Q4 2023 The Sherwin-Williams Co Earnings Call

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With us on today's call are Heidi Petz, President and CEO al Mr. Sheehan, Chief Financial Officer, Jane Cronin Senior Vice President Enterprise Finance, and Jim Jaye, Senior Vice President Investor Relations and communications.

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

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

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

Jane Cronin: Any forward looking statement speaks only as of the date on 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.

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

Jane Cronin: After the company's prepared remarks, we will open up this session to questions I will now turn the call over to Jim Jaye.

Good morning, Thank you for joining the Sherwin Williams Company's review of fourth quarter 2023 results and our outlook for the first quarter and full year of 2024.

Jim Jaye: Thank you and good morning to everyone Sherwin Williams delivered solid fourth quarter results concluded a record year for the company.

Speaker Change: With us on today's call are Heidi Petz, President and CEO al Mr. Sheehan, Chief Financial Officer, Jane Cronin Senior Vice President Enterprise Finance, and Jim Jaye, Senior Vice President Investor Relations and communications.

Jim Jaye: Sales grew four 1% to $23 1 billion.

Jim Jaye: And adjusted earnings per share grew 18, 6% to $10 35 a share.

Sales in the fourth quarter increased by a low single digit percentage against the tough comparison.

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

Jim Jaye: We generated significant year over year gross margin improvement.

Jim Jaye: As we previously described we also continue our deliberate and accelerated investments in the business as reflected by the low double digit year over year increase in SG&A in the quarter.

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

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

Speaker Change: These investments are being made to take advantage of current market uncertainty.

Speaker Change: We are aimed at driving the success of our customers and above market growth across all businesses.

Jane M. Cronin: Any forward looking statement speaks only as of the date on 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 Change: Adjusted earnings per share in the quarter decreased by a mid single digit percentage related to higher non operating costs.

Speaker Change: We maintained our disciplined capital allocation approach and returned $641 million to our shareholders through dividends and share repurchases during the quarter.

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

Jane M. Cronin: After the company's prepared remarks, we will open up this session to questions I will now turn the call over to Jim Jaye.

Speaker Change: Sales in all three of our reportable segments were within or better than our guidance.

Speaker Change: And our architectural business commercial and residential repaint were the strongest performers while DIY remained challenging.

Jim Jaye: Thank you and good morning to everyone Sherwin Williams delivered solid fourth quarter results concluded a record year for the company, where sales grew four 1% to $23 1 billion and adjusted earnings per share grew 18, 6% to $10 35.

Speaker Change: In our industrial business growth was variable by division.

Speaker Change: Sales grew in Europe, and Latin America, the softness in North America and Asia.

Heidi Petz: Let me now turn it over to Heidi, who will provide some commentary on our fourth quarter results by segment in a few full year highlights before moving on to our 2020 for outlook and your questions.

Jim Jaye: Sure.

Sales in the fourth quarter increased by a low single digit percentage against the tough comparison.

Jim Jaye: We generated significant year over year gross margin improvement.

Jim Jaye: As we previously described we also continued our deliberate and accelerated investments in the business as reflected by the low double digit year over year increase in SG&A in the quarter.

Heidi Petz: Thank you Jim.

Heidi Petz: I'll begin with the paint stores group, where sales increased two 3% against a mid teens comparison.

Heidi Petz: Volume drove the increase as our previous price increase annualized in September.

Jim Jaye: These investments are being made to take advantage of current market uncertainty.

Heidi Petz: Segment margin improved 210 basis points to 19, 3%.

They're aimed at driving the success of our customers and above market growth across all businesses.

Jim Jaye: Protective and marine commercial and residential repaint drove the growth.

Jim Jaye: Adjusted earnings per share in the quarter decreased by a mid single digit percentage related to higher non operating costs.

Jim Jaye: Strength in these markets was partially offset by decreases in new residential and property management.

Jim Jaye: From a product perspective exterior and interior paint sales both increased by low single digit percentages.

Jim Jaye: We maintained our disciplined capital allocation approach and returned $641 million to our shareholders through dividends and share repurchases during the quarter.

Jim Jaye: <unk> sales grew faster, but were a smaller part of the mix.

Jim Jaye: We opened 35, new paint stores in paint stores group in the fourth quarter and a total of 76 new stores in 2023.

Jim Jaye: Sales in all three of our reportable segments were within or better than our guidance.

Jim Jaye: And our architectural business commercial and residential repaint were the strongest performers while DIY remain challenging.

Jim Jaye: We also announced a 5% price increase to our customers in the quarter effective February one.

In our industrial business growth was variable by division.

Moving on to our consumer brands group sales decreased by seven 1% in the quarter, which was better than our guidance.

Jim Jaye: Sales grew in Europe, and Latin America.

Jim Jaye: Softness in North America and Asia.

Jim Jaye: Sales increased mid teens percentage in Europe, and Latin America.

Speaker Change: Let me now turn it over to Heidi, who will provide some commentary on our fourth quarter results by segment in a few full year highlights before moving on to our 2020 for outlook and your questions.

Jim Jaye: Sales decreased in North America by a low double digit percentage as customers manage their inventories lower due to soft paint demand, partially offset by an increase in the pro who paints sales.

Heidi: Thank you Jim.

Heidi: I'll begin with the paint stores group, where sales increased two 3% against a mid teens comparison.

Jim Jaye: Adjusted segment margin, which excludes acquisition related amortization expense and impairment charge related to trademarks in Europe and the negative impact from the significant devaluation of the Argentine peso in December was 10, 8% of.

Heidi: <unk> drove the increase as our previous price increase annualized in September.

Heidi: Segment margin improved 210 basis points to 19, 3%.

Jim Jaye: The decrease from last year's fourth quarter was driven by lower volume and higher nonoperating costs.

Jim Jaye: Protective and marine commercial and residential repaint drove the growth.

Jim Jaye: Strength in these markets was partially offset by decreases in new residential and property management.

Jim Jaye: Sales in the performance coatings group increased slightly with continued choppiness across each of our businesses and regions.

Jim Jaye: From a product perspective exterior and interior paint sales both increased by low single digit percentages exterior sales grew faster, but were a smaller part of the mix.

Jim Jaye: Acquisitions, and favorable FX were offset by lower volume.

Jim Jaye: Adjusted segment margin, which excludes acquisition related amortization expense and the Argentine devaluation impact improved to 17, 3%.

Jim Jaye: We opened 35, new paint stores in paint stores group in the fourth quarter and a total of 76 new stores in 2023 wells.

Jim Jaye: This is the fourth straight quarter. This team has delivered year over year segment margin improvement.

Jim Jaye: We also announced a 5% price increase to our customers in the quarter effective February one.

Jim Jaye: This performance reflects execution of our strategy moderating raw material costs and the ongoing.

Jim Jaye: Moving on to our consumer brands group sales decreased by seven 1% in the quarter, which was better than our guidance.

Jim Jaye: Going value, we're providing customers.

Heidi Petz: Industrial wood led the growth, including the impact of recent acquisitions.

Jim Jaye: Sales increased mid teens percentage in Europe, and Latin America.

Heidi Petz: Coil and automotive refinish also delivered solid growth.

Jim Jaye: Sales decreased in North America by a low double digit percentage as customers manage their inventories lower due to soft paint demand, partially offset by an increase in the pro who paints sales.

Heidi Petz: Packaging was down as expected general.

Heidi Petz: <unk> was impacted by lower demand in all regions.

Heidi Petz: ECG sales vary significantly by region with growth in Europe, and Latin America, and decreases in North America and Asia Pacific.

Jim Jaye: Adjusted segment margin, which excludes acquisition related amortization expense and impairment charge related to trademarks in Europe and the negative impact from the significant devaluation of the Argentine peso in December was 10, 8%.

Jane Cronin: From a full year perspective, I'll provide just a few highlights before turning to our 2020 for outlook.

At this time, a year ago Youll recall in environment of tremendous macro uncertainty.

Jim Jaye: The decrease from last year's fourth quarter was driven by lower volume and higher nonoperating costs.

Single family housing starts down an average of more than 20% for seven consecutive months existing home sales down a similar percentage soft PMI manufacturing indices and all regions.

Jim Jaye: Sales in the performance coatings group increased slightly with continued choppiness across each of our businesses and regions.

Jim Jaye: Acquisitions, and favorable FX were offset by lower volume adjusted.

Jane Cronin: And most economists predicting a hard recession.

Jane Cronin: Against that backdrop, we provided guidance that we believed was appropriate.

Jim Jaye: Segment margin, which excludes acquisition related amortization expense and the Argentina devaluation impact improved to 17, 3%.

We also said that if conditions improved our performance would be better than our initial guidance and that is exactly what happened.

Jim Jaye: This is the fourth straight quarter. This team has delivered year over year segment margin improvement.

Jane Cronin: I could not be more proud or thankful for the efforts of our 64000 employees throughout 2023.

This performance reflects execution of our strategy moderating raw material costs and the ongoing value we are providing customers.

Jane Cronin: On a consolidated basis, our team delivered record full year sales adjusted EBITDA adjusted diluted net income per share and net operating cash.

Jim Jaye: Industrial wood led the growth, including the impact of recent acquisitions.

Jim Jaye: Coil and automotive refinish also delivered solid growth.

Jane Cronin: We returned a total of $2 1 billion to our shareholders in the form of dividends and share buybacks in 2023.

Jim Jaye: Packaging was down as expected.

Jim Jaye: General industrial was impacted by lower demand in all regions.

Jane Cronin: We delivered these results while reinvesting in the business by design and then it accelerated rate to drive continued above market growth and enhanced profitability.

Jim Jaye: ECG sales vary significantly by region with growth in Europe, and Latin America, and decreases in North America and Asia Pacific.

Jane Cronin: In terms of Capex, we invested $590 million, including approximately $205 million for our building our future R&D lab projects.

Jim Jaye: From a full year perspective, I'll provide just a few highlights before turning to our 2020 for outlook.

Jim Jaye: At this time, a year ago Youll recall in environment of tremendous macro uncertainty.

Jane Cronin: We expect to begin occupying these facilities by the end of 2024.

Jim Jaye: With single family housing starts down an average of more than 20% for seven consecutive months existing home sales down a similar percentage.

Jane Cronin: We ended the year with a net debt to adjusted EBITDA ratio of two three times.

Jane Cronin: Looking at our reportable segments on a full year basis paint stores grew sales by a high single digit percentage and expanded its margin.

Jim Jaye: <unk> PMI manufacturing indices and all regions.

Jim Jaye: And most economists predicting a hard recession.

Jim Jaye: Against that backdrop, we provided guidance that we believed was appropriate.

Jane Cronin: Sales increased in all end markets, except new residential which was down less than a percent.

Jim Jaye: We also said that if conditions improved our performance would be better than our initial guidance and that is exactly what happened.

Jane Cronin: This new residential performance was remarkable given the state of the market and reflects our share gains.

Jim Jaye: I could not be more proud or thankful for the efforts of our 64000 employees throughout 2023.

Jane Cronin: Performance coatings also grew its top line, while further integrating recent acquisitions and achieving a high teens adjusted segment margin.

Jim Jaye: On a consolidated basis, our team delivered record full year sales adjusted EBITDA adjusted diluted net income per share and net operating cash.

Jane Cronin: The full year adjusted margin performance is the best since the Valspar acquisition in 2017.

Jane Cronin: Consumer brands had a challenging year on the top line with lower sales, resulting from soft DIY demand, but adjusted segment margin expanded.

Jim Jaye: We returned a total of $2 1 billion to our shareholders in the form of dividends and share buybacks in 2023.

Jim Jaye: We delivered these results while reinvesting in the business by design and then it accelerated rate to drive continued above market growth and enhanced profitability.

