed a major regulatory hurdle, and are now fully focused on obtaining face-to-approval from the UK's DMA.

From our top load laundry innovation for pet lovers, and the industry's only two in one agitator washing machine to our latest premium kitchenaid French door refrigerator with superior craftsmanship.

And purposeful innovation like the industry's largest third rack dishwasher or the first in the industry flush Mount microwave Hood combo.

These innovative new products demonstrate our commitment to being the best kitchen, and laundry company improving life at home for our consumers and strengthen our leading position in North America.

Marc Bitzer: By a transaction closure within this year is unlikely, where confident web can close by April next year. A transaction closure will unlock significant value for us, largely coming from an improved free cash flow of $250 million per year. Later during this call, we will give you more detail about the expected regulatory process and the value creation of its transaction.

As we look forward to 2024, we have an even stronger lineup of new product introductions that we expect will positively impact price mix and market share.

Turning to slide 13, I'll review results for our Europe, Middle East and Africa region.

The region saw continued demand weakness as the inflationary environment and geopolitical tensions continue to weigh on consumer sentiment.

Marc Bitzer: Looking more short-term at our Q3 results, we are pleased with our operation progress and our top-line growth, in what is still a very challenging environment. The bottom line showed solid progress over last year, but is essentially flat from prior quarters. Our operational progress term entire year has been sustained and even accelerated during Q3. We improved our supply chain execution. We accelerated our cost take-out actions on our fully-on-track towards our fully-across targets, and we launched several innovative products across multiple categories.

Revenue was down 2% year over year, excluding the Russia business, which was divested in Q3 of last year.

The region delivered margin expansion year over year from cost takeout actions and held for sale accounting benefits due to reduced depreciation.

Later in the call Mark will provide additional insights on the Europe transaction as it continues to progress through the regulatory process.

Turning to slide 14, I'll review the results for our Latin America region.

Marc Bitzer: As a result, we were able to gain market share in almost all of our major businesses. As I mentioned earlier, the market environment is still challenging. Market demand in America has been solid, but this is entirely driven by a very strong replacement demand related to increased appliance usage at home. I trained which would expect it and which would expect to continue. The other side of demand discretionary purchases have been even softer, has been anticipated as a result of an increased mortgage rate and low consumer confidence. The low discretionary demands are the more intensive promotion environment in particular North America. Essentially, we're back to pre-COVID promotion environment.

The region saw strong share gains and industry recovery in both Mexico and Brazil.

With a double digit net sales increase year over year, or 14% and sequential growth of 5%.

Strong cost takeout actions and higher volumes drove 100 basis points expansion in EBIT margins year over year.

Turning to slide 15, I'll review results for our Asia region.

Excluding the impact of currency revenue declined approximately 8% driven by continued consumer demand weakness.

The region delivered EBIT margins of two 2% with our cost takeout actions more than offset by negative price mix.

Turning to slide 16, I will discuss our full year 2023 guidance.

Our net sales guidance of $19 4 billion is unchanged.

We are revising our full year ongoing earnings per share to approximately $16 and free cash flow guidance to approximately 500 million.

Marc Bitzer: We do expect our business to perform on a similar level as Q3. As a result, we're updating our full year guidance. We now expect a full year EBIT margins of 6.5%, and at the same time, we're able to achieve additional tax benefits. Putting both together allows us to remain at the lower end of our original guidance of approximately $16, but with a lower free cash flow of $500 million.

As previously discussed we continue to expect to deliver over $800 million of cost takeout. However, as promotions have normalized to historical levels sooner than expected and the macro environment weighed on discretionary demand, which continues to be depressed. We now expect to deliver an EBIT margin of $6.

Five to six 5% with the fourth quarter operational results.

Marc Bitzer: Turning to slide six, I would provide an overview of our solid third quarter. We delivered 3% of top-line growth both year-old year and sequentially. Promotions which were normalizing sooner than expected were more than offset by over a point of share gained in North America, strong and growing replacement demand, are built a channel benefiting from a shortage of existing homes and the insincere rate or acquisition. We realized $300 million of cost take-out benefits in Macau order, and are fully contracted to deliver over $800 million of cost take-out in 2023. Our actions drove a hundred basis-point margin expansion year with solid EBIT margins of 6.5%, and ongoing earnings per share of $5.45.

In line with our Q3 performance.

Our guidance also includes the updated expectations for our adjusted effective tax rate now.

Now between zero to negative 5% decline.

Reflecting European legal entity restructuring benefits.

I would like to remind you that the European transaction progressing with both Cardinal and May have a material level.

Okay.

We also expect our 2024 adjusted effective tax rate and cash tax rate to be impacted by the closing of the Europe transactions and to be below historical norms. We currently estimate that it will be at or below 15%.

We also continue to expect to repay approximately $500 million of debt associated with the instant greater acquisition during the fourth quarter in line with our commitment to maintaining our investment grade credit rating.

Marc Bitzer: Turning to slide seven, I will share more details on our 100 basis-point margin expansion. The eventually priced mix negatively impacted margins by 150 basis points and 375 basis points year-over-year. Driven from a normalization of a promotion which was largely absent in recent years and re-emerged in the third quarter of 2022. The promotion environment is now reflecting return to historical levels faster than previously expected and normal seasonal patterns which are weighted more towards the second half of each year.

Turning to slide 17, I'll review, our regional expectations for 2023.

Globally, we now expect a flat industry with industry demand up 1% to 2% in North America due to stronger than expected replacement volumes trade customer inventory replenishment and resilient builder demand.

We expect these demand trends to continue and to see low single digit industry growth in 2024.

Marc Bitzer: In addition, mix was negatively impacted in Macau order due to over-index share gains in laundries. As our laundries share was disproportionately impacted by supply chain disruptions during the pandemic. Our strong cost actions delivered both the commercial and year-over-year benefit of a hundred and 625 basis points respectively. Both year-over-year and sequentially invested more in marketing and technology. Ultimately, we delivered ongoing EBIT margin of 6.5%.

Industry expectations in EMEA of down 6% to 8% reflect an increasingly challenging macroeconomic and geopolitical environment Latin.

Latin America has seen significant demand recovery and we now expect industry to be flat to up to 2%.

Finally, Asia demand continues to be impacted by softer consumer sentiment and we now expect industry to be down 2% to 3%.

We have adjusted EBIT margins to reflect a normalized promotional environment negatively impacting price mix, we expect solid full year North America margins of approximately 10%.

Marc Bitzer: Turning to slide eight, you will see our operational priorities are fully on track. Our resilient and adaptive supply chain has delivered share gains throughout the Americas. We have addressed recent supply challenges significantly reducing risk of supply-driven disruptions by expanding dual-sourcing and reducing cost complexity by more than 50% since 2021. We are fully on track to deliver over 800 million of cost reductions in 2023. Even with some raw material cost benefits coming slightly later, many risks.

With industry demand weakness in EMEA, continuing we now expect EBIT margins to be approximately 1%.

And we now expect Latin America, and Asia to deliver EBIT margins of approximately 6% and approximately 3% respectively. Now I will turn the call over to Mark.

Turning to slide 19, let me provide an update on our portfolio transformation.

Marc Bitzer: Origin expected. And while we're not providing guides for 2024, we're increasingly confident about sustained cost progress well into 2024 due to a number of factors. A significant cost takeout during the second half of 2023 will obviously create sizable carry-over benefits. The recent trend in raw material, in particular steel and freight rates, which have been favorable throughout the year, are likely to continue to create tailwinds.

We have and are continuing to take the right actions to transform <unk> into a higher growth higher margin business.

<unk> five years, we have significantly streamlined our business.

Divestitures of Embraco and local China, along with other transactions to transform a company based on free strong pillars.

Small appliances.

Appliances and commercial appliances.

We also acquired <unk>, India and integrator as part of our portfolio transformation.

Jim Peters: Now, I would turn it over to Jim to review our region of results.

In 2022, we announced a strategic review of our Europe business, which we concluded in January.

Jim Peters: Thanks, Marc.

Jim Peters: Good morning, everyone. Turning to slide 10, I'll review results for our North America business. The region saw mid-single-digit revenue growth, both sequentially and year-over-year, with improved supply chain execution and new product introductions delivering over a point of year-over-year share gains, coupled with resilient replacement and builder demand, the addition of insincurator and strong cost actions, partially offset by normalized promotions negatively impacting price mix. Overall, the region delivered double-digit margins of 10%. Turning to slide 11, I will discuss how North America is well positioned to grow and expand margins.

We agreed to contribute European major domestic appliance business into a newly formed entity with partially.

