Q3 2023 Masco Corp Earnings Call

Good morning, ladies and gentlemen, welcome to Masco Corporation's third quarter 2023 conference call.

My name is Jerry now it will be your operator for today's call.

As a reminder, today's conference call is being recorded for replay purposes.

I'll ask a question. Please press Star then the number one on your telephone keypad.

So it's really a question please press the pound key.

I will now turn the call over for any Benedict Director S. P N E and Investor Relations.

You may begin.

Thank you Jerry and good morning, welcome to Masco Corporation's 2023 third quarter Conference call with me today are Keith Allman, President and CEO of Masco, and David Chaika, Nascar's, Vice President Treasurer and Investor Relations.

Our third quarter earnings release, and the presentation slides are available on our website under Investor Relations.

Following our remarks, we will open the call for analyst questions.

Please limit yourself to one question with one follow up.

If we can't take your question now please call me directly at 31379 to 5500.

Our statements today will include our views about our future performance, which constitute forward looking statements.

These statements are subject to risks and uncertainties that could cause our actual results to differ materially from the forward looking statements.

We've described these risks and uncertainties in our risk factors and other disclosures in our Form 10-K, and our Form 10-Q that we filed with the Securities and Exchange Commission.

Our statements will also include non-GAAP financial metrics.

Our references to operating profit and earnings per share will be as adjusted unless otherwise noted.

We reconciled these adjusted metrics to GAAP in our earnings release and presentation slides, which are available on our website under Investor Relations.

With that I'll now turn the call over to Keith.

Thank you Renee.

Good morning, everyone and thank you for joining us this morning.

Before we get into our results I want to take this opportunity to welcome Masco as new CFO, Rick Westenburg, who joined the team on October 16th.

Rick is an accomplished executive with more than 25 years of experience, including nearly 15 years, leading global Finance organization. We're excited to have Rick on board and look forward to him participating in our fourth quarter earnings call in February.

I would like also to take this time to thank Dave Chaika for serving as interim CFO over the last several months they've.

They've quickly stepped into the position and successfully led our finance team during this transition and we greatly appreciate his support.

With that let's turn to our third quarter results. Please go to slide five.

In the third quarter, we demonstrated our ability to execute.

And the earnings power of our business model, despite a challenging environment, which saw topline decreased 10%.

Volume was down 12%, partially offset by pricing actions and favorable currency impacts of 1% each.

While sales were down $225 million, our continued focus on driving cost savings initiatives and a favorable price cost relationship resulted in an operating profit decline of only $2 million in the quarter.

This strong execution resulted in operating profit margin expansion of 170 basis points to 17, 6% and a decremental margin of only 1%.

Our earnings per share for the quarter grew 1% to $1 per share.

Turning to our segments plumbing sales declined 11% in local currency with North American and international plumbing, each declining 11%.

In North American plumbing overall demand remained soft with the wholesale and ecommerce channels performing moderately stronger than the retail channel.

And international plumbing demand trends weakened in our key markets of Europe, and China in line with our expectations we.

We continue to expect our overall international plumbing market to be down high single digits for the full year.

Despite the top line decline, we successfully drove plumbing margin expansion of 230 basis points to 18, 9% in the third quarter.

This strong margin performance was driven by pricing actions commodity and freight deflation and significant cost savings initiatives, particularly in our north American plumbing business.

We also completed the strategic bolt on acquisition of sort of $3 60, a leader in the sauna steam and infrared wellness industry.

This acquisition complements our spa business expands our wellness product offerings, and Leverages Watkins expansive dealer network.

Turning to our decorative architectural segment.

Sales declined 10% in the quarter.

DIY paint sales declined low double digits.

Propane sales declined low single digits against a mid teens comp in the third quarter of 2022.

On a three year stacked basis, our pro paint comp is over 65%.

Demonstrating our significant market share we have captured with pro painters through the strength of the brand.

Quality of our products and our commitment to exceptional service.

Together with our partner the home depot, we believe we have a significant opportunity to continue to grow share in the pro paint market.

Additionally, we were honored that bear was recognized as the home depot 20, twenty-three marketing innovation partner of the year.

This recognition is a testament to our creative marketing campaigns, and our 45 year partnership with the home depot.

Turning to capital allocation, we continued to generate significant free cash flow during the quarter and maintained a strong balance sheet.

As a result, we executed on our balanced capital deployment strategy.

And returned $109 million to shareholders through dividends and share repurchases, including buying back 800000 shares for $45 million in the quarter.

Now turning to our outlook for the remainder of 2023.

With our strong execution, we now anticipate earnings per share for 2023 to be in the range of $2 excuse me $3 65.

The $3 75 per share.

Up from our previous guidance of $3 50 to $3.65.

While the near term demand for the repair and remodel market remains uncertain.

We will stay focused on controlling what we can by closely managing costs minimizing the impact of lower volumes and driving our margins back to at least 2019 levels of 18% in each segment.

We believe our portfolio of low ticket repair and remodel products are market, leading brands and innovation and our geographic diversification.

<unk> us for growth and stability through cycles.

As we look over the longer term.

We believe the fundamentals of our repair and remodel markets are strong and supportive of long term growth.

These include high home equity levels, the age of housing stock at homeowner staying in their homes longer.

We remain committed to investing in our brands capabilities and people to drive strong growth when market conditions improve.

With favorable fundamentals and the continued successful execution of our growth strategy.

Along with our free cash flow and disciplined capital deployment, we are well positioned to drive value creation for the long term.

On our fourth quarter call, we will provide our 'twenty to 'twenty four outlook as well as an updated view on the margin expansion potential of our business over the longer term.

I'd like to conclude with a thank you to our employees for their hard work and dedication to driving operational excellence and delivering for our customers and shareholders.

Now I'll turn the call over to Dave to go over our third quarter results and 2023 outlook in more detail.

Yes.

Thank you Keith and good morning, everyone.

As Rene mentioned my comments excuse me my comments today will focus on adjusted performance, excluding the impact of rationalization and other one time items.

Turning to slide seven sales in the quarter decreased 10% and excluding currency decreased 11%.

North American and international sales, both decreased 11% in local currency.

Our continued focus on operational efficiency helped drive gross margin expansion of 430 basis points to 35, 8%.

Our SG&A as a percent of sales was 18, 2%.

Despite our decline in sales operating profit in the third quarter was $348 million down only slightly year over year.

Operating margin expanded 170 basis points to 17, 6%.

This strong operating profit and margin performance was due to pricing actions lower freight and commodity costs and cost saving initiatives offset by lower volumes.

Resulting in EPS growth of 1% the $1 per share.

Lastly in the third quarter, we received an insurance settlement in our decorative architectural products segment related to the severe weather events that occurred in Texas in 2021.

This weather events significantly impacted our suppliers' ability to produce the raw materials necessary for us to manufacture certain paints and other coding products.

This settlement has been excluded from our results is a non-GAAP adjustment.

Hum.

Turning to slide eight.

Plumbing sales in the quarter decreased 10% and excluding currency decreased 11%.

Lower volume decreased sales by 14%, partially offset by net selling prices, which increased sales by 3%.

North American plumbing sales decreased 11% in local currency.

International plumbing sales decreased 11% in local currency as demand continued to soften in many European markets and China.

Segment operating profit in the third quarter was $225 million up $5 million year over year, and operating margin expanded 230 basis points to 18, 9%.

Operating profit improvement was driven by pricing actions, lower freight and commodity costs and cost savings initiatives, partially offset by lower volumes.

The completion of our <unk> hundred 60 acquisition had minimal impact on our results due to closing late in the third quarter.

Yeah.

Turning to slide nine.

Decorative architectural sales decreased 10% for the third quarter.

<unk> sales declined high single digits with propane sales decreasing low single digits against the mid teens comp in the third quarter of 2022.

With a two year pro sales comp in the mid teens and a three year pro sales comp of over 65%.

We are clearly demonstrating the significant share we have gained and retained over the past three years.

Operating profit was $144 million and operating margin expanded 110 basis points to 18, 3%.

Operating profit was impacted by lower volumes, partially offset by cost saving initiatives.

We are also starting to see relief in certain paint input cost with modest low single digit deflation in the third quarter and we expect modest low single digit deflation in the fourth quarter on these raw materials.

For the full year, we continue to anticipate low single digit inflation for a paint raw material basket.

The second half deflation not fully offsetting first half inflation.

Turning to slide 10, our balance sheet remains strong with net debt to EBITDA at one seven times at quarter end and approximately $1 $6 billion of balance sheet liquidity.

Working capital as a percent of sales improved 40 basis points to 18, 1% and net working capital days improved by 12 days, primarily due to lower inventories.

With this improvement in working capital net cash from operating activities year to date was $928 million, an improvement of $408 million compared to prior year.

We expect free cash flow conversion to be approximately 110% for the full year.

During the third quarter, we repurchased approximately 800000 shares for $45 million.

Share repurchases were lower in the quarter as a result of US completing the acquisition of <unk> of $3 60.

We continue to execute on our disciplined capital allocation strategy and anticipate deploying approximately $500 million to share repurchases and acquisitions for the full year.

With the acquisition of sawn at $3 60 for approximately 124 million euros and year to date share repurchases of approximately $125 million, we expect to deploy up to $225 million for share repurchases in the fourth quarter subject to market conditions.

This will bring our full year share repurchases to approximately $350 million.

Now, let's turn to slide 11 for updated outlook for the year.

For Masco overall, our topline is developing largely as expected and we continue to expect sales to decline in the range of 10%.

However, with our strong execution year to date and margin performance.

