Q3 2023 The Sherwin-Williams Co Earnings Call

Speaker 1: Good morning. Thank you for joining the Sherwin-Williams Company's review of third quarter 2023 results in our outlook for the fourth quarter and full year of 2023.

Good morning, Thank you for joining the Sherwin Williams Company's review of third quarter of 2023 results and our outlook for the fourth quarter and full year of 2023.

Speaker 1: This conference call is being webcast simultaneously in listen-only mode by Issuer Direct via the internet at www.sherwin.com.

This conference call is being webcast simultaneously in listen only mode by issuer direct via the Internet at Www Dot Sherwin Dot com.

Speaker 1: An archived replay of this webcast will be available at www.sherwin.com, beginning approximately two hours after this conference call concludes.

An archived replay of this webcast will be available at www Dot Sherwin Dot com beginning approximately two hours. After this conference call concludes.

Speaker 1: This conference call will include certain forward-looking statements as defined under the US federal securities laws with respect to sales, earnings, and other matters.

This conference call will include certain forward looking statements as defined under the U S. Federal Securities laws with respect to sales earnings and other matters.

Speaker 1: Any forward-looking statement speaks only as of the date to which such statement is made, and the company undertakes no obligation to update or revise any forward-looking statement, whether it's a result of new information, future events, or otherwise.

Any forward looking statements speaks only as of the date of which such statement is made and the company undertakes no obligation to update or revise any forward looking statement, whether as a result of new information future events or otherwise.

Speaker 1: A full declaration regarding forward-looking statements is provided in the company's earnings release transmitted earlier this morning. After the company's prepared remarks, however, that thirsty

A full declaration regarding forward looking statements is provided in the company's earnings release transmitted earlier this morning.

After the company's prepared remarks, we will open the session to questions.

Speaker 1: I will now turn the call over to Jim Jay, Senior Vice President, Investor Relations and Communications.

I will now turn the call over to Jim Jaye, Senior Vice President Investor Relations and communications.

Speaker 2: Thank you and good morning to everyone. Joining me on the call today are John Marikas, Chairman and CEO .

Thank you and good morning to everyone joining.

Joining me on the call today are John <unk>, Chairman and CEO .

Speaker 2: Heidi Pets, President and Chief Operating Officer, Al Mistition, Chief Finance,

Heidi Petz, President and Chief operating Officer.

<unk> Chief Financial Officer.

Speaker 2: And Jane Cronin, Senior Vice President of Enterprise Finance.

And Jane Cronin Senior Vice President of Enterprise Finance.

Speaker 2: Derwin Williams delivered excellent third quarter results compared to the same period a year ago.

German Williams delivered excellent third quarter results compared to the same period a year ago.

Speaker 2: These results follow our strong first half, and we are, again, increasing our full-year guidance, which John will talk about in just a few minutes. But first, let me touch on a few third-quarter highlights. The solidated net sales were within our guidance range.

These results follow our strong first half and we are again, increasing our full year guidance, which John will talk about in just a few minutes.

But first let me touch on a few third quarter highlights.

Consolidated net sales were within our guidance range.

Holidayed gross margin expanded significantly.

Essentially and year over year.

Speaker 2: driven by pricing discipline and moderating raw material costs.

Driven by pricing discipline, and moderating raw material costs.

Speaker 2: To reiterate our commentary from last quarter, we are committed to investing in and profitably growing the business at the same time.

To reiterate our commentary from last quarter, we are committed to investing in and profitably growing the business at the same time.

Speaker 2: high single digit increase in SG&A over the prior year third quarter.

The high single digit increase in SG&A over the prior year third quarter.

Reflects those investments, which are deliberately being made at a higher level to take advantage of current market uncertainty.

Speaker 2: which are deliberately being made at a higher level to take advantage of current market uncertainty.

Speaker 2: and are aimed at driving the success of our customers and growth across all businesses.

And are aimed at driving the success of our customers and growth across all businesses.

Speaker 2: Operating margin expanded year over year and adjusted diluted net income per share grew by a double digit percentage

Operating margin expanded year over year and adjusted diluted net income per share grew by a double digit percentage.

Speaker 2: EBITDA also grew by a double digit percentage, with adjusted EBITDA margin of 20.7%.

EBITDA also grew by double digit percentage with adjusted EBITDA margin of 27%.

Speaker 2: Near the high end of our COVID-19 to 21% target range.

Near the high end of our COVID-19% to 21% target range.

Speaker 2: In addition, we returned $566 million to our shareholders through dividends and share repurchase.

In addition, we returned $566 million to our shareholders through dividends and share repurchases during the quarter.

Speaker 2: Let me now turn it over to Heidi, who will provide some commentary on our third quarter results by segment.

Let me now turn it over to Heidi, who will provide some commentary on our third quarter results by segment.

Speaker 2: John , we'll follow Heidi with comments on our outlook before we move on to your questions. Thank you, Jim.

John will follow with comments on our outlook before we move onto your questions.

Thank you Jim I'll begin with the paint stores group.

Speaker 3: Third quarter Paint Stores Group sales increased 3.6% against the challenging 21.5%

Third quarter paint stores group sales increased three 6% against the challenging 21, 5% comp.

Speaker 3: The increase was driven by continued effective pricing and higher pro architectural volume, excluding new residential.

The increase was driven by continued effective pricing and higher pro architectural volume excluding new residential.

Speaker 3: Segment margin improved sequentially in year over year to 25.9%. Driven by pricing discipline and moderating raw material cost.

Segment margin improved sequentially and year over year to 25, 9% driven.

Driven by pricing discipline, and moderating raw material costs.

Speaker 3: Protective in marine with the fastest growing in the quarter, driven by strong volume, as sales increased by a double-digit percentage against a mid-teens comparison.

Protective and marine with the fastest growing in the quarter driven by strong volume and sales increased by a double digit percentage against the mid teens comparison.

Operator: Good morning. Thank you for joining the Sherwin-Williams Company's review of 3rd quarter 2023 results in our outlook for the 4th quarter and full year of 2023. This conference call is being webcast simultaneously in listen-only mode by issuer-direct via the internet at www.sherwin.com An archive replay of this webcast will be available at www.sherwin.com beginning approximately two hours after this conference call concludes.

Speaker 3: Industrial flooring, infrastructure, and oil and gas applications remain key drivers.

Industrial flooring infrastructure and oil and gas applications remain key drivers.

Speaker 3: In our pro-architectural end-market, commercial sales were strongest, increasing by a high single digit percentage versus a high teens compared.

And our pro architectural end markets commercial sales were our strongest increasing by a high single digit percentage versus a high teens comparison.

Speaker 3: Residential repaint sales increased by a mid single digit percentage amid continued softness in existing home sales and against the 20% comparison.

Residential repaint sales increased by a mid single digit percentage amid continued softness in existing home sales.

Operator: This conference call will include certain forward-looking statements as defined under the U.S. Federal Security's laws with respect to sales, earnings, and other matters. Any forward-looking statement speaks only as of the date of which such statement is made, and the company undertakes no obligation to update or revise any forward-looking statement whether it's results of new information, future events, or otherwise. A full declaration regarding forward-looking statements is provided in the company's earnings release transmitted earlier this morning.

And against the 20% comparison.

Speaker 3: While this is a solid performance in the current environment, we are not satisfied. And Res Repain continues to be our largest opportunity for growth.

While this is a solid performance in the current environment, we are not satisfied.

<unk> continues to be our largest opportunity for growth.

Speaker 3: Property maintenance sales grew by a low single digit percentage against the mid-20s comparison.

Property maintenance sales grew by a low single digit percentage against the mid Twenty's comparison.

Speaker 3: New residential sales were down mid-single digits with volume down high single digits against the mid-20s comparison.

New residential sales were down mid single digits with volume down high single digits against the mid Twenty's comparison.

Speaker 3: As we've previously noted, we anticipated new residential would be challenging near-term, given prior softness and single-family starts.

Operator: After the company's prepared remarks, we will open the session to questions.

As we've previously noted we anticipated new residential would be challenging near term given prior softness in single family starts.

Jim Jaye: I will now turn the call over to Jim J, Senior Vice President, Investor Relations, and Communications. Thank you, and good morning to everyone. Joining me on the call today are John Marikus, Chairman and CEO, Heidi Pets, President and Chief Operating Officer, Almystician, Chief Financial Officer, and Jane Kronin, Senior Vice President of Enterprise Finance.

Speaker 3: We expect our continued share gains and new account wins to become more and more apparent as starts improve.

We expect our continued share gains and new account wins to become more and more apparent as starts improve.

Speaker 3: Our DIY business was down low single digits against a very difficult low 30's comparison.

Our DIY business was down low single digits against a very difficult low <unk> comparison.

Speaker 3: From a product perspective, interior paint sales were up low single digits. And exterior paint sales were flat, both against double digit comparisons in last year's third quarter.

From a product perspective interior paint sales were up low single digits and exterior paint sales were flat both against double digit comparisons in last year's third quarter.

Jim Jaye: Chairman Williams delivered excellent third-quarter results compared to the same period a year ago. These results follow our strong first half, and we are again increasing our full-year guidance, which John will talk about in just a few minutes. At first, let me touch on a few third-quarter highlights. The solidated net sales were within our guidance range. Solidated gross margin expanded significantly, potentially and year-over-year, driven by pricing discipline and moderating raw material costs.

Speaker 3: Sales in our consumer brands group decreased by 4% in the quarter, primarily due to the divestiture of the China architectural business and softer DIY demand in North America, which was partially offset by selling price increase.

Sales in our consumer brands group decreased by 4% in the quarter, primarily due to the divestiture of the China architectural business and softer DIY demand in North America, which was partially offset by selling price increases.

Speaker 3: Sales in North America are largest region, decreased by a mid-single digit percentage against a double digit comparison.

Sales in North America, our largest region decreased by a mid single digit percentage against a double digit comparison.

Speaker 3: The pros who paint category continue to grow, while DIY demand remain muted by inflationary pressures on a consumer.

The pros, who paint category continued to grow while DIY demand remained muted by inflationary pressures on consumers.

Jim Jaye: To reiterate our commentary from last quarter, we are committed to investing in and profitably growing the business at the same time. A high single-digit increase in SG&A over the prior year third quarter reflects those investments, which are deliberately being made at a higher level to take advantage of current market uncertainty, and are aimed at driving the success of our customers and growth across all businesses. Operating margin expanded year-over-year, and adjusted deluded net income per share grew by a double-digit percentage.

Speaker 3: We continue to invest here with our strategic retail partners for growth.

We continue to invest here with our strategic retail partners for growth.

Speaker 3: In other regions, sales were up high single digits in Latin America and low double digits.

In other regions sales were up high single digits in Latin America.

And low double digits in Europe .

Speaker 3: Sales in China were down high double digits as we completed the vestiture of the business on August 1st.

Sales in China were down high double digits as we completed divestiture of the business on August 1st.

Speaker 3: Adjusted segment margin was 13.8%, which was lower than a year ago, primarily due to lower sales volume and lower fixed cost absorption due to lower production volume.

Adjusted segment margin was 13, 8%, which was lower than a year ago, primarily due to lower sales volume and lower fixed cost absorption due to lower production volumes.

Jim Jaye: EBITDA also grew by a double-digit percentage, with adjusted EBITDA margin of 20.7%, near the high end of our current 19-21% target range. In addition, we return $566 million to our shareholders, through dividends and share repurchases during the quarter.

Speaker 3: Fills in the performance coating group decrease 1% against a low-teens comparison.

Sales in the performance coatings group decreased 1% against a low teens comparison volte.

Speaker 3: volume decreased by a high single digit percentage, but was partially offset by positive low single digit contribution from pricing, effects, and acquisitions.

Volume decreased by a high single digit percentage, but was partially offset by positive low single digit contribution from pricing FX and acquisitions.

Speaker 3: Adjusted segment margin increased to 19.1% of sales, primarily due to pricing discipline and moderating raw material costs. Sales in PCD...

Adjusted segment margin increased to 19, 1% of sales, primarily due to pricing discipline and moderating raw material costs.

Heidi Petz: Let me now turn it over to Heidi, who will provide some commentary on our third quarter results by segment.

Jim Jaye: John will follow Heidi with comments on our outlook before we move on to your questions. Thank you, Jim.

Sales and PSEG varied significantly by region.

Speaker 3: Fails were strongest in Europe and increased by a mid-teens percentage.

Sales were strongest in Europe and increased by a mid teens percentage.

Heidi Petz: I'll begin with the paint stores group. 3rd quarter, Painstores Group sales increased 3.6% against the challenging 21.5% come. The increase was driven by continued effective pricing and higher pro-architectural volume, excluding new residential. Segment margin improved sequentially in year over year to 25.9%, driven by pricing discipline and moderating raw material costs. Protective in marine was the fastest growing in the quarter driven by strong volume as sales increased by a double-digit percentage against a mid-teens comparison.

Speaker 3: Latin America sales increased by low single digits against amid teen's comp.

Latin America sales increased by low single digits against a mid teens comp.

Speaker 3: North America sales decreased mid-single digits against a 20% income.

North America sales decreased mid single digits against a 20% comp.

Speaker 3: Demand in Asia remained weak, with sales down double digits against high single digit growth a year ago.

Demand in Asia remained weak with sales down double digits against high single digit growth a year ago.

Speaker 3: From a division perspective, growth was strongest in our industrial wood business, which was up by a low double digit percentage against a mid-single digit comparison.

From a division perspective growth was strongest in our industrial wood business, which was up by a low double digit percentage against a mid single digit comparison.

Speaker 3: This growth reflects our ECA acquisition, share gains, and a potential bottoming of new residential construction.

This growth reflects our <unk> acquisition share gains and a potential bottoming of new residential construction.

Heidi Petz: Industrial flooring, infrastructure, and oil and gas applications remained key drivers. In our pro-architectural end market, commercial sales were strongest, increasing by a high single-digit percentage versus a high-teens comparison. Residential repaint sales increased by a mid-single-digit percentage amid continued softness in existing home sales, and against a 20% comparison. While this is a solid performance in the current environment, we are not satisfied, and res-repaint continues to be our largest opportunity for growth. Property maintenance sales grew by a low single-digit percentage against a mid-20s comparison.

Speaker 3: We expect to gain further momentum in this business as we close October 1 on the previously announced acquisition of Germany-based Specialized Industrial Coatings Holdings, comprised of the Oskar Nolte and Klump Coatings business.

We expect to gain further momentum in this business as we closed October one on the previously announced acquisition of Germany based specialized industrial coatings holding comprised of the Oscar <unk> and clump coatings businesses.

Speaker 3: We are gaining share and seeing steady demand in auto refinish, where sales increased by a mid-single-digit percentage against a high single-digit comparison.

We are gaining share and seeing steady demand in auto refinish, where sales increased by a mid single digit percentage against a high single digit comparison.

Speaker 3: Sales in coil and general industrial both decreased by low single-digit percentages against challenging comparisons and varied widely by region.

Sales in coil and general industrial both decreased by low single digit percentages against challenging comparison and varied widely by region.

Speaker 3: Packaging sales were down by a mid-teenth percentage against a high single-digit comparison.

Packaging sales were down by a mid teens percentage against the high single digit comparison.

Speaker 3: We anticipated this decline given the near-term destocking by brand owners that we described earlier this year.

We anticipated this decline given the near term Destocking by brand owners that we described earlier this year.

Heidi Petz: New residential sales were down mid-single-digits with volume down high single-digits against a mid-20s comparison. As we've previously noted, we anticipated new residential would be challenging near-term, given prior softness in single-family starts. We expect our continued share gains and new account wins to become more and more apparent as starts improve. Our DIY business was down low single-digits against a very difficult low-30s comparison. From a product perspective, interior paint sales were up low single-digits, and exterior paint sales were flat both against double-digit comparisons in last year's third quarter.

Speaker 3: Packaging sales in the quarter were also slightly impacted by the fire at our Garland, Texas plant.

Packaging sales in the quarter were also slightly impacted by the fire at our Garland, Texas plant.

Speaker 3: Our business continuity team is executing our contingency plans to minimize customer impacts from this event near term. Longer term, we continue to feel very good about our position and growth prospects in this end market. And we expect to bring additional capacity online at our Tourneau France plant by early 2024.

Our business continuity team is executing our contingency plans to minimize customer impacts from this event near term.

Longer term, we continue to feel very good about our position and growth prospects in this end market and we expect to bring additional capacity online at our tour new France plant by early 2024.

Speaker 3: With that, let me turn it to John for his comments on our outlook for the fourth quarter and the year.

With that let me turn it to John for his comments on our outlook for the fourth quarter and the year.

Thank you Heidi.

Speaker 2: Our team delivered another strong quarter in an environment characterized by ongoing uncertainty.

Our team delivered another strong quarter in an environment characterized by ongoing uncertainty.

Heidi Petz: Sales in our consumer brands group decreased by 4% in the quarter, primarily due to the divestiture of the China architectural business and softer DIY demand in North America, which was partially offset by selling price increases. Sales in North America are largest region decreased by a mid-single-digit percentage against a double-digit comparison. The pros who paint category continued to grow while DIY demand remained muted by inflationary pressures on consumers. We continued to invest here with our strategic retail partners for growth.

Speaker 2: My thanks go to our 64,000 employees for continuing to focus on our mission and for executing

My Thanks go to our 64000 employees for continuing to focus on our mission.

And for executing on our strategy.

Speaker 4: Their energy in serving our customers and providing them with solutions remains a true differentiator.

Their energy and serving our customers and providing them with solutions remains a true differentiator.

Speaker 4: On our July call, we described the anticipated second half demand backdrop across our business.

On our July call. We described the anticipated second half demand backdrop across our businesses.

Speaker 4: The third quarter played out much as we expected, and we believe the environment remains largely unchanged in the fourth quarter.

The third quarter played out much as we expected and we believe the environment remains largely unchanged in the fourth quarter.

Speaker 4: Paint Stores Group will face another strong year-over-year comparison.

Paint stores group will face another strong year over year comparison.

Speaker 4: Demand in commercial, property maintenance, residential repaint, and protective and marine remain stable, with new residential remaining soft as we expected.

Demand in commercial property maintenance residential repaint and protective and marine remains stable with new residential remaining soft as we expected.

Heidi Petz: In other regions, sales were up high single-digits in Latin America and low double-digits in Europe. Sales in China were down high double-digits as we completed divestiture of the business on August 1st. Adjusted segment margin was 13.8%, which was lower than a year ago, primarily due to lower sales volume and lower fixed cost absorption due to lower production volumes. Sales in the performance coding group decreased 1% against a low-teens comparison. Johnson, Volume Decreased by a high single-digit percentage but was partially offset by positive low single-digit contribution from pricing, effects, and acquisitions.

We have now annualized prior price increases.

Speaker 4: In consumer brands, North America DIY demand remains soft. Europe demand has stabilized, and Latin America markets remain mixed.

And consumer brands North America, DIY demand remains soft Europe demand has stabilized in Latin America markets remain mixed.

Speaker 4: Performance coatings demand remains highly variable by end market and by region We know we cannot

Performance coatings demand remains highly variable by end market and by region.

We know we cannot defy gravity in terms of the macro environment.

Speaker 4: What we can do is aggressively pursue new account and share of wallet opportunities to drive market share gains. We are aggressively focused on

What we can do is aggressively pursue new account and share of wallet opportunities to drive market share gains.

We are aggressively focused on doing just that.

Speaker 4: Moving to the cost side, we're narrowing our full-year raw material outlays.

Moving to the cost side, we're narrowing our full year raw material outlook.

Heidi Petz: Adjusted segment margin increased to 19.1% of sales, primarily due to pricing discipline and moderating raw material costs. Sales in PCG varied significantly by region. Sales were strongest in Europe and increased by a mid-teenth percentage. Latin America sales increased by low single-digit against a mid-teenth count. North America sales decreased mid-single-digit against a 20% count. Demand in Asia remained weak, with sales down double-digit against high single-digit growth a year ago. From a division perspective, growth was strongest in our industrial wood business, which was up by a low double-digit percentage against a mid-single-digit comparison.

Speaker 4: We expect costs to be down by a high single digit percentage in 2023 compared to 2022.

And we expect costs to be down by high single digit percentage in 2023 compared to 2022.

Speaker 4: We expect other costs, including wages and other input costs, to be up in the mid to high single-digit range.

We expect other costs, including wages and other input costs to be up in the mid to high single digit range.

Speaker 4: We also continue to see the current market uncertainty as an opportunity to press our advantages through greater investment in solutions for our customers. They will drive their success and off.

We also continue to see the current market uncertainty has an opportunity to press our advantages through greater investment in solutions for our customers that will drive their success and ours.

Speaker 4: Our SG&A spend in the fourth quarter will reflect these investments.

Our SG&A spend in the fourth quarter will reflect these investments, leaving full year SG&A to increase in the high single digit to low double digit range compared to last year.

Speaker 4: leading full-year SG&A to increase in the high-single-digit to low-double-digit range compared to last year. This approach has served us well.

This approach has served us well many times in the past.

Speaker 4: We are highly confident it will again now, resulting in continued above market growth and strong return.

We are highly confident it will again now resulting in continued above market growth.

Heidi Petz: This growth reflects our ECA acquisition, sharegames, and a potential bottoming of new residential construction. We expect to gain further momentum in this business as we close October 1st on the previously announced acquisition of Germany-based specialized industrial coding coding, comprised of the Oscar Nolte and Clump Coding businesses. We are gaining share in seeing steady demand and auto-recentage, where sales increased by a mid-single-digit percentage against a high single-digit comparison. Sales in coil and general industrial both decreased by low single-digit percentages against challenging comparisons and varied widely by region.

Strong returns.

Speaker 4: Now moving on to our specific guidance. We anticipate our fourth quarter of 2023 consolidated net sales will be up or down a low single digit percentage compared to a high single digit increase in the fourth quarter of 2022 with volume flat to down slight.