Jane Cronin: We're confident our aggressive portfolio adjustments completed during the year, including the divestiture of non core aerosol product lines and the China architectural business should result in improved future profitability.

Jim Jaye: In terms of Capex, we invested $590 million, including approximately $205 million for our building our future R&D Lab project.

Jane Cronin: I am confident that we further separated ourselves from our competitors in 2023, and that's exactly what we intend to do again in 2024.

Jim Jaye: We expect to begin occupying these facilities by the end of 2024, we.

Jane Cronin: Our success in 2023 stemmed from executing on our strategy, which remains unchanged.

Jim Jaye: We ended the year with a net debt to adjusted EBITDA ratio of two three times.

Jane Cronin: We provide differentiated solutions that enable our customers to increase their productivity and profitability and for which they are willing to pay and stay.

Jim Jaye: Looking at our reportable segments on a full year basis paint stores grew sales by a high single digit percentage and expanded its margin.

Jane Cronin: These solutions center on industry and application expertise.

Jim Jaye: Sales increased in all end markets, except new residential which was down less than 1%.

Jane Cronin: Innovation value added services and differentiated distribution.

This new residential performance was remarkable given the state of the market and reflects our share gains.

Jim Jaye: We also have momentum in the enterprise strategic priorities that are illustrated in our slide deck and that I first described at our Investor Day last August I.

Jim Jaye: Performance coatings also grew its top line, while further integrating recent acquisitions and achieving a high teens adjusted segment margin.

Jim Jaye: I am confident that continued execution of our strategy and our enterprise priorities will spur the next era of profitable growth for Sherwin Williams.

Jim Jaye: The full year adjusted margin performance is the best since the Valspar acquisition in 2017.

Jim Jaye: Consumer brands had a challenging year on the top line with lower sales, resulting from soft DIY demand, but adjusted segment margin expanded.

So turning to our outlook, we enter 2024 with confidence.

Jim Jaye: Energy and a commitment to seize profitable growth opportunities in our targeted end market segments.

Jim Jaye: We're confident our aggressive portfolio adjustments completed during the year, including the divestiture of non core aerosol product lines and the China architectural business should result in improved future profitability.

Jim Jaye: We expect to outperform the market just as we have in the past.

Jim Jaye: And while the macro environment feels better today than it did a year ago. It still contains a number of uncertainties.

Jim Jaye: On the architectural side U S. New residential sentiment has improved single.

Jim Jaye: I am confident that we further separated ourselves from our competitors in 2023, and that's exactly what we intend to do again in 2024.

Jim Jaye: Single family starts have been up year over year for six consecutive months.

Jim Jaye: Mortgage rates are expected to begin moderating, but will remain well above historic levels.

Jim Jaye: Our success in 2023 stemmed from executing on our strategy, which remains unchanged.

Jim Jaye: And residential repaint existing home sales drove a portion of our sales and have declined year over year for 28 straight months.

Jim Jaye: We provide differentiated solutions that enable our customers to increase their productivity and profitability and for which they are willing to pay and stay.

Jim Jaye: The trajectory of recovery is not clear here and the Lira index is forecasting negative remodeling spend in 2024.

Jim Jaye: These solutions center on industry and application expertise.

Jim Jaye: However, there are numerous other drivers for repaint and our investments and our model give us confidence that we will continue to grow share.

Jim Jaye: Innovation value added services and differentiated distribution.

Jim Jaye: We also have momentum in the enterprise strategic priorities that are illustrated in our slide deck and that I first described at our Investor Day last August I.

Jim Jaye: In new commercial starts slowed considerably in 2023, which we expect will impact completions, starting midway through 2024.

Jim Jaye: I am confident that continued execution of our strategy and our enterprise priorities will spur the next era of profitable growth for Sherwin Williams.

Jim Jaye: Commercial lending standards have also tightened in the architectural billing index has been negative for five consecutive months.

Jim Jaye: On the DIY side will remain in share gain mode. As we do not currently see a macro economic catalysts driving meaningful improvement in consumer demand, though any improvement in existing home sales could be a tailwind.

Jim Jaye: So turning to our outlook, we enter 2024 with confidence.

Jim Jaye: Energy and a commitment to seize profitable growth opportunities in our targeted end market segments.

Jim Jaye: We expect to outperform the market just as we have in the past.

Jim Jaye: On the industrial side, the PMI numbers for manufacturing in the U S Europe, and Brazil have largely been negative for multiple months with China being slightly better recently.

And while the macro environment feels better today than it did a year ago. It still contains a number of uncertainties.

On the architectural side U S. New residential sentiment has improved single.

Jim Jaye: We expect automotive refinished to be our most resilient business in this environment and.

Jim Jaye: Single family starts have been up year over year for six consecutive months.

Jim Jaye: And we expect to see ongoing benefit from recent share gains.

Jim Jaye: Mortgage rates are expected to begin moderating, but will remain well above historic levels.

Jim Jaye: Industrial wood is likely to benefit from recovery in new residential given the furniture flooring and cabinetry end markets. It serves.

Jim Jaye: In residential repaint existing home sales drove a portion of our sales and have declined year over year for 28 straight months.

Jim Jaye: We expect Coyle will grow driven by significant new account wins over the past year.

The trajectory of recovery is not clear here and the Lira index is forecasting negative remodeling spend in 2024.

Jim Jaye: Protective and marine should continue to have momentum, but will face challenging comps.

Jim Jaye: We expect general industrial demand to remain choppy.

Jim Jaye: However, there are numerous other drivers for repaint and our investments and our model give us confidence that we will continue to grow share.

Jim Jaye: In packaging, we expect industry volume for food and beverage cans to be flat to down in 2024.

Jim Jaye: In new commercial starts slowed considerably in 2023, which we expect will impact completions, starting midway through 2024.

Jim Jaye: We will also see a negative short term impact related to temporary volume shifts which occurred as a result of our Garland production plant incident last August.

Jim Jaye: Commercial lending standards have also tightened in the architectural billing index has been negative for five consecutive months.

Jim Jaye: We fully expect to recover this volume in stages in 2024 and 2025, while also winning new business.

Jim Jaye: On the DIY side will remain in share gain mode. As we do not currently see a macro economic catalysts driving meaningful improvement in consumer demand, though any improvement in existing home sales could be a tailwind.

Jim Jaye: Longer term, we remain bullish on our packaging business and our differentiated non BPA solutions.

Jim Jaye: Our Garland plant is fully back online and we're bringing on additional capacity in other locations during the first half of the year.

Jim Jaye: On the industrial side, the PMI numbers for manufacturing in the U S Europe, and Brazil have largely been negative for multiple months with China being slightly better recently.

Jim Jaye: We continue to have excellent new account and share of wallet opportunities in every business and in every region.

Jim Jaye: The continued growth investments, we have made over the past year give us tremendous confidence in pursuing these opportunities and gaining share.

Jim Jaye: We expect automotive refinished to be our most resilient business in this environment and.

Jim Jaye: And we expect to see ongoing benefit from recent share gains.

Jim Jaye: Moving to the cost environment, our outlook assumes our raw material costs will be down by a low single digit percentage in 2024 compared to 2023.

Jim Jaye: Industrial wood is likely to benefit from recovery in new residential given the furniture flooring and cabinetry end markets. It serves.

We expect Coyle will grow driven by significant new account wins over the past year.

Jim Jaye: We expect to see the largest benefit occurring in the first half of the year as comparisons become more challenging in the back half where the entire basket decreased low double digits.

Jim Jaye: Protective and marine should continue to have momentum, but will face challenging comps.

Jim Jaye: We expect general industrial demand to remain choppy.

Jim Jaye: While raw materials will likely be a benefit for us other costs, including wages healthcare energy and transportation are expected to be up in the mid to high single digit range in 2024.

Jim Jaye: In packaging, we expect industry volume for food and beverage cans to be flat to down in 2024.

Jim Jaye: We will also see a negative short term impact related to temporary volume shifts which occurred as a result of our Garland production plant incident last August.

Jim Jaye: I will remind you that these categories also inflated in 2023.

Jim Jaye: Working with our customers, we delayed additional paint stores price increases last year, given the pricing actions that we took in 2021 and 2022.

Jim Jaye: We fully expect to recover this volume in stages in 2024 and 2025, while also winning new business.

Jim Jaye: We cannot however, ignore these escalating costs indefinitely.

Jim Jaye: Longer term, we remain bullish on our packaging business and our differentiated non BPA solutions.

Jim Jaye: As I mentioned earlier paint stores group is implementing a 5% price increase effective February one.

Jim Jaye: Our Garland plant is fully back online and we are bringing on additional capacity in other locations during the first half of the year.

Jim Jaye: The performance coatings and the consumer brands group are also likely to have some targeted pricing activity in 2024.

Jim Jaye: We continue to have excellent new account and share of wallet opportunities in every business and in every region.

Jim Jaye: Though at a more modest level than paint stores.

The continued growth investments, we have made over the past year give us tremendous confidence in pursuing these opportunities and gaining share.

Jim Jaye: As for our specific outlook the slide deck issued with this morning's press release includes our expectations for consolidated and segment sales for the first quarter of 2024.

Jim Jaye: Moving to the cost environment, our outlook assumes our raw material costs will be down by a low single digit percentage in 2024 compared to 2023.

Jim Jaye: But that also includes our expectations for the full year were consolidated sales are expected to be up low to mid single digit percentage and diluted net income per share is expected to be in the range of $10 five to $10 55 per share.

Jim Jaye: We expect to see the largest benefit occurring in the first half of the year as comparisons become more challenging in the back half where the entire basket decreased low double digits.

Jim Jaye: Excluding acquisition related amortization expense of approximately <unk> 80 per share adjusted diluted net income per share is expected in the range of $10 85.

While raw materials will likely be a benefit for us other costs, including wages healthcare energy and transportation are expected to be up in the mid to high single digit range in 2024.

Jim Jaye: To $11 35.

Jim Jaye: An increase of over 7% at the midpoint compared to 2020 Three's adjusted diluted net income per share of $10 35.

Jim Jaye: I will remind you that these categories also inflated in 2023.

Jim Jaye: Working with our customers, we delayed additional paint stores price increases last year, given the pricing actions that we took in 2021 and 2022.

Jim Jaye: We have provided a GAAP reconciliation in Reg G table within our press release.

Jim Jaye: Let me provide some additional data points and an update to our capital allocation priorities.

Jim Jaye: We cannot however, ignore these escalating costs indefinitely.

Jim Jaye: As I mentioned earlier paint stores group is implementing a 5% price increase effective February one.

Jim Jaye: Given incremental 2024 pricing raw material deflation and paint stores group, our largest and highest gross margin segment.

Jim Jaye: The performance coatings and the consumer brands group are also likely to have some targeted pricing activity in 2024.

Jim Jaye: Growing sales faster than the other two segments, we would expect full year gross margin expansion.

Jim Jaye: Though at a more modest level than paint stores.

Jim Jaye: We expect SG&A dollars to increase by a more typical level and increase by a mid single digit percentage in 2024.

Jim Jaye: As for our specific outlook the slide deck issued with this morning's press release includes our expectations for consolidated and segment sales for the first quarter of 2024.

Jim Jaye: A moderation from the low double digit percentage increase we reported in 2023.

Jim Jaye: The deck also includes our expectations for the full year were consolidated sales are expected to be up low to mid single digit percentage and diluted net income per share is expected to be in the range of $10 five to $10 55 per share.

Jim Jaye: We expect the investments we made last year and those we plan to make this year will enable us to grow at a multiple of the market.

Jim Jaye: We plan to control costs tightly and non customer facing functions and we have a variety of SG&A levers, we can pull depending on a material change to our outlook up or down.

Excluding acquisition related amortization expense of approximately <unk> 80 per share adjusted diluted net income per share is expected in the range of $10 85.