We now expect full year margins to be approximately 16, 5% increase from our previous guide of approximately 16%.

In our plumbing segment, we expect 2023 sales to be down in the range of 9% to 10% improved from our previous expectation of down 10% to 12%.

We also anticipate the full year plumbing margins to improve and be approximately 17, 5% increase.

The increase from our previous guide of approximately 17%.

In our decorative architectural segment, we continue to expect sales to be down in the range of 8% to 10%.

However, we do expect our decorative margins to improve and be approximately 17, 5%.

Increase from our previous guidance of approximately 17% due to cost saving initiatives.

Finally, as Keith mentioned earlier, thanks to our strong execution. Our 2023 EPS estimate is now $3 65 to $3 75.

Up from our previous guide of $3 50 to $3 65.

This assumes a 24% effective tax rate and a 227 million average diluted share count for the year, which is slightly higher than the 226 million share count we guided to last quarter.

Jerry: Good morning ladies and gentlemen. Welcome to Masco Corporation's third quarter 2023 conference call. My name is Jerry and I will be your operator for today's call. As a reminder, today's conference call is being recorded for replay purposes. To ask a question, please press star and then the number one on your telephone keypad. To withdraw your question, please press the Pound key.

Additional modeling assumptions for 2023 can be found on slide 14 of our earnings deck.

With that I'd like to open the call for questions operator.

Thank you in order to ensure everyone has a chance to participate.

We'd like to request that you limit yourself to asking one question and one follow up question during the Q&A session.

Renee Benedict: I will now turn the call over to Renee Benedict, director of FP&A and investor relations. You may begin. Thank you Jerry and good morning. Welcome to Masco Corporation's 2023 third quarter conference call. With me today, our Keith Allman, President and CEO of Masco, and David Chaika, Masco's Vice President, Treasurer and Investor Relations. Our third quarter earnings release, and the presentation slides, are available on our website under investor relations. Following our remarks, we will open the call for analyst questions.

To ask a question. Please press Star then the number one on your telephone keypad.

Renee Benedict: Please limit yourself to one question with one follow up. If we can't take your question now, please call me directly at 313-792-5500. Our statements today will include our views about our future performance, which constitute forward-looking statements. These statements are subject to risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements. We've described these risks and uncertainties in our risk factors and other disclosures in our form 10K and our form 10Q that we filed with the Securities and Exchange Commission.

Withdraw your question. Please press Star then the number two.

Our first question comes from the line of Michael J P. Morgan. Please go ahead.

Okay.

Thanks, Good morning, everyone.

Good morning, Mike.

Wanted to.

Start with the increased guidance.

Driven by the higher margin outlook.

And really zero in a little bit on <unk>.

The drivers of each.

I'm, specifically trying to think about.

No.

No cost saving initiatives as well as a raw material trends.

And how we should think about any of these benefits as perhaps they will come to a clue.

As you moved throughout 2023.

And if there's any way to think about carryover benefits on either the cost saves or the raw materials.

Trends as we look into 2024.

Renee Benedict: Our statements will also include non-GAAP financial metrics. Our references to operating profit and earnings per share will be as adjusted unless otherwise noted. We reconcile these adjusted metrics to GAAP in our earnings release and presentation slides, which are available on our website under investor relations.

So we clearly have Mike margin momentum going into 2024 and that that will continue.

The main drivers of our margin our variable cost productivity, a little bit on the fixed cost side and we've talked about a small plumbing plant that we've closed.

Keith Allman: With that, I'll now turn the call over to Keith. Thank you, Renee. Good morning, everyone, and thank you for joining us this morning.

But really it's about <unk>.

Continuous improvement and that culture of execution that we've demonstrated in the past and continue to do that so we've got good productivity initiatives that we're driving we've.

Keith Allman: Before we get into our results, I want to take this opportunity to welcome Masco's new CFO, Rick Westenberg, who joined the team on October 16th. Rick is an accomplished executive with more than 25 years of experience, including nearly 15 years leading global finance organizations. We're excited to have Rick on board and look forward to him participating in our fourth quarter earnings call in February.

And we've had some.

Pull through of now full year benefit of price increases that we've executed mid year last year, that's now affecting us full year this year and we're getting full benefit of that.

By and large share in the third quarter, and we expect that to continue and of course if if.

If commodities stay where they are or maybe even change to the lower side going into 'twenty for that would be a benefit for us as well leading into 2024, So I think.

Keith Allman: I would like also to take this time to thank Dave Chica for serving his interim CFO over the last several months. Dave quickly stepped into the position and successfully led our finance team during this transition, and we greatly appreciate his support. With that, let's turn to our third quarter results.

The margin story for Us in summary is that we've got good momentum here.

Coming through in this quarter and there will be some benefits for us as we look into 'twenty four.

Okay.

I appreciate it.

Keith Allman: Please go to slide five. In the third quarter, we demonstrated our ability to execute, and the earnings power of our business model. Despite a challenging environment which thought top line decreased 10 percent. Volume was down 12 percent, partially offset by pricing actions and favorable currency impacts of 1 percent each. While sales were down $225 million, our continued focus on driving cost savings initiatives in a favorable price cost relationship resulted in an operating profit decline of only $2 million in the quarter.

I guess secondly.

Keith Allman: This strong execution resulted in operating profit margin expansion of 170 basis points to 17.6 percent and a decriminal margin of only 1 percent. Our earnings per share for the quarter grew 1 percent to $1 per share. Turning to our segments, plumbing sales declined 11 percent in local currency with North American and international plumbing each declining 11 percent. In North American plumbing, overall demand remains soft with the wholesale and e-commerce channels performing moderately stronger than the retail channel.

We had a competitor last night talked about an early thoughts around 2024 and kind of shared.

Expectations for the market to be down slightly based on current trends I was wondering if that's something that you know at this point again, given how you've seen the trajectory.

Play out so far in 2023.

And given still you know kind of depressed existing wholesale turnover.

If that kind of matches directionally at least the way youre thinking about things at this point.

And how you to overall kind of characterize.

You know the demand backdrop.

I know as <unk>.

You kind of noted 2023 has played out as you largely expected but.

Clearly some of the headwinds appear to be.

At least in place as were entering 24 at this point.

Yeah, Mike as I said will.

It would be providing a lot more detailed view on 2024 on our fourth quarter call in February.

In terms of sharing some of our initial thoughts and.

Perspective on what 'twenty four it looks like as we sit here today I would say.

Keith Allman: In international plumbing, demand trends weakened in our key markets of Europe and China in line with our expectations. We continue to expect our overall international plumbing market to be down high single digits for the full year. Despite the top line decline, we successfully drove plumbing margin expansion of 230 basis points to 18.9 percent in the third quarter.

Our assessment of the market.

Based on what we're seeing now in terms of our order patterns in our view.

Agrees with most industry experts and any economist I'd say in that it looks to us like 'twenty four is going to be flattish a flattish year for R&R have rates.

Keith Allman: This strong margin performance was driven by pricing actions, commodity and freight deflation and significant cost savings initiatives, particularly in our North American plumbing business.

Being stubborn in holding up consumers are still getting a little pinched by that existing home sales are at.

How would I think it was about a 20 year low so I would say generally speaking for.

View of 2024, and R&R is that it's going to be flattish.

Keith Allman: We also completed the strategic bolt-on acquisition of Sauna 360, a leader in the Sauna steam and infrared wellness industry.

And in that flattish environment.

We fully expect to outperform the market and grow and expand margins.

Keith Allman: This acquisition complements our spa business, expands our wellness product offerings and leverages what can the expansive dealer network.

We have leading brands around the globe with Delta and how do you grow it.

<unk> demonstrated and have strong share gain momentum.

With our innovation pipeline, our new products, and our leading channel positions, particularly in wholesale and our premium position in China, which is.

Keith Allman: Turning to our decorative architectural segment, sales declined 10 percent in the quarter. DIY paint sales declined low double digits. Propaint sales declined low single digits against a mid-teens comp in the third quarter of 2022. On a three-year stack basis, our propaint comp is over 65 percent. Demonstrating the significant market share we have captured with propaneers through the banks of the brand, quality of our products and our commitment to exceptional service. Together with our partner, the Home Depot, we believe we have a significant opportunity to continue to grow share in the propaint market.

Holding up better than some of the lower priced.

The segments in China, So we've demonstrated our ability to grow.

And retain share and propane that will continue because we're focused on that and you see that we are continuing to.

To invest behind that initiative, so I think that topline story together with our demonstrated margin momentum we're focused on margin execution and with our strong drop down on incremental volume market outperformance in a flash environment will drive margin enhancement of course.

We're continuing to lean out our operations and keep a keen focus on total cost productivity, which.

Keith Allman: Additionally, we are honored that Bear was recognized as the Home Depot 2023 Marketing Innovation Partner of the Year. This recognition is a testament to our creative marketing campaigns and our 45-year partnership with the Home Depot.

Is the hallmark of our execution culture, so longer so in 'twenty four.

I think were.

But as we sit here today, an agreement with it with the general assessment of a <unk>.

A flattish market and we intend to outperform in that market.

Keith Allman: Turning to capital allocation, we continue to generate significant free cash flow during the quarter and maintain a strong balance. Chief. As a result, we executed on our balanced capital deployment strategy and returned $109 million to shareholders through dividends and share repurchases, including buying back $800,000 shares for $45 million in the quarter.

I think importantly longer term, we believe that there is a significant rebound in R&R spending when things normalize due to the strong fundamentals. We've talked about these the age of housing stock strong home prices strong equity levels and what we believe to be pent up demand for R&R spending so.