Now.

Moving onto our specific guidance, we anticipate our fourth quarter of 2023 consolidated net sales will be up or down a low single digit percentage compared to a high single digit increase in the fourth quarter of 2022 with volume flat to down slightly.

Speaker 4: As a reminder, we've largely annualized previous price increases across

As a reminder, we've largely annualized previous price increases across the business.

Speaker 4: For the full year 2023, we expect consolidated net sales to be up a low single-digit percentage with volume down a low single-digit.

For the full year 2023, we expect consolidated net sales to be up a low single digit percentage with volume down a low single digit percentage.

Speaker 4: Our sales expectations by segment for the fourth quarter and the full year are included in the slide deck issued with our press release this morning.

Our sales expectations by segment for the fourth quarter and the full year are included in the slide deck issued with our press release this morning.

Heidi Petz: Packaging sales were down by a mid-single-digit percentage against a high single-digit comparison. We anticipated this decline, given the near-term destocking by brand owners that we described earlier this year. Packaging sales in the quarter were also slightly impacted by the fire at our Garland Texas plant. Our business continuity team is executing our contingency plans to minimize customer impacts from this event near-term.

Speaker 4: We are increasing our full year 2023 diluted net income per share to be in the range of $9.21 to $9.41 per share.

We are increasing our full year 2023 diluted net income per share to be in the range of $9 21 to $9 41 per share.

Speaker 4: We believe this increased range accurately reflects our strong third quarter performance, continued pricing discipline, and moderating raw material.

We believe this increased range accurately reflects our strong third quarter performance continued pricing discipline and moderating raw material costs, while also acknowledging the ongoing uncertainty in our seasonally smaller fourth quarter.

Heidi Petz: Longer term, we continue to feel very good about our position and growth prospects in this end-market, and we expect to bring additional capacity online at our Torneau France plant by early 2024.

Speaker 4: while also acknowledging the ongoing uncertainty in our seasonally smaller fourth quarter.

Speaker 4: This guidance includes acquisition related amortization expense of approximately 80 cents per share and restructuring related net expense of 9 cents.

This guidance includes acquisition related amortization expense of approximately <unk> 80 per share and restructuring and related net expense of <unk> <unk> per share.

John Morikis: With that, let me turn it to John for his comments on our outlook for the fourth quarter and the year. Thank you, Heidi. Our team delivered another strong quarter in an environment characterized by ongoing uncertainty.

Speaker 4: On an adjusted basis, we expect full year 2023 earnings per share in the range of $10.10 to $10.30.

On an adjusted basis, we expect full year 2023 earnings per share in the range of $10 10 to $10 30.

Speaker 4: This is an increase of 16.8% at the midpoint compared to last year's $8.73 since adjusted earnings first.

This is an increase of 16, 8% at the midpoint compared to last year's $8 73 adjusted.

John Morikis: My thanks go to our 64, thousand employees for continuing to focus on our mission and for executing on our strategy. Their energy in serving our customers and providing them with solutions remains a true differentiator. On our July call, we described the anticipated second-half-demand backdrop across our businesses. The third quarter played out much as we expected, and we believe the environment remains largely unchanged in the fourth quarter. Painstores Group will face another strong year-over-year comparison.

Adjusted earnings per share.

Speaker 4: provided a gap reconciliation in the Reg G table within our press.

Provided a GAAP reconciliation in the Reg G table within our press release or.

Speaker 4: Our slide deck includes additional information on our assumptions for the year.

Our slide deck includes additional information on our assumptions for the year.

Speaker 4: As we begin the fourth quarter, we continue to expect shopping this by region and end market. More importantly, we continue to see up.

As we begin the fourth quarter, we continue to expect Choppiness by region and end market.

More importantly, we continue to see opportunity amid uncertainty.

Speaker 4: We are extremely confident in how well our various businesses are positioned.

We are extremely confident in how well our various businesses are positioned.

John Morikis: Demand in commercial, property maintenance, residential repaint, and protective and marine remains stable, with new residential remaining soft as we expect. Martin, Dr. Martin Cronin. We have now annualized prior price increases. In consumer brands, North America DIY demand remains soft. Europe demand has stabilized and Latin America markets remain mixed. Performance coatings demand remains highly variable by end market and by region. We know we cannot defy gravity in terms of the macro-environment, but we can do is aggressively pursue new account and share a wallet opportunities to drive market share gains.

Speaker 4: Our strategy is clear. It's working and it's not changing.

Our strategy is clear.

Working and is not changing.

Speaker 4: We'll continue to provide our customers with differentiated solutions that drive their productivity and their profit.

We will continue to provide our customers with differentiated solutions that drive their productivity and their profitability.

Speaker 4: Our capabilities, products, and services are unique.

Our capabilities products and services are unique.

We remain on offense growing new accounts and share of wallet in the right markets with the right customers.

Speaker 4: growing new accounts and share a wallet in the right markets with the right customer.

Speaker 4: We also remain focused on developing and retaining talent and improving and simplifying our operations.

We also remain focused on developing and retaining talent.

And improving and simplifying our operations.

Speaker 4: We expect to finish the year with momentum that will carry us into 2020.

We expect to finish the year with momentum that will carry us into 2024.

John Morikis: We are aggressively focused on doing just that. Moving to the cost side, we're narrowing our full-year raw material outlook. We expect costs to be down by a high-single-digit percentage in 2023 compared to 2022. We expect other costs, including wages and other input costs, to be up in the mid to high-single-digit range. We also continue to see the current market uncertainty as an opportunity to press our advantages through greater investment and solutions for our customers that will drive their success and ours.

Speaker 4: at the utmost confidence in Heidi, Al, our leadership team and our people.

I have the utmost confidence in highly al our leadership team and our people.

Together.

Speaker 4: We expect to continue outperforming our competitors and the market.

We expect to continue outperforming our competitors in the market.

This concludes our prepared remarks.

Speaker 4: And with that, I'd like to thank you for joining us this morning. And we'll be happy to take your

And with that I'd like to thank you for joining us this morning, and we'll be happy to take your questions.

Speaker 1: Certainly. Everyone at this time will be conducting a question and answer session. If you have any questions or comments, please press star 1 on your phone at this time.

Certainly everyone. At this time, we'll be conducting a question and answer session. If you have any questions or comments. Please press star one on your phone at this time.

Speaker 1: We do ask the while posing your question, please pick up your handset if you're listening on speakerphone to provide optimum sound quality.

We do ask that we're posing your question. Please pickup your handset if you're listening on speaker phone to provide optimum sound quality.

Speaker 1: Once again, if you have any questions or comments, please press star one on your phone.

John Morikis: Our SG&A spend in the fourth quarter will reflect these investments, leading full-year SG&A to increase in the high-single digit to low-double-digit range compared to last year. This approach has served us well many times in the past. We are highly confident it will again now, resulting in continued above-market growth and strong returns. Now moving on to our specific guidance. We anticipate our fourth quarter 2023 consolidated net sales will be up or down a low-single-digit percentage compared to a high-single-digit increase in the fourth quarter 2022 with volume flat to down slightly.

Once again, if you have any questions or comments. Please press star one on your phone.

Speaker 1: Your first question is coming from John McNulty from BMO. Your line is live.

Your first question is coming from John Mcnulty from BMO your.

Your line is live.

Speaker 2: Yeah, good morning. Thanks for taking my question. And first, John , congratulations on a great tenure in the CEO slot and Heidi. Best of luck to you as you take on that role at the at the end of the year.

Yes. Good morning, Thanks for taking my question and first John Congratulations on the on a great tenure in the CEO slot tidy best of luck to you as you take on that role.

End of the year.

Speaker 2: So I guess the first thing I wanted to just touch on was the strength of the contractor market. Can you give us a little bit of color as to what you're seeing, especially in the residential repaint area? It looks like it's been maybe a little bit stronger than what we would have expected. So just curious here, your take on how to think about that continuing going forward.

So I guess the first thing I wanted to just touch on was the strength of the contractor market can you give us a little bit of color as to what youre seeing especially in the residential repaint area. It looks like it's been maybe a little bit stronger than what we would've expected. So just curious your take on how to think about that continuing going forward.

Speaker 3: Yeah, good morning, John . I think you make a great point here. I want to take a minute before I jump right into Res Repain, which I have to well, I just put this a bit in perspective. You heard from some of our prepared remarks that when we look at our performance in general and we're posting some stronger results up against really aggressive comps last year, I think that's an important piece that we anchor in as I get into the Res Repain because it's true for Res Repain.

Yes, good morning, John .

I think you make a great point here and I want to take a minute before I jump right into <unk>, which I have to say well, let's just put this in perspective.

John Morikis: As a reminder, we've largely annualized previous price increases across the business. For the full-year 2023, we expect consolidated net sales to be up a low-single-digit percentage with volume down a low-single-digit percentage. Our sales expectations by segment for the fourth quarter and the full-year are included in the slide deck issued with our press release this morning. We are increasing our full-year 2023 deluded net income per share to be in the range of $9.21 to $9.41 per share.

<unk> heard from some of our prepared remarks that when we look at our performance in general and we're posting some stronger <unk>.

Results up against really aggressive comps last year I think that's an important piece that we anchor and as I get into the range of At&t's distributor rinse repeat certainly new raz being up against over 20% comps here and still in this environment.

Speaker 3: Certainly new res being up against over 20% comps here and still in this environment continuing to post. So we're really, really proud.

Continuing to post really proud of the team.

Speaker 3: to be able to overcome some of that. So I think if I just jump right into Reg Repaint, I'll let you know that yes, we are gaining share in this market. Demand does vary depending on a few variables. I think if you look at this and separate a bit, those contractors that are more established and well-known and are more experienced in marketing their business, they've got the scale and they're confident in their backlog.

You'll be able to overcome some of that.

If I just jump right into <unk> I'll, let you know that yes, we are gaining share in this market demand does vary.

John Morikis: We believe this increased range accurately reflects our strong third quarter performance, continued pricing discipline, and moderating raw material costs, while also acknowledging the ongoing uncertainty in our seasonally smaller fourth quarter. This guidance includes acquisition related amortization expense of approximately 80 cents per share and restructure in related net expense of 9 cents per share. On an adjusted basis, we expect full-year 2023 earnings per share in the range of $10.10 to $10.30. This is an increase of 16.8 percent at the midpoint compared to last year's $8.73 since adjusted earnings per share.

Depending on a few variables I think if you look at this and separate of that those contractors that are more established and well known in there more.

Against in marketing their business, they've got the scale and they're confident in their backlog.

Speaker 3: I would say that's more so true for them than those that have less experience being able to put that type of focus on and marketing their business. So I would say there's a bit of a

Say, that's more sell through for them than those that have less experience.

Being able to put that type of focus on in marketing their business I would say there is a bit of.

Speaker 3: variance there, but you know we look at this importantly, you know the adversity that these contractors are facing in this choppiness

Variance there, but we look at this and importantly, the adversity that these contractors are facing in this choppiness.

Speaker 3: is also an opportunity where I believe that it makes our stores and our reps

It is also an opportunity where I believe that it makes our stores and our reps.

Speaker 3: Even more valuable is we're helping them navigate through a lot of this uncertainty and helping to intercept what it is that they're trying to accomplish in their business, whether it's leads or making sure that we're helping them finding ways to be more efficient in their process.

John Morikis: Provided a gap reconciliation in the REGG table within our press- Police. Our slide deck includes additional information on our assumptions for the year. As we begin the fourth quarter, we continue to expect shopping this by region and in market. More importantly, we continue to see opportunity amid uncertainty. We are extremely confident in how well our various businesses are positioned. Our strategy is clear, it's working, and it's not changing. We'll continue to provide our customers with differentiated solutions that drive their productivity and their profitability.

Even more valuable as we're helping them navigate and rollout of this uncertainty in helping to intercept what it is that they're trying to accomplish in their business, whether it's leads or making sure that we're helping them finding ways to be more efficient in their process. So I think we.

Speaker 3: So I think we've seen this movie before. We're ready for what's ahead. We're putting investments in, John referenced earlier in the SGNA that you see. And I'll take you back. We saw this coming in 2008 and 2009 and making sure that what came out of that was our desire to be well positioned as new residential does recover that we've got all the investments in place here to continue to drive treasury paint. So this is an opportunity where, where and I would say when our model stands out and when we're able to gain a lot of share.

Seen this movie before we're ready for what's ahead, we're putting investments and John referenced earlier with the SG&A that you see.

And I'll take you back we saw this coming in 2008, and 2009 and making sure that what came out of that was our desire to be well positioned.

New residential does recover that we've got all the investments in place here to continue to drive <unk>. So this is an opportunity where we're in I would say when our model stands out and when we're able to gain a lot of share.

John Morikis: Our capabilities, products, and services are unique. We remain on offense, growing new accounts, and share a wallet in the right markets with the right customers. We also remain focused on developing and retaining talent and improving and simplifying our operations. We expect to finish the year with momentum that will carry us into 2024. At the utmost confidence in Heidi, Al, our leadership team, and our people. Together, we expect to continue outperforming our competitors in the market.

Speaker 2: Got it fair enough. And I guess the second question is just around cost versus price. It looks like Ross are coming down, but he highlighted in the remarks that other costs are definitely still pushing higher and you're also still investing in the business. So can you help us to think about

Got it fair fair enough.

I guess the second question is just around around costs versus price it looks like raws are coming down but.

Highlighted in the remarks that.

Other costs are definitely still pushing higher and Youre also still investing in the business. So can you help us think about the.

Speaker 5: the need for further pricing. I know you've taken a little bit of a pause recently as you'd normally do in the paint season, but I guess how should we be thinking about the need for further pricing as you're pushing into 2024? Thank you.

The need for further pricing I know you've taken a little bit of a pause recently as you would normally do in the in the paint season, but I guess, how should we be thinking about the need for further pricing as you're pushing into into 2024. Thank you.

Speaker 2: Yeah, John , this is Almystition. And, you know, we're in that part of the year where we're going through our operating plans. We're reviewing really a demand outlook with our suppliers. I know we've gotten a lot of questions about oil ticking up and...

Yes, John This is al no station and we're in that part of the year, where we're going through our operating plans. We're reviewing really demand outlook with our suppliers I know, we've gotten a lot of questions about oil ticking up and.

Operator: This concludes our prepared remarks. And with that, I'd like to thank you for joining us this morning, and we'll be happy to take your questions. Certainly. Everyone at this time will be conducting a question and answer session. If you have any questions or comments, please press star one on your phone at this time. We do ask the well-posing your question. Please pick up your handset if you're listening on speaker phone to provide optimum sound quality. Once again, if you have any questions or comments, please press star one on your phone.

Speaker 2: You know, that has to be up for a period of time before we see that flow through our raw material basket. I think what you will see is the other cost input items.

That has to be up for a period of time before we see that flow through our raw material basket I think what you will see is the other cost input items.

Speaker 6: Increasing, I think merit increases will get back to a more normal level, but you've got health care, freight, some of the things going on with LTL carriers that are driving our overall cost up. So as we typically do, we push back and look for offsets as much as we can. And then...

Increasing I think merit increases, we'll get back to a more normal level, but you've got health care freight some of the things going on with LPL carriers that are driving our overall costs up so as we typically do.

John Mcnulty: Your first question is coming from John McNulty from BMO. Your line is live. Yeah, good morning. Thanks for taking my question.

We've pushed back and look for offsets as much as we can.

John Morikis: And first, John, congratulations on a great tenure in the CEO slot and Heidi. Best of luck to you as you take on that role at the end of the year. So I guess the first thing I wanted to just touch on was the strength of the contractor market. Can you give us a little bit of color as to what you're seeing, especially in the residential repaint area. It looks like it's been maybe a little bit stronger than what we would have expected.

And then when we don't feel like we have an offset we need to go out with price will tell us our customers first and then we'll talk to the street. So we're going through that process and we.

Speaker 6: We can't don't feel like we have an offset and we need to go out with price. We'll tell our customers first and then we'll talk to the street. So we're going through that process and we need a little more time to figure that out. And we'll let our customers know and then we'll come back and let the street know.

Need a little more time to figure that out and.

We will let our customers know and then we'll come back and let the street know.

Thanks, very much for the color.

Thanks, Jonathan Thanks, John .

John Morikis: So just curious your take on how to think about that continuing going forward. Yeah, good morning, John. I think you make a great point here. You know, I want to take a minute before I jump right into res repaint, which I have to well, I just put this a bit in perspective. You heard from some of our prepared remarks that when we look at our performance in general and we're posting some stronger results up against really aggressive comps last year, I think that's an important piece that we anchor in as I get into the res repaint because it's true for res repaint.

Speaker 1: Thank you. Your next question is coming from Vincent Andrews from Morgan Stanley . Your line is live.

Thank you. Your next question is coming from Vincent Andrews from Morgan Stanley . Your line is live.

Speaker 1: Thank you very much, and good morning, everyone. You know, wondering if I could just dig into the SG&A a bit more, understand completely and appreciate what you're doing this year, but how do we think about that into 24, both in terms of, you know, what level of increase is realistic for next year, presumably SG&A is not going to go down.

Thank you very much and good morning, everyone.

Wondering if I could just dig into the SG&A.

A bit more understand completely appreciate what youre doing this year, but how do we think about that into 'twenty four both in terms of.

What level of increases is realistic for next year, but can we assume it is not going to go down.

Speaker 1: But should it grow a lot less than normal just given a big step up this year?

John Morikis: Certainly new res being up against over 20% comps here and still in this environment continuing to post. We're really really proud of the team, you'll be able to overcome some of that. So I think if I just jump right into res repaint, I'll let you know that yes, we are gaining share in this market. But demand does vary depending on a few variables. I think if you look at this and separate a bit, those contractors that are more established and will know and are more experienced in marketing their business, they've got the scale and they're confident in their backlog.

But it should grow a lot less than normal just given the big step up this year.

Speaker 1: And then, you know, how do we think about from the outside, you know, over the next couple of years, measuring the return on that? Is it simply going to come through the volume line in painstores group, or do you think it's going to be about margin or both? You know, we're here two years from now, and we do a look back. You know, what do you want us to see specifically in the PML?

And then.

How do we think about from the outside you know over the next couple of years measuring the return on that is it simply going to come through the volume line in paint stores group or do you think it's going to be about margin or both.

John Morikis: I would say that's more so true for them than those that have less experience being able to put that type of focus on in marketing their business. So it's a bit of a variance there. But, you know, we look at this importantly, you know, the adversity that these contractors are facing in this choppiness is also an opportunity where I believe that it makes our stores that are reps even more valuable as we're helping them navigate through a lot of this uncertainty and helping to intercept what it is that they're trying to accomplish in their business, you know, whether it's leads or making sure that we're helping them, you know, finding ways to be more efficient in their process.

As we were here two years from now and we do a look back what do you want us to see specifically in the P&L.

Speaker 4: Let me start with that last piece because I think it's really important. And again, I want to reiterate the confidence that we have in our strategy and the fact that we've seen this movie before, the investments that we're making, you will see in the P&L and you will see in market share growth.

Kevin So let me start with that last piece, because I think it's really important.

We reiterate the confidence we have in our strategy and the fact that we've seen this movie before the investments that we're making youll see in the P&L and you will see it in market share growth.

Speaker 4: Our teams are invested in executing on these areas, but I think in another important area, this crucial that you won't be able to measure on our P&L is the success that we'll bring with our customers as well. So, if you go back to the strategy that we employ, it's focused on driving the success of our customers and these investments that we're making.

Our teams are invested in executing on these areas, but I think another important area. That's crucial that you won't be able to measure on our P&L is the success it will bring with our customers as well. So if you go back to the strategy that we employ is focused on driving the success of our customers in these investments that we're making.

Speaker 4: Well, clearly help our customers in achieving what it is that they're trying to do. And so I think as you look forward, the expectations should be increased market share and outpacing the market in volume and profitability as well.

<unk>.

Clearly our customers and achieving what it is that they're trying to do and so I think as you look forward the expectation should be increased market share and outpacing the market.

John Morikis: So I think we've seen this movie before. We're ready for what's ahead. We're putting investments in John referenced earlier in the SGNA that you see. And I'll take you back. We saw this coming in 2008 and 2009 and making sure that what came out of that was our desire to be well positioned, you know, as new residential does recover that we've got all the investments in place here to continue to drive res repaint.

And volume and profitability as well.

Speaker 6: Yeah, Vincent, I would say certainly as we annualize costs or the investment in our long-term growth initiatives, you're gonna see that in the first part of the year. But I'd highlight, if you look at our S-GNA sequentially second quarter to third quarter, even though we kept investing in paint stores, group and reps.

Vincent I would say.

Certainly.

As we annualized costs.

<unk>.

<unk> and our long term growth initiatives youre going to see that in the first part of the year, but I'd highlight if you look at our SG.

John Morikis: So this is an opportunity where and I would say when our model stands out when we're able to gain a lot of share. Got it, fair enough. And I guess the second question is just around cost versus price. It looks like rods are coming down but you've highlighted in the remarks that other costs are definitely still pushing higher and you're also still investing in the business. So can you help us think about the need for further pricing?

SG&A sequentially second quarter to third quarter, even though we kept investing in paint stores group and reps.

Speaker 6: performance coding, group sales and tech service reps and you have investments in the pro who paints. We saw those offset by reductions in our GNA costs or admin SGNA so that...

Performance coatings group sales and Tech service reps and you have the investments in our program we saw those offset.

By reductions in our in our G&A costs, our admin SG&A so that.

Speaker 6: We're trying to figure out ways to continue to drive GNA down to offset the incremental costs of those investments. And yes, we will absolutely measure the return, but as we get into 2024, we're going through our budgeting plan. We're going through key initiatives across future of our functional areas and we'll keep driving low costs, those costs lower to help pay for the incremental investments.

We're trying to figure out ways to continue to drive G&A down to offset the incremental cost of those investments and yes, we will absolutely measure the return, but as we get into 2024.