Our portfolio transformation efforts in addition to delivering on our operating priorities at Bolton on track to being a higher growth higher margin business.

Turning to slide 20, I will provide an update on the Europe transaction.

As I mentioned before with past major regulatory milestones with the European Commission unconditionally cleared the transaction in addition to improvements from Germany, Austria in China.

It creates competition markets authority is conducting a phase II review off the transactions.

We look forward to continuing the dialog with the CMA bump a newly formed entity that will benefit consumers with broad product and service offerings, bringing together the best of our best in innovation brand and sustainable manufacturing.

Jim Peters: We continue to invest in product innovation with a 25% increase in new product introductions this year, compared to 2022, leading to premium product share gains. Our strong portfolio brands target over 90% of consumers with three of those brands delivering well over $1 billion of North America sales annually. We are the number one choice for US national home builders, and our strong direct-to-consumer business has been growing at 20% annual compounded growth rate in the US since 2018.

We believe the European Commission's decision along with the other approval supports the view that consumers would benefit from this transaction.

We will continue to work diligently with all parties to close a transaction.

And as mentioned before we are confident that the transaction will close by April 2024 until then we will continue to focus on Europe, delivering the best product and consumer preferred brands.

Jim Peters: Additionally, we have a relentless focus on delivering the best cost position and reducing complexity. With an industry demand of over 56 million annual units between the United States and Canada, and approximately 75 to 100,000 replacement units are purchased every day, and an under-supply of houses continues to exist in the US. Our brand and product leadership coupled with our operational priorities as North America business well positioned to deliver margin expansion in 2024 and beyond.

And we continue to be excited about the significant value creation from this transaction will deliver.

Turning to slide 21, let me remind you of the benefits of the transaction.

We will own approximately 25% of our uniform European appliance company.

As part of this agreement, we have a potential to unlock long term value creation for our ability to monetize our minority interest.

Coupled with a 40 year Whirlpool brand licensing agreement and we expect approximately $750 million net present value of future cash flows.

Jim Peters: Turning to slide 12, you can see a few recent examples of our product leadership. From our top-load laundry innovation for pet lovers and the industry's only two-in-one agitator washing machine, to our latest premium KitchenAid French Door refrigerator with superior craftsmanship, and purposeful innovation like the industry's largest third rack dishwasher, or the first in the industry flush-mount microwave hood combo. These innovative new products demonstrate our commitment to being the best Kitchen and Laundry company, improving life at home for our consumers, and strengthen our leading position in North America. As we look forward to 2024, we have an even stronger lineup of new product introductions that we expect will positively impact price mix and market share.

Additionally, post closing, we expect the transactions to improve our value creation metrics annually by $150 million of incremental free cash flow and 150 basis points improvement and ongoing EBIT margin.

The anticipation of the closing of the Europe transaction, we expect to have a new financial reporting segment structure, starting January 2024, and.

Including segmenting, our attractive small domestic appliance business.

You can expect to receive more detailed on our new financial segment in our Q4 earnings release in January.

Turning to slide 22, let me close with your remarks.

We delivered a solid third quarter performance in a challenging macro environment, our operational priorities delivered 100 basis points improvement of margin expansion to improve supply chain execution share gains in North America, and $300 million of cost take out actions.

Jim Peters: Turning to slide 13, I'll review results for our Europe, Middle East, and Africa region. The region saw continued demand weeks.

We are on track to deliver over $800 million of cost take out actions in 2023.

Jim Peters: Business as the inflationary environment and geopolitical tensions continue to weigh on consumer sentiment. Revenue was down 2% year over year, excluding the rush of business, which was divested in Q3 of last year. The region delivered margin expansion year over year from cost-take-out actions and held for sale accounting benefits due to reduced appreciation.

As we look to next year, we're confident but will put us well positioned to deliver growth and margin expansion.

We expect positive cost takeouts to continue into 2024 from both our net cost actions and recent favorable commodity trends combined with resilient replacement and build the demand our leading position as a U S builders number one choice with over $2 billion in analyst day, as and MS. Jennifer <unk>.

Jim Peters: Later in the call, Marc will provide additional insights on the Europe transaction as it continues to progress through the regulatory process.

And our continued product innovation, we're well positioned to deliver long term shareholder value.

Jim Peters: Turning to slide 14, I'll review the results for our Latin America region. The region saw strong share gains in industry recovery in both Mexico and Brazil.

Additionally, our portfolio transformation will continue to unlock significant value creation.

So Europe transaction alone is expected to deliver approximately 150 basis points of margin expansion and approximately $250 million of annual incremental free cash flow.

Jim Peters: With a double digit net sales increase year over year of 14% and sequential growth of 5%. Strong cost take-out actions and higher volumes drove 100 basis point expansion and margin year over year.

We're confident in the trajectory of our business and our portfolio transformation driving us towards the higher growth higher margin business.

Jim Peters: Turning to slide 15, I'll review results for our Asia region. Excluding the impact of currency, revenue declined approximately 8% driven by continued consumer demand weakness.

And now we will end, our formal remarks and open it up for questions.

At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad. Your first question comes from the line of Susan Mcclary from Goldman Sachs. Your line is open.

Jim Peters: The region delivered even margins of 2.2% with our cost-take-out actions more than offset by negative price next.

Jim Peters: Turning to slide 16, I will discuss our full year 2023 guidance. Our net sales guidance of 19.4 billion dollars is unchanged. We are revising our full year ongoing earnings per share to approximately 16 dollars and pre-cash flow guidance to approximately 500. As previously discussed, we continue to expect to deliver over 800 billion dollars of cost-take-out. However, as promotions have normalized to historical levels, under the expected and the macro-environment ways of expressionary demand, which continue to increase the price, we now expect to deliver a keep it price of 6.25 to 6.5%. With the quarter operational results, we expect it to run high and start to increase the price. Our guidance also includes updated expectations for our adjusted, expected, and accurate.

Thank you good morning, everyone.

I'm wondering if good morning first question is is maybe getting a bit more details on the demand you mentioned that you gained over a point of market share in North America. This quarter can you talk a bit about where those share gains are coming from and how should we think about the mix component in there and perhaps how that's also fitting into that.

Mix.

That you are facing.

As soon as Susan good morning, it's Mark.

We first of all are you.

Some of you may have heard some acoustic interference on the earlier part of the call.

I apologize for that believe me, it's not a new form of entertainment, which will try to add to the earnings call. It just or is it technically so apologize for that.

So let me so we can come back to your question around demand and share gains and mix and promotion.

Jim Peters: Now, we can do zero to negative 5% for close-up recovery, reflecting European legal and individual disruptions. I would like to remind you that the European Transaction Project is the slow-contained and the material of the market. We also expect close-up recovery to the poor, adjusted and accurate and tax tax rate, to be impacted by the closing of the Europe Transactions and to be below historical norms. We currently estimate that it will be at or below 15%. We also continue to expect to repay approximately 500 million dollars of debt associated with the Insincirator acquisition during the fourth quarter. In line with our commitment to maintaining our investment grade credit rating.

Given that it's probably a question Mitchell on the mind of most analysts on the call. Let me just give you a little bit more expansive answer.

Let's first talk about the demand.

The demand on and I'm, particularly referring to North America, and B of our regions, obviously follow different dynamics.

North America showed solid volume growth in Q3.

Full year, we now guide to with 1% to 2%.

As you know the demand if you simplified falls into two components. One is replacement side of our business <unk> is the discretionary side.

The replacement side of business has been one which has been very strong.

And to put that in perspective, historically, when we look at the North America split between replacement and discretionary you would see replacement demand being kind of $53 54%.

Jim Peters: Turning to slide 17, I will review our regional expectations for 2023. Globally, we now expect a flat industry with industry demand up 1 to 2% in North America due to stronger than expected replacement volumes, trade customer inventory replenishment, and resilient builder demand. We expect these demand trends to continue and to see low single-digit industry growth, in 2024.

Matt Hardt hovers now around 60%. So it is very high or in absolute terms, what it means it has been growing.

That part actually is not surprising, it's actually something which we've talked about repeatedly but post COVID-19, we see significant increased appliance usage at home, which in turn drive fast replacement cycle. The replacement side has been strong.

Jim Peters: Industry expectations in the media of down 6% to 8% reflect an increasingly challenging macroeconomic and geopolitical environment. Latin America has seen significant demand recovery and we now expect industry to be flat to up to 2%. Finally, Asia demand continues to be impacted by softer consumer sentiment and we now expect industry to be down 2% to 3%.

The downside of a replacement type being strong replacement business tripping. It comes with a slightly lower mix when discretionary demand somebody who replaces.

Sure.