It's a volatile time and I think based on our demonstrated execution.

We're ready to go into 'twenty, four and feel good about it and we're going to continue to invest in our brands service innovation to drive above market growth.

Keith Allman: Now turning to our outlook for the remainder of 2023. With our strong execution, we now anticipate earnings per share for 2023 to be in the range of $65 to $3.75 per share, up from our premium guidance of $3.50 to $3.65. While the near term demand for the repair and remodel market remains uncertain, we will stay focused on controlling what we can by closely managing costs, minimizing the impact of lower volumes, and driving our margins back to at least 2019 levels of 18 percent each segment.

And when in the recovery.

Great.

I appreciate the answer and the thoughts Keith Thanks very much.

Our next question comes from the line of Joe <unk> of Deutsche Bank. Please go ahead.

Hey, everybody good morning, and thanks for taking the question.

Yeah morning, Joe I was wondering I know you don't disclose price for your Dec arc. So I was wondering if you could give us directionally if price added to the topline in the quarter and margin in the quarter. It doesn't look like.

Keith Allman: We believe our portfolio of the low-ticket repair and remodel products, our market leading brands and innovation, and our geographic diversification, positions us for growth and stability through cycles. As we look over the longer term, we believe the fundamentals of our repair and remodel markets are strong and supportive of long-term growth. These include high home equity levels, the age of housing stock, and homeowners staying in their homes longer. We remain committed to investing in our brands, capabilities, and people to drive strong growth when market conditions improve. With favorable fundamentals and the continued successful execution of our growth strategy, along with our free cash flow and discipline capital deployment, we are well positioned to drive value creation for the long term.

Maybe in the first quarter, where you didn't call it out.

Yes, Joe or not get again, a specific discussion on price. So price overall for <unk> was around 1% a little more in plumbing, roughly flattish and decorative as we've talked about many times, we tend to be price cost neutral in decorative overtime.

Have seen some sustained raw material deflation likely price could be a little bit of a headwind here in fourth quarter.

But maintain profit dollars.

Right that makes sense and so there is a follow up as you were talking about getting back to 18%.

That includes.

<unk> I suppose.

The deflation plus.

Back to price because thats, the mechanical margin benefit on the way down right.

Keith Allman: On our fourth quarter call, we will provide our 2024 outlook, as well as an updated view on the margin expansion potential of our business over the longer term.

I think when we talk about getting back to the 2019 margin levels of 18%, it's more about driving cost savings initiatives more about driving growth.

Keith Allman: I'd like to conclude with a thank you to our employees for their hard work and dedication to driving operational excellence and delivering for our customers and shareholders.

If there is deflation in the inverse relationship to.

If you do end up giving back price that could help but I think really we're focused on improving margins from a cost productivity and driving growth side of things.

David Chaika: Now, I'll turn the call over today if to go over our third quarter results in 2023 outlook in more detail. Dave, thank you Keith, and good morning everyone. As Renee mentioned, my comments today will focus on adjusted performance, excluding the impact of rationalization and other one-time items. Turning to slide seven, sales in the quarter decreased 10%, and excluding currency decreased 11%. North American and international sales both decreased 11% in local currency.

Understood Alright, thanks, a lot.

Our next question comes from the line of Tom Reed of Wells Fargo. Please go ahead.

Yeah.

Awesome. Thanks, so much guys for taking my questions here I wanted to maybe dig in a little bit on pro paint. It. It's been a great growth engine for you guys understanding theres been a little bit of give back. This year can you give us an update though on what the next leg of growth is from here and maybe touch on some of your initiatives specifically on <unk>.

David Chaika: Our continued focus on operational efficiency helped drive gross margin expansion of 430 basis points to 35.8%. Our SGNA as a percent of sales is 18.2%. Despite our decline in sales, operating profit in the third quarter is $348 million, down only slightly year over year. Operating margin expanded 170 basis points to 17.6%. The strong operating profit and margin performance was due to pricing actions, lower freight and commodity cost and cost saving initiatives, offset by lower volumes, resulting in EPS growth of 1% to $1 per share.

<unk> job site delivery and maybe where you are in terms of building out your propane sales force.

Yeah. Thanks for the question Sam propane, it's been a great story for us and.

A lot of hard work and.

Focus for really a decade now it was.

It wasn't too long ago. When this was just a small piece of our business and we've grown it now to be.

Quite material and the story has really been around staying focused on that segment of the market that we think we have a value proposition that really works and it's that that.

David Chaika: Lastly, in the third quarter, we received an insurance settlement in our decorative architectural product segment related to the severe weather event that occurred in Texas in 2021. This weather event significantly impacted our suppliers ability to produce the raw materials necessary for us to manufacture certain paints and other coding products. This settlement has been excluded from our results as a non-gap adjustment. Turning to slide 8, plumbing sales in the quarter decreased 10%, and excluding currency decreased 11%, lower volume decreased sales by 14%, partially offset by net selling prices, which increased sales by 3%.

Contractor, who.

Also paint and there's other things and is already in the aisle shopping at the home depot and when you couple that with the.

The quality of our paint in our brands and our innovation that we put in the can.

It's in our cost competitiveness, it's a very strong story for that.

For that contractor, we think that's about half the pro paint business and when we in total and when we look at where we are today in terms of our of our overall volume I think the important story to start with is we are just getting started we have a relatively small share of that focused part of the market that we're going for it. So there is some nice white space to go after.

The success that we've had to date and continuing the success that continues to resonate with the propane or based on today's net promoter scores that we look at very closely so we're holding onto the share because it's a it's not a one time.

David Chaika: North American plumbing sales decreased 11% in local currency. International plumbing sales decreased 11% in local currency, as demand continued to soften in many European markets and China. Segment operating profit in the third quarter was $225 million, up $5 million a year, and operating margin expanded 230 basis points to 18.9%. Operating profit improvement was driven by pricing actions, lower freight and commodity cost, and cost saving initiatives, partially offset by lower volumes. The completion of our sauna 360 acquisition had minimal impact on our results due to closing late in the third quarter.

Benefit it's a benefit that has value to these focused contractors that continues and it's about service, it's about reducing the friction and making it an easy.

Process and an easy experience for the propane or to go through so we are there there's no big silver bullet that we're looking to <unk>.

Spend a significant amount of money and that we think is going to our hope is going to drive the benefit it's doing more of the same and staying focused on service. So yes that includes buying online and picking up in store ordering that includes expanding our delivery options, which of course includes job site delivery, we still have <unk>.

David Chaika: Turning to slide 9, decorative architectural sales decreased 10% for the third quarter. Pain sales declined high single digits, with pro-paint sales decreasing low single digits against the mid-teens comp in the third quarter of 2022. With a two-year pro-sales comp in the mid-teens, and a three-year pro-sales comp of over 65%, we are clearly demonstrating the significant share we have gained and retained over the past three years. Operating profit was $144 million, and operating margin expanded 110 basis points to 18.3%.

Significant room to expand our pro sales outside sales force.

<unk> at Bayer and at home depot.

Continue to enhance our loyalty programs and the list goes on so it's fundamentally about the blocking and tackling and delivering the service proposition to a targeted.

Contractor.

Stop really ranks.

In terms of where we are in the build out its early innings I mean, when you look at the share that we have today and the share potential that we think we have.

David Chaika: Operating profit was impacted by lower volumes, partially offset by cost saving initiatives. We are also starting to see relief in certain paint input costs with modest, low single digit deflation in the third quarter, and we expect modest, low single digit deflation in the fourth quarter on these raw materials. For the full year, we continue to anticipate low single digit inflation for our paint raw material basket, with second half deflation not fully offsetting first half inflation.

We're just getting rolling.

No that's helpful and maybe one more on paint touching more on backlogs here. So just do you have a sense as to where those backlogs set for your pro paint customers and then maybe another one just on project sizes are you finding that project sizes, maybe are mixing a little bit smaller.

But that's still keeping pros relatively busy.

Hey, Sam on the backlog, we would say that the pro painters in general have worked through really significant backlogs over the past couple of years, it's probably more of a normalized level still decent demand, but at a much more normalized backlog level in terms of project size.

David Chaika: Turning to slide 10, our balance sheet remained strong, with net debt to EBITDA at 1.7 times the quarter end, and approximately 1.6 billion dollars of balance sheet liquidity. Working capital as a percent of sales improved 40 basis points to 18.1%. And networking capital days improved by 12 days, primarily due to lower immun- Tories. With this improvement in working capital, net cash from operating activities a year to date was $928 million in improvement of $408 million compared to prior year. We expect free cash flow conversion to be approximately 110% for the full year.

Difficult staff to get a handle on anecdotally, maybe a little bit but.

You really can't don't have hard data to back that up at this point, probably a little early for that you haven't really seen a significant change in our ticket size.

Yeah.

Got it no. That's helpful. Thanks, So much guys I'll pass it on.

Our next question comes from the line of Matthew Bouley Barclays. Please go ahead.

David Chaika: During the third quarter, we repurchased approximately $800,000 shares for $45 million. Chair repurchases were lower in the quarter as a result of us completing the acquisition of Sauna 360. We continue to execute on our discipline capital allocation strategy and anticipate deploying approximately $500 million to share repurchases and acquisitions for the full year. With the acquisition of Sauna 360 for approximately $124 million in year-to-date share repurchases of approximately $125 million, we expected to deploy up to $225 million for share repurchases in the fourth quarter, subject to market conditions. This will bring our full year share repurchases to approximately $350 million.

Hi, Good morning, guys. Thanks for taking the questions.