Jim Jaye: We expect to open 80 to 100, new stores in the U S and Canada in 2024.

Jim Jaye: We will also be focused on sales reps capacity and productivity.

Jim Jaye: To $11 35.

Jim Jaye: An increase of over 7% at the midpoint compared to 2020 Three's adjusted diluted net income per share of $10 35.

Jim Jaye: Some improvements and product innovation.

Jim Jaye: Next month at our board of Directors meeting, we will recommend an annual dividend increase of 18, 2% to $2 86 per share up from $2 42 last year.

Jim Jaye: We have provided a GAAP reconciliation in Reg G table within our press release.

Jim Jaye: If approved this will mark the 46th consecutive year that we've increased our dividend.

Speaker Change: Let me provide some additional data points and an update to our capital allocation priorities.

Speaker Change: Given incremental 2024 pricing raw material deflation and paint stores group, our largest and highest gross margin segment.

Jim Jaye: We expect to continue making opportunistic share repurchases will also continue to evaluate acquisitions that fit our strategy.

Jim Jaye: We have a manageable $1 1 billion of long term debt due in 2024 and expect to refinance the debt at higher rates.

Speaker Change: Growing sales faster than the other two segments, we would expect full year gross margin expansion.

Speaker Change: We expect SG&A dollars to increase by a more typical level and increase by a mid single digit percentage in 2020 for a moderation from the low double digit percentage increase we reported in 2023.

Jim Jaye: We expect to be within our current long term target debt to adjusted EBITDA leverage ratio of two to two five times.

Jim Jaye: In addition, I will refer you to the slide deck issued with our press release. This morning, which provides guidance on our expectations for currency exchange effective tax rate capex, depreciation and amortization and interest expense.

Speaker Change: We expect the investments we made last year and those we plan to make this year will enable us to grow at a multiple of the market.

Speaker Change: We plan to control costs tightly in non customer facing functions and we have a variety of SG&A levers, we can pull depending on a material change to our outlook up or down.

Jim Jaye: Our team is operating with great confidence as we begin 2024.

Jim Jaye: We are extremely well positioned to continue delivering shareholder value.

Jim Jaye: And I want to thank John <unk> for the incredibly strong foundation he leaves with us as he moves into his role as executive chair.

Speaker Change: We expect to open 80 to 100, new stores in the U S and Canada in 2024.

Jim Jaye: We will also be focused on sales reps capacity and productivity system improvements and product innovation.

John <unk>: I'm also grateful for the outstanding Executive leadership team surrounding me.

John <unk>: Given that there is still a considerable amount of uncertainty in the global economy. We believe our initial 2024 outlook is an appropriate one.

Jim Jaye: Next month at our board of Directors meeting, we will recommend an annual dividend increase of 18, 2% to $2 86 per share up from $2 42 last year.

John <unk>: Should the demand environment proved to be stronger than we are currently assuming we would expect to do better than the guidance, we are laying out today.

If approved this will mark the 46th consecutive year that we've increased our dividend.

John <unk>: Our first quarter is a seasonally smaller one for that reason, we will not be making any update to full year guidance until our second quarter is completed and we have a better view of how the painting season is unfolding.

Jim Jaye: We expect to continue making opportunistic share repurchases will also continue to evaluate acquisitions that fit our strategy.

Jim Jaye: We have a manageable $1 1 billion of long term debt due in 2024 and expect to refinance the debt at higher rates.

Our strategy is clear our priorities are focused and our people are ready.

John <unk>: We will continue to win by providing innovative solutions that help our customers to be more productive and more profitable.

Jim Jaye: We expect to be within our current long term target debt to adjusted EBITDA leverage ratio of two to two five times.

John <unk>: We expect to deliver meaningful earnings growth in 2024.

Jim Jaye: In addition, I will refer you to the slide deck issued with our press release. This morning, which provides guidance on our expectations for currency exchange effective tax rate capex, depreciation and amortization and interest expense.

This concludes our prepared remarks with that I'd like to thank you for joining us This morning, and we'll be happy to take your questions.

John <unk>: At this time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.

Jim Jaye: Our team is operating with great confidence as we begin 2024.

Jim Jaye: We are extremely well positioned to continue delivering shareholder value.

John <unk>: A confirmation tone will indicate your line is in the question queue.

Jim Jaye: And I want to thank John <unk> for the incredibly strong foundation he leaves with us as he moves into his role as executive chair.

John <unk>: You May press star two if he would like to remove your question from the queue.

John <unk>: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys we.

John Roberts: I'm also grateful for the outstanding Executive leadership team surrounding me.

John <unk>: We do ask to please limit yourself to one question. If you have any additional questions. You May press star one again to reenter the queue.

John Roberts: Given that there is still a considerable amount of uncertainty in the global economy. We believe our initial 2024 outlook is an appropriate one.

John <unk>: One moment, please while we poll for questions.

John Roberts: Should the demand environment proved to be stronger than we are currently assuming we would expect to do better than the guidance, we are laying out today.

John <unk>: Yes.

John <unk>: Okay.

John <unk>: Your first question for today is coming from Vincent Andrews with Morgan Stanley.

John Roberts: Our first quarter is a seasonally smaller one for that reason, we will not be making any update to full year guidance until our second quarter is completed and we have a better view of how the painting season is unfolding.

John <unk>: Thank you and good morning, everyone.

Vincent Andrews: I'm wondering if you could sort of break down the paint stores group topline guidance for LOE.

Vincent Andrews: Low single to mid single digits. Since maybe there is 3% of net pricing there I guess, what I'm really trying to get at is where do you think.

John Roberts: Our strategy is clear our priorities are focused and our people are ready.

John Roberts: We will continue to win by providing innovative solutions that help our customers to be more productive and more profitable.

Vincent Andrews: The sales guidance would be if you hadn't made significant growth investments in 2023.

Vincent Andrews: What are you what are you anticipating youre going to get from that this year.

John Roberts: We expect to deliver meaningful earnings growth in 2024.

Vincent Andrews: Well I'll tell you right now I'll start this off and then I'll hand, it over to <unk> to give some color commentary as well I would start by and you said this beautifully as you look at kind of the drivers of what's making us effective in the investments that we're that we're laying in.

This concludes our prepared remarks with that I would like to thank you for joining us This morning, and we'll be happy to take your questions.

John Roberts: At this time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.

We will talk to this in a minute, but we've made some very significant choices relative to some of these segments and I'll start with residential repaint.

John Roberts: A confirmation tone will indicate your line is in the question queue.

Vincent Andrews: We talked about despite some of the Choppiness out there we are contending continuing rather to take share based on some of these investments that we laid in.

John Roberts: You May press Star two if you would like to remove your question from the queue for.

John Roberts: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Vincent Andrews: It's interesting in this environment you know there's a lot of people that are out there talking about market share gains and I would say that no one's really posting mid single digit.

John Roberts: We do ask to please limit yourself to one question. If you have any additional questions. You May press star one again to reenter the queue.

Vincent Andrews: Gallon gains that we're seeing versus our mid teen comparison last year. So not everyone is able to grow share and confident that we are and I would also say given some of these investments.

John Roberts: One moment, please while we poll for questions.

John Roberts: Yes.

Okay.

John Roberts: Yes.

Speaker Change: Your first question for today is coming from Vincent Andrews with Morgan Stanley.

Vincent Andrews: No one is better positioned in the market.

Vincent Andrews: Then we are to help these contractors.

Speaker Change: Thank you and good morning, everyone.

Vincent Andrews: Specific to residential repaint and some of these investments were really able to demonstrate our model. We're interacting with these contractors that are looking to move beyond.

Vincent Stephen Andrews: I'm wondering if you could sort of break down the paint stores group topline guidance for low single to mid single digits. Since maybe there is 3% of net pricing there I guess, what I'm really trying to get at is where do you think that.

Vincent Andrews: Painting, but becoming business owners. So if you can imagine some of the investments that are allowing our teams our reps to help them in real time in terms of marketing customer acquisition.

John Roberts: The sales guidance would be if you hadn't made significant growth investments in 2023.

John Roberts: What are you what are you anticipating you're going to get from that this year.

Vincent Andrews: Even as they look to expand into different substrates, we launched our gallery series last year, helping these contractors move from just walls into other surfaces in the home while they are their kitchen cabinets being a great example.

Well I'll tell you right now I'll start this off and then I'll hand, it over to al to give some color commentary as well I would start by and you said this beautifully as you look at kind of the drivers of what's making us effective in the investments that we're that we're laying in.

Vincent Andrews: And all of these areas are really our sweet spot. So in this environment, where we're laying these investments then and we're clearly posting results I would also say characterize us as the residential repaint contractor has never been more receptive to all that we can bring them in terms of our consistent store to store.

al: We will talk to this in a minute, but we've made some very significant choices relative to some of these segments and I'll start with residential repaint.

al: We talked about despite some of the Choppiness out there we are contending continuing rather to take share based on some of these investments that we laid in.

al: It's interesting in this environment, there's a lot of people that are out there talking about market share gains and I would say that no one's really posting mid single digit.

Vincent Andrews: Store experiences are traveling and growing access to our highly trained reps that are helping them not just plan work, but helping them in real time to troubleshoot. So the accessibility that's really important.

al: Gallon gains that we're seeing versus our mid teen comparison last year. So not everyone is able to grow share and confident that we are and I would also say given some of these investments.

Vincent Andrews: A list of items here that are really paying off for us and I'm going to hand, it over to al to give a little bit of a specific color on the numbers you have mentioned.

al: No one is better positioned in the market.

Vincent Andrews: This is a almost edition.

Al Smith: Yes, when you look at it.

John Roberts: Then we are to help these contractors.

Al Smith: 2024 volume number up.

John Roberts: Specific to residential repaint and some of these investments were really able to demonstrate our model. We're interacting with these contractors that are looking to move beyond.

Al Smith: Low.

Al Smith: Single digits.

Go back to coming out of the second quarter of 2023 and looking at.

Al Smith: The indicators that we were you know.

John Roberts: Painting, but becoming business owners. So if you can imagine some of the investments that are allowing our teams our reps to help them in real time in terms of marketing customer acquisition.

Al Smith: We were talking about our volumes really being flat.

Al Smith: It's John and how do you like to say.

Al Smith: We got to influence the numbers, so with our line of sights being better rather than a or better.

John Roberts: Even as they look to expand into different substrates, we launched our galleries series last year, helping these contractors move from just walls into other services in the home, while they're there kitchen cabinets being a great example.

Al Smith: The investments we've made in res repaint and what Youll see is we expect Roes repaint.

Al Smith: High end or above the high end of that range in the fourth quarter.

John Roberts: And all of these areas are really our sweet spot. So in this environment, where we're laying these investments in and we're clearly posting results I would also say characterize us as the residential repaint contractor has never been more receptive to all that we can bring them in terms of our consistent store to store.

Al Smith: You saw a low single digit volume growth in again.

Al Smith: Our res repaint volumes were up mid single digits. So even in the short term, we're seeing the benefits of those investments and we fully expect to realize those benefits in 2024 to accelerate our volume growth in res repaint.

Al Smith: Yeah.

John Roberts: Our experiences are traveling and growing access to our highly trained reps that are helping them not just plan work, but helping them in real time to troubleshoot. So the accessibility that's really important.

Al Smith: Your next question is coming from John Mcnulty with BMO capital markets.

Al Smith: Yes. Good morning, Thanks for taking my question.

John Mcnulty: So you know there was a lot of focus on the SG&A.

al: A list of items here that are really paying off for us and I'm going to hand, it over to al to give a little bit of a specific color on the numbers, yes. Vincent this is almost <unk>.

John Mcnulty: Administrative jump in and I guess, when you think about the roughly $300 million of the 20% investment that you have there or growth that you had there I guess, how would you break it out in terms of you know.

al: Yes, when you look at.

al: 2024 volume number up.

al: Low.

al: Single digits.