John Morikis: I know you've taken a little bit of a pause recently as you'd normally do in the paint season, but I guess how should we be thinking about the need for further pricing as you're pushing into 2024? Thank you. Yeah, John, this is Alan Mistysyn and we're in that part of the year where we're going through our operating plans, we're reviewing really a demand outlook with our suppliers. I know we've gotten a lot of questions about oil ticking up and that has to be up for a period of time before we see that flow through our raw material basket.

We're going through our budgeting plan, we're going through key initiatives across each of our functional areas and we will keep driving low cost lowest.

Costs lower to help pay for the incremental investments.

Thank you Vincent.

John Morikis: I think what you will see is the other cost input items increasing, I think merit increases will get back to a more normal level but you've got healthcare afraid, some of the things going on with LTL carriers that are driving our overall cost up. So as we typically do, we push back and look for offsets as much as we can and then when we can't don't feel like we have an offset and we need to go out with price, we'll tell our customers first and then we'll talk to the streets.

Thank you.

Speaker 1: Thank you. Your next question is coming from Jeff Zikoskis from JP Morgan. Your line is live.

Thank you. Your next question is coming from Jeff Zekauskas from Jpmorgan. Your line is live.

Speaker 7: Hi, thanks very much. I know that the Eurovere price comparisons are less positive than they've been, but when you look at sequential pricing from the second to the third quarter, where your price is down sequentially in any important product area.

Hi, Thanks very much.

Note that the year over year price comparisons are less positive than they've been but when you look at the sequential pricing from the second to the third quarter.

Or your prices down sequentially and any important product area.

John Morikis: So we're going through that process and we need a little more time to figure that out and you know, we'll let our customers know and then we'll come back and let the street know. Thanks very much for the caller. Thanks, John. Please join.

Speaker 6: Yeah, Jeff, if you look at our pricing, because you annualize pricing throughout each of the segments as we've gone, I know we've talked about.

Yes, Jeff if you look at our pricing.

Because your annualized pricing throughout each of the segments as we've gone I know we've talked about.

Speaker 6: Performance coding through basically at some points run a 90-day cycle. So Price was still up in the quarter in the third quarter up a low single-digit But if you looked at that compared to our second quarter price would add at a mid single-digit compare Mid single-digit percentage to the second quarter. So and as you get into our fourth quarter You'd be at a lower single-digit impact on our fourth quarter. So that's just annualizing

Performance coatings group basically at some points around a 90 day cycle. So.

Operator: Thank you.

Rice was still up in the quarter in the third quarter up low single digits, but if you looked at that compared to our second quarter price would add at a mid single digit comp.

Vincent Andrews: Your next question is coming from Vincent Andrews from Morgan Stanley. Your line is live. Thank you very much and good morning everyone. You know, wondering if I could just dig into the SUNA a bit more, understand completely and appreciate what you're doing this year. But how do we think about that into 24, both in terms of, you know, what level of increase is realistic for next year presumably SUNA is not going to go down, but should it grow a lot less than normal just given the big step up this year?

Mid single digit percentage for the second quarter, so and as you get into our fourth quarter.

We'll be at a lower single digit impact on our fourth quarter. So that's just annualizing.

Speaker 6: The price increases we've taken throughout 2022, but I would argue and say we have not given that price back, and you can see that in our gross margin performance in the second quarter of 440, up in the third quarter of 490 basis points, and we expect to be up again in our fourth quarter, along with the moderating raw material costs.

The price increases we've taken throughout 'twenty to 'twenty, two but I would argue.

We have not given that price back and you can see that in our gross margin performance.

Vincent Andrews: And then, you know, how do we think about from the outside, you know, over the next couple of years, measuring the return on that? Is it simply going to come through the volume line and paint stores group or do you think it's going to be about margin or both? We're here two years from now and we do a look back. You know, what do you want us to see specifically in the P&L?

In the second quarter of <unk>.

440 up in the third for the third quarter of 490 basis points, and we expect to be up again in our fourth quarter.

Along with the moderating raw material cost sequentially, Jeff I would add to that as well I think our effectiveness is at a record high and it gives the team a lot of credit because it's not just about holding it it's about demonstrating that value every single day with our contractors.

Speaker 3: Jeff, I would add to that as well. I think our effectiveness is that our record high and they give the team a lot of credit because it's not just about holding it, it's about demonstrating that value every single day with our contractors.

John Morikis: Vincent, let me start with that last piece because I think it's really important. And again, I want to reiterate the confidence that we have in our strategy and the fact that we've seen this movie before, the investments that we're making, you will see in the P&L and you will see in market share and growth. Our teams are invested in executing on these areas. But I think in another important area, this crucial that you won't be able to measure on our P&L is the success that we'll bring with our customers as well.

Okay great.

And.

Speaker 7: Your raw materials were down high single digits. I would imagine they would be down low double digits in the fourth quarter if you're gonna be down high single digits for the year. And maybe the fourth quarter is sort of the bottoming of raw materials for the industry in general. Is that fair?

Your raw materials were down high single digits, I would imagine they would be down low double digits in the fourth quarter, if youre going to be down high single digits, the year and maybe the fourth quarter as sort of a bottoming.

Raw materials for the industry in general is that fair.

Speaker 6: You know, Jeff, I don't know I'd go that far as I mentioned earlier. I think we have to look at the market is still demand supply driven.

Jeff I don't know.

John Morikis: So, if you go back to the strategy that we employ, it's focused on driving the success of our customers and these investments that we're making will clearly help our customers in achieving what it is that they're trying to do. And so, I think as you look forward, the expectations should be increased market share and outpacing the market in volume and profitability as well. Yeah, Vincent, I would say, certainly as we annualize costs, or the investment in our long-term growth initiatives, you're going to see that in the first part of the year.

I would go that far.

I mentioned earlier.

We have to look at the market is still demand supply driven.

Speaker 6: We're working with our suppliers to develop what does industry demand look like?

We're working with our suppliers to develop what is industry demand look like across each of the regions and I think that's going to be a bigger driver of raw material pricing as we get into 2024, I think as we mentioned on our second quarter call. We expected our third quarter to be our biggest year over year change in raw material cost.

Speaker 6: across each of the regions. And I think that's gonna be a bigger driver of raw material pricing as we get into 2024. I think, as we mentioned on our second quarter call, we expected our third quarter to be our biggest year-over-year change in raw material costs, but certainly they're gonna be down in our fourth quarter as well.

But certainly theyre going to be down in our fourth quarter as well.

Thank you so much.

Thanks, Jeff.

Speaker 1: Thank you. Your next question is coming from Greg Mellick from Evercore ISI. Your line is live.

John Morikis: But I'd highlight, if you look at our S-GNA sequentially, second quarter to third quarter, even though we kept investing in paint stores, group and reps, performance coding, groups, sales and tech service reps, and you have investments in the pro-who-payment investments, we saw those offset by reductions in our GNA costs, or admin S-GNA, so that we're trying to figure out ways to continue to drive GNA down, to offset the incremental costs of those investments. And yes, we will absolutely measure the return, but as we get into 2024, we're going through our budgeting plan. We're going through key initiatives across each of our functional areas, and we'll keep driving those costs lower to help pay for the incremental investments. Vincent, thank you, Vincent. Thank you.

Thank you. Your next question is coming from Greg Melick from Evercore ISI. Your line is live.

Speaker 7: Hi, I have a couple questions. One is how much did the volume decline year on year hurt gross margins in the quarter?

Hi, I had a couple questions. One is how much did the volume decline year on year hurt gross margins in the quarter.

Speaker 6: Yeah, I think Greg, when you look at the volume decline being overall down low single digit.

Yes, I think.

Greg.

When you look at the volume declined in overall down.

Low single digit.

Speaker 6: It's certainly, as I've talked about, it's always typically the biggest driver of operating margin leverage. When you look at...

Certainly as I've talked about it's always typically the.

Biggest driver of operating margin leverage.

When you look at.

Speaker 6: how that mix changes in the quarter. So we talked about paint stores group being flat, and then the other two segments being down it more than that. So it was less of an impact than if paint stores was down similar. If that makes sense to you, because paint stores group has a higher gross margin.

How that mix changes in the quarter. So we talked about paint stores group being flat and then the other two segments being down more than that so it was less of an impact than if.

Paint stores was down similar if that makes sense because paint stores group has a higher.

Gross margin profile.

Speaker 7: Yeah, so it may have hurt, but not as much as you'd think, given the mix of where the volume decline was. Correct. And then I guess my follow-up question is more specifically on architectural. Could you give us some update on what the backlog that you're hearing about or what it sounds like from the pros, particularly in Rezzie Repaint? But you mentioned how.

So it may have hurt, but not as much as you'd think given the mix of where the volume decline was correct. Okay. And then I guess my follow up question is more specifically on architectural could you give us some some update on what the backlog that you're hearing about or what it sounds like from from the pros, particularly in.

Jeff Zekauskas: Your next question is coming from Jeff Zikoskis from JP Morgan. Your line is live. Hi, thanks very much.

Jeff Zekauskas: I know that the year-over-year price comparisons are less positive than they've been, but when you look at sequential pricing from the second to the third quarter, were your prices down sequentially in any important product area? Yeah, Jeff, if you look at our pricing, because you annualized pricing throughout each of the segments as we've gone, I know we've talked about performance coding through basically at some points around a 90-day cycle. So, price was still up in the quarter, the third quarter, up a low single digit, but if you looked at that, compared to our second quarter, price would have added a mid single digit percentage to the second quarter.

<unk> repaint, but you mentioned how.

Speaker 7: New new residential week, but I'd love to hear more on the new Resi, sorry, the Resi Repaint Time.

New new residential is a week, but I'd love to hear more on the new resi or I'm, sorry, the resi repaint side, yes.

Speaker 3: Yeah, Greg, I think on the rosary paint side, it's similar to what I mentioned earlier. I think you look at traditionally, you're going to see somewhere between 13.

Yes, Greg I think on the reservoir side similar to what I mentioned earlier I think you'd look at traditionally youre going to see somewhere between 13 15 weeks out I would say that that backlog to come down by 2% or three weeks, so a bit more limited in terms of the visibility.

Speaker 3: 15 weeks out, I would say that that backlog come down by two or three weeks, so a bit more limited in terms of visibility. But outside of that, again, I would look at it in terms of the size of the contractor, the level of experience, again, ability to market themselves. They've got further out, site line, into 24 versus some of the other smaller contractors that are still trying to find ways to kind of build those backlogs.

But outside of that again I would look at it in terms of the size of the contract or the level of experience again ability to market themselves. They've got further out sightline into 'twenty four versus some of the other smaller contractors that are still trying to find ways to get.

They tend to build a backlog.

Jeff Zekauskas: So, and as you get into our fourth quarter, you'd be at a lower single digit impact on our fourth quarter. So, that's just annualizing the price increases we've taken throughout 2022, but I would argue and say we have not given that price back. And you can see that in our gross margin performance in the second quarter, up 440, up in the third quarter, up 490 basis points, and we expect to be up again in our fourth quarter, along with the moderating raw material cost sequentially.

Great Thanks, and good luck.

Thanks, Greg.

Speaker 1: Thank you. Your next question is coming from Gansham, Panjabi, from Beard. Your line is live.

Thank you. Your next question is coming from Ghansham Panjabi from Baird. Your line is live.

Speaker 8: Yeah, thanks everyone. And good morning. I guess with the reversal higher interest rates since you last reported and just sort of building on the last question, how do you think this dynamic will play out for your six verticals within PSG relative to what you saw with the first iteration of interest rate increases?

Yes, thanks, everyone and good morning.

I guess with the reversal of higher interest rates since you last reported in just sort of building on the last question. How do you think this dynamic will play out for your six verticals within PSG relative to what you saw with the first iteration of interest rate increases because it seems like some of that was has dampened some of the impact was dampened by the fact that the backlogs were actually very strong coming into this year.

Speaker 8: It seems like some of that was just dampened, some of the impact was dampened by the fact that the backlogs were actually very strong coming into this year.

Heidi Petz: Jeff, I would add to that as well. I think our effectiveness is at a record high, and it gives a team a lot of credit, because it's not just about holding it, it's about demonstrating that value every single day with our contractors.

Speaker 4: Well, I think I describe it this way, that there's some uncertainty given, you know, the challenges and challenges an interest rate can have on a market and.

Well I think.

I would describe it this way.

There is some uncertainty given.

Challenges challenges in interest rates can have on our market.

Allen Mistysyn: Okay, great. And your raw materials were down high single digits. I would imagine they would be down low double digits in the fourth quarter, if you're going to be down high single digits of the year, and maybe the fourth quarter is sort of the bottoming of raw materials for the industry in general. Is that fair? You know Jeff, I don't know I'd go that far and as I mentioned earlier, I think we have to look at the market is still demand supply driven.

Speaker 4: I think Heidi and the team are really focused on one very clear mission. We're going to outpace the market and we've got confidence in the approach that we're taking, the services that we bring.

I think he and the team are really focused on one very clear mission, we're going to outpace the market and we've got confidence in the.

<unk> approach that we're taking the services that we bring.

Speaker 4: the products that we are introducing. And quite frankly, we're also taking advantage of other opportunities within the market. We've got competitors that are changing models, as an example. And our simplified

The products that we are introducing and quite frankly, we're also taking advantage of other opportunities within the market and we've got competitors are changing models as an example.

Our simplified approach of dealing with one Sherwin Williams stores it relates to the painting contractor. We believe adds value. So the investments that we're making will enhance on top of the organic growth that we expect from our stores and so we're taking advantage of market conditions, where hydrogen mentioned.

Speaker 4: of dealing with one shown wind stores that relates to the painting contractor, we believe adds value. So investments that we're making will enhance that on top of the organic growth that we expect from our stores. And so we're taking advantage of market.

Allen Mistysyn: We're working with our suppliers to develop what does industry demand look like across each of the regions and I think that's going to be a bigger driver of raw material pricing as we get into 2024. I think as we mentioned on our second quarter call, we expected our third quarter to be our biggest year-over-year change in raw material cost, but certainly they're going to be down in our fourth quarter as well.

Speaker 4: where Heidi just mentioned some Resri paint customers that may not have had experience going through a cycle yet. They are now turning to our people for guidance and support on how do you begin advertising in the past? They just parked their truck in front of a car and I'm sorry, a truck in front of a house in the neighborhood and all the neighbors would clock in.

Rosary paid customers that may not have had experienced going through a cycle yet they are now turning to our people for guidance and support on how do you begin advertising in the past they just park their truck in front of a car.

Jeff Zekauskas: Great, thank you so much. Thank you.

Sorry, a truck in front of the house in the neighborhood and all the neighbors would block in <unk>.

Speaker 4: They need help right now. And so they're turning to our people and our people are playing an important role. And so when we look at what's happening with interest rates it's some choppiness, but we also believe it creates opportunity. And we talked openly about...

Greg Melich: Your next question is coming from Greg Mellick from Evercore ISI, your line is live. Hi, I have a couple questions. One is how much did the volume decline you're on your hurt gross margins in the quarter? Yeah, I think Greg, when you look at the volume decline being overall down low single digit, certainly as I've talked about, that's always typically the biggest driver of operating margin leverage. When you look at how that mix changes in the quarter, so we talked about paint stores group being flat, and then the other two segments being down it more than that.

I need help right now and so they're turning to our people and our people are playing an important role and so when we look at what's happening with interest rates as some choppiness, but we also believe that creates opportunity we've talked openly about.

Speaker 4: Adversity creates opportunity at Sherwin and we're capitalizing on it.

The diversity creates opportunity at Sherwin and we're capitalizing on that.

Speaker 3: The other piece I would add to that, I think new residential specifically relative to interest rates, while the single family completions have been flat or negative.

I would add to that I think new residential specifically relative to interest rates, while the single family completions has been flat or negative year over year for eight straight months, we are starting to see that starting to see the starts are positive year over year for three straight months, though.

Speaker 3: year over year for eight straight months. We are starting to see that starting to see the starts are positive year over year for three straight months. So, you know, we're watching interest rates very closely. It may also signal that we're we're past the bottom. So, knowing that this is a choppy environment. Another point that I think is important here.

We're watching interest rates very closely it may also signal that we're past the bottom so.

Knowing that this is a choppy environment. Another point that I think is important here.

Speaker 3: While others are talking, the market are talking about preparing for this slowdown.

While others are talking in the market or talking about preparing for the slowdown it's really important that our teams are laser focused on preparing for taking disproportionate share. So we went into COVID-19.

Greg Melich: So it was less of an impact than if paint stores was down similar, if that makes sense to you because paint stores group has a higher gross margin profile. Yeah, so it may have hurt, but not as much as you'd think given the mix of where the volume decline was. Correct.

Speaker 3: it's really important that our teams are laser focused on preparing for taking disproportionate shares. So we went into COVID, you know, with a large majority of exclusive arrangements with multi, with these national home builders, and we've come out building momentum in the number of exclusive contracts that we have with some of these, these builders. I think that's a testament to the team's ability to demonstrate our value in this environment.

A large majority of exclusive arrangements with multi with these national homebuilders and they've come out building momentum in the number of exclusive contracts that we have with some of these.

Greg Melich: Okay, and then I guess my follow-up question is more specifically on architectural. Could you give us some update on what the backlog that you're hearing about or what it sounds like from the pros, particularly in Rezzy Repaint. Do you mention how new new residentials a week, but I'd love to hear more on the new Rezzy, or sorry, the Rezzy Repaint sign?

These builders I think that's a testament to the team's ability to demonstrate our value in this environment and I'm going to take a step further here and it goes back to some of the discussion on working capital we talk about managing our working capital really closely and as we.

Speaker 3: And I'm going to take it a step further here, and this goes back to some of the discussion on working capital.

Speaker 3: We talk about managing our working capital really closely and but as we're having these partnerships and trying to demonstrate more of Sheryl Lane's value proposition, especially in the new residential space and in this environment.

Having these partnerships.

Greg Melich: Yeah, Greg, I think on the Rezzy Repaint sign, it's similar to what I mentioned earlier. I think you look at traditionally, you're going to see somewhere between 13, 15 weeks out. I would say that that backlog has come down by two or three weeks, so a bit more limited in terms of visibility, but outside of that again, I would look at it in terms of the size of the contractor, the level of experience, again, ability to market themselves. They've got further out site line into 24 versus some of the other smaller contractors that are still trying to find ways to kind of build those backlogs.

Trying to demonstrate more up shareholdings value proposition, especially in the new residential space and in this environment.

Speaker 3: helping to get in front of helping them to streamline and standardize what it is that they're doing in terms of the product that they're bringing to market. So they can be as aggressive as possible, helping them look at ways to reduce cycle time. And this all in an effort to of course help them drive increased profitability and productivity, but also to be effective as they can be with their working capital again in this environment with a lot of volatility in the interest rate.

Helping to get in front of helping them streamline and standardize what it is that they are doing in terms of the product that they're bringing to market.

They can be as aggressive as possible.

Helping them look at ways to reduce cycle time and this all in an effort to of course helped them drive increased profitability and productivity, but also to be as effective as they can be with our working capital again in this environment with a lot of volatility in the interest rate.

Speaker 8: Got it. And then in terms of free cash allocation, you know, I just, I guess going back to the fact that interest rates are much higher, it looks like you have about a little over $2 billion of debt due for refinancing between $24 and $25. How are you thinking about the terminal sort of balance sheet leverage for Sherwin-Williams at this point, given the changed interest rates?

Got it and then in terms of free cash flow allocation.

Greg Melich: Great, thanks, and good luck. Thanks, Greg.

Operator: Thank you.

I guess going back to the fact that interest rates are much higher it looks like you have about a little over $2 billion of debt due for.

Goncham Panjabi: Your next question is coming from Gonchum, Panjabi, from Beard. Your line is live. Yeah, thanks, everyone, and good morning. I guess with the, you know, reversal hire and interest rates since you last reported and just sort of building on the last question, how do you think this dynamic will play out for your six verticals within PSG relative to what you saw, you know, with the first iteration of interest rate increases, because it seems like some of that was just dampened, some of the impact was dampened by the fact that the backlogs were actually very strong coming into this year.

Refinancing between 'twenty, four and 'twenty five.

How are you thinking about the terminal sort of balance sheet leverage for Sherwin Williams at this point given the changed interest rate environment.

Speaker 6: Yeah, gosh, I think you remember coming into the year I said I thought we'd keep our total debt flat with 20 in year and 2022, but as you saw

Gotcha.

You remember coming into the year I said I thought we would keep our total debt flat.

With 20 and year end 2022, but as you saw.

Speaker 6: At the end of the third quarter, our net debt to EBITDA leverage ratio was 2.2 times versus 3.1, and that was a combination of a strong...

At the end of the third quarter, our net debt to EBITDA leverage ratio was two two times versus three one and that was a communal combination of strong.

Goncham Panjabi: Well, I think I described it this way that there's some uncertainty given, you know, the challenges, challenges and interest rates can have on a market. And I think Heidi and the team are really focused on one very clear mission. We're going to outpace the market, and we've got confidence in the approach that we're taking, the services that we bring, the products that we are introducing. And quite frankly, we're also taking advantage of other opportunities within the market.

Speaker 6: You'll get a trailing 12-month EBITDA growth of over almost a little over 28%, but we also reduced our total debt by almost $600 million. I would expect as we kind of forecast the end of the year, we'd keep that total debt lower year-over-year by about $600 million, and we'll be firmly in that 2 to 2.5 times range.

You'll get a trailing 12 month EBITDA growth of over almost over 28%.

But we also reduced our total debt by almost $600 million I would expect as we.

Kind of forecast the end of the year would keep that total debt lower year over year by about $600 million in and it will be firmly in that two to two five times range.