Just one on the international market it sounds like you kept guidance unchanged.

But there was some weakening in those markets and I guess, if I heard you correctly that that was already in line with your expectations and.

My question is do you think those international markets have found a trough here or would there be risk.

To those markets weakening a bit further and just since you gave some color on R&R into 24 I'm. Just curious if you have any thoughts on how those international markets may play out into early next year. Thank you.

Yeah, Matt it's always tough to tell if you're if you're on the bottom are you coming up.

Where we are in terms of stability, it's about it'll.

All of the time period for sure we have seen softening in.

David Chaika: Now let's turn to slide 11 for our updated outlook for the year. For Masco overall, our top line is developing largely as expected and we continue to expect sales to decline in the range of 10%. However, with our strong execution year-to-date and margin performance, we now expect full year margins to be approximately 16.5% increase from our previous guide of approximately 16%. In our plumbing segment, we expect 2023 sales to be down in the range of 9 to 10%, improved from our previous expectation of down 10 to 12%.

In international and Central Europe.

Germany's economy is under a little bit of pressure of course, we've talked.

About China, and we understand what's what's happening there we do expect.

The softening to continue.

I should say, we do expect it to be soft in Q4.

How does it grow is very resilient, we are gaining share significantly in Europe. So to combat those choppy market conditions. The team has just gone to work and really penetrated not only in Europe, but also doing a fine job holding up in China.

David Chaika: We also anticipate the full year plumbing margins to improve and be approximately 17.5% increase from our previous guide of approximately 17%. In our decorative architectural segment, we continue to expect sales to be down in the range of 8 to 10%. However, we do expect our decorative margins to improve and be approximately 17.5% increase from our previous guide of approximately 17% due to cost saving initiatives.

Continuing to grow in some of our higher growth markets in terms of where we see 24, I'm not going to get into the specifics of of calling it down on a region by region basis.

We are beginning to see some some favorable signs in terms of more steady demand coming out of Europe and.

That gives me a lot of positivity.

I would just add you're right. We did anticipate the international markets declining so that the deceleration that we saw here in <unk> roughly in line with our expectations and the key point there are signs of stabilization I would say, it's a little too early to call. It.

David Chaika: Finally, as Keith mentioned earlier, thanks for our strong execution. Our 2023 EPS estimate is now $3.65 to $3.75 up from our previous guide of $3.50 to $3.65. This assumes a 24% effective tax rate and a 227 million average alluded share count for the year, which is slightly higher than the 226 million share count we guided to last quarter.

Certainty or a trend, but definitely there are signs of stabilization.

Got it okay. Thanks for that guys.

And then second one on the retail channel it sounded like it might have been a little weaker in plumbing relative to wholesale clearly on the on the paint side, you might've seen DIY decelerating a bit I'm curious what that means for promotional activity. What are you kind of seeing at the retail level.

David Chaika: Additional modeling assumptions for 2023 can be found on slide 14 of our earnings deck.

In terms of trying to address.

Jerry: With that, I'd like to open call for questions. Operator? Thank you.

Some of that kind of deceleration out there and how might that impact your margin outlook. Thanks, guys.

Jerry: In order to ensure that everyone has a chance to participate, we would like to request that you limit yourself to asking one question and one follow-up question during the Q&A session. If you ask a question, please press star, then the number one on your telephone key, to withdraw your question. Please press star in the number two.

Right as where we sit today, it's been fairly consistent with what it's been in the past and I would say.

Not only applies to our plumbing business, but also to paint meaning that we do have periodic.

Sales around some holidays, we have some new lower price.

And spots, but by and large it really has not we have not seen any significant change in the promotional environment.

Michael Rehaut: Our first question comes on the line of Michael Rehaut of JP Morgan. Please go ahead. Thanks. Good morning, everyone. Good morning, Mike. Good morning to start with the increased guidance and you know, during by the the higher margin outlook. And really zero in a little bit on, you know, kind of the drivers of each and specifically trying to think about, you know, you know, cost saving initiatives as well as raw material trends and, you know, how we should think about any of these benefits as perhaps they've begun to accrue as you move throughout 2023.

And that's that's a choice obviously, we are strategic partners with with our customers, but really that is their choice and then sometimes we participate in the funding and in others. We don't so that's that's really up to them and to this date.

At this time, we really haven't seen much of a change at all in the promotional environment.

Great. Thanks, Keith Thanks, Dave Good luck guys.

Thank you Matt.

Our next question comes from the line of Tim Lugo of.

Of UBS. Please go ahead.

Good morning, guys. Thank you for taking my questions the.

The first one is what did you see in terms of plumbing mix.

Geographic mix still a headwind internationally and then in terms of plumbing pricing I think it was 4% through the first half I think it was 3% in the third quarter are you expecting further tapering as we move into the fourth quarter.

Michael Rehaut: And if there's any way to think about carry over benefits on either the cost saves or the raw materials trends as we look into 2024. So we clearly have Mike margin momentum going into 2024 and that will continue. The main drivers of our margin are variable cost productivity. A little bit on the fixed cost side, we've talked about a small plumbing plant that we've closed. But really it's about continuous improvement and that culture of execution that we've demonstrated in the past and continue to do that.

Yeah, John let me take the pricing, yes, we do expect further tapering in the fourth quarter as we analyze the majority of our price increases we did take some selective price actions in plumbing.

Earlier this year that will continue through but the majority of our larger increases are annualized now as we head into the fourth quarter. So it'll be a little bit of a benefit that smaller than what we saw in <unk> on.

On the mix side, not a not a real material impact, but we have seen some mix impact mainly geographic mix in our international business. So we are a premium player in China, and we like that position. We think that's more resilient position more consistent position to be in and it feeds into the strength of our.

Michael Rehaut: So we've got good productivity initiatives that we're driving. We've had some pull through of now full year benefit of price increases that we've executed mid year last year that's now affecting us fully this year. And we're getting full benefit of that by and large here in the third quarter. And we expect that to continue. And of course, if if commodities stay where they are or maybe even change to the lower side going into 24, that would be a benefit for us as well leading into 2024.

Of our high jewelry, and XR brands and when China is under pressure a little bit more than the overall international market in general that gives us a little bit of geographic mix, but it's not particularly material in the quarter in order to expect it to be throughout the year.

A little bit Okay. That's helpful.

Understood and.

And then.

Paint and coatings revenue was down high single digits and total segment sales were down 10%.

Keith Allman: So I think the margin story for us in summary is that we've got good momentum here coming through in this quarter and there will be some benefits for us as we look into 24. Okay, appreciate it. I guess secondly, we had a competitor last night talk about an early thoughts around 2024 and kind of shared expectations for the market to be down slightly based on current trends. I was wondering if that's something that at this point, again, given how you've seen the trajectory play out so far in 2023 and given still, you know, kind of depressed existing home sale turnover, if that kind of matches directionally at least the way you're thinking about things at this point and how you to overall kind of characterize the demand backdrop.

How much was the hardware business down and what are you seeing there and what was sort of the drivers of the declines there.

Yeah, our lighting and hardware businesses were down double digits, a little bit more than the segment John.

Tend to be a little more DIY oriented type products. So they pulled back a little bit more than our paint and coating products in aggregate. So we did see more softening sort of consistent softening, but we did see softness here in the <unk> on the lighting and hardware businesses.

Got it thank you guys.

Thanks, Jeff.

Our next question comes from the line of Adam Baumgarten of Selman. Please go ahead.

Hey, good morning, guys, just maybe kind of backing into the fourth quarter margin guidance pretty.

Pretty big step down sequentially, I think kind of bigger than maybe typically are seasonal.

Anything to note there in terms of headwinds on the margin side.

No nothing beyond really what we've talked about we may see a little bit more of international mix in our plumbing segment.

Keith Allman: I know as you've kind of noted, 2023 has played out as largely expected, but clearly some of the headwinds appear to be at least in place as we're entering 24 at this point. Yeah, Mike, as I said, we'll be providing a lot more detailed view on 2024, on our fourth quarter call in February, in terms of sharing some of our initial thoughts and perspective on what 24 looks like as we sit here today, I would say that our assessment of the market, based on what we're seeing now in terms of our order patterns, and our view agrees with most industry experts and economists, I'd say in that, it looks to us like 24 is going to be flatish year for R&R, you know, we have rates being stubborn, holding up, consumers are still getting a little pinched by that existing home sales or at what I think is about a 20-year low, so I would say generally speaking for view of 2024 and R&R is that it's going to be flatish, and in that flatish environment, we fully expect to outperform the market and grow and expand margins.

That that could provide a little bit more headwind, Dave maybe you can add some color on to that but.

The fourth quarter is typically.

Our slowest from a seasonality perspective.

We do have costs that come in in the fourth quarter, such as through up on various accounts compensation accounts and that sort of thing that can have some headwinds we've got a little bit of.

We bring up and start to more aggressively ramp up our new factories, we have a new paint facility outside Columbus in Ohio, and we have a new plumbing plant in Serbia, So there'll be a little more expenses, there and headwinds, but I think it's when you think about our margin and where we're going to be driving this in 24 I think it's best to.

Think about the full year 'twenty three margins and then you know that.

Strong incremental that I've talked about earlier on the call as it relates to share growth.

Adam I didn't keep that a good summary in general remains an uncertain market a market. So there is some caution probably in the fourth quarter on the margin side, but we do anticipate continued pressure from lower volumes essentially a little bit of negative mix in plumbing as well as plant startup costs in both in plumbing and decorative with our European farm.

And shower facility coming online as well as our Heath, Ohio paint manufacturing distribution center coming online.