Broken down refrigerated kitchen Duping doesn't go force a mixed as a.

<unk> re model and an entire new kitchen. So it's a good volume slightly no mix, but that has been basically the growth driver may industry.

Jim Peters: We have adjusted EBIT margins to reflect the normalized promotional environment negatively impacting price mix. We expect solid, full year North America margins of approximately 10%. With industry demand, weakness in the media continuing, we now expect EBIT margins to be approximately 1%. And we now expect Latin America and Asia to deliver EBIT margins of approximately 6% and approximately 3% respectively.

We ever side is with discretionary demand side.

Which as you know typically is driven or is highly correlated with consumer confidence and existing home sales.

As you all know existing home sales pretty much dropped to slightly below 4 million, which is now all way back to 2010 post financial crisis.

And consumer sentiment is very soft.

All the discretionary side of the demand has been very soft throughout Q3, but you could almost deep drop in entire year.

Marc Bitzer: Now, I will turn the call over to Mark. Thanks Jim. Turning to slide 19, let me provide an update on our portfolio transformation. We have and are continuing to take the right actions to transform Whirlpool into a high growth higher margin business. In the last 5 years, we have significantly streamlined our business.

That site becomes a higher mix and so because of that shift towards replacement tire business comes with a slightly lower mix.

And the other side, but lower discretionary demand that's right now being chased by a lot of players in the industry and that probably drove a promotional environment.

Marc Bitzer: If it's our vestitures of Enbrocco and Whirlpool China along with other transactions to transform a company based on three strong pillars. Small appliances, major appliances and commercial appliances. We also acquired Elika India and Intincelerator as part of our portfolio transformation.

And just to be clear awesome promotional environment.

There were minor.

Mindful in choosing my words it has normalized.

It is not normalizing, what we mean with that.

It has basically gone back to pre COVID-19 levels, but we also mean, we expect the stabilization going forward.

Marc Bitzer: In 2022, we announced a strategic review of our Europe business which we concluded in January. We agreed to contribute our European major domestic appliance business into a newly formed entity with Marshallix. Our portfolio transformation effort, in addition to delivering on our operating parties, has opened on track to being a higher growth higher margin business.

It is not higher than pre COVID-19. It just earlier back to when we originally expected which is entirely driven by the drop of discretionary demand and in turn kind of a more intense promotional environment.

That is right now thats about as being kind of our change was the original expectation that it just happened earlier than expected now.

Marc Bitzer: Turning to slide 20, I will provide an update on the Europe transaction. As I mentioned before, we passed major regulatory milestones for European commission unconditionally clearing the transaction, in addition to approvals from Germany, Austria and China. The increased competition market authority is conducting a phase two review of the transactions. We look forward to continuing the dialogue with the CMA about the newly formed entity that will benefit consumers with raw product and service offerings bringing together the best of the best in innovation, brands and sustainable manufacturing.

Know how to operate in by the environment as we demonstrate for many years is kind of it.

It is a normal promotion environment would participate in promotion value, creating and nothing we have a pretty good knowledge base and the algorithms in terms of how to drive maximum promotion effectiveness.

Assuming that the buffer.

But long answer to your question and I hope I clarified a little bit.

Yes, no that was very helpful color. Thank you for all of that.

And maybe turning to the margins a bit I know that you mentioned.

Expecting some of those continued raw material tailwind into 2024, but I guess as we think about that $300 million to $400 million range that you've talked about any sense of where we're following today within that and any additional color you can provide as youre thinking about the cost environment for next year.

Marc Bitzer: We believe a European commission decision along with the other approvals supports with you that consumers will benefit from this transaction. We will continue to work diligently with all parties to close our transactions. And as mentioned before, we are confident that the transaction will close by April 2024. Until then, we will continue to focus on Europe delivering the best product and consumer preferred brands. And we continue to be excited about the significant value creation this transaction will deliver.

Yes, Susan let me take first of all maybe Jim May also add something on the cost environment again stepping back in beginning of the year, we guided towards the 800 million cost takeout and whereby now look into 800, plus something for the full year. So we're pretty much fully on track.

Marc Bitzer: Turning to slide 21, let me remind you of the benefits of the transactions. We will own approximately 25% of a uniform European appliance company. As part of this agreement, we have a potential to unlock long-term value creation for ability to monetize our minority interest. Coupled with a 40-year, will put brand licensing agreement. We expect approximately $750 million net present value, of Future Cash Flows. Additionally, post-closing, which expects the transaction to improve our value creation metrics annually by $150 million of incremental free cash flows and 150 basis point improvement in ongoing EBIT margin.

In terms of the split of their business coming from it's pretty close to where we had in mind to roughly less than half of it is raw materials and we are ones are really true cost take out beat and logistic costs are.

Product and reengineering et cetera, So we feel pretty good about where we are.

As you can also see from our numbers, but momentum in taking up with cost has picked up as the year has been progressing.

As you saw on the chart I think it's on page eight or so.

You see we had very little cost take out in Q1 little bit more on Q2 Q3, we had some some $300 million in Q4, we see already even more so we certainly do like the momentum, which we see in cost takeout.

Marc Bitzer: The anticipation of the closing of the Europe transaction, which expect to have a new financial reporting segment structure starting January 2024, including segmenting our attractive small domestic appliance business. You can expect to receive more details on our new financial segments in our Q4 earnings release in January.

What that means also because I know I know youre all curious about 2024.

First of all you will because it's just about how it skewed in the year you will have carryover office cost take out into next year.

But frankly, we're also like some of the underlying.

Dynamics and what we see it by number of costs that we also do expect some additional tailwind on the raw materials side in particular in steel as we head into next year.

Marc Bitzer: Turning to slide 22, let me close with your remarks. We delivered a solid third quarter performance in a challenging macro environment. Our operational priorities delivered 100 basis point improvement of margin expansion to improve supply chain execution, share gain to North America and $300 million of cost-take-out actions. We are on track to deliver over 800 million of cost-take-out actions in 2023. As we look to next year, we are confident that Whirlpool is well-positioned to deliver growth and margin expansion.

I mean I'd just emphasize what Mark said is I think the trends are very positive. We do believe there'll be a good amount of carryover in the range of 25% as we head into next year.

And the momentum we have right now is in line with what we expected in a very positive trend from a cost perspective heading into next year.

Your next question comes from the line of Sam <unk> from Raymond James Your line is open.

Marc Bitzer: We expect positive cost-take-outs to continue into 2024 from both our net cost actions and recent favorable commodity trends. Combined with resilient replacement and build demand, our leading position as a U.S. Builders number one choice of over 2 billion in annual sales and mischannel, and our continued product information were well-positioned to deliver long-term shareholder value. Additionally, our portfolio transformation will continue to unlock significant value creation. The Europe transaction alone is expected to deliver approximately 150 basis points of margin expansion and approximately $250 million of annual incremental free cash flow. We are confident in the trajectory of our business and our portfolio transformation, driving us toward the high growth, higher margin business.

Good morning, Marc Good morning, Jim how are you.

Good morning, Good morning, Sam.

Two questions.

First has to do with your.

You were citing expectations next year for margin expansion was hoping you could help.

Help quantify or at least give us a sense of a reasonable bar ballpark.

For 24, North American margins, obviously price cost is coming in.

For profound.

Headwind then you start I think.

North American margin guide for the fourth quarter alone, it's like down three or 400 basis points versus where it was before but then youre also citing the.

Expectations for unit growth next year, and the raw tailwind and the cost takeout rollover. So if you could help bracket what margin expansion expectations should be right now for North American.

Operator: And now we will end our former remarks and open it up for questions. At this time, I would like to remind everyone in order to ask a question, press star, then the number one on your telephone keypad.

Segment margins next year that would be really helpful.

Sam it's Marc so.

Susan Maklari: Your first question comes from a line of Susan McClary from Goldman Sachs. Your line is open. Thank you.

As you know we give a precise guidance detailed guidance in January 2024, but let me to.

Susan Maklari: Good morning, everyone. Good morning. My first question is maybe getting a bit more details on the demand. Do you mention that you gained, I think, over a point of market share in North America this quarter? Can you talk a bit about where those share gains are coming from and how should we think about the mix component in there and perhaps how that's also fitting into that price mix headwind that you're facing?

To use your words give you some brackets around book margin expectation is.

First of all looking into 'twenty three in memory.

Can you talk about 24 as you know if you could go back for the back half of 'twenty. Two we had disappointing margins as a company and in North America kind of like.

Single digit margins.

Job number one was to quickly reestablished double digit margins.

We've done that.