Goncham Panjabi: We've got competitors that are changing models as an example. And, you know, our simplified approach of dealing with one Sherwin-Williams stores that relates to the painting contractor, we believe adds value. So the investments that we're making will enhance that on top of the organic growth that we expect from our stores. And so we're taking advantage of market conditions where Heidi just mentioned some Resuree paint customers that may not have had experience on the market.

Okay. Thanks, so much and John and how do you best wishes for the future.

Thank you.

Speaker 1: Thank you. Your next question is coming from Arun Viswanathan from RBC.

Thank you. Your next question is coming from Arun Viswanathan from RBC. Your line is live.

Speaker 9: Your line is live. Great thanks for taking my question. I guess I said to maybe I get your thoughts on protective and the other markets within industrial.

Great. Thanks for taking my question.

I guess I'm, just trying to maybe get your thoughts on protective.

And the other markets within industrial.

Speaker 9: What are you seeing, maybe if we can just run through some of those verticals? Apologies if I missed that earlier, but it seemed like wood was unusually strong. We're expecting some weakness there, but that was actually better. Protect from rain, obviously strong. Refinish, I would imagine is still strong. Packaging weak. Could you just reiterate what you're seeing in those markets? Thanks.

Goncham Panjabi: We're just going through a cycle yet. They are now turning to our people for guidance and support on how do you begin advertising. In the past, they just parked their truck in front of a car and I'm sorry, a truck in front of a house in a neighborhood and all the neighbors would flock in. They need help right now. And so they're turning to our people and our people are playing an important role.

What are you seeing maybe if you can just run through some of those verticals I apologize if I missed that earlier, but let's.

It seemed like what was unusually strong were expecting some weakness there, but that was actually better protect marine obviously strong refinish I would imagine there is still strong packaging weak could.

Could you just reiterate what youre seeing in those markets. Thanks.

Speaker 3: Yeah, good morning, everyone. I think first and foremost, I think that's indicative that there are strategies working. And when we look at this business and this portfolio, it's really important to share with you what we talk about internally, which is we're not trying to be all things to all people.

Good morning, Arun I think first and foremost I think thats indicative that our strategy is working and when we look at this business and its portfolio. It's really important to share with you. What we talk about internally, which is we're not trying to be all things to all people and so when you look across these businesses, making sure that the.

Goncham Panjabi: And so when we look at what's happening with interest rates is some choppiness, but we also believe it creates opportunity. And we talked openly about adversity creates opportunity at Sherwin and we're capitalizing on that. The other piece I would add to that, I think new residential specifically related interest rates while the single family completion has been flat or negative year over year for eight straight months. We are starting to see that starting to see the starts are positive year over year for three straight months.

Speaker 3: And so when you look across these businesses, you know, making sure that it's the discipline and how we're thinking about investment, the discipline and when we're investing is certainly a key part of this. So, maybe just a little bit across some of these divisions, I'll invite.

The discipline in how we're thinking about investments that discipline and when we're investing is certainly a key part of that so maybe just a little bit across some of these decisions on date.

Speaker 3: John or out of jump in as well. You start with, we mentioned the industrial wood. There's been a lot of wind here against the regional competitors. And while we mentioned earlier, US housing is continuing to soften. We think this is an opportunity for us just coming out of completing some key acquisitions that we mentioned are prepared remarks with Oscar Nultian and Clump. Still, like we're in a really good position here to continue to drive increase.

Goncham Panjabi: So, you know, when we're watching interest rates very closely, it may also signal that we'll pass the bottom. So knowing that this is a choppy environment, another point that I think is important here. You know, while others are talking, the market are talking about preparing for the slowdown, it's really important that our teams are laser focused on preparing for taking disproportionate shares. So we went into COVID, you know, with a large majority of exclusive arrangements with multi with the national home builders and we've come out building momentum in the number of exclusive contracts that we have with some of these these builders.

John or how to jump in as well you start with.

You mentioned in industrial wood, there's been a lot of wins here and some regional competitors.

And while we mentioned earlier U S housing is continuing to soften and we think this is an opportunity for us just coming out of completing some key acquisitions that we mentioned in our prepared remarks with Oscar multi and pump Hill like we're in a really good position here to continue to drive increased value and return of value to our shareholders our gallon.

Speaker 3: value and return of value to our shareholders. Our gallons per day appear to have bottomed out in all regions against who is the new residential.

<unk> per day.

Here to a modern bottomed out in all regions against that with the new residential swing back we expect industrial with Apple they come along for the ride there.

Speaker 3: swing back, we expect industrial wood to absolutely come along for the ride.

Goncham Panjabi: I think that's a testament to the team's ability to demonstrate our value in this environment. And I'm going to take it a step further here and it goes back to some of the discussion on working capital. We talk about managing our working capital really closely and but it's worth having these partnerships and trying to demonstrate more of Sherwin's value proposition, especially in the new residential space and in this environment, helping to get in front of, you know, helping them to streamline and standardized.

Speaker 3: I'll comment briefly on automotive refinish. I think, importantly, we've had some really good share gain here, a year-to-date installs in North America have been up strong, double digits, and our core users are growing.

I'll comment briefly on automotive refinish I think importantly, we've had some really good share gain here year to date installed in North America had been up strong double digits in our core users are growing.

Speaker 3: We talk a bit about our collision core technology and business, that momentum and adoption is continuing. And this is a suite of digital tools and solutions that truly is helping.

We talked a bit about our collision core technology in business that momentum and adoption is continuing and this is a suite of digital tools and solutions that truly is helping to.

Speaker 3: to benefit our business here. And I would also add along with our North America footprint, similar, think of our paint stores group, similar to that footprint. We're really able to have a better opportunity to control a more consistent.

To benefit our business here and I would also add along with our North America footprint similar to think of our paint stores group similar to that flip and we're really able to have a better opportunity to control a more consistent customer experience beginning to end here that our audit refinish, which we think is an incredible differentiator for us.

Goncham Panjabi: What it is that they're doing in terms of the product that they're bringing to market so they can be as aggressive as possible, helping them look at ways to reduce cycle time. And this all in an effort to of course help them drive increased profitability and productivity, but also to be effective as they can be with their working capital again in this environment with a lot of volatility in the interest rate.

Speaker 3: customer experience beginning to end here with our audit refinish, which we think is an incredible differentiator for us.

Speaker 3: We talked a bit about general industrial, heavy equipment market is holding up, especially in ag, and we continue to, we expect to see that continue. Building products, general finishing is soft but works. We've expected that for the team that's laser focused on pivoting and adapting to the market.

We talked a bit about general industrial heavy equipment market is holding up especially in AG and we continue that we expect to see that continue building products.

Goncham Panjabi: Got it. And then in terms of free cash allocation, you know, I guess going back to the fact that interest rates are much higher. It looks like you have about a little over two billion of debt due for refinancing between 24 and 25. What are you thinking about the terminal, sort of balance sheet leverage for Sherwin Williams at this point, given the change interest. Strait Environment. Yeah, gotcha. I think you remember coming into the year I said I thought we'd keep our total debt flat with 20 and you're in 2022, but as you saw at the end of the third quarter or net debt to even a leverage ratio with 2.2 times versus 3.1, and that was a combination of strong, you'll get a trailing 12 month, even a growth of over almost a little over 28%.

General, finishing a soft that works and we expected that the team is laser focused on pivoting and adapting to the market.

Speaker 3: In the coil side, North America is holding up better than the other regions still soft. But the teams are working really hard against some new business winds. And then near-shoring in Mexico continues to create demand for us. So we're managing that across the region very carefully.

And the coil side, North America is holding up better than the other regions still soft but the.

Team's working really hard against some new business wins, and then near shoring and Mexico continues to create demand for us. So we're managing that across the region very carefully.

Speaker 3: One comment on Quail as well. I would say that most of the China coders are running at about 50% capacity, so.

Comment on.

<unk> as well I would say that most of the China coders are running at about 50% capacity. So we expect there to be some forward opportunity there as well Arun I think you mentioned on your <unk>.

Speaker 4: We expect there to be some forward opportunity there as well. You know, Rune, I think you mentioned your question about PNM. I think the team there is doing a terrific job of really staying focused on...

Question about PNM I think the team there is doing a terrific job of really staying focused on the value proposition that we bring into high value projects. So EV battery plants. As example semiconductor plants.

Speaker 4: the value proposition that we bring into high-value projects. So EV battery plants, as an example, semiconductor plants. Heidi and I were just recently out at one of the largest plants I've ever been on. And our fluoride.

Goncham Panjabi: But we also reduced our total debt by almost 600 million. I would expect as we kind of forecast into the year, we'd keep that total debt lower year by about 600 million and we'll be firmly in that two to two and a half times range. Thanks so much and John and Heidi best wishes for the future. Thank you.

Just recently one of the largest plants I've ever been on.

Our our floor coating teams are all over these businesses.

Speaker 4: teams are all over these businesses. I think the offshore wind and other alternative energy investments, as well as water infrastructure, I mean, these are all areas that we're focused on. And I'll remind you, it wasn't long ago we were talking about our protective and marine business at a time when it was under pressure. We reminded our investors

I think the offshore wind and other alternative energy investments as well as water infrastructure. I mean these are all areas that we're focused on and I'll remind you. It wasn't long ago, we were talking about our protective and marine business at a time when it was under pressure, we reminded our investment for our investors.

Arun Viswanathan: Your next question is coming from Arun Biswanathan from RBC. Your line is live. Great, thanks for taking my question. I guess I just had to maybe I get your thoughts on protective and the other markets within industrial. What are you saying maybe you can just run through some of those verticals apologies for this that earlier, but you know seemed like wood was unusually strong. We're expecting some week to stay, but that was actually better. The death of marine obviously strong refinished out imagine is still strong packaging week. Could you just reiterate what you're seeing in those markets. Thanks.

Speaker 4: that we take this long-term approach. And I believe these are terrific examples of our continuing to invest, even when times are a little tough, knowing that these projects can be delayed, but they can't be canceled.

We take this long term approach and I believe these are terrific. Examples are continuing to invest even when times were a little tough knowing that these projects can be delayed but they can't be canceled.

Speaker 4: Oftentimes, you'll find highly corrosive areas that need to be coated. You might get an extra year or a year or two out of those, but they need to be coated. And it's those types of high-value projects.

Oftentimes, you'll find high highly corrosive areas that need to be quoted you might get an extra year or two out of those but what they need to be coded and it's those types of high value projects. There are almost kind of a return.

Speaker 4: There are almost kind of a return repeat businesses as you maintain those that add to the attractiveness of these coding. So we're really proud of.

Heidi Petz: Yeah, good morning, Arun. I think first and foremost, I think that's indicative that there are strategies working and you know when we look at this business in this portfolio, it's really important to share with you what we talk about internally, which is we're not trying to be all things to all people. And so when you look across these businesses, you know, making sure that it's a discipline and then how we're thinking about investments, a discipline and when we're investing is certainly a key part of this.

<unk> businesses as you maintain those that add to the attractiveness of these coatings. So we're really proud of Karl Jorgen Road, the entire leadership team within our <unk> business for what they are delivering and importantly.

Speaker 4: Carl Jordan, the entire leadership team within our PCG business for what they're delivering. And importantly, if you remind you of the operating margin goals that we had set.

I'll remind you of the operating margin goals that we've set.

Speaker 4: for this team at 19, it's come in at 19%. Our goal of getting up into the...

Or for this team at 19 came in at 19% with a goal of getting it up into the high teens low 20. So they are doing it and they're doing it by bringing value to our customers and to us.

Heidi Petz: So maybe just a little bit across some of these decisions on the genre out of jumping as well. You start with we mentioned industrial wood. You know, there's been a lot of wind here against the regional competitors. And while we mentioned earlier, US housing is continuing to soften. We think this is an opportunity for us just coming out of completing some key acquisitions that we mentioned are prepared remarks with us for multi and clumps.

Speaker 4: Hi to you go 20 so they're doing it and they're they're doing it by bringing value to our customers and to us.

Yes.

Speaker 9: Great, thanks for that. And if I could just have one follow-up on the M&A side, you know, given what you said in those different protocols, do you see the need to add capacity in organically any of those areas and similarly divest any businesses or what would you share on that side? Thanks.

Great. Thanks for that and then if I could just ask one follow up on the M&A side.

Given what you said in those different verticals do you see the need to add capacity inorganically any there.

Areas, and similarly, divested businesses or what would you share on that side. Thanks.

Heidi Petz: So like we're in a really good position here to continue to drive increased value and return a value to our shareholders. Our gallons per day appear to have bottomed out in all regions. Again, so as the new residential swings back, we expect industrial wood to have come along for the ride there. I'll comment briefly on automotive recent. I should think importantly, we've had some really good share gain here a year to date installs in North America have been up strong double digits and our core users are growing.

Speaker 3: Well, we've said certainly in our investor call recently and we say this consistently, but we don't need M&A to grow. There's a lot of confidence in every segment that we have for us to continue to take share organically. And so from a capacity standpoint, we've continued to be very strategic about where we are laying that capacity in. And I'll go back to Al's point. You know, all of that is by design. You know, as we look at our 10 year CapEx plans or 10 year demand plan.

All we've said is certainly in the in our Investor call recently, and we say this consistently we don't need M&A to grow there's a lot of confidence in every segment that we have.

For us to continue to take share organically and so from a net.

Capacity standpoint, we've continued to be very strategic about where we are laying that capacity in and I'll go back to Al's point.

All of that is by design you know as we look at our 10 year Capex plan for 10 year demand plans.

Heidi Petz: We talk a bit about our collision core technology and business that momentum and adoption is continuing. And this is a suite of digital tools and solutions that truly is helping to benefit our business here and I would also add along with our North America footprint similar think of our paint stores for similar to that. But we're really able to have a better opportunity to control a more consistent customer experience beginning to end here with our audit reef finish, which we think is an incredible differentiator for us.

Speaker 4: Certainly, we don't want to put anything that's, you know, net new to the system if it's not needed, but where we need that capacity, we're gonna do that. The one point that I do wanna add, I don't know if Heidi mentioned packaging or not, but that's an area that we continue to invest. Not so much needed through acquisition or M&A erunance, it's more through our investment of very unique technology. So the packaging business are particularly RV 70.

Certainly we don't want to put anything thats net new into the system. If it's not needed at that where we need that capacity, we're going to we're going to do that the one point that I do want to add I don't know, if you mentioned packaging or not but thats an area that we continue to invest not so much needed through acquisition or M&A.

Arun, it's more through our investment a very unique technology.

So the packaging business, particularly our <unk> 70 <unk>.

Speaker 4: Project product is a very unique technology and as quickly as we can bring techno or bring capacity On board it's sold out So I think that's an area that we will continue to invest in

Product is a very unique technology in as quickly as we can bring technology bring capacity on.

Heidi Petz: We talked a bit about general industrial, heavy equipment market is holding up, especially in Hague, and we continue that we expect to see that continue, building products, general finishing is soft, but works, we've expected that the team is laser focused on pivoting and adapting to the market. In the coil side, North America is holding up better than the other region, still soft, but the teams working really hard against some new business wins, and then near-shoring in Mexico continues to create demand for us, so we're we're managing that across the region very carefully.

On board, it's sold out.

So I think that's an area that we will continue to invest in.

Great. Thanks.

Yes.

Speaker 1: Thank you. Your next question is coming from David Begleiter from Deutsche Bank.

Thank you. Your next question is coming from David Begleiter from Deutsche Bank.

Speaker 1: your life is live. Thank you, good morning. On your gross margins, they were near your long-term target in the quarter. And it sounds like they'll be above that target in Q4. So given that, how high can it go this cycle? Could they approach or even exceed 50%.

Your line is live.

Thank you good morning.

On your gross margins they were near your long term target in a quarter.

It will be above that target in Q4 so.

Given that how high can it go this cycle, because they approach or even exceed 50%.

Heidi Petz: One comment on coil as well, I would say that most of the China coders are running at about 50% capacity, so we expect there to be some forward opportunity there as well. You know, Rune, I think you mentioned your question about P&M. I think the team there is doing a terrific job really staying focused on the value proposition that we bring into high value projects, so EV battery plants as an example, semiconductor plants, Heidi and I were just recently out at one of the largest plants I've ever been on, and our four coding teams are all over these businesses.

Speaker 6: David, one caveat to that that I would make when you look at our fourth quarter growth margin because you typically see the .

David one one caveat to that that I would make when you look at our fourth quarter gross margin because you typically see.

Speaker 6: an architectural, seasonal architectural slowdown in volumes and sales. The fourth quarter margin may or may not be sequentially improving. It's our smallest quarter. You have year-end adjustments and other year-end adjustments that have, could have a material impact on the gross margin. Also, I'll just reiterate that, you know, price increases aren't going to be as big of a, of a tailwind.

And architects seasonal architectural slowdown in volumes and sales.

The fourth quarter margin may or may not be.

Sequentially, improving is our smallest quarter yearend adjustments and other year end adjustments that have.

Could have a material impact on the gross margin also just reiterate that.

Nice increases arent going to be as big of a of a tailwind.

Heidi Petz: I think the offshore wind and other alternative energy investments, as well as water infrastructure. I mean, these are all areas that we're focused on, and I'll remind you, what's it long ago we were talking about our protective and marine business at a time when it was under pressure, and we reminded our investment investors that we take this long term approach. And I believe these are terrific examples of our continuing to invest, even when times are a little tough knowing that these projects can be delayed, but they can't be canceled.

Speaker 6: in our fourth quarter than what we saw in our third quarter. And the other side of that paint source group is going to grow faster in our fourth quarter that will help drive gross margin. You know, as we talked about at our investor day, we are at a current range of 45 to 48%. We set aggressive goals for our teams, and as we consistently achieve

And our fourth quarter than what we saw in our third quarter on the other side of that paint stores group is going to grow faster than our fourth quarter that will help drive gross margin.

As we talked about at our Investor day.

We are at a current range of $45 to 48%.

We set aggressive goals for our teams and as we consistently achieve.

<unk>.

Speaker 3: that current range will adjust the range. I don't think we're ready to sit here today and make a change to any range or talk about 2024 at this point, but we're gonna be consistent in our approach going forward. And David, I would just add very simply, there is no feeling.

That that current range, we'll adjust the range I don't think we're ready to sit here today and make a change to any range or talk about 2024 at this point, but.

Heidi Petz: Oftentimes you'll find highly corrosive areas that need to be coded, you might get an extra year or a year or two out of those, but they need to be coded. And it's those types of high value projects that are almost kind of return repeat businesses as you maintain those that add to the attractiveness of these coding. So we're really proud of Carl Jordan, the entire leadership team within our PCG business for what they're delivering.

We're going to be consistent in our approach going forward, David I would just add very simply there isn't a ceiling.

Speaker 1: Very good. And Heidi and John , just looking at past DIY cycle weaknesses, what does it take, or what do you need to see, do you think, to see a reversal of current DIY cycle?

Very good and Heidi and John just looking at past DIY cycle weaknesses, what does it take or what do you need to see you think to see a reversal of current DIY cycle weakness here.

Speaker 4: Well, clearly, the consumer is feeling some pressure on it from an inflation perspective. And, you know, there'll be some normalization if it's in wages increases, at wage increasing or, you know, the spending patterns of consumers that will take effect. But the fact is this, that, you know, I'll remind you that paint is a relatively inexpensive yet highly impactful

Well clearly the consumer is feeling some pressure from inflation perspective in.

Heidi Petz: And importantly, if you remind you of the operating margin goals that we have set for this team at 19, it's come in at 19%. Our goal of getting up into the high to go 20, so they're doing it and they're doing it by bringing value to our customers and to us.

There'll be some normalization.

Wages increases wage increases or.

Spending patterns of consumers that.

We will take effect.

Fact is this.

I'll remind you that <unk> is a relatively inexpensive yet highly impactful.

Speaker 4: opportunity for people that are interested in in their homes, staying in their homes, to make a difference. And if people decide they're not going to sell the home and they're going to stay in place...

The opportunity for people that are interested in their homes staying in their homes to make a difference and if people decide theyre not going to sell their home and they're going to stay in place.

John Morikis: Great, thanks for that. And if I could just ask one follow-up on the M&A side, given what you said in those different examples, do you see the need to add capacity in organically in any of those areas and similarly divest any businesses, or what would you share on that side? Thanks. Well, we've said certainly in our investor call recently and we say this consistently, but we don't need M&A to grow. There's a lot of confidence in every segment that we have for us to continue to take share organically.

Speaker 4: It's a very viable option. I remind you the average home age now is over 40 years old.

It's a very viable option I'll remind you the average home age now has over 40 years old.

Speaker 4: So there's more and more investment in the structures, people aging in place.

So there is more and more.

<unk> investment in <unk>.

The structures people aging in place.

Speaker 10: impacting as well.

Impacting as well.

John Morikis: And so from the capacity standpoint, we've continued to be very strategic about where we are laying that capacity in. And I'll go back to Al's point, you know, all of that is by design. You know, as we look at our 10-year CAPX plans or 10-year demand plans, certainly we don't want to put anything that's, you know, net new into the system. This is not needed. But where we need that capacity, we're going to do that.

Speaker 10: Additionally, I would say not only does it help the DIY, but as the population is aging, that generally will turn into more of a res repain opportunity, which helps, you know, our position in that space as well. We don't want 70-year-old people out there scraping their gutters and ease of their homes. But inside, yeah, DIY is going to be an important part. There's a cycle and we're playing the long game here. Where whichever way the table tilts will be.

Hum.

Additionally, I would say not only does it help the DIY, but as the population is aging.

Generally we will turn into more of a rose repaint opportunity which helps.

Our position in that space as well, we don't want 70 year old people administrators or gutters.

And the ease of their homes.

John Morikis: The one point that I do want to add, I don't know if Heidi mentioned packaging or not, but that's an area that we continue to invest not so much needed through acquisition or M&A. Arunas, it's more through our investment of very unique technology. So the packaging business are particularly our V70 product is a very unique technology and as quickly as we can bring technology or bring capacity on board, it's sold out. So I think that's an area that we will continue to invest.