Keith Allman: We have leading brands around the globe with Delta and Hodge-Growey, we have demonstrated and have strong share game momentum with our innovation pipeline, our new products, and our leading channel positions, particularly in wholesale, and our premium position in China, which is holding up better than some of the lower price segments in China, so we've demonstrated our ability to grow and retain share and propane, that will continue because we're focused on that, and you see that we are continuing to invest behind that initiative, so I think that top-line story together with our demonstrated margin momentum, we're focused on margin execution, and with our strong drop down and incremental volume, market out performance and a flatish environment will drive margin enhancement. Of course, we're continuing to lean out our operations and keep a keen focus on total cost productivity, which is the hallmark of our execution culture so long, so in 24, I think we're, as we said here today, in agreement with the general assessment of a flatish market, and we intend to outperform in that market.

Okay got it that's helpful. And then just maybe if you could touch on Pos trends at retail throughout the quarter and maybe into October if youre willing to share though.

Yeah, we don't really.

To break it down within the quarter as there's a lot of variability in terms of load in from new products and other comps and that sort of thing.

It certainly varies with with respect to Pos I'd say, we're seeing.

Some fairly good trends.

Thanks Best of luck.

Our next question comes from the line of Susan Mcclary of Goldman Sachs. Please go ahead.

Thank you good morning, everyone.

Good morning, Susan.

My first question is maybe taking a step back because theres been obviously a lot of focus on the consumer.

Last month or two.

I'm thinking about housing and their ability to spend as rates move higher how would you characterize the consumer today as you kind of look across the business and then any thoughts on shifts that are there either positive or negative and what that could suggest for next year as we think about the potential for maybe waits to change either.

Keith Allman: I think importantly, longer term, we believe that there's a significant rebound in our and our spending when things normalize due to the strong fundamentals. We talked about these age of housing stock, strong home prices, strong equity levels, and what we believe to be a pen-up demand for our and our spending.

Up or down and where things could kind of come together with that.

I'd characterize it by saying, it's a mixed bag Susan when when we look in in Europe.

Michael Rehaut: So it's a volatile time, and I think based on our demonstrated execution, we're ready to go into 24 and feel good about it, and we're going to continue to invest in our brand, service, innovation, to drive above market growth, and win in the recovery. Great, that was, appreciate the answer in the thoughts, Keith. Thanks very much.

We did see we did see a pullback in the consumer and there's some some noise there with with various legislation. That's been it's now clarified to a degree anyway more than it was last time, we talked as it relates to driving for Nonfossil fuel heating systems in central Europe and Germany.

And that taking away some of the consumers willingness to spend that stay bath remodel projects and that sort of thing is they're concerned with.

Joe Olsmeyer: Our next question comes from the line of Joe Olsmeyer of Deutsche Bank. Please go ahead. Hey, everybody. Good morning, and thanks for taking the question. Yeah, morning, Joe. I was wondering, I know you don't disclose price for your deck arc set, but I was wondering if you could give at least directionally a price added to the top line in the quarter and margin in the quarter. It didn't look like it's made been the first quarter where Yeah Joe, we're not going to get in a specific discussion on price, so price overall for Masco was around 1% a little more in plumbing, roughly flatish in decorative, as we've talked about many times we tend to be price cost neutral in decorative over time.

Putting in.

Green or heating systems for what they thought was pending legislation. It looks like that's going to now be protracted out to 2028. So we expect that consumer to start to come back so in Europe. The consumer was.

Kind of a little later to the game and the pullback if you will and is now coming back in.

In Europe in the U S.

They have fairly well for US you know as expected I should say so you know we're not seeing.

Any any accelerated slowdown whatsoever.

And again I think there's a there's a lot of volatility uncertainty uncertainty and it's a.

The full impact of inflation.

Joe Olsmeyer: We have seen some sustained raw material deflation, likely price could be a little bit of a headwind here in fourth quarter but maintain profit dollars. Right, that makes sense, so there's a follow up as you're talking about getting back to 18%, that includes, I suppose, the deflation plus giving back the price because that's the mechanical margin benefit on the way down, right. I think when we talk about getting back to the 2019 margin levels of 18%, it's more about driving cost savings initiatives, more about driving growth.

<unk> is yet to be seen in the consumer but by and large the consumer is still holding up pretty good for us and our products and I think that's driven by the bank for the Buck if you will that the consumer sees and painting a room and in changing out faucets and light fixtures were.

It's a relative relatively inexpensive.

The investment in your home.

<unk> with <unk>.

Work from home where you.

That's not fully going to go back to everybody working in the office and that puts more wear and tear on the paint and.

And it's not that expensive to do it and you can do it DIY. If you want so I think that combination has helped us.

Joe Olsmeyer: If there is deflation and the inverse relationship, if you do end up giving back price, that could help, but I think we really were focused on improving margins from a cost productivity and driving growth side of things.

Susan I would add to it I mean it could.

Tumors clearly have been resilient.

Great.

Washington, and consumers thousands there had been significant increase in rates and inflation over the past couple of years that said they have demonstrated their resilient. When you look at home medically levels are feeling very good about their home. So we do think that when things do stabilize that that consumer will be very interested in remodeling their homes and as Keith alluded to we do.

Joe Olsmeyer: Understood, all right, thanks a lot.

Sam Darkatsh: Our next question comes from the line of some read of Wells Fargo, please go ahead. Awesome, thanks so much guys for taking my questions here. I wanted to maybe dig a little bit on propane, it's been a great growth engine for you guys. Understanding there's been a little bit of good feedback this year. You can give us an update though on what the next leg of growth is from here and maybe touch on some of your initiatives specifically. I'm thinking job site delivery and maybe where you are in terms of building out your propane sales force.

There will be a nice pent up demand that we fully intend to capitalize on.

Okay.

Helpful color and then.

And thinking about capital allocation I know that you've closed the acquisition this quarter and as you think about priorities.

Priorities for cash and especially maybe on the buyback side.

Any thoughts on how that could come together over the next couple of quarters.

Hey, Susan our typical philosophy is to allocate all of our free cash flow after dividends to share repurchases or acquisitions.

Sam Darkatsh: Thanks for the question, Sam. Propane's been a great story for us and a lot of hard work and focus for really a decade now. It wasn't too long ago when this was just a small piece of our business and we've grown it now to be quite material. And the story has really been around staying focused on that segment of the market that we think we have a value proposition that really works.

Sam Darkatsh: And it's that contractor who also paints and does other things and is already in the aisle shopping at the Home Depot and when you couple that with the quality of our paint and our brands and our innovation that we put in the can. It's in our cost competitiveness. It's a very strong story for that for that contractor. We think that's about half the propane business and when we in total and when we look at where we are today in terms of our overall volume.

So with our significant cash flow and are pausing of share repos in the third quarter, we do tend to be fairly aggressive here in the fourth quarter, and we talked about allocating $225 million likely towards share repurchases.

If you look at 'twenty four I think if you follow that basic formula the excess free cash flow and free cash flow after dividends allocated to share repurchases or acquisition you'd be right in the ballpark on how we're thinking about share repos for next year.

Okay. That's helpful. Thank you good luck with everything.

Thanks, Tim.

Our next question comes from the line of Luke.

Capital. Please go ahead.

Oh, hi, Thanks for taking my question a question on DIY paint just.

The move to a down low teens year on year versus down low single digits I think in the second quarter just curious.

<unk> built a sizable change on a year on year basis, since but curious how trends performed sequentially there.

Sam Darkatsh: I think the important story to start with is we are just getting started. We have a relatively small share of that focused part of the market that we're going for. So there's some nice whitespace to go after the success that we've had today and continue in the success that continues to resonate with the propane or based on today's net promoter scores that we look at very closely. So we're holding on to this year because it's not a one time benefit.

D O S T a.

White paint, we did see softening in <unk> actually and continued softening here in <unk> I think you have to look at the low level of existing home sales, which are a 13 year low we haven't seen this level of existing home sales since 2010 at the end of the housing crisis. So we think that is affecting DIY DIY.

Paint sales.

That market is softer here in <unk> roughly in line with our revised expectation coming out of <unk>.

Sam Darkatsh: It's a benefit that has value to these focused contractors that continues and it's about service. It's about reducing the friction and making it an easy, and an easy experience for the pro-painter to go through. So there's no big silver bullet that we're looking to spend a significant amount of money in that we think is going to, or hope is going to drive the benefit. It's doing more of the same and staying focused on service.

Derek I would say that the fundamentals are still supportive of DIY paint, particularly when you think about millennials going into the housing market.

And the basic research that we've done is that these millennials that the millennials are diyer and not only for a single project, but their return.

<unk> wires and paint as we've shown with regards to if there is such thing as a fun DIY project, that's how it's viewed and.

Sam Darkatsh: So yes, that includes buying online and picking up in the store ordering. It includes expanding our delivery options, which of course includes job site delivery. We still have a significant room to expand our pro sales, outside sales force, both at-bear and at-home depot. We continue to enhance our loyalty programs. The list goes on. So it's fundamentally about the blocking, attacking, and tackling, and delivering a service proposition to a targeted contractor for really rings.

Our positioning with that as a favorable for us.

Understood Thanks for that.

Follow up question just on commodity costs I think you mentioned, you're starting to you're starting to finally see some relief here, maybe if you can walk through some of the baskets that are particularly beneficial right now in the fourth quarter. If there's any early look into 'twenty for the raw material side that would be great.

Well container costs have come down off their peak levels that certainly has helped with freight.

Some of our metals such as zinc is off the.