John Mcnulty: Just general inflation versus investment for growth versus management pump.

al: Go back to coming out of the second quarter of 2023 and looking at.

Al Smith: The team did pretty darn well this year. So I guess, how would you break that out and can you help us to think about on there on the growth investment side. The types of investments that are that are grabbing grabbing those costs are grabbing grabbing those dollars.

al: The indicators that we were.

al: We were talking about our volumes really being flat.

John: It's John and how do you like to say.

John: We got to influence the numbers, so with our line of sights being better rather than a or better.

John: Yes, John.

John: You look at the.

John Roberts: The investments we've made in raws repaint and what Youll see is we expect Roes repaint.

John: Adjusted.

John: Adjusted.

John: The increase in SG&A, almost 70% of that.

John: High end or above the high end of that range in the.

John:

John: Is attributed to our operating segments with the majority of that being in paint stores group and as <unk> mentioned in her opening remarks, we added 35, new stores in the quarter 76, new stores for the year as well as additional rest of which will be additional investments that we've made in the second half our uptown.

John: Fourth quarter.

John: A low single digit volume growth in again.

John: Our res repaint volumes were up mid single digits. So even in the short term, we're seeing the benefits of those investments and we fully expect to realize those benefits in 2024 to accelerate our volume growth in res repaint.

John: Is up.

John: Yeah.

John: Multiple of that and the remaining increase is evenly split between our consumer brands.

John: Your next question is coming from John Mcnulty with BMO capital markets.

John: The pro paint Robson.

John P. McNulty: Yes. Good morning, Thanks for taking my question.

John: Increases and also with our performance coatings group sales and Tech service reps.

So you know Theres a lot of focus on the SG&A job.

John: You know John I believe.

John P. McNulty: Administrative jumped in and I guess, when you think about the roughly $300 million of the 20% investment that you have there or growth that you had there I guess, how would you break it out in terms of.

John: The teams have done a really good job of it.

John: Driving the metrics in.

John: Monitoring the metrics to make sure we're going to get a return for those and then as you can imagine.

John: And the remaining portion of the increase is really related to the admin segment, and primarily compensation, including stock based comp, which as you know is typically a heavier in our fourth quarter, it's really driven by the stock price.

John P. McNulty: Just general inflation versus investment for growth versus management, Tom because it will give you.

Tom: The team did a pretty darn well this year. So I guess, how would you break that out and can you help us to think about the growth investment side. The types of investments that are that are grabbing grabbing those costs are grabbing grabbing those dollars.

John: Bird top and wage inflation, but I'd say those are the primary drivers of the SG&A and just I'll just add one more comment to that those will annualize on our first half next year, but we do expect as Heidi and mentioned in the opening to be back to a more typical.

John: Yes, John if you look at.

John: Adjusted the adjusted.

John: Increase in SG&A, almost 70% of that.

John: Investments in SG&A investments in 2024, so we'll see a bigger increase than our first half.

John: This is attributed to our operating segments with the majority of that being in paint stores group and as <unk> mentioned in her opening remarks, we added 35, new stores in the quarter 76, new stores for the year as well as additional Russ which would be additional investments that we've made in the second half.

Heidi Petz: At or below the range in our second half to get to that mid single digit range for 2024.

John Mcnulty: John One thing I would add to that too I think when you've got significant points of differentiation and you believe in your strategy youre going to you're going to invest in them. So while we're growing faster than the market and we're confident as al pointed out on the return we're going to get here are our heads are not in the sand, we absolutely know that it's an expense.

Our rep count.

John: As.

John: A multiple of that and the remaining increase is evenly split between.

John Mcnulty: We expect to get a return there is no doubt about that but we do see this also as an investment to make sure that we continue to outpace the market.

John Roberts: Our consumer brands.

John Roberts: The pro paint Robson.

John Roberts: Increases and also with our performance coatings group sales and Tech service reps in.

John: Thank you John.

John: John I believe.

John: Your next question for today is coming from Jeff Zekauskas with J P. Morgan.

John: The teams have done a really good job of it.

John: Driving the metrics in.

Jeff Zekauskas: Thanks very much.

Monitoring the metrics to make sure we're going to get a return for those and then as you mentioned the remaining portion of the increase is really related to the admin segment, and primarily compensation, including stock based comp, which as you know is typically a heavier in our fourth quarter, it's really driven by the stock price.

Jeff Zekauskas: In your remarks, you said that your raw materials I think in the second half of 2023 were down more than 10% and that makes sense or cost of goods sold in the fourth quarter was downtown higher people costs.

Jeff Zekauskas: But next year in the first quarter you have your easiest raw material.

John: Third top and wage inflation, but I'd say those are the primary drivers of the SG&A and just I'd just add one more comment to that those will annualize in our first half next year, but we do expect as hydraulic and mentioned in the opening to be back to more typical.

Jeff Zekauskas: Paris in the second quarter is pretty easy to.

Jeff Zekauskas: So if the first quarter.

Jeff Zekauskas: Continuing the pattern, we've seen is down again.

Jeff Zekauskas: Low double digits in the second quarter is down high single digits.

John: Investments in SG&A investments in 2024, so we'll see a bigger increase than our first half.

Jeff Zekauskas: Your raw material base case for next year would be down mid single digits, rather than low single digits.

John: At or below the range in our second half to get to that mid single digit range for 2024.

Jeff Zekauskas: Yes, Jeff.

John: One thing I would add to that too I think when you've got significant points of differentiation and you believe in your strategy youre going to invest in them. So while we're growing faster than the market and we're confident as al pointed out on the return we're going to get here are our heads are not in the sand, we absolutely know that it's an expense.

Jeff Zekauskas: We have.

Jeff Zekauskas: Raw material benefit rolling out in 2020 for about 85% of that benefit is in our first half.

Jeff Zekauskas: And the assumption, we're making is that we're not going to see another material drop.

Jeff Zekauskas: As the year goes on so essentially we're annualizing the benefits that we saw through.

John Roberts: We expect to get a return there is no doubt about that but we do see this also as an investment to make sure that we continue to outpace the market.

Jeff Zekauskas: The second half of 2023 that being said you know.

Jeff Zekauskas: The market is driven by supply and demand in the raw material costs are driven by supply and demand and as we see how demand unfolds.

John: Thank you John.

John: Your next question for today is coming from Jeff Zekauskas with J P. Morgan.

Jeff Zekauskas: Certainly.

John: Thanks very much.

Jeff Zekauskas: Plenty of availability of supply in the market.

In your remarks, you said that your raw materials I think in the second half of 2023 were down more than 10% and that makes sense. Your cost of goods sold in the fourth quarter was down Todd do you have higher people costs.

Jeff Zekauskas: That may change, but that's.

Jeff Zekauskas: Our low single digit outlook is based on the indicators we see today.

Jeff Zekauskas: Thank you Jeff.

Jeff Zekauskas: Your next question for today is coming from Mike Sison with Wells Fargo.

Jeffrey J. Zekauskas: But next year in the first quarter you have your easiest raw material <unk>.

Jeffrey J. Zekauskas: Paris in the second quarter is pretty easy to.

Jeff Zekauskas: Hey, good morning, guys.

Jeff Zekauskas: End of the year.

Jeffrey J. Zekauskas: So if the first quarter.

Mike Sison: How do you think he noted that revenue repaint would be up.

Jeffrey J. Zekauskas: Continuing the pattern, we've seen is down again.

Mike Sison: Tracking mid single digit volume growth from 24.

John Roberts: Low double digits in the second quarter is down high single digits.

Mike Sison: What I suspect that that's what you're looking at for the first quarter, but just wanted to be clear. So from the market <unk> would that imply it would be flat or maybe slightly up.

John Roberts: Your raw material base case for next year would be down mid single digits, rather than low single digits.

Mike Sison: That mid single digits and your outperformance and then what are you looking for in terms of any indicators that would help us.

Jeffrey J. Zekauskas: Yes, Jeff.

Jeffrey J. Zekauskas: We have the raw material benefit rolling out in 2020 for about 85% of that benefit is in our first half.

Mike Sison: Jackson at the market growth could be better or worse in 'twenty four.

Mike Sison: So just to clarify the mid single digit reference was relative to 'twenty. Three so I think yes, we would expect it to be flat now having said that I'll go back to my earlier comments that the investments that we placed in we're not we're not waiting for the market and we don't think the market is going to help us. This year. So the team was very diligent we were very clear.

Jeffrey J. Zekauskas: The assumption, we're making is that we're not going to see another material drop.

Jeffrey J. Zekauskas: As the year goes on so essentially we're annualizing the benefits that we saw through the.

Jeffrey J. Zekauskas: The second half of 2023 that being said.

Jeffrey J. Zekauskas: The market is driven by supply and demand in the raw material costs are driven by supply and demand and as we see how demand unfolds.

Mike Sison: On putting those investments in long enough ago last year. So that we were in a position to take advantage of this so in this environment, while I would characterize the demand is flat you can absolutely count on our ability to take share we've got the right positioning in the market. We've got a model that allows us to.

Jeffrey J. Zekauskas: Certainly.

Jeffrey J. Zekauskas: Plenty of availability of supply in the market.

Jeffrey J. Zekauskas: That may change, but.

That's.

Jeffrey J. Zekauskas: Our low single digit outlook is based on the indicators we see today.

Al Smith: Absolutely understand largely not just through our stores and our reps through our data our ability to follow these customers to partner with these customers and helping them not just to get by with their current projects, helping them travel, helping them grow and really helping partner with them as they're looking to grow their business. So.

Jeffrey J. Zekauskas: Thank you Jeff.

Jeffrey J. Zekauskas: Your next question for today is coming from Mike Sison with Wells Fargo.

Jeffrey J. Zekauskas: Hey, good morning, guys nice end of the year.

Michael J. Sison: How do you think you noted that resi repaint would be up or is tracking mid single digit volume growth from 24.

Jim Jaye: The characterization will be flat, but I would expect us absolutely to outpace the market there.

Michael J. Sison: No just what I suspect thats, what youre looking at for the first quarter, but just wanted to be clear. So the market <unk> would that imply it would be flat or maybe slightly up.

Jim Jaye: The only thing I would add to that is.

Jim Jaye: You're talking about indicators that might.

Jim Jaye: Helped drive a market existing home turnover would be one of those is interest rates moderate and we do expect that to happen.

Michael J. Sison: That mid single digits and your outperformance and then what are you looking for in <unk>.

Michael J. Sison: Any indicators that would help us.

Jim Jaye: As we progressed through the year existing home turnover does have an impact as well as home price appreciation, which is still up the aging housing stock in the U S.

Michael J. Sison: Suggest that the market growth could be better or worse in 'twenty four.

John Roberts: So just to clarify the mid single digit reference was relative to 'twenty. Three so I think yes, we would expect it to be flat now having said that I'll go back to my earlier comments that the investments that we placed in we're not we're not waiting for the market and we don't think the market is going to help us. This year. So the team was very diligent we were very clear.

Jim Jaye: Boomer staying in place all of those are driving whereas repaint, but your comment about the market being flat, we believe that to be true.

Jim Jaye: If the existing home turnover would pick up that would be a tailwind for us and likely.

Jim Jaye: Second half.

Jim Jaye: Our view of that.

Michael J. Sison: On putting those investments in long enough ago last year.

Mike Sison: Thank you Mike.

Mike Sison: Your next question is coming from Ghansham Panjabi with Baird.

John Roberts: So that we were in a position to take advantage of this so in this environment, while I would characterize the demand is flat.

Speaker Change: Hi, everyone. Good morning.

John Roberts: Can absolutely count on our ability to take share we've got the right positioning in the market. We've got a model that allows us to absolutely understand largely not just through our stores and our reps through our data our ability to follow these customers to partner with these customers and helping them not just to.