Yeah, DIY is going to be an important part there is a cycle and we're playing the long game here, where observer way the table will be there.

Speaker 11: Very good. Thank you very much.

Very good. Thank you very much you bet.

Operator: Justin, Great, thanks.

Speaker 1: Thank you. Your next question is coming from Josh Specter from UBS. Your line is live.

Thank you. Your next question is coming from Josh Spector from UBS. Your line is live.

David Begleiter: Thank you.

Speaker 8: Yeah, hi, thanks for taking my question. I guess two ones were back row around the stores group. When I look at US completion data for new res, it looked like that was kind of flat. You guys reported down mid single digits. I assume you get some pricing. I don't know if that original divergence or something else you call out. Maybe I'll stop with that one first.

Yeah, Hi, Thanks for taking my question I guess two ones more macro around the stores group I guess first when I look at U S completion data for new raise it looked like that was kind of flat you guys reported down mid single digits I assume you get some pricing I don't know if thats, a regional divergence or something else you'd call out.

Maybe I'll start with that one first.

David Begleiter: Your next question is coming from David Begleiter, from Deutsche Bank. Your line is live. Thank you. Good morning. On your gross margins, they were near your long-term target in the quarter. And it sounds like they'll be above that target in Q4. So, given that, how high can it go this cycle? Could they approach or even exceed 50 percent?

Speaker 10: Well, I think what you're experiencing right now is the delay between housing starts and the nine, whatever, 90 days or so after, maybe a little bit longer, after a start before homes are painted. So our view, and Heidi mentioned this, when you look at...

Well, I think which are which are experiencing right now is the delay between housing starts and the nine.

Whatever 90 days or so after maybe a little bit longer.

After a start before homes are painted.

Our view in highly mentioned this when you look at it.

Allen Mistysyn: David, one caveat to that that I would make, when you look at our fourth quarter gross margin, because you typically see an architectural slowdown in volumes and sales, the fourth quarter margin, may or may not be sequentially improving. It's our smallest quarter. You have urine adjustments. Another year in adjustments that could have a material impact on the gross margin also just reiterate that price increases aren't going to be as big of a tailwind in our fourth quarter than is what we saw in our third quarter.

Speaker 10: And I think where your question is going is around the share, our share of new residential.

I think where your question is growing as well.

Around the share our share of new residential.

Speaker 4: Our position here is very strong and getting stronger every day.

Our position here is very strong and getting stronger every day.

Speaker 10: Heidi mentioned the exclusive arrangements that continue to grow in count. Our relationship with the new residential builder and our commitment to helping their profitability and success is helping us grow those those customers. It's delayed right now because the more agreements that we are signing right now and with the pressure on starts, we're not seeing that. That's, that's, pizza's.

How do you mentioned the exclusive arrangements that continue to grow and count.

Our relationship with the new residential builder and our commitment to helping their profitability and success.

Is helping us grow those those customers it's delayed right now.

Because the more agreements that we are.

Signing right now.

And with the pressure on starts we're not seeing that but.

Allen Mistysyn: On the other side of that, paint source group is going to grow faster in our fourth quarter that will help drive gross margin. And as we talked about at our investor day, we are at a current range of 45 to 48 percent. We set aggressive goals for our teams. And as we consistently achieve that current range, we'll adjust the range.

To tell you with great confidence.

Speaker 10: as the new homes continue to rise and they will. I mean, everyone would agree there's a higher demand and there is supply right now.

As the new homes.

Continue to rise and they will I think everyone would agree there is a higher demand than there is supply right now Sam.

Speaker 4: Family formation continues. There's a hole right now that exists in housing availability. When that comes back, we're going to be the coiled spring that we've been in the past. And it's exciting, actually, to see our teams winning at the rate that they're winning. And it will show up on the scoreboard.

We formation continues there is a whole right now that exist in housing availability when that comes back we're going to be those coiled spring that we've been in the past and it's exciting to see our teams winning at the rate that they are winning and it will show up on the scoreboard.

John Morikis: I don't think we're ready to sit here today and make a change to any range or talk about 2024 at this point, but we're going to be consistent in our approach going forward. And, David, I would just add very simply there is no feeling. Very good.

Speaker 8: Okay, thanks. No, I appreciate that. I just, on the other side of it, when you think about the resi repaint side, not just Sherwin, but maybe the industry. So, I mean, we still have turnover down about a third from the peak a couple years ago. Has the industry fully digested that? So, have contractor backlogs reflect that? Have orders reflected that? And just, I mean, how are you thinking that plays out into next year? Is there another leg down in the industry to normalize to that if we don't have a step up? Or have we already reflected that in the current run rate?

Okay. Thanks, and I appreciate that I just on the other side of it when you think about the resi repaint side, not just sherwin, but maybe the industry. So I mean, we still have turnover down about a third from the peak a couple of years ago has has the industry fully digested that sort of contracted backlogs reflect that have orders reflected that.

John Morikis: And, John, just looking at past DIY cycle weaknesses, what does it take? What do you need to see a thing to see a reversal of current DIY cycle weakness here? Well, clearly the consumers feeling some pressure from an inflation perspective. And, you know, there'll be some normalization if it's in wages increase at wage increasing or, you know, the spending patterns of consumers that that will take effect, but the fact is this that, you know, I'll remind you that paint is a relatively inexpensive yet highly impactful opportunity for people that are.

I mean, how are you thinking that plays out into next year or is there another leg down in the industry to normalize to that if we don't have a step up or have we already reflected that in the current run rate.

Speaker 4: Yeah, I think it's been reflected. If you take a few quarters back here, we were talking about resume paint contractors that in many cases weren't even returning phone calls. I mean, there were many people were saying that they'd come out and give you a quote in six to nine months. And then it'd be about a year before they could get to the project. So there has been a more normalized.

Yes, I think it's been reflected if you tick.

Few quarters back we were talking about Roes repaint contractors that in many cases weren't even returning phone calls who they were.

Many people were saying that they would come out and give you a quote in six to nine months and then it would be about a year before they could get to the project. So there has been a more normalized.

John Morikis: They're interested in in their home, staying in their homes to make a difference. And if people decide they're not going to sell the home and they're going to stay in place, it's a very viable option. I remind you the average home age now is over 40 years old. So there's more and more investment in in the structures people aging in place is impacting as well. And additionally, I would say not only does it help the DIY, but as the population is aging that generally will turn into more of a res repain opportunity, which helps, you know, our position in that space as well.

Speaker 4: reality, if you will, as it relates to the residential repaying contractor. Again, I'll reiterate that this adversity creates opportunity for Sherwin.

Reality, if you will.

Lights to the residential repaint contractor again I'll reiterate that.

This adversity creates opportunity for sharing with.

Speaker 10: You should bet right now, as we are here in this moment, that our customers are getting visited with Sherwin-Williams representatives. You should also bet that our competitors' customers are getting visited as well. So we're not playing nice here. We're going after some pretty aggressive market share gains, and we expect to win aggressively.

You should bet right now as we are here in this moment that our customers are.

Or getting visited with Sherwin Williams.

Our representatives you should also bet that our competitors' customers are getting visited as well. So we're not we're not playing nice here, we're going after some pretty aggressive market share gains and we expect to win aggressively and I would add to that too Josh I think there is.

Speaker 3: And I would add to that too, Josh, I think there's a lot of confusion in the marketplace right now and our opportunity, John mentioned, you know, adversity is our friend and I couldn't agree more with that.

John Morikis: We don't want 70 year old people scraping their gutters and and ease of their homes. But inside, yeah, DIY is going to be an important part. There's a cycle and and we're playing the long game here, whichever way the table tilts will be.

A lot of confusion in the marketplace right now and our opportunity Jon mentioned adversity, as our friend and I Couldnt agree more with that.

Speaker 3: You know, our strategy is working here, and I'll take you to we talk about our control distribution platform. We own the stores, we own the reps, the store manager owns that, you know, the store manager own staffing owns the culture of that store. And I think it's really important, because when we talk about that relationship and the consistent experience, we can offer these rosary paint contractors.

Our strategy is working here and I'll take you to talk about our controlled distribution platform.

We own the stores, we own the reps the store manager owns that P&L the store manager own staffing owns the culture of that store.

Operator: Thank you. Very good. Thank you very much. You bet. Thank you.

Joshua Spector: Your next question is coming from Josh Spector, from UBS. Your line is live. Yeah, hi. Thanks for taking my question. I guess two ones were back row around the stores group. I guess first, when I look at US completion data for new res, it looked like that was kind of flat. You guys reported down mid single digits. I assume you get some pricing. I don't know if that original divergence or something else you call out. Maybe I'll stop with that one first.

It's really important because when we talk about that relationship and that consistent experience. We can offer these rents repaint contractors, it's critical that they know exactly what they can get from the experience. They can have a sherwin Williams and so as they are coming in as they're traveling as they're trying to grow and take on more our teams are prepared trained and ready to get any tool.

Speaker 3: It's critical that they know exactly what they can get from the experience they can have as sure on Williams. And so as they're coming in, as they're traveling, as they're trying to grow and take on more, our teams are prepared, trained and ready to get any tools that they need in front of them to help them to become as productive and profitable as possible. So I'm really confident in how we are prepared to differentiate as we add value to this contractor. So I'm really confident in how we are prepared to get any tools that they need in front of them to help them to become as productive and profitable as possible.

All that they need in front of them to help them to become as productive and profitable as possible. So I'm really confident in how we are prepared to differentiate as we as we add value to this contractor.

John Morikis: Well, I think what you're, what you're experiencing right now is the delay between housing starts and the nine whatever 90 days or so after maybe a little bit longer. After start before homes are painted. So our view and Heidi mentioned this when you look at, I think where your question is going is, around the share, our share of new residential, our position here is very strong and getting stronger every day. Heidi mentioned the exclusive arrangements that continue to grow and count our relationship with the new residential builder and our commitment to helping their profitability and success is helping us grow those customers.

Got it thank you both.

Josh.

Sure.

Speaker 1: Thank you. Your next question is coming from Mike Harrison from Seaport Research Partners. Your line is live.

Thank you. Your next question is coming from Mike Harrison from Seaport Research Partners. Your line is live.

Speaker 4: Hi, good morning. You have opened 36 new paint store locations so far this year. Is the target still 80 to 100? And are you seeing any delays in either the permitting process or the construction process?

Hi, good morning.

You have opened 36, new paint store locations. So far this year is the target still 80 to 100 and are you seeing any delays in either the permitting process, where the construction process.

Speaker 3: Mike, yes, we expect to build as we send it and no, we do not expect any delays, I think.

Mike, Yes, we expect to build as we then it and no. We do not expect any delays I think this is really important when we look at our commitment.

Speaker 3: This is really important. You know, when we look at our commitment to the team to the street, we're opening a new store every three days. And there's there's puts and takes in terms of timing. You can imagine our strategy is reflecting, you know, our desire to chase the density and the volume and some of those markets there's there's.

17th Street, we're opening a new store every three days and Theres puts and takes in terms of timing you could imagine our strategy is reflecting our desire to chase the density and the volume and some of those markets.

John Morikis: It's delayed right now because the more agreements that we are signing right now and with the pressure on starts, we're not seeing that, but I can tell you with great confidence that as the new homes continue to rise and they will, I mean everyone would agree there's a higher demand and there is supply right now, family formation continues. There's a whole right now that exists in housing availability. When that comes back, we're going to be the coil spring that we've been in the past and exciting actually to see our teams winning at the rate that they're winning and it will show up on the scoreboard.

Speaker 3: unique nuances where we're timing getting into a certain market in a certain area but our commitment to getting to those stores is critical because we still continue to see a return on those stores at a rapid clip and we think there's a lot of opportunities to chase a future

Any nuances where timing getting into a certain market in a certain area, but our commitment to get into the stores is critical because we still continue to see a return on those stores at a rapid clip and we think theres a lot of opportunities to change the future density there.

Okay.

Speaker 4: All right, and then within the consumer business, one of your competitors suggested that selling to the big box retailers had been weaker than sell out that suggests that maybe there's been some inventory worked on this year. Do you have any thoughts on how point of sale with some of your key customers has compared to your volumes into those customers? And I guess whether big box inventories at this point in the year are below where you would expect them to be. Thank you.

Alright, and then within the consumer business one of your competitors suggested that sell in to the big box retailers have been weaker than sell out that suggest that maybe there's been some inventory work done. This year do you have any thoughts on how.

Point of sale with some of your key customers as compared to your volumes into those customers and I guess, whether big box inventories at this point in the year are below where you would expect them to be thank you.

John Morikis: Okay, thanks. I appreciate that. I just on the other side of it, when you think about the residue paint side, not just Sherwin, but maybe the industry. So I mean, we still have turnover down about a third from the peak a couple of years ago, has the industry fully digested that sort of contractor backlogs reflect that have orders reflected that. And just, I mean, how are you thinking that plays out into next year?

Speaker 3: Well, first of all, we wouldn't comment on anything specific to our customers. So, but I can't share with you with our approach that we're making as a partner.

Well.

We wouldn't comment on anything specific to our customer so, but what I can guarantee with our approach that we're taking as partners.

Speaker 4: And again, we do talk openly about making sure that success is our customer's success. So when we're looking at making sure that they're at the right inventory level, helping them thinking through how to manage to optimize their working capital, you can rest assured that those conversations are happening on a daily basis. So we'll let them speak to their specific strategy here. Yeah, and I think that's really important. I like the way that Heidi framed that, you know, that we gauge our success by how successful our customers are. And so we're actually

And again, we do talk openly about making sure that success is our customer success. So when we're looking at making sure that they're the right inventory levels, helping them thinking through how to manage to optimize our working capital you can rest assured that those conversations are happening on a daily basis, So that will let them speak to their specific strategy here.

John Morikis: Is there another leg down in the industry to normalize to that if we don't have a step up or have we already reflected that in the current run rate? Yeah, I think it's been reflected if you take a few quarters back here, we were talking about res repaint contractors that in many cases weren't even returning phone calls. I mean, there were many people were saying that they'd come out and give you a quote in six to nine months, and then it'd be about a year before they could get to the project.

Yeah, and I think that's really important with it how do you frame that we gauge our success by how successful our customers are and so we're actually working with our customers encouraging them to manage their working capital. So that they can put their cash to work and be more successful and maybe you want to talk a little bit about what the impact.

John Morikis: So there has been a more normalized reality, if you will, as it relates to the residential rethink contractor. Again, I'll reiterate that, you know, this adversity creates opportunity for Sherwin, you should bet right now, as we are here in this moment, that our customers are getting visited with Sherwin, a representative, you should also bet that our competitors customers are getting visited as well. So we're not, we're not playing, you know, nice here, we're going after some pretty aggressive market share gains and we expect to win aggressive, and I would add to that too, Josh, I think there's a lot of confusion in the marketplace right now, and our opportunity, John mentioned, you know, adversity is our friend, and I couldn't agree more with that.

Speaker 6: working with our customers, encouraging them to manage their working capital so that they can put their cash to work and be more successful. And Al, maybe you want to talk a little bit about what the impact of that might be, because we're trying to drive reasonable or acceptable working capital, not only for us, but for our customers. Yeah, I'd start with, Mike, that as we typically do, we saw our inventory gallons decreasing.

That might be because we're trying to drive reasonable or acceptable working capital normally for us for our customers, Yes, I'd start with Mike.

As we typically do when he saw our inventory gallons decreased sequentially.

Speaker 6: As we you know, we're getting back to a more typical bell curve. We grow inventory into the summer selling season We see incremental decreases as we go through the through through the second half And then we'll build inventory in our fourth quarter that that consistency

As we were getting back to a more typical bell curve, we grow inventory into the summer selling season, we see incremental decreases as we go through the <unk>.

Through through the second half and then we'll build inventory in our fourth quarter that that consistency allow.

Speaker 6: allows our customers to also manage their inventory better because you're back to a more normal environment. To that point, I would say we expect our working capital trend towards our 11 to 11.5%.

John Morikis: You know, our strategy is working here, and I'll take you to, we talk about our control distribution platform. We own the stores, we own the Reps, the store manager owns that P&L, the store manager owns staffing, owns the culture of that store, and I think it's really important. Because when we talk about that relationship and the consistent experience, we can offer these resident contractors, it's critical that they know exactly what they can get from the experience, they can have a Sherwin-Williams.

Allows our customers to also manage their inventories better because youre back to a more normal environment.

To that point I would say, our we expect our working capital trend towards our 11% to 11, 5%.

Speaker 6: We were at 12% coming out of the third quarter, so we're well on track for that. And what it's allowing us to do is drive significant cash flow, and you saw that in our

We were at 12% coming out of the third quarter. So we're well on track for that and what it's allowing us to do is drive significant cash flow and you saw that.

John Morikis: And so, as they're coming in, as they're traveling, as they're trying to grow and take on more, our teams are prepared, trained, and ready to get any tools that they need in front of them to help them to become as productive and profitable as possible. So I'm really confident in how we are prepared to differentiate as we add value to this kind.

Speaker 6: our third quarter, and that's a combination of strong net income results and

Sure.

Our third quarter.

And that's a combination of strong net income results and.

Speaker 6: working capital management and we expect to slow that through into our fourth quarter and have a really strong cashier that's allowed us to be very flexible. Gontram talked about our ability to pay down debt, but it also allowed us to return cash to our shareholders.

Working capital management, and we expect to flow that through into our fourth quarter and have a really strong cash year, that's allowed us to be very flexible.

Ghansham talked about our ability to pay down debt, but it also allowed us.

Operator: Thank you. Josh.

To return cash to our shareholders in dividends and buybacks and we've returned over $1 billion or to our shareholders over that time. So in this high interest rate environment.

Speaker 6: in dividends and buybacks, and we've returned over $1.4 billion to our shareholders over that time. So in this high interest rate environment, we get back to our more normal operating cadence with inventory, and you'll see us manage our working capital down.

Mike Harrison: Thank you.

Operator: Your next question is coming from Mike Harrison from Seaport Research Partners. Your line is live. Hi, good morning. You have opened 36 new paint store locations so far this year. Is the target still 82-100? Are you seeing any delays in either the permitting process or the construction process? Mike, yes, we expect to build as we send it, and no, we do not expect any delays. I think this is really important. When we look at our commitment to the team to the street, we're opening a new store every three days.

We get back to our more normal operating cadence with inventory and you'll see us manage our working capital down, which then allows that consistency to allow our customers to manage their working capital down.

Speaker 3: which then allows that consistency to allow our customers to manage their work in capital. One piece I would add to that as well, I go back to Elk Point here, we put, you know, by design, very intentional capacity.

I'd add to that as well go back to our point here.

By design very intentional capacity.

Speaker 3: to work here so that as we're partnering closely to manage and optimize working capital and inventory with our partners that in fact we've got the confidence that we have the capacity to build the inventory in time for the season ahead.

To work here, so that as we're partnering closely to manage and optimize working capital and inventory with our partners that isn't that and we've got the confidence that we have the capacity to build the inventory and in time for the season.

Operator: There's puts and takes in terms of timing. You can imagine our strategy is reflecting our desire to chase the density and the volume and some of those markets. There's unique nuances where we're timing, getting into a certain market in a certain area, but our commitment to getting to those stores is critical because we still continue to see a return on those stores at a rapid club. And we think there's a lot of opportunity to chase a future density there.

Yes.

Yeah.

Thanks, Mike.

Speaker 1: Thank you. Your next question is coming from Duffy Fisher from Goldman Sachs. Your line is live.

Thank you. Your next question is coming from Duffy Fischer from Goldman Sachs. Your line is live.

Speaker 5: Yeah, good morning. John , you've often talked about things like sprayers being a good leading indicator, what you're seeing in your stores with like a one to two quarter lag. What is that equipment sale telling you today about what the next couple of quarters holds for the store sales?

Yes, good morning.

John you've often talked about things like sprayers being a good leading indicator of what youre seeing in your stores with like a one to two quarter lag what is that equipment sale, telling you today about what the next couple of quarters holds for the store sales.

Operator: All right, and then within the consumer business, one of your competitors suggested that selling to the big box retailers had been weaker than sell out. It suggests that maybe there's been some inventory work down this year. Do you have any thoughts on how point of sale with some of your key customers has compared to your volumes into those customers? And I guess whether big box inventories at this point in the year are below where you would expect them to be.

Speaker 10: Well, Duffy, I'd say that what is telling me now is that we're ending the season. So I'd say, you know, while we talk about that, typically the greatest...

Well Duffy I would say that what is telling me now is is that we are ending the season, So I would say.

While we talk about that typically the greatest correlation between those types of sales and confidence is usually as we go into the season as we were coming off the season, we are continuing to see spray parts right now move in.

Speaker 10: Correlation between those types of sales and confidence is usually as we go into the season as we're coming out of the season. We are continuing to see spray parts right now move and and I say right now as we've talked, you know, there's.

I'd say right now as we've talked.

Operator: Thank you. Well, first of all, we wouldn't comment on anything specific to our customers. But I can't share with you with our approach that we're making as partners. And again, we do talk openly about making sure that success is our customer's success. So when we're looking at making sure that there are the right inventory levels, helping them thinking through how to manage to optimize their working capital, you can rest assured that those conversations are happening on a daily basis.

There is.

Speaker 4: There's a choppiness in the market, but we have confidence in our position in the market. And we'll see how this unfolds next year as we go into the paint season. Coming out of it, though, it's typically not the...

Theres a choppiness in the market, but we have confidence in our position in the market and we will see how this unfolds next year as we go into the paint season coming out of it though is typically not the best.

Speaker 3: best tool to use to gain a level of confidence of contractors. But what we are seeing there too, despite the sprayers, is the backlog of projects for our commercial contractors continues to be solid well through midpoint of next year. So getting back to more of that normal cycle. So a good indicator of some growth.

Hum.