Sam Darkatsh: In terms of where we are in the build-out, it's early innings. I mean, when you look at the share that we have today and the share potential that we think we have, we're just getting rolling. No, that's helpful.

22 high copper I think is at about $3 50, a pound now 22 high was closer to four Bucks. So that's come off now we we haven't really seen that roll through the P&L because of the time on the water and then the flow through of our inventory, but that would be.

Sam Darkatsh: And maybe one more on paint, touching more on backlogs here. So just, do you have a sense as to where those backlogs sit for your pro-paint customers? And then maybe another one just on project sizes. Are you priming their project sizes? Maybe you're mixing a little bit smaller, but that's still keeping pros relatively busy. Thanks.

24.

A tailwind for us.

All in all in plumbing, let's call it low single digit deflation.

For the year and paint.

Sam Darkatsh: Hey, Sam, on the backlog, we'd say that the pro-painters in general work through really significant backlogs over the past couple of years is probably more than normalized level. Still decent demand, but at a much more normalized backlog level. In terms of project size, that's a difficult stat to get a handle on. Anodoli may be a little bit, but you really can't, don't have hard data to back that up at this point, probably a little early for that. I haven't really seen a significant change in our ticket size. Gotcha. No, that's helpful. Thanks so much guys.

Certain input costs have moderated we've seen resins moderated a little bit.

To see a little bit of deflation.

In the third quarter, but still inflation based on a full year is that we believe not going to be enough to cover the inflation. We saw in the first half so let's call it approximately flat.

Flat all in for the total company for the full year and then the movement.

Reduced commodity costs that we're seeing in the back end of the half of the year here would be benefits for us in 'twenty four.

Great. Thanks again best of luck.

Yeah.

Our next question comes from the line of Stephen Kim Evercore. Please go ahead.

Matthew Bouley: I'll pass it on.

Yeah. Thanks, very much guys I appreciate all the color I.

Matthew Bouley: Our next question comes from the line of Matthew Bule of Marklies. Please go ahead. Good morning, guys. Thanks for taking the questions. Just one on the international market. It sounds like you kept guidance unchanged. You know, but there was some weakening in those markets, and I guess if I heard you correctly, that was already in line with your expectations.

I guess my question is related to your targeted 18 plus percent operating margins Youre pretty close in both segments, but.

In Dec arc, I'm curious as to whether or not there's a subsegment, particularly either hardware or lighting, where you're further away from your target. Then you are in paint basically is that is that is that true and as you know maybe painting or I'm, sorry, a lighting or hardware a little further away and then also.

Matthew Bouley: My question is, do you think those international markets have found a trough here, or would there be risk to those markets weakening a bit further, and since you gave some color on R and R into 24, just curious if you have any thoughts on how those international markets may play out into early next year. Thank you. Yeah, Matt, it's always always tough to tell if you're on the bottom or you're coming up where we are in terms of stability.

Within plumbing is there a sub segment you know.

A couple of areas worth calling out within your plumbing portfolio, where again, maybe you're a little further away from your targeted levels.

Yeah, when you look across deepen our segments and within segments not everything is the same margins. So there is a there's a distribution.

Matthew Bouley: It's a bottle of time period for sure. We have seen softening in international and central Europe. Germany's economy is under a little bit of pressure. Of course, we've talked about China and we understand what's happening there. We do expect the softening to continue. I should say we do expect it to be soft in 24, and Hans Groey is very resilient. We are gaining share significantly in Europe. So to combat those choppy market conditions, the team is just going to work and really penetrated not only in Europe but also doing a fine job holding up in China and continuing to grow in some of our higher growth markets.

<unk> of margins.

And you know when you think about hardware hardware has lower margin than paint and that is an area, where we're looking to improve and I will tell you that 18% is the target that we're shooting for now, but we think we have.

Significant room to continue to drive that even higher and as I mentioned in my prepared remarks, we'll be talking about where we see some long term margin targets on our on our call next quarter within plumbing, we have a broad plumbing platform and we we've talked before about how there's a continuum of margin in that platform.

Some of the the beautiful chrome plated jewelry in the kitchen, and Bath and plumbing to some of the less.

Matthew Bouley: In terms of where we see 24, I'm not going to get into the specifics of calling it down on the region by region base, is that we are beginning to see some favorable signs in terms of more steady demand coming out of Europe and that that gives me a lot of positivity. Matt, I just had you, you're right, we did anticipate the international markets decline so that the deceleration we saw here in 3Q is roughly aligned with our expectations and yeah, the key point. You know, there are signs of stabilization, I'd say it's a little too early to call it a certainty or a trend but definitely our signs of stabilization. Got it.

Decorative components say of plastics.

Plastic shower pan that we would install in our bathing fun bathing business. So there is variability in margin and I think the key takeaway I'd like to share with you is that we.

We've demonstrated the ability to execute and drive margin be it with.

Our focus on where we play in with our Masco operating system to drive.

Efficiencies, so will be tax will be tackling the whole business, but yes, theres variability of course across our segments.

So within plumbing, there's not a particular.

Matthew Bouley: Okay, thanks for that guys. And then second one on the retail channel, it sounded like it might have been a little weaker and plumbing relative to wholesale. Clearly on the paint side, you might have seen DIY decelerating a bit. I'm curious about what that means for promotional activity. What are you kind of seeing at the retail level? You know, in terms of trying to address some of that kind of deceleration out there and how like that impact your margin outlook.

You know lets say way of talking about it that that sub segment or segments out.

Maybe by country or or sort of a price point or something like that where youre a little bit further away from your goal within that segment.

Well, there's there's there's not a whole lot of variability when we look geographically.

And we look at all of these things we look at margin variability on a product type basis, we look at margin variability based on the raw component.

Matthew Bouley: Thanks guys. Right, as where we sit today, it's been fairly consistent with what it's been in the past and I would say that not only applies to our plumbing business but also to paint, meaning that we do have periodic sales around some holidays. We have some new low price in spots but by and large it really has not. We have not seen any significant change in the promotional environment. And that's a choice.

Make up of the products, we look at margin variability across channels. So.

That's all part of our operating system that we used to drive improvements, but we're not we're not going to break it out specifically by those components as we talk here.

Okay, that's fine.

Regarding overall.

Your your your your improved margin.

You talk about cost savings and some of those you know I think you highlighted there is a little bit of of raws that are starting to come to you.

Matthew Bouley: Obviously we are strategic partners with our customers but really that is their choice and sometimes we participate in the funding and others we don't. So that's really up to them and to this date, at this time we really haven't seen much of a change at all in the promotional environment.

As a benefit and then you have a freight which you called out as well, but you've also talked about just sort of other productivity initiatives and so forth and so I'm curious as we look into.

Matthew Bouley: Great. Thanks Keith. Thanks Dave. Good luck guys. Thank you.

Let's say the fourth quarter, if you were to sort of segregate out.

Things like freight and price over raws.

John Lovallo: Our next question comes on the line of John Lovano of UBS. Please go ahead. Good morning guys. Thank you for taking my questions. The first one is, what did you see in terms of plumbing mix, which geographic mix still had went internationally? And then in terms of plumbing pricing, I think it was 4% through the first half, I think it was 3% in the third quarter. Are you expecting further tapering as we move into the fourth quarter?

How much is would you say related to <unk>.

Productivity like things that are you know.

More sort of permanent cost saving efforts that you've made I mean would you put that in the.

10 to 20 basis point range overall or is it just if you can help us understand what some of those initiatives had been adding.

Adding or are expected to add here, maybe in the fourth quarter, where if you want to talk to the full year or whatever.

John Lovallo: Yeah, John, let me take the pricing. Yes, we do expect further tapering in the fourth quarter as we analyze the majority of our price increases. We did take some selective price actions in plumbing earlier this year that will continue through, but the majority of our larger increases are analyzed now as we head into the fourth quarter. So it'll be a little bit of a benefit that's smaller than what we saw on 3Q, on the mix side, not a real material impact, but we have seen some mixed impact, mainly geographic mix in our international business.

Thank you Steve we have made very nice improvements on the productivity line recall it we had some inefficiencies in the back half of 'twenty, two particularly in plumbing that we've done a very nice job of getting on top of that I'd.

I'd say in terms of buckets, the biggest drivers clearly getting our price cost relationship back to where it should be throughout this year. So we've been very nice cost recovery this year.

Since we did lag a bit last year. So that's the biggest bucket the productivity is a nice tailwind to help with that but the biggest buckets of price cost recovery.

Okay. Thanks.

John Lovallo: We are a premium player in China, and we like that position. We think that's a more resilient position, more consistent position than to be in, and it feeds into the strength of our hungry and extra brands. And when China is under pressure a little bit more than the overall international market in general, that gives us a little bit of geographic mix, but it's not particularly material in the quarter in order to expect it to be throughout the year.

Thanks, very much guys.

Thanks, Steve.

Our next question comes from the line of Truman Patterson of Wolfe Research. Please go ahead.

Hey, good morning, everyone. Thanks for taking my questions. Keith just wanted to follow up you mentioned that brass deflation for.

For the year should kind of run in the down low single.

Did your percentage shall.

John Lovallo: A little bit more. Okay, that's not a problem. Understood. And then, Peyton Codings revenue was down high single digits, and total segment sales were down 10%. How much was the hardware business down, and what are you seeing there, and what were sort of the drivers at the decline there? Yeah, our lighting and hardware businesses were down, double digits, you know, a little bit more than the segment, John. You know, there tend to be a little more DIY-oriented type products, so they pull back a little bit more than our paint coating products in aggregate. So we did see more softening, sort of consistent softening, but we did see soft here in the 3Q on the lighting and hardware businesses. Got it. Thank you guys. Thanks, Sean.