Speaker Change: I guess first off on the paint stores group pricing, maybe you can give us a sense as to how to think about the timeline for price realization specific to the segment and I'm just asking because historically you took a couple of quarters to realize the increases and then during the Covid supply chain chaos. It was of course much faster just given the extent of inflation and then also related to that what do you expect productivity.

John Roberts: Get by with their current projects, helping them travel, helping them grow and really helping partner with them as they are looking to grow their business. So the characterization will be flat, but I would expect us absolutely to outpace the market there.

Ghansham Panjabi: To be in 2024 and context of the non commodity inflation, such as wages and also with all the investments you have been making.

Ghansham Panjabi: Yes ghansham.

Ghansham Panjabi: The 5% effective February 1st I do think there is a way and that'll be similar.

John Roberts: Mike the only thing I would add to that is.

Michael J. Sison: You're talking about indicators that might helped drive a market existing home turnover would be one of those is interest rates moderate and we do expect that to happen.

Ghansham Panjabi: The past price increases I do expect to get to a similar effectiveness mind you as a consolidated basis, we talk about price being up low single digits. There's some.

Michael J. Sison: As we progressed through the year existing home turnover. It does have an impact as well as home price appreciation, which is still up the aging housing stock in the U S.

Ghansham Panjabi: Headwind for customers that are on contracts with index pricing small amount.

Ghansham Panjabi: A headwind.

Ghansham Panjabi: And I do.

Michael J. Sison: Baby Boomers staying in place all of those are driving rosary paint, but your comment about the market being flat.

Ghansham Panjabi: We expect.

Ghansham Panjabi: And how do you mentioned this.

Ghansham Panjabi: The raw basket is down low single digits still highly elevated over the three year period that we're looking at.

Michael J. Sison: It would be true, but if the existing home turnover would pick up that would be a tailwind for us and likely.

Ghansham Panjabi: We didn't go out with price increase in 2023, and if we look at wage inflation.

John Roberts: Second half.

John Roberts: Our view of that.

John Roberts: Thank you Mike.

Ghansham Panjabi: Our health care energy transportation costs on that two year stack is a mid to high single digits. So.

Speaker Change: Your next question is coming from Ghansham Panjabi with Baird.

Speaker Change: Hi, everyone. Good morning.

Ghansham Panjabi: To continue to offer the services that we do in the convenience and the differentiated solutions we.

Speaker Change: I guess first off on the paint stores group pricing.

Speaker Change: If you can give us a sense as to how to think about the timeline for price realization specific to the segment and you know I'm just asking because historically it took a couple of quarters to realize increases and then during the Covid supply chain chaos. It was of course much faster just given the extent of inflation and then also related to that what do you expect productivity to be in 2024 and context of the non <unk>.

Ghansham Panjabi: We need to recover some of recoup some of these costs.

Ghansham Panjabi: Thanks Ghansham.

Ghansham Panjabi: Yeah.

Alexia: Your next question for today is coming from Alexia, Yes, Rob, Yes for boss with Keybanc capital markets.

Ghansham Panjabi: Commodity inflation, such as wages and also with all the investments you have been making.

Alexia: Thank you and good morning, everyone I just wanted to ask you about the appropriate even maintenance sub segment.

Ghansham Panjabi: Thank you.

Ghansham Panjabi: Yes ghansham.

Alexia: You are showing negative low single digit.

Ghansham Panjabi: 5% effective February 1st I do think there is a way and that will be similar.

Alexia Yes: Number there are down from double digit growth earlier in the first half 'twenty three can you just address what's going on in this in this segment.

Ghansham Panjabi: In the past price increases I do expect to get to a similar effectiveness mind you as a consolidated basis, we talk about price being up low single digits. There's some.

Rob Yes: Yes poverty management right now I would characterize this similar to how we look at new residential. So this is this is going to be a segment, that's going to be extremely exciting to watch.

Ghansham Panjabi: Headwind for customers that are on contracts with index pricing small amount about.

We are growing share through some additional agreements.

Ghansham Panjabi: A headwind.

Jim Jaye: And I do expect our and <unk> mentioned this.

Rob Yes: With customers at all sizes, all the way through so it's been I think clear out in the market. There's been some incremental capacity that's been entering the market, which we benefit from during construction and then these turns become an annuity for us which is a significant part of our business. So we're looking at this on both.

Jim Jaye: The raw basket is down low single digits still highly elevated over the three year period that we're looking at.

Jim Jaye: We didn't go out with price increase in 2023, and if we look at wage inflation.

Rob Yes: <unk>.

Health care energy transportation cost on that two year stack is.

There is another piece of this and I think if you look at the dynamics between what's happening with kind of new commercial property management. We're also benefiting.

Jim Jaye: Mid to high single digits. So.

Jim Jaye: To continue to offer the services that we do in the convenience and the differentiated solutions we.

Rob Yes: From the upgrading of properties that are competing with these new units and investing in keeping their properties current and fresh.

We need to recover some of recoup some of these costs.

Rob Yes: So our teams are touching certainly both the capex projects and maintenance.

Ghansham Panjabi: Thanks Ghansham.

Jim Jaye: Yeah.

Rob: Your next question for today is coming from Aleksey, Yes, Rob Yeah for boss with Keybanc capital markets.

Alexia Yes: As well as color and design support I'm trying to make our customer successful. So we're going to catch up on either side, there who people are going to live somewhere so we're going to make sure that we're meeting our customers where they are at regardless of what's going on with the economy and you can expect that we'll take share in this current environment yes.

Aleksey: Thank you and good morning, everyone I just wanted to ask you about the appropriate even maintenance sub segment.

Rob: You're showing negative low single digit.

Alexia Yes: Yeah, Let's see you mentioned the fourth quarter, so property maintenance was down low single digits in the quarter, but that was against a really strong fourth quarter, a year ago, where we were north of 20%.

Rob: Number there are down from double digit growth earlier in the first half 'twenty three can you just address what's going on in this in this segment.

Ghansham Panjabi: Yes poverty management right now I would characterize this similar to how we look at new residential. So this is this is going to be a segment, that's going to be extremely exciting to watch.

Alexia Yes: If you look at property management for the year I mean, it was up mid to high single digits. So we continue to feel good there and the investments that al and I know youre talking about many of those are aimed at growing our position there and continuing to.

Ghansham Panjabi: We are growing share through some additional agreements with.

Ghansham Panjabi: With customers at all sizes, all the way through so it's been I think clear out in the market. There's been some incremental capacity that's been entering the market, which we benefit from during construction and then these turns become an annuity for us which is a significant part of our business. So we're looking at this on both.

Al Smith: To add to what we're doing in that property maintenance segments.

Alexia Yes: Thanks Alexia.

Alexia Yes: Your next question for today is coming from Mike <unk> with Barclays.

Alexia Yes: Great. Thanks, good morning team.

Speaker Change: And I wanted to ask.

Speaker Change: Good morning, I wanted to ask on the 2024 EPS outlook it looks like Youre guiding for low to mid single digit top line growth. You mentioned you expect some degree of gross margin expansion.

Ghansham Panjabi: <unk>.

Ghansham Panjabi: There is another piece of this and I think if you look at the dynamics between what's happening with kind of new commercial property management. We're also benefiting.

Ghansham Panjabi: The upgrading of properties that are competing with these new units and investing in keeping their properties current and fresh.

Mike <unk>: And you should also have a good amount of cash flow to deploy so even with SG&A up a bit I would think that leverage itself through the P&L, maybe greater than 7% EPS year over year. So can you maybe just walk through some of the key offsets or other items, there, but maybe I'm missing.

Ghansham Panjabi: Our teams are touching certainly both the capex projects and maintenance.

Ghansham Panjabi: As well as color and design support.

Ghansham Panjabi: To make our customers successful so we're going to catch up on either side, there who people are going to live somewhere so we're going to make sure that we're meeting our customers where they are at regardless of what's going on with the economy and you can expect that we will take share in this current environment yes.

Mike: Yes, Mike.

Mike: The biggest.

Mike: Variability is on volume.

Mike: We've talked about the Choppiness.

Mike: In demand across different.

Jim Jaye: Yeah, Let's see you mentioned the fourth quarter, so property maintenance was down low single digits in the quarter, but that was against a really strong fourth quarter, a year ago, where we were north of 20%.

Mike: Different segments.

Mike: Different businesses in different regions and.

Mike: An example of Haynesville use paint stores group when you look at what volume assumptions, we kind of have embedded in our guidance.

Jim Jaye: If you look at property management for the year I mean, it was up mid to high single digits. So we continue to feel good there and the investments that al and I know youre talking about many of those are aimed at growing our position there and continuing to.

Mike: I mentioned I think rosary pain.

Mike: The market being flat with the investments, we make being at the high high end of our.

Stephen Byrne: To add to what we're doing in that property maintenance segment.

Mike: Low single digit volume, so low single to mid single digits, you'll get new residential you've seen the positive new single family starts for the last six months that takes time to get through the market and our expectation is.

Stephen Byrne: Thanks Alexia.

Alexia: Your next.

Alexia: Question for today is coming from Mike <unk> with Barclays.

Mike: Going up against a really strong first quarter last year, our first half will be softer and then improving in our second half and that'll that'll be timing more than anything Conversely, commercial we expect to be exactly the opposite of that where we have a line of sight to a stronger first half and then softening in the second half based on the dynamics.

Alexia: Great. Thanks, good morning team.

Speaker Change: Wanted to ask.

Michael J. Harrison: Good morning, I wanted to ask on the 2024 EPS outlook it looks like Youre guiding for low to mid single digit top line growth. You mentioned you expect some degree of gross margin expansion.

Michael J. Harrison: And you should also have a good amount of cash flow to deploy so even with SG&A up a bit I would think that leverage itself through the P&L, maybe greater than 7% EPS year over year. So can you maybe just walk through some of the key offsets or other items, there that maybe I'm missing.

Mike: And the indicators that we see.

Mike: Well, we just talked about property maintenance and Capex side.

Mike: Being softer than we have and as interest rates improve and lending standards get a little more open we would expect that to continue to improve and DIY PNM, we expect growth.

Michael J. Sison: Yes, Mike.

Michael J. Sison: The biggest.

John Mcnulty: To continue when you get into industrial.

Michael J. Sison: Variability is on volume.

John Mcnulty: Feel very good about auto refinish coil.

Michael J. Sison: We've talked about the Choppiness.

Michael J. Sison: In demand across <unk>.

John Mcnulty: Industrial wood returning with.

Michael J. Sison: Different segments.

John Mcnulty: New res.

John Mcnulty: But there is choppiness across each of those and including GI and we've talked about packaging and the openings. So.

John Roberts: Different businesses in different regions and if you are an example of Haynesville use paint stores group. When you look at what volume assumptions, we kind of have embedded in our guidance.

John Mcnulty: As I've mentioned in the past volume is the single biggest driver of operating margin and leverage.

John Roberts: I mentioned I think rosary pain.

John Mcnulty: If the volume is better than what we have in our guidance today, we would expect to do better than that EPS.

John Roberts: The market being flat with the investments, we make being at the high high end of our.

John Roberts: Low single digit volume, so low single to mid single digits, you'll get new residential you've seen the positive new single family starts for the last six months that takes time to get through the market and our expectation is going up against a really strong first quarter last year, our first half will be softer and then improving in our <unk>.

Mike: Thanks, Mike.

Mike: Your next question is coming from David Begleiter with Deutsche Bank.

Mike: Thank you good morning, Heidi now in terms of your plants I believe you ran your plants below your volumes in 2023.

Mike: So what was your earnings hit from that under absorption and so they're all reverse in 'twenty four.