Best tool to use to gain a level of confidence of contractors, but what we are seeing there too. Despite the spray spares as the backlog of projects for our commercial contractors continues to be solid well through the midpoint of next year, so getting back to more of that normal cycle. So good indicators of growth there.

Operator: So we'll let them speak to their specific strategy here. Yeah, I think that's really important. I like the way that Heidi framed that, you know, that we gauge our success by how successful our customers are. And so we're actually working with our customers, encouraging them to manage their working capital so that they can put their cash to work and be more successful. And Al, maybe you want to talk a little bit about what the impact of that might be because we're trying to drive reasonable or acceptable working capital manually for us for our customers.

Speaker 12: And then Heidi, I think you made a comment that your gallons per day had bottomed in your view. And I didn't know, was that for the company as a holder, was that for a paint stores group? And that's even inclusive of kind of the seasonal weakness that we generally see in Q4. That was just in wood. Oh, that was just in wood. Okay, thank you.

Sure.

And then how do you I think you made a comment that.

Your gallons per day had bottomed in your view.

Was that for the company as a whole or was that for paint stores group and thats, even inclusive of kind of the seasonal weakness that we generally see in Q4 that was just in wood.

Although as Justin what okay. Thank you Yeah you bet.

Operator: Yeah, I start with Mike that, as we typically do, we saw our inventory gallon. Decrease Sequentially, as we're getting back to a more typical belt bell curve, we grow inventory into the summer selling season, we see incremental decreases as we go through the second half and then we'll build inventory in our fourth quarter. That consistency allows our customers to also manage their inventories better because you're back to a more normal environment.

Thank you guys.

Thanks Duffy.

Speaker 1: Thank you. Your next question is coming from Kevin McCarthy from Vertical Research. Your line is live.

Thank you. Your next question is coming from Kevin Mccarthy from vertical research. Your line is live.

Speaker 13: Yes, good morning. I was wondering if you could comment on your administrative costs. It looks like they jumped up a bit in the third quarter and in reading the commentary you called out two items, namely environmental expense and asset disposals. So, you know, a few questions would be, you know, what were the nature and magnitude of those items and and would you expect that line item to come back down in the fourth quarter and be

Yes. Good morning, I was wondering if you could comment on your administrative costs it looks like they jumped up.

A bit in the third quarter and in reading the commentary you called out two items, namely environmental expense and asset disposals.

A few questions would be.

What are the nature and magnitude of those items and would you expect that line item to come back down in the fourth quarter and beyond.

Operator: To that point, I would say, we have to expect our working capital trend towards our 11 to 11.5%. We were at 12% coming out of the third quarter so we're well on track for that. And what it's allowing us to do is drive significant cash flow and you saw that in our third quarter. And that's a combination of strong net income results and working capital management and we expect to slow that through into our fourth quarter and have a really strong cash year that's allowed us to be very flexible.

Speaker 6: Yeah, Kevin, the year-over-year increase, I would say, you know, environmental, a little less than half of that increase year-over-year, and then costs related to our garland.

Yes, Kevin the year over year increase.

I would say environmental.

It was a little less than half of that increase year over year and then.

Costs related to our Garland plant fire.

Speaker 6: is a little less than half and we also are going up against the stale.

There's a little less than half and we also are going up against a sale, which benefited our gain on sale of that gain on sale of assets last year that benefited R. R.

Speaker 6: benefit are again on sale of that gain on sale of assets last year that benefited our our third quarter last year. I would say I'm glad you asked that question because I think I want to give a little color around our fourth quarter guidance even though we don't get even EPS guidance it's implied

Operator: Ghansham talked about our ability to pay down debt, but it also allowed us to return cash to our shareholders in dividends and buybacks and we've returned over a billion for to our shareholders over that time. So in this high interest rate environment, we get back to our more normal operating cadence with inventory and you'll see us manage our working capital down, which then allows that consistency to allow our customers to manage their working capital down.

Third quarter last year, I would say I am glad you asked that question because I think.

I want to give a little color around our fourth quarter guidance, even though we don't get EPS guidance. It is implied.

Speaker 6: And it's backwards, but I think a better way to look at that is our guidance at the operating margin line And we're expecting our fourth quarter operating margin to be flattish at the midpoint year over year

And its backwards, but I think a better way to look at that as our guidance at the operating margin line, we're expecting our fourth quarter operating margin to be flattish at the midpoint year over year.

Speaker 6: Compared to a strong fourth quarter last year with operating profit up to over 60% and our our operating margin was up 450 basis points. So

Fair to a strong fourth quarter last year with operating profit up over 60% and our our operating margin was up 450 basis points. So.

Operator: In one piece, I would add to that as well, I go back to Elf point here, you know, we put, you know, by design, very intentional capacity to work here so that as we're partnering closely to manage and optimize working capital in and inventory with our partners that if that we've got the confidence that we have the capacity to build the inventory in time for the season to head. Thanks, Mike.

Speaker 6: We are expecting gross margin expansion in our fourth quarter, not as much as we saw in our third quarter. We see raw material moderation. We're not going to get as big of a price tailwind that we got in our third quarter. And I do expect.

We're not we are expecting gross margin expansion in our fourth quarter not as much as we saw in our third quarter, we see raw material moderation, we're not going to get as big of a price tailwind that we got in our third quarter and I do expect.

Speaker 6: um, higher SG and a, uh,

Higher SG&A.

Speaker 6: year-over-year because of the long-term investment. So then that gets us to these non-operating costs. And we have approximately a $60 million increase in our non-operating costs that'll be predominantly in our admin segment. And it's due to the credits that we realized last year in environmental and other income in the fourth quarter that we don't expect to repeat and really get environmental and these other expense lines to a more normal level.

Year over year because of the long term investment. So then that gives us to these nonoperating costs.

Duffy Fisher: Thank you. Your next question is coming from Duffy Fisher from Goldman Sachs. Your line is live. Yeah, good morning. John, you've often talked about things like sprayers being a good leading indicator, what you're seeing in your stores with like a one to two quarter lag. What is that equipment sale telling you today about what the next couple quarters holds for the store sales? Well, Duffy, I'd say that what is telling me now is that we're ending the season.

We have approximately a $60 million increase in our non operating costs predominantly in our admin segment and that's due to the credits that we realized last year in environmental and other income in the fourth quarter.

Duffy Fisher: So I'd say, you know, while we talk about that, typically the greatest correlation between those types of sales and confidence is usually as we go into the season as we're coming out of the season, we are continuing to see spray parts right now. Move and I say right now, as we've talked, you know, there's there's a choppiness in the market, but we have confidence in our position in the market and we'll see how this unfolds next year as we go into the paint season.

That we don't expect to repeat and really good environmental and these other expense lines to a more normal level.

Speaker 13: OK, thank thank you for that owl and then as a second question.

Okay. Thanks, Thank you for that Al and then.

Second question.

Speaker 13: You know, if your raw material costs were to trend flat from here, would it be reasonable to estimate that you could see relief in 2024, perhaps in the Negative low single to mid single digit percentage range or how would you frame that outlook for next year as it relates to raw material cost specific

If your raw material costs were to trend flat from here would it be reasonable to estimate.

That you could see relief in 2020 for perhaps in the <unk>.

Negative low single to mid single digit percentage range or how would you frame that outlook for next year as it relates to raw material cost specifically.

Speaker 6: Yeah, Kevin, I think, you know, with the current environment and the volatility we're seeing both in.

Yes, Kevin I think with the current environment and the volatility we're seeing both in an oil.

Duffy Fisher: Coming out of it, though, it's typically not the best tool to use to gain a level of confidence with contractors. But what we are seeing there to despite, you know, the spray sprayers is the backlog of projects for commercial contractors continues to be solid, you know, well through midpoint of next year. So getting back to more of that normal cycle, so good indicator of some growth. There, and then Heidi, I think you made a comment that your gallons per day had bottomed in your view.

Speaker 6: in oil, in the choppy demand environment. I know historically we've given run rates of preliminary run rate on raw material, they think.

And the choppy demand environment I know historically, we've given run rates, our preliminary run rate on raw materials I think.

Speaker 6: That's probably a little too soon for that in the sense that we also have to take a look at the other costs.

That's probably a little a little too soon for that in the sense that we offer.

So I'd have to take a look at the other cost factors in the in the total input costs I talked about the merit increases getting back to more normal levels, but health care.

Speaker 6: factors in the total input cost. I talked about the merit increases, getting back to more normal levels, but health care.

Speaker 6: is growing significantly. We have free cause.

Is growing significantly we have freight costs.

Duffy Fisher: Was that for the company as a whole, or was that for the paint stores group, and that's even inclusive of kind of the seasonal weakness that we generally see in Q4? That was just in wood. Oh, that was just in wood, okay, thank you. Yes, you guys. Thank you, guys. Thanks, Sophie. Thank you.

Speaker 6: and things going on in the LTL freight side of the market that are driving our overall costs up. So I think it's a little premature to.

Something is going on in the L. T O freight side of <unk>.

The market that are driving our overall cost up so I think it's a little premature to say.

Speaker 6: give that level of guidance. I'd rather wait till we get more line of sight or a better line of sight and give you an update in January .

Give that level of guidance I'd, rather wait until we get more line of sight or a better line of sight and give you an update in January .

Okay fair enough. Thank you.

Kevin Mccarthy: Your next question is coming from Kevin McCarthy from Vertical Research. Your line is live. Yes, good morning. I was wondering if you could comment on your administrative costs. It looks like they jumped up a bit in the third quarter. And in reading the commentary, you called out two items, namely environmental expense and asset disposal. So, you know, a few questions would be, you know, what are the nature and magnitude of those items?

Thanks, Kevin.

Speaker 1: Thank you. Your next question is coming from Alexey Yefremov from KeyBank Capital Markets. Your line is live.

Thank you. Your next question is coming from Aleksey <unk> from Keybanc capital markets. Your line is live.

Speaker 13: Thanks and good morning. Al, I wanted to follow up on your comments regarding fourth quarter EPS. I guess. Historically, it's hard to find a Q4 where sequential EPS fell by more than a dollar. You know, you're looking at somewhere around dollar 50, dollar 55, based on your guidance. Is there anything else going on sequentially besides the year over year things that you just pointed out?

Thanks, and good morning al.

Wanted to follow up on your comments regarding fourth quarter EPS.

I guess historically, it's hard to find it.

The Q4, where sequential EPS fell by more than a dollar youre looking at somewhere around $50 55 based on your guidance is there anything else going on sequentially. Besides that Europe over year things that you just pointed out.

Kevin Mccarthy: And would you expect that line item to come back down in the fourth quarter and beyond? Yeah, Kevin, the year-over-year increase, I would say, you know, environmental little less than half of that increase year-over-year and then costs related to our Garland plant fire is a little less than half. And we also are going to go up against the sale, which benefited our gain on sale of that gain on sale of assets last year that benefited our our third quarter last year.

Speaker 6: No, I think that's going to be, uh, when you, the bigger, the bigger, uh, driver sequentially you have is,

No I think that's going to be.

The bigger the bigger driver sequentially you have is the decrease in sales on the seasonality of that.

Speaker 6: decrease in sales on the seasonality of that. I think what's hard, Alexi, is you look at our last four years, it has been choppy, really choppy quarter to quarter and including third quarter to fourth quarter, so I think you got to go back pretty far to find a more normal year. I think the

What's hard Alexia as you look at our last four years.

It's been choppy.

Really choppy quarter to quarter, including third quarter to fourth quarter. So I think you got to go back.

Allen Mistysyn: I would say I'm glad you asked that question because I think I want to give a little color around our fourth quarter guidance, even though we don't get even EPS guidance. It's implied, and it's backwards, but I think a better way to look at that is our guidance at the operating margin line. And we're expecting our fourth quarter operating margin to be flatish at the midpoint year-over-year compared to a strong fourth quarter last year with operating profit up to over 60% and our operating margin was up 450 basis points.

Pretty far to find a more normal year.

I think that the.

Yeah.

Speaker 6: Like I said, the gross margin, I do expect to be higher year over year, but sequentially lower because of less of a tailwind in price. I think.

Like I said, the gross margin I do expect to be higher year over year, but sequentially lower because of less of a tailwind on price I think SG&A growth is probably higher in this year's fourth quarter sequentially than it has in past years because of the things <unk> talked about about leaning in harder on.

Speaker 6: SG&A growth is probably higher in this year's fourth quarter sequentially than it has in past years because of the things Heidi talked about, about leaning in harder on.

Speaker 6: investments in our paint stores and long-term growth initiatives within TCG.

On investments in our paint stores and long growth long term growth initiatives within TCG and CPG. So that that's probably is driving some of it and it is our smallest quarter. So.

Allen Mistysyn: So we are expecting gross margin expansion in our fourth quarter, not as much as we saw in our third quarter. We see raw material moderation. We're not going to get as big of a price tailwind that we got in our third quarter, and I do expect higher SGNAs year-over-year because of the long-term investment. So then that gets us to these non-operating costs, and we have approximately a $60 million increase in our non-operating costs that will predominantly in our admin segment.

Speaker 6: CBG so that that probably is driving some of it and it is our smallest quarter so.

Speaker 6: Some of these year and adjustments have a bigger impact on our fourth quarter than they would on our third

Some of these year end adjustments have a bigger impact on our fourth quarter than they would on our third quarter.

Speaker 5: Thanks. And then a quick follow-up on your stores. Of course, you have a large competitor who is shifting strategy, but besides that, are there any players who are either slowing investment or outright closing stores kind of in response to you gaining share?

Thanks, and then a quick follow up on your stores.

Of course, you have a large competitor who is shifting strategy, but besides that are there any players who are either slowing investment or outright closing stores kind of in response to your gaining share.

Allen Mistysyn: And it's due to the credits that we realized last year, an environmental and other income in the fourth quarter, that we don't expect to repeat and really get environmental and these other expense lines to a more normal level.

Speaker 3: So I'll take that. It's a great question. I think you're spot on. And I would say that there is go back to my comment earlier, great amount of confusion at the marketplace. And this is an opportunity where are consistent.

So I'll take that that's a great question I think you're spot on and I would say is that there is go back to my comment earlier.

Right amount of confusion out in the marketplace and this is an opportunity where our consistent strategy.

Speaker 3: strategy I think is on full display, and I have a lot of confidence in Justin Vins and his organization and the depth of leadership that we have there. This team is well prepared to not only execute our strategy, but to adapt to market conditions around us, and I think we've got a competitive advantage.

Kevin Mccarthy: Okay, thank you for that, Al. And then the second question, if your raw material costs were to trend flat from here, would it be reasonable to estimate that you could see relief in 2024 perhaps in the negative low single to mid single digit percentage range, or how would you frame that outlook for next year? It relates to raw material cost. Yeah, Kevin, I think, you know, with the current environment and the volatility we're seeing both in oil, in the choppy demand environment, I know historically we've given run rates of preliminary run rate on raw material.

Is on full display and I have a lot of confidence and Jonathan Dann and his organization and the depth of leadership that we have there.

This team is well prepared to not only execute our strategy, but to adapt to market conditions around us and I think we've got a competitive advantage.

Speaker 3: in doing that. And I suppose if we didn't own 5,000 stores and 4,000 reps and have strong customer relationships and data, they can help our customers.

And doing that and I suppose if we didn't own 5000 stores and 4000 reps in.

Strong customer relationships and data that can help our customers be more successful I think we might try to stitch together a strategy that that helps to get you know products placed on the shelf, but this is really an opportunity for us to do what we do well and to demonstrate to our customers.

Speaker 3: I think we too might try to fish together a strategy that helps to get products placed on the shelf, but this is really an opportunity for us to do what we do well, and to demonstrate to our customers a very consistent experience for sure when we-

A very consistent experience with Sherwin Williams.

Speaker 3: We're working with them closely to help, you know, fight through a lot of the complexity out there and make sure that they're coming out winning. So I do think, you know, where we're seeing competitors make different choices on store closings or channels, we think, again, this uncertainty is our opportunity.

Working with them closely to help fight through allowed the complexity out there and make sure that theyre coming out winning so I do think where we're seeing.

Kevin Mccarthy: They think that's probably a little too soon for that in the sense that we also have to take a look at the other cost factors in the total input cost. I talked about the merit increases, getting back to more normal levels. But healthcare is growing significantly. We have freight costs and there's some things going on in the LTL freight side of the market that are driving our overall cost up. So I think it's a little premature to give that level of guidance. I'd rather wait till we get more line of sight or a better line of sight and give you an update in January. Okay, fair enough. Thank you. Thanks, Kevin.

Competitors make different choices on store closings our channels. We think again this uncertainty is our opportunity.

Thanks Alexia.

Speaker 1: Thank you. Your next question is coming from Garrick Schmoys from Loop Capital. Your line is live.

Yeah.

Thank you. Your next question is coming from Garik <unk> from loop capital. Your line is live.

Speaker 14: Hi, thanks. Within pro-architectural, you called out strength in commercial. I'm just wondering what drove that. It sounds a little contrary to some of the commercial data points that emerged over the course of the quarter. So, just curious as to the outperformance there.

Oh, hi, Thanks, we can pull architectural you called out strength in commercial.

Wondering what drove that it sounds a little contrary to some of the commercial data points emerged over the course of the quarter. So just curious as to.

Four months there.

Speaker 3: Well, I think the way to characterize that would be more back to a normal cycle where you're seeing kind of strong, you know, backlobs front half. And then, you know, it would obviously kind of look just off in a bit in the back half. So I would characterize it more as a normal cycle. But I do think that this is an opportunity, you know, we talk about the strength and position and commercial for us is amongst the highest of our segments. So we're going to be hard at work focusing on...

Well I think the way to characterize that would be more back to a normal cycle, where you're seeing kind of strong backlog front half and then.

Alexi Yefremov: Thank you. Your next question is coming from Alexi Yefremov from Keybank Capital Markets. Your line is live.

We would obviously look to soften a bit in the back half so I would characterize it more than normal cycle.

Alexi Yefremov: Thank you. Good morning. I wanted to follow up on your comments regarding, you know, fourth quarter EPS. I guess historically it's hard to find a Q4 where sequential EPS fell by more than a dollar. You know, you're looking at somewhere around dollar $50 or $55 based on the guidance. Is there anything else going on sequentially besides the year over year things that you just pointed out? No, I think that's going to be the bigger driver sequentially you have is the decrease in sales on the seasonality of that.

But I do think that this is an opportunity and we talk about the strength and position in commercial for US is amongst the highest of our segments.

We're going to be hard at work focusing on share gains and making the right decisions, making the right investments in our people and our resources are aligned and ready to help these customers to respond for the duration of these projects I think.

Speaker 3: making the right decisions, making the right investments and our people and our resources are aligned and ready to help these customers to respond through the duration of these projects. I think regardless of the demand outlook.

Regardless of the demand outlook.

Speaker 3: you know, we will take share of this environment. And part of our differentiation is.

We will take share in this environment and part of our differentiation as we are with these contractors at every step of these projects and so as they're navigating uncertainty and or changes that come up in every single project. Our team is right there side by side to make sure that they're getting is complete on time.

Speaker 3: We are with these contractors at every step of these projects and so as they're navigating uncertainty and or, you know, changes that come up in every single project, our team is right there side by side to make sure that they're getting those complete on.

Alexi Yefremov: I think what's hard to like to say is you look at our last four years. It has been choppy really choppy quarter to quarter, including third quarter to fourth quarter. So I think you got to go back pretty far to find a more normal year. I think the, like I said, the gross margin. I do expect to be higher year over year, but sequentially lower because of the tailwind and price. I think SGNA growth is probably higher in this year's fourth quarter sequentially than it has in past years because of the things Heidi talked about about leaning in harder on investments in our paint stores and long growth, long term growth initiatives within PCG and CBG. So that that probably is driving some of it. And it is our smallest quarter. So some of these year and adjustments have a bigger impact on our fourth quarter than they would on our third quarter.

Speaker 2: Yeah, I think if you look at the commercial piece, that's where we have the longest visibility, the longest lead time. So we feel pretty comfortable about what we're seeing in terms of completions into first half of 24, as Heidi said.

Yeah, I think if you look at the commercial piece Thats, where we have the longest visibility the longest lead time, so we feel pretty comfortable about what we're seeing in terms of completions into first half of 'twenty. Four is Heidi said I think you might be referencing you know things like the architectural billing index, which are choppy or now that's why.

Speaker 2: I think you might be referencing, you know, things like the architectural billing index, which are choppier now. That's why we're saying the back half of 24, we might start to see a little softness, but feel very comfortable, again, about our ability, if that was to occur, our ability to fill those gaps with perhaps new res is starting to come back. We'll put our foot on the gas with the res repaint, property maintenance, et cetera.

We are saying in the back half of 'twenty four we might start to see a little softness but feel very comfortable we'll again about our ability if that was to occur our ability to fill those gaps with perhaps new res is starting to come back we'll put our foot on the gas with the rest repaint property maintenance et cetera.

Speaker 14: Great, that's helpful. I wanted to follow up on consumer brands, just the sequential weakness in margins, third quarter versus second quarter. Was it really just the decline in volumes, quarter over quarters, or something else that drove the change in the margin?

Great. That's helpful. I wanted to follow up on consumer brands just.

<unk> weakness in margins.

Third quarter versus second quarter or was it really just.

Patrick Cunningham: Thanks and a quick follow up on your stores. You know, of course you have a large compared who is shifting strategy, but besides that, are there any players who are either slowing investment or outright closing stores, kind of in response to your gaining share? So I'll take that. That's a great question. I think you're thought on and I would say that there is, go back to my comment earlier, great amount of confusion at the marketplace.

The decline in volumes quarter over quarter or was there something else that drove the change in the margins no. Okay I got it.

Speaker 6: No, it's primarily, well, it's primarily two things, but it's sequential.

Primarily well, it's primarily two things.

Sequential.

Speaker 6: decline in volume, but also, you know, as we have talked about, and I mentioned on our working capital, you know, we're targeting a year-end...