Should we assume that was likely inflationary and kind of the first quarter and perhaps the fourth quarter is trending down maybe in the mid single digit percentage or better range.

As we said today.

Yes, that's about right.

Yeah, Truman I'd add too just copper and zinc are down but they have been bouncing around to they've gone down. These levels have gone back up close to the 22 averages so it.

I wouldn't run with that consistently through 24 at this point, but it does look like it'll be a little bit of a benefit.

Okay, Okay, Gotcha and then.

As we are.

Look at your margin performance in both segments on a year over year basis is there any way you could frame how much your investments in both businesses stepped up in the third quarter or was it relatively light.

Adam Baumgarten: Our next question comes from the line of Adam Baumgarten, also on them. She's going ahead. Hey, good morning, guys.

Versus your expectations kind of given the margin performances.

Adam Baumgarten: I just maybe kind of back into the fourth quarter margin guidance. A pretty big step down sequentially. I think you know, kind of bigger than maybe typically or seasonal, just kind of anything to note there in terms of headwinds on the margin side. No, nothing beyond really what we've talked about. We may see a little bit more of international mix in our plumbing segment that could provide a little bit more headwind.

Just trying to understand if you know perhaps some of these costs are really.

Fully hitting in the fourth quarter that might have been expected in <unk>.

Yeah, I'd say investments were roughly in line with what we anticipate in <unk>, maybe a little bit light.

We do we do plan to continue to invest in our business as Keith talked about it will impact a little bit on the fourth quarter, but roughly in line with probably what we saw in <unk>.

Adam Baumgarten: Maybe you can add color onto that, but we've, the fourth quarter is typically our slowest from a seasonality perspective. We do have costs that come into the fourth quarter, such as through up on various accounts, compensation accounts, and that sort of thing that can have some headwinds. We've got a little bit of, we bring up and started to more aggressively ramp up our new factories. We have a new paint facility outside Columbus in Ohio, and we have a new plumbing plant in Serbia, so there'll be a little more expenses there in headwinds.

Let's say the margin improvement is much more of a as we've talked about the productivity improvements as well as getting the price cost relationship back to where it should be.

It is.

Okay perfect. Thank you guys.

Thanks Sherman.

Our last question comes from the line of Phil on of Jefferies. Please go ahead.

Hey, guys. Thanks for squeezing me in I guess for you, Dave you kind of mentioned.

Mentioned price cost was a huge driver for margins this year, particularly plumbing.

Adam Baumgarten: But I think it's, when you think about our margin and where we're going to be driving this in 24, I think it's best to think about the full year, 23 margins, and then, you know, that's strong incremental that I've talked about earlier on the call, as it relates to share growth. Yeah, Adam, I think you've had a good summary in general. It remains an uncertain market, so there is some caution probably in the fourth quarter on the margins side, but we do anticipate continued pressure from lower volumes.

Your products have obviously resonated with consumers and showing good pricing power.

And your competitor is actually alluded to taking price next year in plumbing do you have any pricing actions geared for 2024.

And when we look at the pace of price cost spread widening this year.

Do you see that spread widening the pace of that spread widening even faster perhaps next year.

Again, we will get into detail for 24 on the next call.

Adam Baumgarten: You know, potentially a little bit of negative mix in plumbing as well as we'll have plants starting up costs in both in plumbing and decorative with our European foster and shower facility coming online as well with our heat so high of paint manufacturing distributions that are coming online. Okay, got it. No, it's helpful.

We've taken.

Some targeted price in plumbing this year.

Here in the third quarter and and our demonstrated ability as you mentioned with our pricing power is to stay stay in front of us to keep our price cost in our sights and go after price through our channels when we need it.

Adam Baumgarten: And then just maybe you can touch on POS trends at retail throughout the quarter and maybe into October through the line of the shadow. Yeah, we don't really like to break it down within the quarter as there's a lot of variability in terms of load in from new products and other comps and that sort of thing and it certainly varies. With respect to POS, I'd say we're seeing some fairly good trends. Thanks, Bethel Aks.

We tend to keep it and hold onto it longer in plumbing than we do in decorative giving given our relationship.

With a significant customer in coatings. So our pricing power is pretty strong it's too early to say if we're going to take price next year, we'll have to see Oh.

What that means in terms of our innovation pipeline and our new products that come out and where commodities ultimately end up.

Susan Maklari: Our next question comes from the line of Susan Maklari of Goldman Sachs. Please go ahead. Thank you. Good morning, everyone. Good morning, Susan.

Too early to call, whether or not we're going to do any price in plumbing in 'twenty four but certainly if needed we've got the capability and the pricing power with our brands to be able to do that.

Susan Maklari: My first question is, maybe taking a step back, because there's been obviously a lot of focus on the consumer in the last month or two and thinking about housing and their ability to spend as rates move higher, how would you characterize the consumer today as you kind of look across the business and any thoughts on shifts that are there, either positive or negative, and what that could suggest for next year as we think about the potential for maybe rates to change, either up or down, and where things could kind of come together with that? I'd characterize it by saying it's a mixed bag, Susan.

Okay, Keith just to clarify you meant <unk> price increase in plumbing that was last year right.

<unk> <unk>, Okay, we've taken some targeted.

Correct, sorry about that we've taken some targeted price here earlier, nobody here as well.

It makes sense and then on the DIY side of things for paint any color on where volumes are shaking out right now as of fourth quarter in terms of your guidance relative to pre COVID-19 levels.

It keeps you kind of mentioned that.

Do you see a good momentum going forward long term on DIY, just given the millennial cohort.

Do you see that kind of flipping in 2024 in terms of trends in DIY versus wholesale.

Susan Maklari: When we look in Europe, we did see a pullback in the consumer and there's some noise there with various legislation that's been, it's now clarified to a degree anyway. More than it was last time we talked as it relates to driving for non-fossil fuel heating systems in central Europe and Germany, and that taking away some of the consumer's willingness to spend on, say, battery model projects, and that sort of thing is they're concerned with putting in green or heating systems per what they thought was pending legislation.

The pro channel has definitely held up much better than the DIY. This year in the retail channel.

The DIY market during Covid was a bit of a roller coaster, where it took a significant improved.

Improvement if you recall when folks were reticent to have pros in their homes.

And then when that that.

That kind of fear of Covid relaxed, a little bit and people are more comfortable with pros coming in pro took off in DIY down and that I think is bodes.

It speaks to our diversification and our strength in pro for that customer that we can handle that that variation and be there to catch that and grow grow share, but it has been an up and down market I will tell you, where we sit now and DIY that absolute.

Susan Maklari: It looks like that's going to now be protracted out to 2028, so we expect that consumer to start to come back. So in Europe, the consumer was kind of a little later to the game in the pullback, if you will, and is now coming back in Europe. In the US, holding up fairly well for us. As expected, I should say, so we're not seeing any accelerated slowdown whatsoever, and again, I think there's a lot of volatility and uncertainty, and it's the full impact of inflation, I think is yet to be seen in the consumer, but by and large, the consumer is still holding in pretty good for us in our products, and I think that's driven by the bang for the buck, if you will, that the consumer sees in painting a room, and in changing our faucets and light fixtures where it's a relatively inexpensive investment in your home.

Volumes are lower than our pre pandemic called 2019 levels.

<unk> with respect to.

If I think as I said, we'll get into more detail about next year on our fourth quarter call.

I'm not so sure that the millennial cohort will be enough to really drive significant growth overall in the DIY segment, but we will talk about where we see DIY more in detail in the next call.

Okay. Thank you I appreciate the color.

We'd like to thank all of you for joining us on the call. This morning and for your interest in Masco that concludes today's call. Thank you.

Yeah.

The conference is no longer being recorded.

Okay.

[music].

Susan Maklari: I think with work from home where that's not fully going to go back to everybody working in the office, and that puts more wear and tear on the paint, and it's not that expensive to do it, and you can do it DIY if you want. So I think that combination has helped us. This is not it, I mean, the consumer has clearly been resilient. Dr. Washington and consumers now since there have been significant increase in rates and inflation over the past couple of years.

Susan Maklari: That said, you know, they have demonstrated their resilient when you look at home medically levels, they're feeling very good about their home. So we do think that when things do stabilize that that consumer will be very interested in remodeling their homes and as Keith alluded to, we do think there will be a nice pent-up demand that we fully intend to capitalize on. Okay, that's helpful, Collar.

Susan Maklari: And then thinking about capital allocation, I know that you close the acquisition this quarter. As you think about, you know, priorities for cash and especially maybe on the buy-back side, any thoughts on how that could come together over the next couple quarters? Yes, Susan, our typical philosophy is to allocate all of our free cash flow after dividends to share repurchases or acquisitions. So with our significant cash flow and our pausing of share repos in the third quarter, we do tend to be fairly aggressive here in the fourth quarter and we talked about allocating 225 million likely towards share repurchases.

Susan Maklari: If you look at 24, I think if you follow that basic formula of excess free cash flow, free cash flow after dividends allocated to share repurchases or acquisitions, you'd be right in the ballpark on how we're thinking about share repos for next year. Okay, that's helpful. Thank you. Good luck with everything. Thanks, sir.

God ex-moise: Our next question comes from the line of God ex-moise of loop capital. Please go ahead. Oh, hi, thanks for taking my question.

God ex-moise: I'm question on DIY paint. Just the move to download teams here on a year versus down a little single digits. I think in the second quarter, just curious. You know, that that was a sizable change on a year on your basis, but curious how trends performed sequentially there. You know, on DIY paint, we did see softening in 2Q actually and continued softening here in 3Q. You know, I think you have to look at the low level of existing home sales, which are about 13 year low.