John Roberts: Second half and that'll that'll be timing more than anything Conversely, commercial we expect to be exactly the opposite of that where we have a line of sight to a stronger first half and then softening in the second half based on the dynamics.

Mike: <unk>.

Yes, David I would say that.

Mike: We saw the bigger impact of that through the first.

Mike: Three quarters of 2023.

John Roberts: And the indicators that we see.

Mike: Our expectation is we are going to see a headwind.

John Roberts: Well, we just talked about property maintenance.

Mike: Fourth quarter, and even though we had volume.

John Roberts: Capex side and.

John Roberts: Softer than we have and as interest rates improve and lending standards get a little more open we would expect that to continue to improve and DIY PNM, we expect growth.

Down a low single digit I think the team did a really nice job of controlling their costs.

Mike: And we actually saw a little bit of a tailwind in our fourth quarter, which allowed us to be a little bit stronger in gross margin our fourth quarter for 2020 for my expectation is that.

John Roberts: To continue when you get into industrial.

John Roberts: Feel very good about auto refinish coil.

John Roberts: Industrial wood returning with.

John Roberts: New res.

John Roberts: But there is choppiness across each of those and including GI and we've talked about packaging and the openings. So I think as I've mentioned in the past volume is the single biggest driver of operating margin and leverage if the volume is better than what we have in our guidance today, we would expect to.

Jim Jaye: Because we're getting back to what I would call a more normalized bell curve. When you look at inventories and in how we build inventory coming into the spring selling season will drop inventory in the second and third quarters, and then build inventory again in our fourth quarter. It really allows I'll talk specific ability.

John Roberts: Or do better than that EPS.

Jim Jaye: About our architectural plants really allows us to schedule those plants more efficiently.

John Roberts: Thanks, Mike.

Jim Jaye: <unk> plan or our staffing the right way.

John Roberts: Your next question is coming from David Begleiter with Deutsche Bank.

And I do expect to see an improved.

David I. Begleiter: Thank you good morning, Heidi now in terms of your plants I believe you ran your plants below your volumes in 2023.

Rob Yes: Performance from our global supply chain and our supply chain in general in 2024, we're not going to talk specifics on dollars on that but.

David I. Begleiter: So what was your earnings hit from that under absorption and should all reverse in 'twenty four thank you.

Rob Yes: We certainly expect a better performance as we get into 'twenty four.

Rob Yes: Yes.

David I. Begleiter: Yes, David I would say that.

Rob Yes: Thank you David.

Rob Yes: Your next.

David I. Begleiter: We saw the bigger impact of that through the first.

Rob Yes: For today is coming from Mike Harrison with Seaport Research partners.

Three quarters of 2023.

Mike Harrison: Hi, good morning.

David I. Begleiter: Our expectation is we are going to see a headwind.

Mike Harrison: In the consumer brands group curious if you can talk a little bit about your expectations around customer order patterns into the spring paint season. It sounds like as of Q4, they were maybe still managing their inventory levels lower.

David I. Begleiter: Fourth quarter, and even though we had volume.

Jim Jaye: Down a low single digit I think the team did a really nice job of controlling their costs.

Jim Jaye: And we actually saw a little bit of a tailwind in our fourth quarter, which allowed us to be a little bit stronger in gross margin our fourth quarter for 2020 for my expectation is that.

Mike Harrison: But I'm just curious if right now you are expecting kind of a more normal seasonal improvement or if there's still going to be some some caution on inventory management.

Mike: Yes, Mike normal is exactly how I would characterize that.

Jim Jaye: Because we're getting back to what I would call a more normalized bell curve. When you look at inventories and in how we build inventory coming into the spring selling season will drop inventory.

Mike: As with all come through the last few years I would also say that the the alignment and the partnership has never been in a better place.

Mike: You know Mike can I, just add one thing about that.

Jim Jaye: Second and third quarters, and then build inventory again in our fourth quarter. It really allows I'll talk specific about architectural plants really allows us to schedule those plants more efficiently efficiently plan or our staffing the right way and I do expect to see it.

Mike: And specifically DIY on the on the pro soup paint side of that.

Mike: I know, it's not a huge portion of that business, but I think the team is.

<unk> invested in that working closely with our partners and we have been taking share and growing faster than the market and we expect that to continue going into 2024.

Jim Jaye: Approved.

Jim Jaye: Performance from our global supply chain and our supply chain in general in 2024, we're not going to talk specifics on dollars on that but.

Mike: Thanks, Mike.

Mike: Your next question for today is coming from Greg Melanie ever.

We certainly expect a better performance as we get into 'twenty four.

Mike: Evercore ISI.

Mike: Yeah.

David: Thank you David.

Mike: Hey, Greg maybe on mute.

David: Your next question for today is coming from Mike Harrison with Seaport Research partners.

Greg: Greg Greg.

Greg: Greg Your line is live.

David: Hi, good morning.

Speaker Change: Within the consumer brands group curious if you can talk a little bit about your expectations around customer order patterns into the spring paint season. It sounds like as of Q4, they were maybe still managing their inventory levels lower.

Greg: Hmm.

Greg: Drugs that come back to Greg to come back to you Greg.

Greg: We'll come back to you Greg Thanks.

Greg: Your next question is coming from Chuck Cerankosky with Northcoast research.

Mike Harrison: I'm just curious if right now you are expecting kind of a more normal seasonal improvement or if there's still going to be some some caution on inventory management.

Greg: Good morning, everyone great quarter.

Greg: When you look at the do it yourself business at.

Paint stores and consumer brands Mark that it was weak in both areas can you sort of contrast, the reasons for that weakness, especially.

Mike: Yes, Mike normal is exactly how I would characterize that.

Mike: As with all come through the last few years I would also say that the the alignment and the partnership has never been at a better place.

Greg: At.

Greg: Our consumer brands exist the bulk of the business, whereas the paint stores. So it's a smaller part of the business, but still significant thank you.

Mike: Mike can I, just add one thing about that.

Mike Harrison: We're talking to specifically DIY on the on the <unk>.

Mike: <unk> paint side of that.

Greg: Yes, Chuck it's certainly an interesting environment right now I'll start with our stores and even when we get to the consumer piece.

Mike: I know, it's not a huge portion of that business, but I think the team is.

Mike: Invested in that working closely with our partners and we have been taking share and growing faster than the market and we expect that to continue going into 2024.

Greg: As you know in our stores, it's a small part of the business and we are catering to a unique I would call. It a sub segment, which is.

Greg: Our higher end customer that really values more of that high touch that we can provide.

Mike: Thanks, Mike.

Greg: And candidly this time of year, it's even smaller and then we'll need to see how the consumer is going to react to the to the macro conditions. During the paint season. So I would I would say that it's early.

Mike: Your next question for today is coming from Greg Miller with Evercore ISI.

Mike: Yeah.

Greg Miller: Hey, Greg.

Greg: And we're certainly watching that but you talk about the consumer brands group.

Greg Miller: <unk>.

Greg Miller: Okay.

Greg Miller: Greg Greg.

Greg: Which is obviously our focus on certainly in the market from every angle so you've got more price points.

Greg Your line is live.

Greg Miller: Hmm.

Greg: Certainly within that environment and Al mentioned, the promo paints already but in terms of the DIY. It certainly is it's a choppy.

Greg Miller: Greg will come back to growth come back to you Greg.

Greg: We'll come back to you Greg Thanks.

Greg: It's a choppy market right now we're trying to stay really close to it and being in lockstep with our retail partners to look for opportunities to.

Speaker Change: Your next.

Speaker Change: Question is coming from Chuck Cerankosky with Northcoast research.

Speaker Change: Good morning, everyone great quarter.

Al Smith: To continue to build strength in that segment.

Chuck Cerankosky: When you look at the do it yourself business at the paint stores and consumer brands.

Al Smith: Chuck the only thing I would add is.

Al Smith: We'd be guidance.

Mark: Mark there was weak in both areas can you sort of contrast, the reasons for that weakness, especially.

In the fourth quarter.

Al Smith: Yeah, I would say that a couple things that drove that.

Mark: At.

Mark: Consumer brands exist the bulk of the business, whereas.

Al Smith: Less destocking.

Al Smith: We expected.

Mark: Paint stores, so it's a smaller part of the business, but still significant thank you.

Al Smith: As you typically see in the fourth quarter architecture, all the seasonality you see.

Al Smith: Some destocking in the in the fourth quarter, but also.

Chuck Cerankosky: Yes, Chuck it's certainly an interesting environment right now.

Al Smith: I give our Latin America and Europe teams.

Chuck Cerankosky: Start with our stores and even when we get to the consumer piece.

Al Smith: Drew.

Chuck Cerankosky: As you know in our stores, it's a small part of the business and we are catering to a unique I would call. It a sub segment, which is.

Al Smith: Low teens in the quarter, which was better than our expectations. So.

Al Smith: A little bit of positivity there.

Chuck Cerankosky: Thanks Chuck.

Chuck Cerankosky: Our higher end customer that really values more of that high touch that we can provide.

Chuck Cerankosky: Your next question is coming from Greg Melick with Evercore ISI, Greg Your line is live.

Chuck Cerankosky: And candidly this time of year, it's even smaller and then we will need to see how the consumer is going to react to the macro conditions. During the paint season. So I would I would say that it's early.

Chuck Cerankosky: Hi, hopefully this is working now.

Chuck Cerankosky: Yes.

Chuck Cerankosky: And we're certainly watching that but you talk about the consumer brands group.

Greg Melick: Okay, great Yeah, no it's good to be back.

Chuck Cerankosky: Group.

Greg Melick: So I just wanted to frame a little bit differently.

Chuck Cerankosky: Which is obviously our focus on certainly in the market from every angle so you've got more price points.

Greg Melick: How important the gross margins back up to the middle Upper part of your range and if I take your guidance. It seems like there's another 100 bps of gross margin expansion.

Chuck Cerankosky: Certainly within that environment and al mentioned, the promo painful already but in terms of the DIY. It certainly is it's a choppy.

Greg Melick: Assume this year.

Chuck Cerankosky: It's a choppy market right now we're trying to stay really close to it and being in lockstep with our retail partners to look for opportunities to.

Greg Melick: How important is volume.

Greg Melick: Versus price raws and mix for that 100.

Chuck Cerankosky: To continue to build strength in that segment.

Greg Melick: <unk> this year.

Greg Melick: I guess, how long do you wait before you wind up.

Chuck Cerankosky: Chuck the only thing I would add is on.

Greg Melick: Zane that that long term goal.

Chuck Cerankosky: We beat guidance.

Greg Melick: Well first and foremost at volume I'll go back to our comments earlier.

Chuck Cerankosky: In the fourth quarter.

Chuck Cerankosky: I'd say, a couple things that drove that as well.

Greg Melick: We certainly are looking at the margin expansion and ultimately operating margin, but volume is there's no doubt that the key focus al I know you Alan Airbus sitting here wanting to jump onto the answer so I'll sure I'll share this with him yet and Greg in 2024 price will be a little heavier than raw materials as we talked about raw.

Chuck Cerankosky: Less destocking than what we expected.

Chuck Cerankosky: You typically see in the fourth quarter architectural the seasonality you see.

Chuck Cerankosky: Some destocking in the fourth quarter, but also.

Chuck Cerankosky: Our Latin America, and Europe teams they grew.

Chuck Cerankosky: Low teens in the quarter, which was better than our expectations. So.

Greg Melick: <unk> will be down low single digits.

Greg Melick: Certainly nowhere near where it was in 2023, but I think <unk> set a volume is specifically our pro architectural volume in our paint stores group is what's going to drive that gross margin. It's our highest margin segment, that's growing the fastest and is the biggest opportunity.

Chuck Cerankosky: Bit of positivity there.

Chuck: Thanks Chuck.

Your next question is coming from Greg Melick with Evercore ISI, Greg Your line is live.