Marc Bitzer: As Susan, good morning, it's Mark. By the way, first of all, some of you may have heard some acoustic interference on the earlier part of the call. Apologize for that, believe me, it's not a new form of entertainment, which we're trying to add to the earnings, all it's just technically.

And we're spending more because we expanded for double digit margins and picked up share. So we achieve both margin expansion and share.

Right now we're kind of.

You called we have sustained margins in Q2, Q3, Q4 pretty much around 10%.

Marc Bitzer: So apologize for that. So let me, Susan, come back to your question around demand, share gains and mix and promotion. I guess give me that it's probably that's a question which was on the mind of most analysts on the call. Let me just give you a little bit more expansive answer. So let's first talk about the demand. The demand on, and I'm particularly referring to North America and the other reasons obviously follow different dynamics.

All the transparency, that's what Tim alluded to earlier, we expect it to be 11 or 11% plus.

So we're pleased with double digit, 10%, but frankly, because all reasons, which I mentioned before because of the promotion environment, we're not yet at 11.

So as we look into 2024. The key question obviously on everybody's mind is when do you expect north American margins and material of 12% plus okay.

Marc Bitzer: North America showed solid volume growth in Q3. And hopefully we now guide to which one to two percent. As you know, the demand if you simplify forcing the two components, one is replacement side of a business and the other one is the discretionary side. The replacement side of business has been one which has been very strong, and to put that in perspective, you know, historically when we look at the North America split between replacement and discretionary, you would see replacement demand being kind of 53, 54 percent, that part hovers now around 60 percent, so it is very high on absolute terms, what it means it has been grown.

Which I think is a realistic target corridor.

The key question is what are the drivers in order to get there and again starting from the from a baseline of 10% roughly of margins.

Marc Bitzer: That part actually is not surprising, it's actually something which we talked about repeatedly, but post-COVID we see significantly increased appliance usage at home, which in turn drives fast replacement type. So the replacement side has been strong, but downside of the replacement side being strong, replace them business, typically comes with a slightly lower mix and discretionary demand. Somebody who replaces, you know, a broken down refrigerator in a kitchen, typically doesn't go for a stay mix as a home remodel in an entire kitchen.

The two biggest drivers of free actually is one is we have to sustain the cost take out.

Again as I heard.

Some early active good above a momentum we have.

But that on its own will not be sufficient in 'twenty four and we got to find additional cost opportunities for 'twenty four and we're working on a lot of things in and I think once we come up with guidance you will see I would say in a number of sizable element of cost target, which we have for 'twenty.

Sure.

Second one is we have to continue to re leverage the business from a volume perspective.

In.

Our business and the size of business like North America half fixed cost and if you look at our volume right now it is still fairly quite a bit below pre COVID-19.

So re leveraging.

That business will have a significant impact also of course on EBIT margin.

<unk> volume growth coming from but ultimately comes back to yes, we expect a low single digit growth in the market.

But we are very confident in our sustained momentum and market share gains and product innovation, which we brought in the business and in particular at one point, maybe not in Q1 Q2, we'll build a business will pick up.

Marc Bitzer: So it's a good volume, slightly lower mix, but that has been basically the growth driver in industry. The other side is the discretionary demand side, which as you know, typically is driven or is highly correlated with consumer confidence and existing home sales, as you all know existing home sales pretty much dropped to slightly below 4 million, which is now all way back to 2010 post financial crisis and consumer sentiment is very soft.

But of course as you know disproportionately benefits us.

The reason why I'm, saying, it's now Q1 and Q2, we all ceb's great order intake some of builders.

But Sam as you know very well it takes eight to 10 months until in order on the build side turns into appliance shipments so.

So we know we have volume momentum coming into next year, driven by product and channel mix.

Marc Bitzer: So the discretionary side of the demand has been very soft throughout Q3, but it could almost a problem entire year. That side to become the higher mix. So because of that shifts towards replacement, the entire business comes with a slightly lower mix and the ever side below discretionary demand that's why not being chased by a lot of players in the industry, and that probably drove the promotion environment. And just to be clear of the promotion environment, and there were very mindful and confusing words, it has normalized.

And that will continue to help us.

Kind of re leverage our business. These are the two fundamental drivers to to get back North America, what I would call healthy, 12% plus margins now.

Now I'll be exact timing again that is something which we will talk about in the guidance.

Thank you My second question you mentioned.

Retailer.

Hey, Phil.

As a dynamic that was occurring also in the quarter.

Can you help quantify what sell through versus sell in was in North America, and what retailer inventory weeks on hand look like versus pre pandemic at this point.

Marc Bitzer: It is not normalizing what we mean with that. It has basically gotten back to pre COVID level, but we also mean it's we expect a stabilization going forward. It is not higher than pre COVID, it's just earlier back to when we originally expected, which is entirely driven by the drop of discretionary demand and in turn kind of more intense. Promotion environment. So that is right now that has been kind of our change was originally expectation that it just happened earlier when expected.

Yeah, Sam I think if you.

Zooming out beyond Q3, the entire Covid and post Covid.

As you all know almost a roller coaster of up and down of retail demand I mean, I know, we're taking people that referred to the bullwhip effect, but believe me we felt it so there has been destocking restocking.

Marc Bitzer: Now, we know how to operate in my environment as we demonstrate for many years is kind of it is a normal promotion environment would participate in promotion value trading and I think we have a pretty good knowledge base and algorithms in terms of how to drive maximum promotion effectiveness. So, excuse me for both the long answer to your question, and I hope I clarified a little bit. Yeah, no, that was very helpful color.

And these swings have been more amplified when the actual consumer demand growth over the last two or three years.

I think now, particularly end of Q3.

Things look reasonably balanced what I mean with that I think in Q3, we still saw some restocking of our retailers.

So, but technically industry growth you saw in Q3 was the head.

Marc Bitzer: Thank you for all of that. And maybe turning to the margins a bit, I know that you mentioned expecting some of those continued raw material tailwinds into 2024, but I guess as we think about that $300 to $400 million range that you've talked about, any sense of where we're falling today within that and any additional color you can provide as you're thinking about the cost environment for next year. Susan, let me take first and maybe Jim may also add something on the cost environment.

Of the actual consumer sell out in our view.

And Ryan number consumer sell out, which we experience is pretty much in line with what we guided on a full year industry growth. So call. It low single digit 1% to 2% with some ups and downs during the promotion period.

No. Unfortunately, we know our numbers, but we don't know entire industry sell out numbers, but the Q3 shipments were slightly ahead of consumer demand.

Again as a result of rebalancing inventories at this point, we do believe there.

Marc Bitzer: Again, stepping back in the beginning of a year, we guided towards an 800-minute cost takeout and we're right now looking at 800 plus something for the full year. So we're pretty much fully on track. All in terms of a split of their wishes coming from, it's pretty close to where we had in mind to roughly less than half of it is raw materials, and their ones are really true cost takeout, be it in logistic cost or in product, I'm re-engineering et cetera.

But retail is appropriately stocked from an inventory perspective going into the promotional periods.

Your next.

Jay comes from the line of David Macgregor from Longbow Research. Your line is open.

Yes, hi, good morning, everyone.

Mark I wanted to ask me, David Davis program.

Hey, guys.

I'd ask you about promotional programs and you've noted.

As this call.

Marc Bitzer: So we feel pretty good about where we are, as you can also see from our numbers, the momentum in taking up its cost has picked up as the year has been progressing. So as you saw on the charts, I think it's on page 8 or so. You see, we had very little cost takeout in Q1, a little bit more on Q2, 2 free, we had some 300 million in Q4, we see already even more.

Youre prepared to participate in promotions only for value added. So can you help us understand how you define a value added promotions and what exactly is the metrics we use to determine what is value added and how.

How would you characterize what youre doing now promotional within the context of that discipline.

So David let me.

We could probably spend two hours on promotion effectiveness I would say.

Our teams.

Four years off of our experience.

Marc Bitzer: So we certainly do like the momentum which we see in the cost takeout, and what that means also, because I know you're all curious about 2024, first of all, you will, because of just the how it's skewed in the year, you will have carryover of its cost takeout into next year. But frankly, we also like some of the underlying dynamics, and what we see right now, because we also do expect some additional tail vents on the raw material side, in particular, and steel as we head into next year. I mean, I just emphasize what Mark said, as I think the trends are very positive.

Without being too arrogant priding ourselves so much I think we know one or two things about merchandising. So we have a very very good understanding.

Price elasticity in sensitivity by product category by price segment by time of the year.

Jim Peters: You know, we do believe there'll be a good amount of carryover in the range of 25% as we head into next year, and the momentum we have right now is in line with what we expected in a very positive trend from a cost perspective heading into next year.