God ex-moise: We haven't seen this level of existing home sales since 2010 at the end of the housing crisis. So we think that is affecting DIY paint sales. So that market is softer here in 3Q. You know, roughly line with our revised expectation coming out of 2Q. Derek, I would say that, you know, the fundamentals are still supportive of the DIY paint, particularly when you think about millennials going into the housing market. And the basic research that we've done is that these millennials are DIYers and not only for a single project, but their return DIYers. And paint as we've shown with regards to, if there is such thing as a fund DIY project, that's how it's viewed. And our positioning with that is favorable for us. Understood. Thanks for that.

God ex-moise: Follow questions just on commodity costs. I think you mentioned you started. You're starting to finally see some relief here. Maybe if you can walk through some of the baskets that are particularly beneficial right now in the fourth quarter. If there's any early look into 24 of the raw material side, that'll be great. Well, container costs have come down after peak levels. That certainly is helped with freight. Some of our metals such as zinc is off the 22 high copper I think is at about 350 a pound now, 22 high was closer to four bucks so that's come off.

God ex-moise: Now we haven't really seen that roll through the P&L because of the time in the water and then the flow through of our inventory, but that would be a 24 tailwind for us. We've got low single digit deflation for the year in paint, certain input costs have moderated, we've seen resins moderated a little bit. We're starting to see a little bit of deflation in the third quarter, but still inflation based on a full year is not we believe not going to be enough to cover the inflation we saw in the first half.

God ex-moise: So let's call it approximately. Lat all in for the total company for the full year and then the movement the reduced commodity cost that we're seeing in the back end of the year here would be benefits for us in 24. Great, thanks again, best of luck.

Stephen Kim: Our next question comes from the line or Stephen Kim of Evacol, please go ahead. Yeah, thanks very much guys, appreciate all the color. I guess my question is related to your targeted 18 plus percent operating margin, you're pretty close in both segments, but in deck are I'm curious as to whether or not there's a sub segment, particularly either hardware or lighting. If you're planning where you're further away from your target, then you are in paint, basically is that is that true and is, you know, maybe painting or a lighting or hardware a little further away.

Stephen Kim: And then also within plumbing, you know, is there a sub segment, you know, a couple of areas worth calling out within your plumbing portfolio where again, maybe you're a little further away from your targeted levels. Yeah, when you look across Steve and our segments and within segments, not everything is the same margin, so there is a distribution of margins. And, you know, when you think about hardware, hardware is lower margin than paint and that is an area where we're looking to improve.

Stephen Kim: And I will tell you that 18% is the target that we're shooting for now, but we think we have a significant room to continue to drive that even higher. And as I mentioned in my prepared remarks, we'll be talking about where we see some long term margin targets on our call. Next quarter, within plumbing, you know, we have a broad plumbing platform and we we've talked before about how there's a continuum of margin in that platform from some of the beautiful chrome plated jewelry and the kitchen and bass and in plumbing to some of the less.

Stephen Kim: Decorative components say of a, you know, a plastic shower pan that we would install in our bathing, bathing business, so there is variability in margin and I think the key takeaway I'd like to share with you is that we've demonstrated the ability to execute and drive margin. Be it with our focus on where we play and with our magical operating system to drive efficiencies, so we'll be tackling the whole business, but yes, there's variability, of course, across our segment.

Stephen Kim: Williams. So within plumbing there's not a particular, you know, let's say, way of talking about it that sub-segment or segment out, maybe by country or sort of price point or something like that, where you're a little bit further away from your goal within that segment. Well there's not a whole lot of variability when we look geographically. And we look at all these things. We look at at margin variability on a product type basis.

Stephen Kim: We look at margin variability based on the raw component makeup of the products. We look at margin variability across channels. So that that's all part of our operating system that we used to drive improvements, but we're not we're not going to break it out specifically by those components as we talk here. Okay, that's fine. Are we learning, you know, overall, you know, your your your your your your improved margin. You talk about, you know, cost savings.

Stephen Kim: And some of those, you know, I think you highlighted, you know, there's a little bit of of raw that are starting to come to you as a benefit. And then you have a freight, which you called out as well. But you've also talked about, you know, just sort of other productivity initiatives and so forth. And so I'm curious as we look into, you know, let's say the fourth quarter. If you were to sort of segregate out things like freight and, you know, price over, raw, how much is, would you say related to productivity, like things that are, you know, more sort of permanent cost saving efforts that you've made.

Stephen Kim: I mean, would you put that in the, you know, 10 to 20 basis point range overall? Or I mean, is it just if you can help us understand what some of those initiatives have been adding or are expected to add here, maybe in the fourth quarter or if you want to talk the full year or whatever. Steve, we have made very nice improvements on the productivity line recall. We had some inefficiencies in the back half of 22, particularly in plumbing that we've done a very nice job getting on top of.

Stephen Kim: I'd say in terms of bucketing, the biggest drivers clearly getting our price cost relationship back to where it should be throughout this year. So we've been very nice cost recovery this year since we did lag in a bit last year. So that's the biggest bucket. The productivity is a nice tailwind to help with that, but the biggest bucket of surprise cost recovery. Okay. Thanks very much, guys. Thank you, Steve.

Truman Paterson: Our next question comes from the line of Truman Paterson of Wolf Research. Please go ahead. Hey, good morning, everyone. Thanks for taking my questions. Keith, just wanted to follow up. You mentioned that brass deflation for the year should kind of run in the down low single digit percentage. Should we assume that was likely inflationary and kind of the first quarter and perhaps the fourth quarter is trending down maybe in the mid single digit percentage or better range as we said today?

Truman Paterson: Yeah, Truman, that's about right. It's true, but I had to just comprehensive our down, but I have been bouncing around too. They've gone down these levels, gone back up close to the 22 averages. So it went running with that consistently through 24th this point, but it does look like it'll be a little bit of a benefit. Okay, gotcha, and then as we look at your margin performance in both segments on a year-over-year basis, is there any way you could frame how much your investments in both businesses stepped up in the third quarter or was it relatively light versus your expectations kind of given the margin performances?

Truman Paterson: I'm just trying to understand if perhaps some investing in these costs are really, you know, fully hitting in the fourth quarter that might have been expected in 3Q. Yeah, I'd say investments were roughly in line with what we anticipated in 3Q, maybe a little bit light. We do plan to continue investing in businesses. Keith talked about it will impact a little bit on the fourth quarter but, you know, roughly in line was probably what we saw in 3Q.

Truman Paterson: I'd say the margin improvement is much more of our, you know, as we've talked about the productivity improvements as well as getting the price-cost relationship back to where it should be. Okay, perfect. Thank you guys. Thanks, Roman.

Phil on: Our last question comes from the line of Phil on of Jeffries. Please go ahead. Hey guys, thanks for squeezing me in. I guess for you, Dave, you kind of mentioned price-cost was a huge driver for margins this year, particularly plumbing. You know, your products have obviously resonated with consumers and show them good pricing power and your competitor is actually due to taking price next year and plumbing. Do you have any pricing actions geared for 2021? And when we look at the pace of price-cost spread widening this year, do you see that spread widening? The pace that spread widening even faster perhaps makes sure.

Phil on: Again, we'll get into our detail for 24 on the next call. We've taken some targeted price and plumbing this year here in the third quarter and our demonstrated ability, as you mentioned with our pricing power, is to stay in front of it to keep price-cost in our sites and go after prices. We've increased throughout channels when we need it. We tend to keep it and hold on to it longer in plumbing than we do in decorative giving our relationship with our significant customer in coatings.

Phil on: So our pricing power is pretty strong. It's too early to say if we're going to take price next year, we'll have to see what that means in terms of our innovation pipeline and our new products that come out and where commodities ultimately end up. So, too early to call whether or not we're going to do any price and plumbing in 24, but certainly if needed, we've got the capability and the pricing power with our brands to be able to do that.

Phil on: Okay. Can you just clarify, you meant 3Q price increase in plumbing? That was last year, right? That's correct. Sorry about that. We've taken some targeted price here earlier in the year as well. Okay, make sense. And then on the DIY side of things for paint, any color on where volumes are shaking out right now has a fourth quarter in terms of regard, it's relative to pre-COVID levels. And Keith, you kind of mentioned that you see good momentum going forward long-term on DIY, just given the millennial cohort.

Phil on: Do you see that kind of flipping in 2024 in terms of trend in DIY versus wholesale? The pro channel has definitely held up much better than DIY this year in the retail channel. Yeah, the DIY market during COVID was a bit of a roller coaster where it took a significant improvement, if you recall, when folks were reticent to have pros in their homes. And then when that kind of fear of COVID relaxed a little bit and people were more comfortable with pros coming in, pro took off and the I went down.

Phil on: And that I think is it. It speaks to our diversification, our strength, in pro for that customer that we can handle that variation and be there to catch that and grow share but it has been an up and down market. I will tell you where we sit now in DIY that absolute volumes are lower than our pre pandemics called 2019 levels in DIY with respect to if I think as I said, we'll get into more detail in about next year on our fourth quarter call.

Phil on: I'm not so sure that the millennial cohort will be enough to really drive significant growth overall in the DIY segment but we'll talk about where we see DIY more in detail next call. Okay, thank you. Appreciate it, Colin.

Jerry: We'd like to thank all of you for joining us on the call this morning and for your interest in Masco. That concludes today's call. Thank you.

Jerry: The conference is no longer being recorded.