Gregory Scott Melich: Hi, hopefully this is working now.

Greg Melick: Don't get me wrong, all of our segments have great opportunity in the targeted segments as they play in but certainly rosary paint as we've talked in the past largest segment.

Gregory Scott Melich: Yes.

Gregory Scott Melich: Okay, great Yeah, no it's good to be back.

Gregory Scott Melich: So I just wanted to frame a little bit differently.

Greg Melick: This growing biggest opportunity and you know like.

Gregory Scott Melich: How important I mean, the gross margins back up to the middle or upper part of your range and if I take your guidance. It seems like there's another 100 bps of gross margin expansion.

Alexia Yes: Like we've talked about in the past you know.

Alexia Yes: Historically, we challenge the teams.

Pretty hard we set up.

Alexia Yes: The goal for them and as they have consistency achieving are above that goal will raise the target and we've done that in the past and I.

Gregory Scott Melich: Assume this year.

Gregory Scott Melich: How important is volume.

Gregory Scott Melich: Versus price raws and mix for that 100.

Need to get some comfort and consistency, but yeah, we will we will take the target up when appropriate.

Gregory Scott Melich: Improvement this year.

Gregory Scott Melich: And I guess, how long do you wait before you end up raising that that long term goal.

Alexia Yes: Thanks, Greg.

Gregory Scott Melich: Well first and foremost that volume will go back to our comments earlier.

Alexia Yes: Your next question is coming from Steve Byrne with Bank of America.

Gregory Scott Melich: We certainly are looking at the margin expansion and ultimately operating margin, but volume is there's no doubt that the key focus al I know Alan Airbus sitting here wanting to jump out there the answer so I'll sure I'll share this with him yet and.

Alexia Yes: Yes. Thank you.

Alexia Yes: Ask you a couple of questions about price mix.

You know when you when you look at your paint stores and you look at your end markets.

Greg Miller: And Greg in 2024 price will be a little heavier than raw materials as we talked about raw materials will be down low single digits.

Steve Byrne: Which of them do you think you have the greatest ability to.

Steve Byrne: To drive a mixture.

Certainly nowhere near where it was in 2023, but I think <unk> set a volume is specifically our pro architectural volume in our paint stores group is what's going to drive that gross margin and it's our highest margin segment, that's growing the fastest and is the biggest opportunity.

Steve Byrne: If you stroll through any of your stores one of the characteristics that just jumps out is.

Steve Byrne: The huge range of price points.

Steve Byrne: I am curious do you see.

Steve Byrne: The ability for your investments so not just drive share gains in volume, but can you drive a mix shift up in price.

Greg Miller: Don't get me wrong, all of our segments have great opportunity in the targeted segments that they play in but certainly raise repaint as we've talked in the past largest segment.

Steve Byrne: And Conversely to the is there any risk that you have seen in the past when you raise pricing does it cause any of your opposed to.

Greg Miller: Fastest growing biggest opportunity and.

Greg Miller: Like we've talked about in the past.

Greg Miller: Historically, we've challenged the teams.

Steve Byrne: Just down to a lower price point.

Greg Miller: Pretty hard we set.

Steve Byrne: Well, Steve I'll start and I would say that there's absolutely opportunity to drive some improvement here in terms of mix shift and if you look at this through our view. It is very much segment, driven and I'll go back to my earlier comments on the Reds repaint that has such a announced that is just a few moments ago.

Greg Miller: The goal for them and as they have consistency achieving are above that goal will raise the target and we've done that in the past and I.

Greg Miller: Need to get some comfort and consistency, but yes, we'll take the target up when appropriate.

Greg Miller: Thanks, Greg.

Steve Byrne: We have opportunity to gain share in every one of our targeted segments and residential repaint in particular.

Greg Miller: Your next question is coming from Steve Byrne with Bank of America.

Steve Byrne: So as you think about.

Steve Byrne: Yes. Thank you.

The opportunity for us to help that this contractor, we talk a lot about helping them be more productive and more profitable, but your point is spot on here that it is in our best interest to help partner with them to make them as productive as possible.

Steve Byrne: Ask you a couple of questions about price mix.

Steve Byrne: When you when you look at your paint stores and you look at your end markets.

Steve Byrne: Which of them do you think you have the greatest ability to drive a mix shift.

Steve Byrne: So the role of premium products.

Steve Byrne: Making sure that they understand the time saving the labor cost saving that correlates to the use of some of those products.

Steve Byrne: And if you stroll through any of your stores one of the characteristics that just jumps out is.

Steve Byrne: The huge range of price points.

Steve Byrne: It's a great. It's a win win for them and for US. That's a great example, given where the macro is right now so.

Steve Byrne: I'm curious do you see.

Steve Byrne: The ability for your investments to not just drive share gains in volume, but can you drive a mix shift up in price.

Steve Byrne: We expect mix to be a significant part of that having said that as we watch new residential come back the teams are working hard.

Steve Byrne: On our simplification efforts there to ensure that we continue to put the right products in the hands of the right contractors on those jobs as well so I would expect across the board.

Steve Byrne: And Conversely.

Steve Byrne: Is there any risk that you see.

Steve Byrne: In the past when you raise pricing.

Steve Byrne: Has it caused any of your opposed to.

Steve Byrne: I'll focus on those premium products as a critical part of our strategy, yes, Steve the other part of your question, we typically do not see.

Steve Byrne: Just down to a lower price point.

Steve Byrne: Well, Steve I'll start and I would say that there's absolutely opportunity to drive some improvement here in terms of mix shift and if you look at this through our view, it's very much segment, driven and I'll go back to my earlier comments on the <unk> that is such a.

Steve Byrne: Contractors.

Steve Byrne: Go down in quality.

Steve Byrne: In an inflationary environment typically in an inflationary environment, we've talked about in the past in the past.

Steve Byrne: We tend to do better on.

Steve Byrne: <unk> said this just a few moments ago, we have opportunity to gain share in every one of our targeted segments and residential repaint in particular.

Steve Byrne: Converting contractors to a higher quality product with the idea, they're there they're going to pay more for the product anyway. So try this a better quality product and to <unk> point, it's going to make it more efficient and effective and you'll get on and off jobs faster.

Steve Byrne: So as you think about.

Mike Harrison: The opportunity for us to help with this contractor, we talk a lot about helping them be more productive and more profitable, but your point is spot on here that it is in our best interest to help partner with them to make them as productive as possible.

Steve: Thank you Steve.

Steve: Okay.

Steve: Your next question is coming from Josh Spector with UBS.

Steve: Yeah, Hi, good morning.

Steve Byrne: So the role of premium products.

Josh Spector: So I wanted to ask on resin repaint kind of revisit that a little bit and maybe just kind of test the downside scenario. There. So if you look over the last couple of years and say existing home sales are down 30% plus tips.

Jim Jaye: Making sure that they understand the time saving the labor cost saving that correlates to the use of some of those products.

Jim Jaye: It's a great. It's a win win for them and for US. That's a great example, given where the macro is right now so.

Typically that has some impact on the resi repaint your volumes look like generally they haven't declined at all over the last couple of years. So I know initially that was higher contracted backlogs and then it was remodel people put in place are stuck in their homes.

Jim Jaye: We expect mix to be a significant part of that having said that as we watch new residential come back the teams are working hard.

Jim Jaye: On our simplification efforts there to ensure that we continue to put the right products in the hands of the right contractors on those jobs as well so I would expect across the board.

Josh Spector: Scenario, where you don't see a decline in interest rates.

Josh Spector: How would you think that that will play out for residue repaint is this a new higher base, where you don't see the downside risk or would you see some catch up there just curious on your thinking there. Thanks.

Steve Byrne: I'll focus on those premium products as a critical part of our strategy, yes, Steve the other part of your question, we typically do not see.

Steve Byrne: Contractors.

Josh Spector: I will tell you that we don't see a downside here.

Steve Byrne: Go down in quality.

Josh Spector: And the level of again, if we didn't have access to we talk about leading indicators. The data that helps us to really understand our contractors and I'll give you a little bit of color here without going too far as you know what they're buying what they are not buying what their projects are current and their future pipeline.

Steve Byrne: In an inflationary environment typically in an inflationary environment and we've talked about in the past in the past.

Steve Byrne: We tend to do better on.

Steve Byrne: Converting contractors to a higher quality product with the idea there they're going to pay more for the product anyway. So try this a better quality product and to <unk> point, it's going to make it more efficient and effective and you'll get on and off jobs faster.

Josh Spector: Where they're looking to travel and as they're looking to grow and expand in the different territories and so we're able to then Josh to take our data sit down with our reps and our sales managers and make sure that they are armed to truly help bring value to these contractors in a way that.

Steve Byrne: Thank you Steve.

Steve Byrne: Okay.

Steve Byrne: Your next question is coming from Josh Spector with UBS.

Steve Byrne: Yes, hi, good morning.

Josh Spector: So I wanted to ask on residue repaint kind of revisit that a little bit and maybe just kind of test the downside scenario. There. So if you look over the last couple of years and say existing home sales are down 30% plus tips.

Josh Spector: A competitor that doesn't have a specialty paint store just doesn't have those those levers to pull so I don't see a downside in this environment.

Josh: Thank you Josh.

Josh: Your next question is coming from John Roberts with Mizuho.

Josh Spector: Typically that has some impact on the resi repaint your volumes look like generally they haven't declined at all over the last couple of years. So I know initially that was higher contracted backlogs and then it was remodel people put in place are stuck in their homes.

John Roberts: Thank you Heidi I think Wayne on John's first earnings call as CEO. He used the hudler meet the new boss same as the old boss is that still on the play listed Sherwin Williams, who do you think you came up through a different career path and John So do bring a different perspective to the role.

Josh Spector: In a scenario, where you don't see a decline in interest rates. How would you think that that will play out for Rajiv repaint is this a new higher base, where you don't see the downside risk or would you see some catch up there just curious on your thinking there. Thanks.

John Roberts: I do and I also think.

John Roberts: I find.

John Roberts: On your question very interesting because I think there is a commonality.

John: Certainly first and foremost the belief that our strategy is working I think John has contributed we say as fingerprints are all over this company and they absolutely are so I have the fortune of inheriting an incredibly you know rock solid foundation on which to build and when we talk about just getting started I couldnt agree more that we're just.

Josh Spector: I will tell you that we don't see a downside here.

Josh Spector: And the level of <unk>.

Josh Spector: Then if we didn't have access to we talk about leading indicators the data that helps us to really understand our contractors.

Josh Spector: Give you a little bit of color here without going too far as you know what they are buying what they are not buying.

John Mcnulty: Getting started I think in terms of having a different background and bringing perspective into the business. I think it is important to share that my values and John's values are spot on in terms of culture customer focus.

Josh Spector: What their projects are current and there are future pipeline.

Josh Spector: Where theyre looking to travel.

Josh Spector: They are looking to grow and expand in the different territories and so we're able to then Josh to take our data sit down with our reps and our sales managers and make sure that they are armed to truly help bring value to these contractors in a way that.

John Roberts: The desire to grow determination to win and so bringing a perspective from outside of only a paint category I think only helps to.

Josh Spector: A competitor that doesn't have a specialty paint store just doesn't have those those levers to pull so I don't see a downside in this environment.

John: Continue to put our foot on the gas on what's working and I would characterize this more maybe as a healthy challenge on where we might have opportunity to strengthen our model and just continue to grow.

Josh: Thank you Josh.

John: Thanks, John.

Josh: Your next question is coming from John Roberts with Mizuho.

John: Your next question is coming from Avon Viswanathan with RBC capital markets.

John Roberts: Thank you Heidi I think Wayne on John's first earnings call as CEO. He used the hudler meet the new boss same as the old boss is that still on the play listed Sherwin Williams, who do you think you came up through a different career path and Johnson do bring a different perspective to the role.