In between promotions enduring promotion. So we have it all starts with we believe we have a good knowledge base of really understanding how consumer demand is actually lift.

Versus versus.

One promotion environment will also have a very good understanding in our view in terms of what is pure pull forward or cannibalization versus true incremental growth.

Now of course, we all recognize that it's all driven by competitive forces et cetera, but we have pretty good knowledge base.

Against this knowledge base, we assess technically what we call. It investment that's just because the promotion relative to normalized prices against what kind of margin pick up and what we call contribution margin pickup we get is that just.

Samuel Darkatsh: Your next question comes from a line of Sam Darkash from Raymond James.

Samuel Darkatsh: Your line is open. Good morning, Mark. Good morning, Jim. How are you? Good morning, Sam.

As a positive.

<unk> two big Bend in our expectation make a decision about do we participate or not I know it sounds overall technically.

Marc Bitzer: Two questions. The first has to do with your... You were citing expectations next year for margin expansion that was hoping you could help quantify or at least give us a sense of a reasonable ballpark for 24 North American margins. Obviously, price cost is coming in more profound headwind than you thought. I think your North American margin guide for the fourth quarter alone is like down three, four hundred basis points versus where it was before.

But it's not a one single formula is entirely driven by by detailed byproduct by segment by category by channel in terms of where we make the decision to participate or not.

Marc Bitzer: But then you're also citing the expectations for unit growth next year and the raw tailwinds and the cost takeout rollover. So if you could help bracket what margin expansion expectations should be right now for North American segment margins next year, that would be really helpful. As Sam, it's smart. So as you know, we give a precise guidance of the detailed guidance in January 2024, but let me to use your words, give us some brackets around the margin expectation is.

Okay.

Maybe I could follow up with you offline on that.

My second question was around the free cash flow guidance revisions of $300 million reduction.

Just.

Talk through I'm guessing that's the reduced income maybe some working capital impact as well.

But I guess im.

Along the lines of Sam's question, if there's any way you could kind of bracket out how we should think about free cash flow in 2024 at this point I think that would be pretty.

Very helpful as well thanks.

Yeah. David This is Jim and first thing I'd say your assessment is correct on free cash flow the change and it was purely about two thirds of that is due to.

Lower earnings and the other third is due to that we think will come out of the year with slightly higher working capital. So.

Obviously, we're not giving guidance for next year, but I think you should think about it if you even look at where this year is working capital. Despite the fact, it's a $100 million difference, it's not a big build.

Marc Bitzer: First of all, looking into 23 in memory of Benag can talk about 24. As you know, if you go back further, the back half of 22, we had disappointing margins as a company and in North America, kind of like single digit margins. And our job number one was to quickly reestablish double digit margins. As you've seen, we've done that and we've done it more because we expanded to double digit margins and picked up share.

And I think going into next year, you Shouldnt expect us to be building working capital nor taking it down significantly we're probably going to be around that that same point now as we talked about earlier, we haven't given guidance on earnings and margins, yet, but with increased margins. We would expect our cash flow from earnings to improve the biggest probably.

Marc Bitzer: So we achieved both margin expansion and share. But right now we kind of, you call, we have sustained margins in Q2, Q3, Q4, pretty much around 10%. In all transparency, that's what Jim alluded to earlier. We expected to be 11 or 11% plus. So we're pleased with double digit 10%. But frankly, because of all reasons which I mentioned before because of the promotion environment, we're not yet in level. So, as we look in 2024, the key question obviously on everybody's mind is when do you expect North American margin in between of 12% plus, which I think is a realistic target corridor?

<unk> and the free cash flow for 2024, but will be fully reflected in 2025 is once we close the EMEA transaction here, we've talked about that we believe we will on a full year basis on an ongoing full year basis deliver about $250 million additional free cash flow every year, we still would confirm that.

Now the timing of the transaction could close in early next year. So we will have an impact from having EMEA in but when you get beyond that we are still very very confident in that $250 million of positive free cash flow that will come. Additionally on top of where we are today and on top of what I talked about that I think earnings will be in a better place.

And working capital should be a relatively non event in terms of how it impacts free cash flow next year, David maybe just one additional comment on the working capital side.

Marc Bitzer: The key question is what are the drivers in order to get there, and again starting from a baseline of 10% roughly margin, but the two biggest drivers of free actually is, one is we have to sustain the cost takeout, again as I mentioned earlier I feel good above the momentum that we have, but better on its own will not be sufficient in 24 and we got to find additional cost of betunes for 24 and we're working on a lot of things and I think once we come up with a guide we'll see, I would say, the number sizeable element of cost target which we have for 24. Second one is we have to continue to re leverage the business from a voting perspective.

Obviously, the two big components inventory, we feel reasonably good.

<unk> were down from Q2, but probably $50 million, maybe higher than we originally had in mind, but we feel good about how we enter from an inventory position entering Q4, a big difference right now is actually receivables because frankly that comes with growth global business you carry a slightly higher receivables.

And that will be to some extent the same thing in Q4, we feel good about our growth momentum, but it means not all of the sales you collect this cash in the year. So there's always the timing element about when we actually collect the cash from receivable in Maine falls into next year.

Marc Bitzer: Our business and the size of business like North America has six costs, and if you know look at our volume right now it is still fairly quite a bit below pre-COVID, so re-leveraging that business will have a significant impact also, of course, on the EBIT margin. So where is the volume growth coming from, where ultimately comes back to, yes we expect a low single digit growth in the market, but we are very confident in our sustained momentum on market share gains and product innovation which we brought in the business, and in particular at one point maybe not in Q1, Q2, the build of business will pick up, and that of course as you know this proportionately benefits us.

Your next question comes from the line of Eric <unk> from Cleveland Research. Your line is open.

Thanks first of all one.

One clarification and then a question from a clarification standpoint, Jim you talked about the cost benefit accelerating through the year.

And then carrying into next year does this make next year, a little bit more front end loaded than normal because of the progress you've made on on costs. I guess is the first point of clarification.

I would say listen from a cost perspective, I think we will start the year and we will show positive year over year cost just because of that carryover going into next year and the trends that we're seeing now the other thing that you've got to take into account is just the natural seasonality of our business and I think we've seen the business getting back to what is probably.

Marc Bitzer: The reason I'm saying it's not Q1, Q2, we all see this great order in takes form of builders, but Sam as you know very well it takes eight to ten months until an order of the build that turns into an appliance shipment. So we know we have volume momentum coming into next year driven by products and channel mix, and that will continue to help us kind of re-leverage our business. These are the two fundamental drivers to get back North America to what I would call healthy 12% plus margins.

Crew pre COVID-19 type of seasonality, where from a volume perspective, Q1 still tends to be the lightest and you see the pick up throughout the year. So I do believe cost will be a positive going into next year, but when youre looking at a year over year on a year over year basis, I think we've normalized into an environment, where Q Q1 will still be one.

Marc Bitzer: Now the exact timing, again that is something which we will talk about in the next slide.

Of our lower quarters from a volume perspective.

Samuel Darkatsh: Thank you. My second question, you mentioned retailer refill as a dynamic that was occurring also in the quarter. Can you help quantify what sell through versus sell-in was in North America and what the retailer inventory weeks on hand look like versus pre-pandemic at this point? Yeah Sam I think if you zoom out beyond Q3 the entire COVID and post-COVID has been as you all know almost a roller coaster of up and down of retail demands.

Okay, and then the other point of clarification that the.

The strategic payback from Europe, I understand and it is certainly compelling the EPS impact in 'twenty four can you just help us <unk>.

<unk>, how we should be thinking about this is it's also accretive to EPS next year as well or how does that work.

It will not be so much accretive to EPS.

Cause if you think about it right now EMEA as close to a breakeven business. So it will improve all of our overall margins. It does have negative cash flows will improve that but from an absolute earnings perspective. It starts to become a net neutral there now as I said the bigger lift comes is that it's 150 basis point improvement in EBIT margins.

Samuel Darkatsh: I mean I know technically people that refer to a ball wave effect but please me we felt it. So it has been destalking, restalking and these swings have been more amplified than the actual consumer demand was over the last two or three years. I think now particularly in the Q3 things look reasonably balanced. What I mean with that I think in Q3 you still saw some restalking over retailers. So but technically in this redrobe you saw in Q3 was ahead of the actual consumer sell-out in our view and right now consumer sell-out which we experience is pretty much in line with what we guided on a full-year industry growth.

It's a reduction or an improvement of free cash flow and then it's a reduction in the volatility and the seasonality of our business also and I think the thing I need to point out on the cash flow is within the year the seasonality of EMEA as cash flow is much greater than the single benefit of $250 million that were getting so the biggest benefit really comes.