Decline in volume.

But also you know as we've talked about.

And I mentioned on our working capital we are targeting a year end.

Speaker 6: Inventory level so that when we come out into 2024 our inventories in great shape Which means we're we tweak our production Volumes to make sure we stay in line with that targeted inventory level. So with production gallons being down Sequentially a low single-digit number That does have a head. This is a headwind for us in this segment You understand

Inventory level, so that when we come out into 2024, our inventory's in great shape, which means.

Patrick Cunningham: And this is an opportunity where our consistent strategy, I think, is on full display. And I have a lot of confidence and confidence in his organization and the depth of leadership that we have there. This team is well prepared to not only execute our strategy, but to adapt to market conditions around us. And I think we've got competitive advantage in doing that. And I suppose if we didn't own 5000 stores and 4000 wraps and have strong customer relationships and data, they can help our customers be more successful.

Tweak our production.

Volumes to make sure we stay in line with that targeted inventory levels. So.

With production gallons being down sequentially.

Sequentially, our low single digit number.

That does have a hat.

As a headwind for us.

In this segment.

Understood. Thanks for the help them out before.

Thanks, Karen.

Speaker 1: Thank you. Your next question is coming from Adam Baumgarten from Zillman. Your line is live.

Patrick Cunningham: I think we too might try to fish together a strategy that helps to get products placed on the shelf. But this is really an opportunity for us to do what we do well and to demonstrate to our customers. There's a very consistent experience with Sherman Williams. We're working with them closely to help, you know, fight through a lot of the complexity out there and make sure that they're coming out winning. So I do think, you know, where we're seeing competitors make different choices on store closings or channels, we think again, this uncertainty is our opportunity. Thanks, Alexey.

Thank you. Your next question is coming from Adam Baumgarten from Zelman Your line is live.

Operator: Thank you.

Speaker 9: Hey, everyone, just 1 for me, just thinking about Europe . It seems like it was a bit better year over year across multiple segments. You know, just curious if that's just comps, or maybe you're seeing some kind of bottoming or even improvement in demand on the ground there.

Hey, everyone.

One for me just thinking about Europe. It seems like it was a bit better year over year across multiple segments I'm just curious if that's just comps or.

Maybe youre seeing some kind of bottoming or even improvement in demand on the ground there.

Speaker 3: Well, I'll start and I'm sure Al will jump in here. I'll go back to, you know, especially on the TCG side, you know, where we're not trying to be all things to all people. I think that's a really important point.

Well I'll start and I'm sure I'll jump in here I'll go back to especially on the CCG side, you know what we're not trying to be all things to all people I think is a really important point.

Speaker 3: And we are laser focused on driving increased operating margins to your point proud of.

And we are laser focused on driving increased operating margins to your point, we're proud of the <unk>.

Speaker 3: The work that the team has done in delivering a 19% margin in Q3, we'll get some benefits for recent acquisitions.

Work that the team has done and delivering a 19% margin in Q3, we.

We will get some benefit from recent acquisitions.

Garik Shmois: Your next question is coming from Garik Shmois, from Luke Capital. Your line is live. Oh, hi, thanks. Within pro-architecture, you called out strength and commercial. I'm just wondering what drove that? It sounds a little contrary to some of the commercial data points that emerged over the course of the quarter. So just curious as to the performance there.

Speaker 4: But I'll point to, you know, four of our six businesses are up against very strong comps last year. And the team is doing all the right things to ensure that we are taking a very disciplined approach to decision-making, investment, pacing, et cetera, as we're watching the market closely and making sure that our investments are pacing with the demand in the market. Yeah, I think four of the six, to your point, had some strong comps.

But I'll point to you four of our six businesses are up against very strong comps last year.

And the team is doing all the right things to ensure that we are taking a very disciplined approach to decision making investment.

Pacing et cetera, as we're watching the market closely and making sure that our investments are pacing.

Heidi Petz: Well, I think the way to characterize that would be more back to a normal cycle where you're seeing kind of strong, you know, backlobs front half, and then, you know, it would obviously kind of look to soften a bit in the back half. So I would characterize it more as a normal cycle. But I do think that this is an opportunity, you know, we talk about the strength and position and commercial for us is amongst the highest of our segments.

With the demand in the market I think four of the six so you pointed to some strong comps.

Speaker 10: Four of the six had double-digit sales gains in Europe in Q3. And I think putting a bow on what Heidi just said, we're doing that the right way.

Four of the six had double digit sales gains and good in Europe.

Q3, and I think.

Putting a bow on what how do you just said we're doing it the right way.

Speaker 4: We're focused on the right segments where we can bring value and that our customers appreciate that value and are willing to pay for it We're not in this for practice

We're focused on the right.

Heidi Petz: So we're going to be hard at work focusing on share games, making the right decisions, making the right investments, and our people and our resources are aligned and ready to help these customers to respond to the duration of these projects. I think, you know, regardless of the demand outlook, you know, we will take share of this environment. And part of our differentiation is we are with these contractors at every step of these projects.

Segments, where we can bring value and that our customers appreciate that value and are willing to pay for it we're not in this for practice.

Speaker 4: And so we're growing and bringing value to our customers. And we're open about the fact that while we bring value to them, our shareholders need to be rewarded as well. That's why we work as hard as we do. So it's good performance in Europe and it's driving both the sales and bottom line as a result.

And so we're growing in and bringing value to our customers and we're open about the fact that while we bring value to them our shareholders need to be rewarded as well and that's why we work as hard as we do so good performance in Europe.

Driving both the sales and bottom line as a result.

Heidi Petz: And so is there navigating uncertainty and or, you know, changes that come up in every single project, our team is right there side by side to make sure that they're getting those complete on time. Yeah, I think if you look at the commercial piece, that's where we have the longest visibility, the longest lead time. So we feel pretty comfortable about what we're seeing in terms of completions into first half of 24 as Heidi said.

Thank you and good luck.

Thanks, Adam.

Speaker 1: Thank you. Your next question is coming from Steve Byrne from Bank of America. Your line is live.

Thank you. Your next question is coming from Steve Byrne from Bank of America. Your line is live.

Speaker 4: Thank you. Yes, thank you. What's the fraction of your REZI-REPaint volumes? Would you say the Sherwin-Million paint was selected by the contractor versus selected by...

Thank you yes. Thank you.

Fraction of your resin repaint volumes would you say the Sherwin Williams paint was selected by the contractor versus selected by the homeowner.

Speaker 4: The homeowner and clearly you've highlighted a multi pronged approach going after that contractor for loyalty. What would you say you can.

Heidi Petz: I think you might be referencing, you know, things like the architectural billing index, which are chopier now. That's why we're saying the back half of 24 we might start to see a little softness, but feel very comfortable. But again, about our ability, if that was to occur, our ability to fill those gaps with perhaps new res is starting to come back. We'll put our foot on the gas with the res repaint property maintenance, et cetera.

And clearly you've highlighted a multi pronged approach going after that contractor for loyalty.

Would you say you can perhaps do more to drive loyalty with the homeowners selecting sure Juan.

Speaker 4: Perhaps do more of to drive loyalty with the with the homeowners, electing Sherwin. That could help you also drive. Um, chairing.

That could help you also drive.

Share gains.

Speaker 10: Yeah, Steve, we focus on the residential repaint contractor as the applicator. And that's a very big influencer in the decision tree.

Yes, Steve.

We focus on the residential repaint contractor.

Garik Shmois: Great, that's helpful. I'm going to follow up on consumer brands, just the sequential weakness in margins, third quarter versus second quarter, was it really just the decline in volumes, quarter of a quarter or something else that drove the change in the margins? No, it's primarily, well, it's primarily two things, the sequential decline in volume, but also, you know, as we have talked about, we, and I mentioned on our working capital, you know, we're targeting a year and inventory level so that when we come out into 2024 are inventories and great shape, which means we're tweaking our production.

As the applicator and that's a very big Influencer.

The decision.

Tree.

Speaker 4: Other decision influencers would include color specification, which we've been working very hard at, and the homeowner. But typically what we see is that the homeowner turns to the professional contractor as the expert.

Other decision Influencers would include Kohler specification, which we've been working very hard to.

And the homeowner.

Typically what we see is that the homeowner turns to the professional contractor is the expert.

Speaker 4: And while in some markets with some homeowners, they'll have a specific brand in mind, but the hard work that our teams do on a daily basis and in building relationships with that residential repaying contractors, the largest driver, and it's exactly why we believe we'll continue to grow share at an outpaced rate going forward.

And while in some markets with.

Some homeowners they all have a specific brand in mind, but the hard work that our teams do on a daily basis and.

And building relationships with that residential repaint contractor is the largest driver and it's exactly why we believe we will continue to grow share at all.

<unk> rate going forward.

Speaker 10: I'll finish with this that we've had a terrific success with the residential repaying contractor, we've had seven years of double digit growth.

Garik Shmois: And volumes to make sure we stay in line with that targeted inventory level. So with production gallons being down sequentially, a low single digit number, that does have a, and this is a headwind for us in this segment. Understood.

I'll finish with this that we've had terrific success with the residential repaint contractor, we've had seven years of double digit growth.

Speaker 10: We're just getting started here and there's a long opportunity and a big opportunity and that's why we believe investing in Sherwin-Williams is the right approach.

We're just getting started here and there's a long opportunity and a big opportunity and that's why we believe investing and Sherwin Williams is the right approach.

Speaker 4: And how would you rank the REZI retained end market in paint stores as an opportunity to gain share as compared to new commercial property management and new home new home construction. How would you rank those in terms of potential share gains?

And how would you rank that.

BSI repaint and market in paint stores as an opportunity to share to gain share.

Operator: Thanks for the help. That's for luck.

Adam Baumgarten: Thank you.

Adam Baumgarten: Your next question is coming from Adam Baumgarten from Zellman, your line is live. Hey everyone, just one for me, just think about Europe, it seems like it was a bit better over your across multiple segments, you know, just curious if that should come, sir, maybe you're seeing some kind of bottoming or even improvement in demand on the ground there. Well, I'll start, I'm sure, Allison, then I'll go back to, you know, especially on the TCG side, you know, where we're not trying to be all things.

As compared to.

New commercial.

The management.

And new home new home construction, how would you rank those in terms of potential share gains.

We don't.

Speaker 10: They're all opportunities for us, Steve, and the teams that are focused on residential re-painting have the greatest opportunity.

They are all opportunities for us Steve and the teams that are focused on residential repaint the greatest opportunity.

Then when you get to the priority.

Speaker 10: When they get to the property management, they have the greatest opportunity. Then you will get to the commercial, they have. We deliver on each of those segments as that's how we feed our families. Each one of them offer terrific opportunities.

When they get to the property management they have the greatest opportunity.

Heidi Petz: All people, I think it's a really important point. And we are laser focused on driving increased operating margins to your point. We're proud of the work that the team has done in delivering a 19% margin in Q3. We'll get some benefits for recent acquisitions, but I'll point to, you know, four of our six businesses are up against very strong comp last year. And the team is doing all the right things to ensure that we are taking a very disciplined approach to decision making, investment, pacing, et cetera, as we're watching the market closely and making sure that our investments are pacing with the demand in the market.

Through the commercial reach to deliver on each of those segments as that's how we feed our families. Each one of them offer terrific opportunities.

Speaker 4: So, when you look at share gains, we've talked openly about residential repaint offering the greatest amount of share opportunity and our position in these other segments are a little bit stronger, but there's terrific opportunities there. But, but our approach. I want to be very clear.

So when you look at share gains, we've talked openly about residential repaint offering the greatest amount of share opportunity and our position in these other segments.

A little bit stronger, but there's terrific opportunities there, but but our approach I won't be very clear.

Speaker 10: You know, we were boxers, and we're in the center of the ring. We're not looking to get to the end of the bout and stand up waiting for our hands to be raised. We want a decisive knockout as it relates to these segments. And so we're pursuing aggressively each one of these. So I'm not going to parse out which offers great opportunities. They all do, and we're very determined to get after them.

We were boxers and we're in the center of the room, we're not looking for to get to the end of the.

Stand up waiting for all he has to be raised we want a decisive knockout as it relates to these segments and we are pursuing aggressively use one of these so I'm not going to parse out which offers great opportunities. They all do and we're very determined to get after them.

Heidi Petz: I think four of the six to your point had some strong cons, but four of the six had double digit sales gains in in your in Q3 and I think, you know, putting a bowl on what Heidi just said, we're doing that the right way. We're focused on the right segments where we can bring value and that our customers appreciate that value and are willing to pay for it. We're not in this for practice.

Okay. Thank you.

You bet Thanks, Steve.

Speaker 1: Thank you. Your next question is coming from Eric Boshard from Cleveland Research. Your line is live.

Thank you. Your next question is coming from Eric Bosshardt from Cleveland Research. Your line is live.

Speaker 7: Good morning. In terms of the investments in 23 to gross share, I'm curious what the current thinking is about 24. and I guess specifically I'm trying to figure out, do you sustain incremental investments or does SNA growth go back to normal trend or perhaps below normal trend? How do you think about that?

Good morning in terms of the investments in 'twenty three to grow share I'm curious, what's the current thinking is about 24, and I guess, specifically I'm trying to figure out do sustained incremental investments or does SG&A growth go back to normal trend or perhaps below normal.

Heidi Petz: And so we're growing and bringing value to our customers and and we're open about the fact that while we bring value to them, our shareholders need to be rewarded as well. That's why we work as hard as we do. So it's good performance in Europe and it's it's driving both the sales and bottom line as a result. Thank you. Yeah, thank you.

How do you think about that.

Speaker 6: Yeah, Eric, here's how I would think, here's how we think about it. And as you know, we manage operating margin.

Yeah, Eric Here's how I would think here's how we think about it and and as you know we manage operating margin.

Speaker 6: not specific SG&A, and as this year showed, our volumes held up better than what we had planned coming into the year. Our gross margin performance and gross margin expansion was a little bit better than what we had coming into this year, so it allowed us the opportunity to lean in and put more investments in than we normally would. We are certainly going to have...

Not specific SG&A.

As last year showed our volumes held up better than what we had planned coming into the year. Our gross margin performance gross margin expansion was a little bit better than what we had coming into this year. So it allowed us the opportunity to lean in and put more investments in than we normally would we are certainly going to have.

John Morikis: What fraction of your ready repaint volumes, would you say the Sherman William paint was selected by the contractor versus selected by the homeowner. And clearly you've highlighted a multi-pronged approach going after that contractor for loyalty. What would you say you can perhaps do more of to drive loyalty with with the homeowner selecting sure one that could help you also drive chair games. Yeah, see, we focus on the residential repaint contractor as the applicator and that's a very big influencer in the decision tree.

Speaker 6: growth and investments next year, I would say back to a more normal level and then as we see the year unfold with

Growth in investments next year, I would say back to a more normal level and then as we see the year unfold with.

Speaker 6: volumes, and gross margin, and what we see happening going into 2025, that'll dictate how much more investments we put into each of those segments.

Volumes and gross margin and <unk>.

What we see happening going into 2025 that'll dictate.

How much more investments, we put into each of those segments.

Speaker 3: Eric, I would add to that, I think going hand in hand, you know, you asked a question about SG&A, and I, we talk a lot about managing operating margin. I think just talking about how we're thinking about a different approach to working capital is an important element here that a very intentional focus on end to end supply chain, but also a broad simplification effort that goes across every business unit to make sure we're as tight as possible.

Eric I would add to that I think going hand in hand, you asked the question about SG&A and it we talk a lot about managing operating margin I think just talking about how we're thinking about a different approach to working capital is an important element here that are very intentional focus on end to end supply chain, but also abroad simplification effort that goes across every business unit.

John Morikis: Another decision influencers would include color specification, which we've been working very hard at and in the homeowner. But typically what we see is that the homeowner turns to the professional contractor as the expert. And while in some markets with some homeowners, they'll have a specific brand in mind, but the hard work that our teams do on a daily basis and in building relationships with that residential repaint contractor. The largest driver. And it's exactly why we believe we'll continue to grow share at an outpaced rate going forward.

It.

To make sure were as tight as possible.

Speaker 3: You know, we talk about our value proposition goes far beyond what's in the can. And we're looking at this through the lens of our customers. And our value proposition can't include idle assets or excessive working capital. And our customers just simply aren't willing to pay for that. So I think it's, you know, obviously, always going to be room for improvement here. But we're looking to manage that closely. Al and I are locked at the hip relative to SG&A working capital to drive those operating.

We talk about our value proposition goes far beyond what's in the can and we're looking at this through the lens of our customers and at our value proposition can't include idle assets or excess of working capital and our customers just simply aren't willing to pay for that so I think it's you know obviously, we're always going to be room for improvement here, but as far as <unk>.

John Morikis: I'll finish with this that we've had terrific success with the residential repaint contractor. We've had seven years of double digit growth. We're just getting started here and there's a long opportunity and a big opportunity and that's why we believe investing in journal lines is the right approach.

Looking to manage that closely.

Alan and I are locked to hit relative to SG&A and working capital to drive operating margin.

Speaker 6: helpful. And then, Al, if I could follow up. In terms of managing the operating margin, is it fair to say as you solve for 24, you're managing these different levers for some degree of operating margin expansion? Again, I'm not asking you to comment on 24. I'm just curious how that thinking can play out. Absolutely, Eric. I think

That's helpful and then al if I could follow up in terms of managing the operating margin is it fair to say as you solve for 24, you're managing these different levers for some degree of operating margin expansion again, I'm not asking you to comment on 24, I'm just curious how that thinking can play out.

John Morikis: And how would you rank the ready retained and market in in paint stores as an opportunity to share to gain share as compared to new commercial property management and new home new home construction, how would you rank those. In terms of potential share gains we don't they're all opportunities for us to even the teams that are focused on residential repay at the greatest opportunity. Then we get to the property when they get to the property management they have the greatest opportunity then you will get to the commercial they have reach deliver on each of those segments as that's how we feed our families each one of them offer terrific opportunities.

Eric.

I think.

Speaker 6: You know, just color around 2024. I mean, we believe the macro environment is still going to be difficult. We're going to see choppy performance on different parts of our business, different segments, different regions. But we absolutely believe that we're going to drive operating margin growth through that whatever environment that we see unfold in 2024. We'll outperform the market. That's right.

Just color around 2024, I mean, we believe the macro environment is still going to be difficult, we're going to see choppy performance on different parts of our business different segments different regions, but we absolutely believe that we're going to drive operating margin growth through that whatever environment that we saw.

Seen unfold in 2024 will outperform the market that's right.

Thank you.

Thanks, Eric.

Speaker 1: Thank you. Your next question is coming from Michael Sisson from Wells Fargo.

Thank you. Your next question is coming from Michael Sison from Wells Fargo.

John Morikis: So when you look at share gains we talked openly about residential repaint offering the greatest amount of share opportunity in our position in these other segments are a little bit stronger but there's terrific opportunities there but but our approach I want to be very clear. You know we were boxers and we're in the center of the ring we're not looking for to get to the end of the to the bout and stand up waiting for our hands to be raised we want a decisive knockout as it relates to these segments and so we're pursuing aggressively each one of these so I'm not going to parse out which offers great opportunities they all do and we're very determined to get after them.

Your line is live.

Speaker 15: Hi there, this is Abigail on your mic. I just wanted to press further into the raw material basket.

Hi, there this is the idea on for Mike.

I just wanted to perhaps further into the raw material basket.

Speaker 15: Can you speak to which materials you've seen the most inflation in and where prices might be holding up more?

Can you speak to which materials, you've seen the most deflation and where prices might be holding up more.

Speaker 2: Yeah, Abigail happy to do that. So as we said, the third quarter was likely the biggest benefit for us from a year over year perspective, I would say, as we've commented, you know, the petrochemical side of the basket is where we've seen.

Yeah, Abigail happy to do that so as we said the third quarter was <unk>.

Likely the biggest benefit for us from a year over year perspective.

I would say.

As we've commented the petrochemical side of the basket is where we've seen some relief.

Speaker 2: Some relief to get a little bit.

<unk> been a little bit stickier, but I think al said it well earlier as you think about going forward.

Speaker 2: stickier, but I think Al said it well earlier is you think about going forward.

Operator: Okay, thank you. You bet next week.

Speaker 2: You know, oil is moving around and while it hasn't necessarily made its way into those commodities yet.

Oil is moving around and while it hasn't necessarily made its way into those commodities, yet I think it's to be determined of where that heads into next year. So so right now it's again petrochemical side has been probably the greatest relief.

Eric Bosshard: Thank you your next question is coming from Eric Bosshard from Cleveland research your line is live. Good morning in terms of the investments in in 23 to grow share I'm curious what the current thinking is about 24 and I guess specifically I'm trying to figure out. Do you sustain incremental investments or does as you know growth go back to normal trend or perhaps below normal trend how do you think about that.

Speaker 2: I think it's 2B determined of where that heads into next year. So right now it's, again, petrochemical side has been probably the greatest relief. TiO to a little bit stickier.

Two a little bit stickier.

Speaker 2: We feel very good about our ability to hold on to the pricing that we put into the marketplace given the solutions we're providing our customers.

We feel very good about our ability to hold onto the pricing that we've put into the marketplace given the solutions, we're providing our customers.

Speaker 2: And we'll have a better update on where it goes as we get into January .

And we'll have a better update on where it goes as we get into January.

Eric Bosshard: Yeah, we're here here so I would think here's how we think about it and and as you know we manage operating margin not specific S. G. N. A. And as last year showed our volumes held up better than what we had planned coming into the year our gross margin performance and gross margin expansion was a little bit better than what we had coming into this year so it allowed us the opportunity to lean in and put more investments in.

Speaker 15: Okay, thanks. And then a quick question about your packaging desalking that you were referencing. Is that still persistent or has that started to tail off a little bit?

Okay. Thanks, and then a quick question about your packaging Destocking that you were referencing is that still persistent or he thought starting to tail off a little bit.