On the free cash flow side.

Your next question comes from the line of Mike Dahl from RBC capital markets. Your line is open.

Hi, Thanks for taking my questions.

Samuel Darkatsh: So call this low single digit one to two percent with some ups and downs during a promotion period. As you know verse and portrait we know our numbers but we don't know entire industry sell-out numbers but the Q3 shipments were slightly ahead of a consumer demand and again as a result of rebounding inventors. At this point we do believe where the retail is appropriately stocked from an inventory perspective going to a promotion period.

First one just.

Okay, great margins and specifically North America.

I think the part that I'm struggling with is your cost tailwind has accelerated through the year. Your margin guide for the fourth quarter is kind of at or below 10.

10%.

If we think full year impact 'twenty three versus 24.

Understand that tailwind of ramp through the year, but full year full year.

Are there cost out actions probably are.

David Macgregor: David MacGregor.

David Macgregor: Your next question comes from the line of David MacGregor from Longbow Research. Your line is open. Yes.

Equal between the two years, if not still slightly weighted.

<unk> 23, so the promotional cadence has.

David Macgregor: Good morning, everyone. Mark, I want to ask you about promotional programs. And you've noted recently as this call that you prepared to participate in promotions only if we value added. So can you help us understand how you define a value added promotion? And what exactly is the metric used to determine what is value added? And how would you characterize what you're doing now, promotion within the context of the discipline? Yes. So David, let me probably spend two hours on promotion effectiveness.

Normalized and is expected to remain steady the cost takeouts for now have probably reached their peak run rate.

The bridge to margin improvement in 2004 in North America.

As I get its cost and volume, but doesn't that mean, it's really just volume next year in terms of driving the levers what.

Whats the I am sorry.

We're going to see that magnitude of uplift to get from kind of nine to 10 <unk>.

David Macgregor: I would say our teams and for years of our experience about being too arrogant or priding ourselves too much. I think we know one or two things about merchandising. So we have a very, very good understanding about price elasticity and sensitivity by product category, by price segments, by time of a year. In between promotions and during promotions. So we have, it all starts with, we believe we have a good knowledge base of really understanding how consumer demand is actually lifts versus a non promotion environment.

11, 12 next year.

Yes.

Mike Let me start and then I'll, let mark kind of add on to this I think.

As you even alluded to in your question. There is right now we do see actually cost continuing to drive further benefits and we will see additional cost benefits coming into next year. And then also you did highlight that as we've said we believe the promotional environment has normalized so that should not be a factor in terms of margin impact year over year as we go into <unk>.

Next year should be a positive impact and then picking up.

David Macgregor: We also have a very good understanding in our view in terms of what is pure pull forward or cannibalization versus true incremental growth. Now, of course, we all recognize that all driven by competitive forces, et cetera, but it's, we have a pretty good knowledge base against this knowledge base. We assess technically what we call an investment that's just the cost of promotion relative to normalize prices against what kind of margin pick up and what we call this contribution margin pick up we get.

Additional share and volume will also have a positive impact both on our margins just from the incremental margin that comes from that in addition to the leverage and benefit we get within our factories and other things our logistics network from the leverage that we get on that and you've got to remember today that today, if we look at our environment.

We still have we don't need to add capacity or anything so each unit that we add actually adds an incremental amount of margin that's above and beyond our our margin that we have today. So those are the levers and the drivers and Mark if you want to yes.

David Macgregor: If that is a positive, that's to pick them we in our expectation make a decision about that we participate or not. I know that sounds overall technically, but it's not a one simple formula is entirely driven by by detail by price and by segment by category by by channel in terms of where we make the decision to participate or not.

Just first of all to clarify the bill.

Because you mentioned non margins are at or below we just guided to 10% and we delivered 10%. So we are on sustained double digit margin level in Q2 Q3 Q4. So.

We feel very good about.

David Macgregor: Maybe I could pull up with the offline on that.

Regaining Mr. Abducent in particular compared to 2022 now.

Jim Peters: My second question was around the free cash flow guidance revision, the $300 million reduction. Just talk through I'm guessing that's the reduced income and maybe some working capital impact there as well. But I guess along the lines of Sam's question, if there's any way you could kind of bracket out how we should think about free cash flow in 2024 at this point, I think that would be pretty helpful as well. Yeah, David, this is Jim and first thing I'd say your assessment is correct on free cash flow.

On the cost side. There is also an algorithm and keep in mind. What we showed you we see significant progress for <unk>.

Cost side.

I think most of you know given how our standard costing works you basically sell in Q4, but cost, but you had in Q3 and because you have 60 days of inventory and the same is true for Ben go in Q1, so the cost progress which was in Q4.

Technically will only be fully P&L visible in the first two months of next year. It's about just timing Thats normal standard cost accounting, so don't forget that part of the equation.

Jim Peters: The change in it was purely about two thirds of that is due to you know lower earnings and the other third is due to that we think will come out of the year with slightly higher working capital. So, you know, obviously we're not given guidance for next year, but I think you should think about if you've been look at where this year is working capital despite the fact it's a hundred million difference.

Now to your point about it's only volume no we need cost volume and product introductions.

All three of that.

We feel very good we have a momentum we know how to get cost out.

Jim Peters: It's not a big build and I think going into next year, you know, you shouldn't expect us to be building working capital nor taking it down significantly. We're probably going to be around that that same point now, you know, as we talked about earlier, we haven't given guidance on earnings and margins yet, but with increased margins, we would expect our cash flow from earnings to improve. The biggest probably, you know, variable in the free cash flow for 2024, but will be fully reflected in 2025 is, you know, once we close the amea transaction here, we've talked about that we believe we will on a full year basis on an ongoing full year basis deliver about 250 million additional free cash flow every year.

It's a highly competitive environment, where you just need to remain Brazilian army cost takeout to volume to Jim's point about re leveraging and just because it's it's it comes the capacity majority page four so you get the full leverage and three ultimately you can only get the volume if you have strict strong product in the markets.

Jim showed early in my presentation, we feel very good about what we launched with <unk>. There's a lot of good new product launches in the pipeline again, I just I, absolutely would not reduce the volume we need all three components.

Yeah. That's helpful. I appreciate the color there.

My second question just shifting gears.

Jim Peters: We still would confirm that number now the timing of the transaction could close in early next year, so we will have an impact from having amea in, but when you get beyond that, we are still very, very confident in that 250 million of positive pre cash flow that will come additionally on top of where we are today and on top of, you know, what I talked about that I think earnings will be in a better place and working capital should be a relatively not event in terms of how it impacts pre cash flow next year. David, maybe just one additional comment on my work in capital sites, obviously a two big components inventory, we feel reasonably good.

There's probably some accounting technicalities around around tax, but it's such a meaningful number or figure out I'll ask it I mean, it's unusual to see a net tax benefit being considered part of ongoing EPS. In this case, it's kind of like a north of $3 a share impact versus your prior guide.

Shifting tax expectations can you just.

Maybe give us a little more detail on what's actually driving that and maybe more importantly, as we look out to the two.

24 and beyond.

Has your view changed on what a more normalized.

Jim Peters: We're down from Q2, probably 50 million maybe higher than we originally had in mind, but it's we feel good about how we enter from inventory position entering Q4. The big difference right now is actually receivables because frankly that comes with growth, you grow a business, you carry a slightly higher receivables, and that will be to some extent the same thing Q4, which feels good above our growth momentum, but it means not all the sales you collect as cash in the year. So there's also time element about when we actually can collect the cash from receivables and mentors into next year, last year.

Right would be especially post the disposal of them yet.

Yes.

Here's what I'd say, Michael and whenever we've looked at a lot of these these tax things because they they flow through very unevenly from a GAAP perspective, so we normalize them typically from a.

An ongoing perspective.

The first thing is as the cash benefits of what we realized within this quarter and we'll realize this year and then what I'm about to talk about next year will come over a multiyear period of time and so we will see ongoing cash benefits just from some of these these tax benefits that we talked about I'd say the second thing with that is you look at next.

Eric Bosshard: Your next question comes from Alina, Eric Bosshard from Cleveland Research.

Eric Bosshard: Your line is open. Thanks. First of all, one clarification and then a question from a clarification standpoint, Jim, you talked about the cost benefit accelerating through this year, and then carrying into next year. Does this make next year a little bit more front and loaded than normal, because of the progress you've made on cost, I guess is the first point of clarification. I would say listen, from a cost perspective, I think we will start the year and we will show positive year over year cost, just because of that carry over going into next year and the trends that we're seeing.