Speaker 3: Well, I would say this, similar to what we talked about before, we won't get into very specific details here, but I think it really is important that we're at lockstep with the demand environment, making sure that.

Yeah.

Well, it's a I would say that's similar to what we talked about before where we wont get into very specific details here, but I think it really is important that we're in lockstep with the demand environment and making sure that John mentioned. This earlier that is our customers are working through some choppiness right now that we've got capacity continuing to come on.

Speaker 3: John mentioned this earlier, that as our customers are working through some choppiness right now, that we've got capacity, you know, continuing to come online through our Tourneau brand site. And as soon as we have that capacity, we're confident, not just in our ability to have the capacity to satisfy that demand, but what's behind that are the technology that the market is looking for. So we're very confident that we're going to have that online here soon.

Eric Bosshard: Then we normally would we are certainly going to have growth and investments next year I would say back to a more normal level and then as we see the year unfold with. Volume and gross margin and what we see happening going into 2025 that'll dictate how much more investments we we put into each of those segments. Eric I would add to that I think going hand in hand you have to question about S. G. N. A.

Online through our tour, new France site and as soon as we have that capacity. We're confident not just our ability that you have the capacity to satisfy that demand with behind that are the technologies that the market is looking for so we were very confident that we're going to have that online here shortly.

Speaker 10: I think there is some destocking with our customers have spoken about some areas of excessive inventory that they're driving down and and to Heidi's point, you know, is our additional.

I think there is some destocking with customers have spoken about some areas of excessive inventory that they are driving down and.

Eric Bosshard: We talk a lot about managing operating margin I think just talking about how we're thinking about a different approach to working capital is an important element here that. Very intentional focus on end to end supply chain but also a broad simplification effort that goes across every business unit to make sure we're as tight as possible and. We talk about our value proposition, goes far beyond what's in the can, and we're looking at this through the lens of our customers.

And.

So at this point you know is our.

Our additional.

Speaker 4: capacity comes back online, we get through the repairs down in Garland, we're going to take this wonderful technology and bring solutions to our customers that allow them to run their plants more efficiently.

Capacity comes back online we go through a repair, Arizona and Garland, we're going to take this wonderful technology and bring solutions to our customers that allow them to run their plants more efficiently.

Yeah.

Okay. Thank you.

Thanks drew.

Speaker 1: Thank you. Your next question is coming from Patrick Cunningham from Citi. Your line is live.

Thank you. Your next question is coming from Patrick Cunningham from Citi. Your line is live.

Eric Bosshard: Our value proposition can't include idle assets or accessible working capital, and our customers are simply not willing to pay for that. So, I think it's obviously always going to be room for improvement here, but we're looking to manage that closely. Alan Eyre looked at relative to SGN, working capital to drive those operating margins. It's helpful, and then I could follow up, in terms of managing the operating margin, is it fair to say, as you solve for 24, you're managing these different levers for some degree of operating margin expansion.

Speaker 16: Hi, this is Eric on for Patrick. Given the DIY consumer is under pressure, have you seen any relative share gains or losses within PSG or CBG? Thank you.

Hi, This is Eric on for Patrick.

Given the DIY consumers under pressure have you seen any relative share gains or losses within PSG always CPG. Thank you.

Speaker 10: Well, we're clearly seeing improvement and share gain in our PSG, our stores business.

Well, we're clearly seeing improvement and share gain in our PSG our stores business.

Speaker 10: I mentioned the comparisons to last year in the quarter were all.

How do you mentioned the.

Comparisons to last year in the quarter were all very.

Speaker 10: Very strong 20 nearly 20% comparison that we've continued to perform very well even against that backdrop

Very strong nearly 20% comparisons and we've continued to perform very well even against that backdrop.

Eric Bosshard: Again, I'm not asking you to comment on 24. I'm just curious how that thing can play out. Absolutely, Eric, I think just color around 2024. I mean, we believe macro environments are going to be difficult. We're going to see choppy performance on different parts of our business, different segments, different regions, but we absolutely believe that we're going to drive operating margin growth through that whatever environment that we see unfold in 2024. We'll help perform the market. That's right.

Eric Bosshard: Thank you. Eric. Thank you.

Speaker 4: of the investments that we're making are easy to point to as key drivers for future share, but I drive you back to the.

The investments that we're making are easy to point to as key drivers for future share, but I'd drive back to the core business that we have and the expectations. We have for organic growth. How do you mentioned quickly in one of the M&A questions about that we don't need acquisitions.

Speaker 10: core business that we have and the expectations we have for organic growth. Heidi mentioned quickly in one of the M&A questions about that we don't need acquisitions and

Speaker 4: you know, in stores, when you look at our business, you could arguably say that this core business in itself is going to be a fantastic.

In stores when you look at our business you could arguably say that this core business in itself is going to be a fantastic show to watch and that will be but our expectations are to accelerate growth even faster. So the investments that we're making.

Speaker 4: show to watch, and it will be. But our expectations are to accelerate growth even faster. So the investments that we're making will allow us to capture that even quicker. As it relates to our consumer business.

Michael Sisson: Your next question is coming from Michael Sisson from Wells Fargo. Your line is live. Hi there.

Allow us to capture that even quicker as it relates to our consumer business. We've got wonderful partners, where we're committed to their growth already mentioned things like capacity and helping them to drive down their inventory.

Speaker 4: We've got wonderful partners. We're committed to their growth.

Speaker 10: I already mentioned things like capacity and helping them to drive down their inventory with the reassurance that we have the ability to respond to them. So from the backside, we're, we're clearly trying to help position them.

Michael Sisson: This is Abigail on your mic. I just wanted to press further into the raw material basket. Can you speak to which materials do you see the most inflation in, and where prices might be holding up more? Yeah, Abigail, happy to do that. So as we said, the third quarter was likely the biggest benefit for us from a year over a year perspective. I would say, as we've commented, you know, the tetrachemical side of the basket is where we've seen some relief.

Assurance that we have the ability to respond to them. So from the back side, we're clearly trying to help position them.

Speaker 10: financially, but more importantly, we're introducing new products, we're bringing innovation, we're adding people in our team, on our team to help train their team members.

Financially, but more importantly, we're introducing new products, we're bringing innovation, we're adding people in our team on our team to help train their team members and we do believe there is continued opportunity to convert people that might be in or not.

Speaker 4: And we do believe there's a continued opportunity to convert people that might be in our customers' stores as shoppers.

Michael Sisson: CIO2 has been a little bit stickier, but I think Al said it well earlier as you think about going forward, you know, oil is moving around. And while it hasn't necessarily made its way into those commodities yet, I think it's to be determined of where that heads into next year. So right now, it's again, tetrachemical side has been probably the greatest relief. CIO2 a little bit stickier. We feel very good about our ability to hold on to the pricing that we've put into the marketplace, given the solutions we're providing our customers. And we'll have a better update on where it goes as we get into January. Okay, thanks.

Our customers stores shoppers, we can help turn them into buyers of products in our category. So we're excited this is a.

Speaker 4: we can help turn them into buyers of products in our category. So we're excited. This is.

Speaker 10: a type of market that most don't hope for. I would say arguably we don't hope for this type of market, but we know what to do. We're gonna turn it into advantage to our shareholders.

The type of market that most don't hope for I would say arguably we don't hope for this type of market, but we know what to do we are going to turn it into advantage to our shareholders.

[noise].

Thanks, Patrick.

Speaker 1: Thank you. Our next question is coming from Aaron Ceccarelli from Barenburg. Your line is locked.

Thank you. Our next question is coming from Erinn Ceccarelli from Burton Berg Your line is live.

Speaker 17: Hello. Thank you for taking my question. Congratulations on strong results. I have one on product simplification. You have been doing quite a lot of simplification inside and outside the can, reducing formulation and also right-sizing the number of SKUs. Can you help me understand a little bit better where are we in this process and if you can quantify what has been done and where can we go from here? Thank you.

Hello. Thank you for taking my question congratulations from reserves have one on product simplification you have been doing quite a lot of.

Operator: And then a quick question about your packaging desolking that you were referencing. Is that so persistent or has that started to kale off a little bit? Well, it's a, I would say this a similar to what we talked about before, we won't get into very specific details here, but I think it's really as important that we're in lockstep with the demand environment, making sure that. So I mentioned this earlier that as our customers are working through some choppiness right now that we've got capacity, you know, continuing to come online through our tor new.

Simplification inside and outside the con reducing formulation I noticed some right sizing the number of Skus. Maybe can you help me understand a little bit better where are we in this process and if you can quantify what they've been done and where can we go from here. Thank you.

Speaker 3: Yeah, Aaron, I would say we're early innings, really confident that there's a regressive road map ahead here. And the way I would characterize this is thinking through this is truly an end to end effort across the enterprise that you mentioned.

Yeah, Aaron I would say, we're early innings I'm really confident that.

Roadmap ahead here and the way I would characterize this is.

Thinking through this is truly an end to end effort across the enterprise. So you mentioned.

Speaker 3: whether it's ski rationalization, formula rationalization, but really starting with raw material and understanding the basket all the way through.

Operator: And as soon as we have that capacity, we're confident, not just our ability to have the capacity to satisfy that demand, but what's behind that are the technologies that the market is looking for. So we're very confident that we're going to have that online here. I think there is some destocking. Our customers have spoken about some areas of excessive inventory that they're driving down and to Heidi's point is our additional capacity comes back online. We get through the repairs down in Garland. We're going to take this wonderful technology and bring solutions to our customers that allow them to run their plants more efficiently. Okay, thank you. Thank you.

Whether it's SKU rationalization formula rationalization, but really starting with raw material and understand the basket all the way thrill.

Speaker 3: to what it is that we're sending out to our customers. But I think an important point here is it's a mindset.

To what it is that we're sending out to our customers that I think an important point here is it's a mindset.

Speaker 3: that we have adopted going forward. And so it's part of how we, John mentioned innovation, it's part of our new product development process. I mean, we're gonna make sure that we're always looking at.

We have adopted going forward and so it's part of how we John mentioned innovation is part of our new product development process. I mean were going to make sure that we're always looking at opportunities to take complexity out of the business and I take it a step further if you look at.

Speaker 3: opportunities to take complexity out of the business. And I think it's up further if you look at.

Speaker 3: You know, our performance coatings group, we still have a lot of opportunity as we think about even, you know, rationalization of footprint. So the team's hard at work.

Performance coatings group, we still have a lot of opportunity as we think about even rationalization of footprint. So the team is hard at work.

Speaker 10: know, this isn't going to be something that we land in the next 12 or 24 months. That's something we're going to be constantly looking at going forward. And I think, uh, Heidi's strength here is, and she's a humble person. She won't say this, but I, I will say this, having a front row to this, uh, to this show, you've got a leader that.

So this isn't going to be something that we land in the next 12 or 24 months, that's what we're going to be constantly looking at going forward and I think.

Patrick Cunningham: Your next question is coming from Patrick Cunningham from City. Your line is live. Hi, this is Eric on from Patrick.

This strength here is.

He's a humble person she won't say this but I will say this having the front row to this too.

Operator: Given the DIY consumers under pressure, have you seen any relative sharegain to losses within a PSG or CBG? Thank you. Well, we're clearly seeing improvement in sharegain in our PSG, our stores business. Heidi mentioned the comparisons to last year in the quarter were all very strong, nearly 20% comparisons and we've continued to perform very well even against that backdrop of the investments that we're making are easy to point to as key drivers for future share.

So you've got a leader that.

Speaker 10: is driving the opportunity of the bottom line. She's got a very respectful approach to our traditions and to our norms. You know, we're a 157 year old company. There's a lot of things that we do and have done. And many of them are right.

As driving the opportunity to the bottom line. She has got a very respectful approach to our traditions and to our norms were 157 year old company. There's a lot of things that we do and have done in many of them are right.

Speaker 10: And we've got an opportunity, I think, to take a look at those traditions and norms and ask if there's a better way to do that. And this simplification effort is a great example of that. I think our company is going to come out much stronger, much more efficient, better responsiveness to our customers, and an opportunity to pursue.

We've got an opportunity I think to take a look at those the traditions of norms and ask if there is a better way to do that and this simplification effort is a great example of that I think our company is going to come out much stronger much more efficient better responsiveness to our customers and an opportunity to pursue.

Operator: I drive it back to the core business that we have and the expectations we have for organic growth. Heidi mentioned quickly and one of the MNA questions about that we don't need acquisitions and you know, in stores when you look at our business, you could arguably say that this core business in itself is going to be a fantastic show to watch and it will be but our expectations are to accelerate growth even faster.

Speaker 10: business in new ways. We didn't really get into our digital approach.

Business in new ways, we didn't really get into our digital approach.

Speaker 4: And the approach that Heidi's leading there to our team to better use the data that we have available in ways that we just haven't in the past. We've scratched around the surface.

And the approach that hide he's leaving there to our team to better use the data that we have available and ways that we just haven't in the past we've scratched the surface, but there are some terrific opportunities that she is leading and I think we will further differentiate sherwin Williams.

Speaker 4: But there are some terrific opportunities that she's leading that I think will further differentiate Sherwin-Williams.

Okay.

Speaker 17: Thank you. And I have a follow-up on PSG. You touched earlier on the commercial vertical. Maybe can you provide some color on property management? Because also this vertical has been incredibly strong this year. And again, Q3 was very strong against very tough coms. So I would like to understand how you think about the momentum in terms of volume growth going into next year, please.

Thank you.

A follow up on PSG, you've touched on the commercial vertical maybe can you provide some color on property management because most of these vertical has been incredibly strong this year.

Operator: So the investments that we're making will allow us to capture that even quicker as it relates to our consumer business. We've got wonderful partners were committed to their growth. Heidi mentioned things like capacity and helping them to drive down their inventory with the reassurance that we have the ability to respond to them. So from the backside, we're clearly trying to help position them financially, but more importantly, we're introducing new products. We're bringing innovation.

And.

Again, Q3 with very strong against very tough comps. So I would like to understand how you think about the momentum when it comes to volume growth going into next year. Please.

Speaker 3: Yeah, the underlying demand is solid. I think, you know, we've seen some delayed catbacks and

Yeah. The underlying demand is solid I think we've seen the delayed capex in and a lot of deferred maintenance that is now being addressed and we will continue to see that coming into next year I would say.

Speaker 3: a lot of deferred maintenance that is now being addressed and we'll continue to see that coming into next year.

Operator: We're adding people in our team on our team to help train their team members and we do believe there's a continued opportunity to convert people that might be in our customers stores as shoppers. We can help turn them into buyers of products in our category. So we're excited. This is a type of market that most don't hope for. I would say arguably we don't hope for this type of market, but we know what to do.

Speaker 3: I would say, relative to apartment terms, they're improving a bit influenced by, you know, the return to travel office school driving some of that demand, but much like our momentum in new.

Relative to apartment turns are improving.

Was it influenced by the return to travel office school driving some of that demand is that much like our momentum in new residential.

Speaker 3: You know, we're demonstrating our unique ability here to really serve the property management segment with a consistent experience that I believe only Sherwin-Williams can deliver and regardless of the size.

We are demonstrating our unique ability here to really serve that property management segment with a consistent experience that I believe only sherwin Williams can deliver.

Regardless of the size or the location.

Speaker 3: of these contractors, you know, our goal is consistently the same. It's we want to make it as convenient as possible to leverage our stores, our reps, and our segment-specific tools and solutions here. So we're taking share, we're increasing our number of, you know, sole preferred or exclusive contracts, if you will, and we're confident that we're going to continue with our foot on the gas going forward.

These contractors our goal is consistently the same.

Operator: We're going to turn it into advantage to our shareholders. Thanks Patrick. Thank you. Our next question is coming from Aaron Checker-Relly from Baronberg. Your line is live. Hello. Thank you for taking my question. Congratulations from results. I have one on product simplification. I've been doing quite a lot of simplification inside and outside the can. I've done reduced information and also right size in the number of SKUs.

We want to make it as convenient as possible to leverage our stores, our rep and our segment specific tools instilled.

Installations here. So we're taking share we are increasing our number of salt preferred or exclusive contracts. If you will.

And we're confident that we're going to continue with our foot on the gas going forward.

Thank you talked about.

Thank you Aaron.

Speaker 1: Thank you. That concludes our Q&A session. I will now hand the conference back to President and Chief Operating Officer Heidi Petz for closing remarks. Please go ahead.

Thank you that concludes our Q&A session I will now hand, the conference back to President and Chief Operating Officer, Heidi Petz for closing remarks. Please go ahead.

Aaron Checker-Relly: Can you help me understand a little bit better where are we in this process and if you can quantify what have been done and where can we go from here? Thank you. Yeah, Aaron, I would say we're early innings. Really confident that there's a regress in the road map ahead here. In the way I would characterize this as thinking through this as truly an end-to-end effort across the enterprise. You mentioned whether it's ski rationalization, formula, rationalization, but really starting with raw material and understanding the basket all the way through to what it is that we're sending out to our customers.

Great. Thank you.

Speaker 3: So I expect to close out this year with momentum. I think you heard that loud and clear here. We believe that we're growing share and we are our humility takes us to the point where we say we recognize that there is no finish line. So we're, we're determined to move forward.

So I expect to close out this year with momentum I think you heard that loud and clear here. We believe that we're growing share and we are our humility takes us to the point, where we say we recognize that there is no finish line. So we're determined to move forward here.

Speaker 3: Going forward, as we look at 2024, here's what I can tell you. I have a clear line of reality, there is going to be some choppiness that we talked about ahead, but we have seen this movie before and my confidence is in this team, our ability to execute on our strategy that we know is working, our confidence that our key investments that we know will deliver shareholder value, and those combined together is what gives me confidence that we're going to outperform the market.

Going forward, if we look at 2024, here's what I can tell you I have clear line of reality.

There is going to be some choppiness that we talked about ahead, but we have seen this movie before and my confidence in this team our ability to execute on our strategy that we know what's working our confidence that our key investments that we know will deliver shareholder value.

Aaron Checker-Relly: But I think an important point here is it's a mindset that we have adopted going forward. And so it's part of how we John mentioned innovation as part of our new product development process. I mean, we're going to make sure that we're always looking at opportunities to take complexity out of the business. And I take it a step further, if you look at, you know, our performance coding group. We still have a lot of opportunity as we think about even, you know, rationalization of footprint.

And those combined together is what gives me confidence that we're going to outperform the market.

Speaker 3: With any additional questions, please feel free to reach out to Jim and Eric, and we'll conclude with just looking forward to talking with all of you in January about our outlook and our plans, and have a wonderful holiday.

Any additional questions. Please feel free to reach out to Jim and Eric and will conclude with just looking forward to talking with all of you in January about our outlook and our plan and have a wonderful holiday.

Aaron Checker-Relly: So the team's hard at work. You know, this isn't going to be something that we land in the next 12 or 24 months that we're going to be talking about. And I think Heidi's strength here is a humble person. She won't say this, but I will say this having a front row to this, to this show. You've got a leader that is driving the opportunity to the bottom line. She's got a very respectful approach to our traditions and to our norms, you know, 157-year-old company.

Speaker 1: Thank you, everyone. This concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.

Okay.

Thank you everyone. This concludes today's event you may disconnect at this time and have a wonderful day.

You for your participation.

Aaron Checker-Relly: There's a lot of things that we do and have done. And many of them are right. And we've got an opportunity, I think, to take a look at those traditions and norms and ask if there's a better way to do that. And this simplification effort is a great example of that. I think our company is going to come out much stronger, much more efficient, better responsiveness to our customers and an opportunity to pursue business in new ways.

Aaron Checker-Relly: We didn't really get into our digital approach and the approach that Heidi's leading there to our team to better use the data that we have available in ways that we just haven't in the past. We've scratched around the surface, but there are some terrific opportunities that she's leading. And I think we'll further differentiate some lines. Thank you.

Heidi Petz: And I have a follow up on PSG. You touched earlier on on the commercial vertical. If you can, you provide some color on property management because also this vertical has been incredibly strong this year. And again, Q3, very strong against very tough com. So we'd like to understand how you think about the momentum in terms of volume growth going to next year, please. Yeah, the underlying demand is solid. I think, you know, we've seen some delayed catbacks and a lot of deferred maintenance that is now being addressed and will continue to see that coming not into next year.

Heidi Petz: I would say relative to apartment terms are improving. A bit influenced by, you know, the return to travel office school driving some of that demand, but much like our momentum in new residential, you know, we're demonstrating our unique ability here to really serve the property management segment with a consistent experience that I believe only Sherwin Williams can deliver. And regardless of the size or the location of these contractors, you know, our goal is consistently the same.

Heidi Petz: It's we want to make it as convenient as possible to leverage our stores or reps and our segment specific tools and solutions here. So we're taking share, we're increasing our number of, you know, sole preferred or exclusive contracts, if you will. And we're confident that we're going to continue with our foot on the gas going forward. Thank you. All the best. Thank you, Aaron. Thank you.

Heidi Petz: That concludes our Q&A session.

Heidi Petz: I will now hand the conference back to President and Chief Operating Officer, Heidi Petz, for closing remarks. Please go ahead. Great. Thank you. So I expect to close out this year what we mentioned. I think you've heard that lot and clear here. We believe that we're growing share and we are humility takes us to the point where we say we recognize that there is no finish line, so we're determined to move forward here.

Heidi Petz: Going forward as we look at 2024, here's what I can tell you, I have clear line of reality. There is going to be some choppiness that we talked about ahead, but we have seen this movie before and my confidence is in this team, our ability to execute on our strategy that we know is working, our confidence that our key investments that we know will deliver shareholder value. And those combined together is what gives me confidence that we're going to perform the market.

Heidi Petz: With any additional questions, please feel free to reach out to Jim and Eric, and we'll conclude with just looking forward to talking with all of you in January about our outlook and our plans and have a wonderful holiday. Thank you, everyone.

Operator: This concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.