Sure listen, we expect our rate to be below 15% and once we close the EMEA transaction and were able to realize that.

The benefits of some of the losses will have from investments. We've made in there. We will see also in 2020 for a significantly lower tax rate than we historically have but then as I alluded to over the period of multiple years, we will continue to realize cash benefits from that and so right now we're not going to give a full guide on.

Next year's tax rate, because it's very dependent upon when we close the EMEA transaction, but then additionally is look we look forward beyond that right now I'd say absent of any changes in the tax environment out there at some point in time in the much more distant distant future. We can see the rate going closer to 20.

Eric Bosshard: Now, the other thing that you've got to take into account is just the natural seasonality of our business. And I think we've seen the business getting back to what is probably true pre COVID type of seasonality, where from a volume perspective, Q1 still tends to be the lightest. And you see the pickup throughout the year.

Jim Peters: So I do believe cost will be a positive going into next year, but when you're looking at a year over year over year basis, I think we've normalized into an environment where Q1 will still be one of our lower quarters from a volume perspective. Okay, and then the other point of clarification that the strategic payback from Europe, I understand, and it's certainly compelling. The EPS impact in 24, could you just help us clarify how we should be thinking about this?

Percent.

But but over the next couple of years, we will continue to see benefits from this transaction.

Your next question comes from the line of Liz Suzuki from Bank of America. Your line is open.

Great. Thank you just had a question about the cash flow again, and then just at that lowered out outlook, implying that the majority of your free cash flow this year as being paid back out to shareholders in the form of the dividend. So at this point how are you thinking about addressing that debt and reducing our ongoing interest expense burden.

Jim Peters: Is this also a creative to EPS next year as well, or how does that work? You know, it will not be so much a creative to EPS, because if you think about it right now, Amia is close to a break even business. So it will improve all overall margins. It does have negative cash flows, it will improve that. But from an absolute earnings perspective, it starts to become a net neutral there.

Yeah. So this is Jim and I think the first thing, we still intend to pay down $500 million of debt in the back half or in the last fourth quarter here that will come from cash on our balance sheet as.

As you pointed out our free cash flow is funding our dividend, which will be around 400 million that we'll return to shareholders. Here, obviously, the incremental 100 goes towards debt Paydown, but we also have cash available on our balance sheet that we will use to pay that down and then as we head into next year, we expect to continue to focus on.

Jim Peters: Now, as I said, the bigger lift comes is that it's 150 basis point improvement in EBIT margins. It's a reduction or an improvement of free cash flow. And then it's a reduction in the volatility and the seasonality of our business also. And I think the thing I need to point out on the cash flow is within the year, the seasonality of Amia's cash flow is much greater than the single benefit of 250 million that we're getting.

Paying down debt and reducing our level of leverage.

Maybe just adding to this one because again also going back in time as you know we held quite a bit of cash balance on our balance sheet now for couple of years and some of you may have asked why do you take on the debt.

Jim Peters: So the biggest benefit that really comes on the free cash flow side.

Mike Dahl: Your next question comes from a line of Mike Dahl from RBC Capital Markets.

We actually our decision a couple of years ago was while the interest rates are very low we wanted to lock in some long term debt at favorable interest rates.

Mike Dahl: Your line is open. Thanks for taking my questions. The first one just to stick with margins and specifically North America. I think the part that I'm struggling with is your cost tailwinds have accelerated through the year, your margin guy for the fourth quarter is kind of at or below 10%. Then, you know, if we think full year impact 23 versus 24 understand that tailwinds have ramped through the year, but full year, full year, you know, your cost out actions probably are, you know, kind of equal between the two years, it's not still slightly weighted towards 23.

And Thats why we kept the fairly significant cash balance now we use the cash bonds that some of that to pay down some of the floating interest rates, which was the temporary loans, which also part of that came from integrator. So we basically now use that cash balance to pay down the more expensive part of that.

That makes sense.

Kind of thinking about long term I mean, you did mention that your cash balance has been high for the last couple of years, but historically, it's been somewhere over 1 billion. So.

I guess, how comfortable are you at a cash level below that threshold or what is your minimum levels of cash that you'd like to have on the balance sheet.

Mike Dahl: So the promotional cadence has normalized and is expected to remain steady. The cost takeouts for now have probably reached their peak run rate. The bridge to margin improvement in 24 in North America is, again, its cost and volume but doesn't that mean it's really just volume next year in terms of driving the levers or what's the, I'm struggling to see that magnitude of uplift to get from kind of 9 to 10 and 4Q up to 11, 12 next year.

Yeah listen this is Jim again, and part of that is driven by remember us as a geographically diverse company, we have cash in multiple jurisdictions and to certain extent because some of those businesses are also separate publicly traded entities.

There's restrictions on some of the usage of cash that we can use outside of those areas and so I think as you've alluded to typically we've always had a cash balance of around $1 billion or maybe slightly above that and that deals more with our geographic dispersion now as we exit.

EMEA, obviously that will not be an area that we'll be retaining cash. So I would still on an ongoing basis expect us to be in the neighborhood of $1 billion, but it could be a little higher a little lower at times, depending on what our funding needs are as.

Jim Peters: Yeah, and Mike, let me start and then I'll let Mark kind of add on to this. I think as you even alluded to in your question there is right now we do see actually cost continuing to drive further benefits and we will see additional cost benefits coming into next year and then also you did highlight that as we've said, we believe the promotional environment is normalized so that should not be a factor in terms of margin impact year over year as we go into next year.

As well as where we're generating cash and our ability to repatriate that into the U S and used for other things. So that's really more of the driver is just that we have such a diverse geographic footprint. So, let's maybe just adding to this one and Jim alluded to we started a bit earlier.

Jim Peters: Bossh should be a positive impact and then picking up additional share and volume will also have a positive impact both on our margins which is from the incremental margin that comes from that in addition to the leverage and benefit we get within our factories and and you know other things our logistics network from the leverage that we get on that and you know you've got to remember today that today if we look at our environment we still have we don't need to add capacity or anything so each unit that we add actually adds an incremental amount of margin that's above and beyond our you know margin that we have today. So those are the levers and the drivers and Mark if you want to.

The basic question is why do you have to have cash on hand at all.

So the simple reasons within the quarter, we have cash volatility that's just the nature of our business. When you collected in menu build inventory et cetera.

<unk> historically around this $1 billion.

Very significant portion of that intra quarter, but also intra year volatility was driven by our European business.

Once you close a European transaction, you don't have that same kind of volatility in our cash flow streams, both intra quarter and then also within the year. So what it all means is in a post Europe transaction environment. We do not expect that we will hold $1 billion of cash because it's just not needed.

Jim Peters: Just first of all to clarify because you mentioned non margins are at or below which is guided to 10% and we delivered 10% so we are on sustained double digit margin level and that's Q2, Q3, Q4 so we we feel very good about regaining the stubborn digit in particular compared to 2022. Now on the cost side there's also another element keep in mind what we showed you we see significant the progress of our cost side but as I think most of you know given our standard costing works you're basically selling Q4 the cost but you're adding Q3 because you have 60 days of inventory and the same is true for when going to you one.

We will quantify and coming into next year, how much it will be but it will not be them a level of $1 billion.

Your next question comes from the line of Mike Rehaut from Jpmorgan. Your line is open.

Yes.

Hi, guys. Good morning, Doug Wardlaw on for Mike.

I just wanted to kind of clarify in and see if there is any type of trade offs between.

Share and margins.

Is it somewhat of a zero sum game and it continues to gain market share could we see similar margins in North America to what we see now moving forward.

Jim Peters: So the cost progress which we've seen Q4 technically will only be fully visible in the first two months of the next year so that just timing that's normal then it costs the count thing so don't don't forget that part of the equation. Now to to your point about its own volume no we need cost volume and product introductions all three of that cost we feel very good we have a momentum we know how to get cost out but it's a highly competitive environment where you just need to remain resilient on the cost takeout.

So it's Marc I mean, obviously I mean.

The simple answer is no.

As we demonstrated in Q3, we picked up share and margins year over year. So.

It doesn't need to be a trade off and in the case of it what would just M&A in Q3.

We delivered both share and margin expansion and that is also our objective going forward.

Key to have both share and margin expansion ultimately still comes back to having a strong product pipeline with our products, which we which we launched in which you. Jim showed earlier, we were able to expand both share and margin.

Jim Peters: Two volume is to Jim's point about re-leveraging and just because it's comes the capacity which are a pay for to get the full leverage and three of them you can only get the volume if you have strong product in the market and I mean as Jim showed earlier in my presentation we feel very good about what we launched this year and there's a lot of good new products launches in the pipeline so again I just I absolutely would not reduce the volume we need all three components.

If you wouldn't have these products, yes, when you're right when it probably will turn at one point in two zero sum game and that's why that's why we'll continue to invest that's why you may have seen also in Q3, we both year over year, but also sequentially continued to invest even more in products and brands.

That's really the key to avoiding this tradeoff.

Marc Bitzer: Yeah that's helpful I appreciate the additional color there.

Jim Peters: My second question just just shifting gears and I don't lose probably from accounting. Technicalities around tax but it's such a meaningful number for you I'll ask you I mean it's unusual to see a net tax benefit being considered part of ongoing EPS and in this case it's kind of like a north of three dollars of share impact versus your prior guide this this shift in tax expectations. Can you just maybe give us a little more detail on what's actually driving this and maybe more importantly as we look out to the 24 and beyond you know has your as your view changed on what a more normalized tax rate would be especially close to the disposal of them.

Yes.

Great. Thanks, and then secondly, and this is just another clarification question because I know you guys have done it throughout the call in terms of the raw material.

Cost savings carryover into 2024 do you guys have any sense on the size.

What that might look like.

At this time.

We're not really giving any precise guidance on that because as we mentioned before the trends do seem very positive we go through during our fourth quarter typically.

A negotiation process with many of our suppliers to help us bring more clarity to that number and then typically we don't give that number until we get to January so right. Now we would just say we expect it to be positive.

And.

Once we get to January then we will give them much more specific number.

Jim Peters: Yeah, and here's what I'd say, Michael, and whenever we've looked at a lot of these tax things because they flow through very unevenly from a gap perspective, so we normalize them typically from an ongoing perspective. The first thing is the cash benefits of what we realized within this quarter and we'll realize this year and then what I'm about to talk about next year will come over a multi-year period of time, and so we will see ongoing cash benefits just from some of these tax benefits that we talked about.

So with that let me just close the call first of all I. Appreciate all your attendance today and good questions I mean, obviously as you've seen before.

We feel actually good about Q3, we had.

Revenue growth, we expand our share I think we are delivering on our operational priorities.

Jim Peters: It's said the second thing with that is as you look at next year, listen, we expect our rate to be below 15%, and once we close the AMIA transaction and we're able to realize the benefits of some of the losses we'll have from investments we've made in there, we will see also in 2024 a significantly lower tax rate than we historically have. Then as I alluded to over the period of multiple years, we'll continue to realize cash benefits from that, and so right now we're not going to give a full guide on next year's tax rate because it's very dependent upon when we close the AMIA transaction, but then additionally we look forward beyond that.

Did we come all the way on the EBIT.

<unk> no.

We openly talked about it but we feel good about the fundamentals of our business. Both in Q3 and also as we look into Q4 next year.

And we look forward to kind of give you a more detailed picture in Q4, but then more importantly about 24 in January of next year. Thank you all for joining us.

Jim Peters: Right the tax environment out there, at some point in time in the much more distant out future, we could see the rate going closer to 20%, but over the next couple of years we will continue to see benefits from this transaction.

Ladies and gentlemen that concludes today's conference call you may now disconnect.

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Jim Peters: Your next question comes from a line of Liz Suzuki from Bank of America. Your line is open. Right, thank you. I'm just ahead a question about the cash flow again and just the lowered outlook, implying that the majority of your free cash flow this year is being paid back out to shareholders in the form of the dividend. So at this point, how are you thinking about addressing the debt and reducing your ongoing interest expense burden?

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Jim Peters: Yeah, so this is Jim, and I think the first thing, we still intend to pay down 500 million of debt in the back half or in the left quarter here. That will come from cash on our balance sheet. As you pointed out, our free cash flow is funding our dividend, which will be around 400 million that will return to shareholders here, obviously the incremental 100 goes towards debt pay down, but we also have cash available on our balance sheet that we will use to pay that down. And then as we head into next year, we expect to continue to focus on paying down debt and reducing our level of leverage.

Thank you.

Perfect.

Thanks.

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Sure.

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Jim Peters: This may be just adding to this one, because again, also going back more in time, as you know, we held quite a bit of cash balance on our balance sheet now for a couple of years. And some of you may have asked why do you take on the debt. We actually, our decision a couple of years ago was while the interest rates are very low, we want to lock in some long-term debt at favorable interest rates.

Jim Peters: And that's why we kept the fairly significant cash balance. Now, we use the cash balance as some of that to pay down some of the floating interest rates, which was the temporary loans, which also partly came from Insane Curator. So we basically now use that cash balance to pay down the more expensive part of it. That makes sense. Just kind of thinking about long-term, I mean, you did mention that your cash balance has been high for the last couple years, but historically, it's been somewhere over a billion.

Jim Peters: So I guess how comfortable are you at a cash level below that threshold? Or what is your minimum level of a cash that you like to have at the balance? Yeah, you know, Liz, and this is Jim again, and part of that is driven by remember us as a geographically diverse company. We have cash and multiple jurisdictions and to certain extent, because some of those businesses are also separately publicly traded entities.

Jim Peters: There's restrictions on some of the usage of cash that we can use outside of those areas. And so, you know, I think as you've alluded to, typically we've had a cash balance around a billion dollars or, you know, maybe slightly above that. And that deals more with our geographic dispersion. Now, as we exit, you know, Mia, obviously, that will not be an area that will be retaining cash. So, I would still on an ongoing basis, expect us to be in the neighborhood of a billion dollars, but it could be, you know, a little higher, a little lower.

Jim Peters: I'm depending on what our funding needs are, as well as where we're generating cash and our ability to repatriate that into the US and use for other things. So, that's really more the drivers just that we have such a diverse geographic footprint.

Marc Bitzer: So, let me maybe just adding to this one and Jim alluded to this one a little bit earlier. You know, the basic question is why do you have to have cash on hand at all? So, the simple reason is, within the quarter, we have cash volatility. That's just the nature of our business when you collected and when you build inventory, et cetera. And that was historically around this one billion, a very significant portion of that intra quarter, but also intra year volatility was about European business.

Marc Bitzer: Once you close your European transaction, you don't have that same kind of volatility on our catalog streams, both intra quarter and then also within the year. So, what it all means is in a post Europe transaction environment, we do not expect that we will hold a billion dollars of cash because it's just not needed. We can, we will quantify coming to next year, how much it will be, but it will not be a mid level of one billion.

Mike Rehaut: Your next question comes from a line of Mike Reholt from JP Morgan.

Mike Rehaut: Your line is open. Hi guys, good morning, Doug Wardle on from Mike. I just wanted to kind of clarify and see if there's any type of trade off between share and margins.

Marc Bitzer: Is it somewhat of a zero sum game? And if you continue the game market share, could we see similar margins in North America to what we see now moving forward? Yes, so it's Mark, I mean obviously, I mean, the simple answer is no. As we demonstrate in Q3, we picked up share and margins year over year. So it doesn't need to be a trade off. And in the case of what we just demonstrate in Q3, we deliver both share and margin expansion.

Marc Bitzer: And that is also our objectives going forward. A key to have both share and margin expansion ultimately still comes back to having a strong product pipeline. But for products which we launched and which Jim showed earlier, we were able to expand both share and margin. If you wouldn't have this product, yes, when you write many probable turn at one point into zero sum game. And that's why that's why we'll continue to invest. That's why you may have seen also in Q3 with both year over year, but also eventually continue to invest in more in product and brands. And that's really the key to avoiding the trade off.

Jim Peters: Great, thanks. And then secondly, and this is just another clarification question, because I know you guys have done it throughout the call, and in terms of the raw material and cost savings carry over into 2024, do you guys have any sense on the size or dollars of what that might look like? You know, at this time, we're not really giving any, you know, precise guidance on that, because as we mentioned before, the trends do seem very positive.

Jim Peters: We go through during our fourth quarter, typically a negotiation process with many of our suppliers to help us bring, you know, more clarity that number, and then typically we don't give that number until we get to January. So right now, we would just say we expect it to be positive, and you know, once we get to January, then we'll give a much more specific number.

Okay, so with that, let me just close recall, first of all, appreciate all your attendance today, and good questions. I mean, obviously, as you've seen before, we feel actually good about Q3. We had revenue growth. We expand our share. I think we're delivering on our operational priorities. Did we come all the way on the EBIT percentage? No, and we openly talked about it, but we feel good about the fundamentals of our business, both in Q3, and also as we look into Q4 next year, and we look forward to kind of give you more detail picture on Q4, but then more importantly, about 24 in January of next year.

Thank you all for joining us. Ladies and gentlemen, that concludes today's conference call.

You may now disconnect.