Avon Viswanathan: Great. Thanks for taking my question good morning.

Speaker Change: I guess I had a couple of questions are on paint stores group. So first off is there any way that you could help us understand.

Avon Viswanathan: The magnitude of share gains.

John Roberts: I do and I also think.

Avon Viswanathan: It would seem that given the strong growth in resi repaint that you've you've enjoyed share gains for a while so is there any mechanism to keep those going or or maybe you can just help us understand how much share you gained over the last couple of years and then Furthermore on the.

John Roberts: Find your question very interesting because I think there is a commonality of certainly first and foremost the belief that our strategy is working I think John has contributed.

John Roberts: We say its fingerprints are all over this company and they absolutely are so I have the fortune of inheriting an incredibly rock solid foundation on which to build and when we talk about just getting started I couldnt agree more that we're just getting started.

Avon Viswanathan: On the sales guidance, you know low to mid single digits, usually PSG is at the upper end of that so is that still your expectation for for 'twenty four and would you expect that to improve as you go through the year I E. Maybe second and third quarter at the at the upper end of that mid single digit range or even above.

John Roberts: In terms of having a different background and bringing perspective into the business I think it's important to share that my values and John's values are spot on in terms of culture customer focus.

Avon Viswanathan: Thanks.

Al Smith: Yes, hi, everyone I'll start with your first question and then I'll kick it over to Al for your second one you mentioned <unk>, so I won't touch that but in terms of we won't get into the numbers, but you asked what the magnitude of share gains and I would point to.

John Roberts: The desire to grow determination to win and so bringing a perspective from outside of only a paint category I think only helps to.

Continue to put our foot on the gas on what's working and I would characterize this more maybe as a healthy challenge on where we might have opportunity to strengthen our model and just continue to grow.

Al Smith: Candidly the rest of the segments. So new residential here is we're we're obviously playing the long game, but we're continuing to take share by expanding the number of agreements that we've secured even in these very challenging times, we have been able to secure incremental agreements.

John: Thanks, John.

John: Yeah.

John: Your next question is coming from Avon Viswanathan with RBC capital markets.

Al Smith: And we're doing that at a time when there is a lot of pressure on starts and so as you fast forward and play this out and as the cycle plays out.

Speaker Change: Great. Thanks for taking my question good morning.

Al Smith: And it will our position here is going to be even more significant as these new agreements begin to to really pay off with the acceleration in housing starts.

Arun S. Viswanathan: I guess I had a couple of questions around paint stores group. So first off is there any way that you could help us understand.

Arun S. Viswanathan: The magnitude of share gains.

Al Smith: Property management, we hit on that a bit I hit on that a bit earlier, but I would say that it's very similar in terms of our ability in this environment.

Arun S. Viswanathan: It would seem that given the strong growth in resi repaint that you've enjoyed share gains for a while so is there any.

Al Smith: To demonstrate our value and secure some of these incremental agreements again in property management that would be true certainly at the national regional and the local level. Our teams have been able to really pair.

Mechanism to keep those going or or maybe you can just help us understand how much share you gained over the last couple of years and then Furthermore on the.

Arun S. Viswanathan: On the sales guidance low to mid single digits, usually PSG is at the upper end of that so is that still your expectation for for 'twenty four and would you expect that to improve as you go through the year I E. Maybe second and third quarter at the at the upper end of that mid single digit range or even above.

Al Smith: Penetrate based on a lot of the data that we've got access to their.

Al Smith: Certainly a lot of benefit commercial protective and marine.

Al Smith: Two segments that I would say are largely focused on product technology specifications and really great distribution. These businesses are both strong and we're working very hard every day to put distance between ourselves and our competition and I would go with maybe a step further on commercial where we're confident is.

Arun S. Viswanathan: Thanks.

Arun S. Viswanathan: Yes, hi, everyone I'll start with your first question and then I'll kick it over to Al for your second one you mentioned <unk>, so I won't touch that but in terms of we won't get into the numbers, but you asked what the magnitude of share gains and I would point to.

Al Smith: We are well positioned in every sub segment within commercial so.

Stephen Byrne: Candidly the rest of the segments. So new residential here is we're we're obviously playing the long game, but we're continuing to take share by expanding the number of agreements that we've secured even in these very challenging times, we've been able to secure incremental agreements.

Al Smith: When Al mentioned, we've got stronger view in the first half.

Al Smith: More soft in the second half we're prepared to meet our these contractors where they are is they're looking to shift and transition within sub segment. So I'm confident that even despite where the market goes we're going to we're going to intercept them.

Stephen Byrne: And we're doing that at a time when there is a lot of pressure on starts and so as you fast forward and play this out and as the cycle plays out.

Al Smith: Yeah, So arun with our.

Al Smith: Holiday to forecast.

Stephen Byrne: And it will our position here is going to be even more significant as these new agreements begin to to really pay off with the acceleration in housing starts.

Arun Kumar: Being up low low to mid <unk>.

Arun Kumar: I would tell you on a consolidated basis, we expect volume to be flat to up low single digits.

Stephen Byrne: Pretty management, we hit on that a bit I hit on that a bit earlier, but I would say that it's very similar in terms of our ability in this environment.

Arun Kumar: And to your point.

Arun Kumar: Whereas retain certainly would be above the hyatt.

John Roberts: To demonstrate our value and secure some of these incremental agreements.

Arun Kumar: Up.

Arun Kumar: Low to mid but where we think.

John Roberts: Again in property management that would be true certainly at the national regional and the local level our teams have been able to really.

Arun Kumar: The second half will play out and could we be above that range is really what Heidi just set a new residential the timing of that recovery.

John Roberts: Penetrate based on a lot of the data that we've got access to their.

Arun Kumar: And the timing of projects on commercial.

John Roberts: Certainly a lot of benefit commercial protective and marine.

Arun Kumar: Through our first half into our second half and that'll dictate.

John Roberts: Two segments that I would say are largely focused on product technology specifications and really great distribution. These businesses are both strong and we're working very hard every day to put distance between ourselves and our competition and I would go immediate step further on commercial where we're confident is.

Arun Kumar: Our second half outlook will be it will be determined.

Arun Kumar: Thanks Arun.

Arun Kumar: Your next question for today is coming from Duffy Fischer with Goldman Sachs.

Arun Kumar: Yes, good morning.

Duffy Fischer: Question on SG&A. So historically you guys have had positive leverage on the growth in SG&A, Brooklyn that change last year.

John Roberts: We are well positioned in every sub segment within commercial so.

John Roberts: When Al mentioned, we've got stronger view in the first half.

Duffy Fischer: It still seems like it's going to be negative and the FERC tariffs this year, maybe going to neutral in the back half.

John Roberts: Look more soft in the second half we're prepared to meet our these contractors where they are is they're looking to shift and transition within sub segment. So im confident that even despite where the market goes we're going to we're going to intercept them.

Duffy Fischer: Once fully has something changed in the market or with your model.

Duffy Fischer: Or will that revert back to positive leverage in 'twenty, five and 26 and what this will be just kind of a short term bump.

John Roberts: Yeah, So arun with.

John Roberts: Our consolidated forecast.

Duffy Fischer: Maybe to kind of push through the high pricing that you pushed through on raw materials, but just structurally SG&A versus sales longer term do we get back to a positive leverage there.

John Roberts: Being up low low to mid <unk>.

Jim Jaye: I would tell you on a consolidated basis, we expect volume to be flat to up low single digits.

Duffy Fischer: Yeah, Duffy I think what you've heard us talk about in the past and going forward is our focus that drive any operating margin leverage and that's either going to come through gross margin expansion or SG&A leverage and you're right as we see a stronger topline stronger gross.

Jim Jaye: And to your point.

Jim Jaye: Whereas repaint certainly would be above the hyatt.

Jim Jaye: Up.

Jim Jaye: Low to mid but where we think.

Jim Jaye: The second half will play out and could we be above that range is really what Heidi just set a new residential the timing of that recovery.

Duffy Fischer: <unk> expansion then we're planning we are going to take the opportunity because of our confidence in our strategy to add incremental investments or accelerate incremental investments in our long term growth strategies, because we know based on our history from our data from our metrics that we're going to get a return for those.

Jim Jaye: And the timing of projects on commercial.

Jim Jaye: Through our first half into our second half and that will dictate.

Jim Jaye: Our second half outlook will be it will be determined.

Jim Jaye: Thanks Arun.

Jim Jaye: Your next question for today is coming from Duffy Fischer with Goldman Sachs.

Duffy Fischer: Investments in AD Nauseum, you've heard me talk about 2008, and nine and continued investments through that cycle.

Jim Jaye: Yes, good morning.

Duffy Fischer: Question on SG&A. So historically you guys have had positive leverage on the growth in SG&A, Brooklyn that change last year.

Hi.

High single low double digit 10 year compounded average growth rates and we believe we're in a very similar environment. So there are years.

Duffy Fischer: It still seems like it's going to be negative in the FERC tariffs this year, maybe going to neutral in the back half.

Duffy Fischer: Where we are going to get SG&A leverage and I believe you're right, we're going to annualize the investments with strong investments we made in the second half and maybe have some deleveraging in our first half, but as we get back towards a more normal cadence of investments, we'll see deleveraging and then as the market normalizes and demand normalizes and we.

Duffy Fischer: Fully has something changed in the market or with your model.

Duffy Fischer: Or will that revert back to positive leverage in 'twenty, five and 26 and what this will be just kind of a short term bump.

Duffy Fischer: Maybe to kind of push through the high pricing that you pushed through on raw materials, but just structurally SG&A versus sales longer term do we get back to a positive leverage there.

Duffy Fischer: Taking outsized share of that demand.

Duffy Fischer: We'll see.

Leverage on our SG&A gone out.

Duffy Fischer: Yes, Duffy I think what you've heard us talk about in the past and going forward as our focus on driving operating margin leverage and that's either going to come through gross margin expansion or SG&A leverage and you're right as we see.

Thanks Duffy.

Duffy Fischer: Your next question is coming from Kevin Mccarthy with vertical research partners.

Kevin Mccarthy: Yes, Thank you and good morning.

Kevin Mccarthy: About two weeks ago, the trade press reported that one of your competitors Kelly Moore.

Duffy Fischer: Stronger topline stronger gross margin expansion than we were planning we are going to take the opportunity because of our confidence on our strategy to add incremental investments are accelerating.

Kevin Mccarthy: It's essentially going out of business as I understand it and so my question would be does that open the door for sherwin to gain a little bit more share than you otherwise would perhaps on the west coast.

Duffy Fischer: <unk> and our long term growth strategies, because we know based on our history from our data from our metrics that we're going to get a return for those.

Kevin Mccarthy: And if so.

Kevin Mccarthy: Are you allocating resources any differently or might anything change operationally to take advantage of that void.

Duffy Fischer: Investments in AD Nauseum, you've heard me talk about 2008, and nine and continued investments through that cycle.

Kevin Mccarthy: Before your competitors act to do so.

Hi.

Duffy Fischer: High single low double digit 10 year compounded average growth rates and we believe we're in a very similar environment.

Kevin Mccarthy: Well, Kevin I would tell you that that void is absolutely our opportunity and I won't get into details here, but I can share with you that you should expect us to be very competitive.

Duffy Fischer: There are years.

Duffy Fischer: Where we are going to get SG&A leverage and I believe youre right were going to annualize the investments with strong investments we made in the second half and maybe have some deleveraging in our first half, but as we get back towards a more normal cadence of investments, we will see deleveraging and then as the market normalizes and demand normalizes and we.

Kevin Mccarthy: With that with that announcement.

Kevin Mccarthy: Yeah, I think a very aggressive approach as <unk> says, we've been making the investments and I would tell you Kevin.

Kelly Moore: Kelly Moore among.

Kelly Moore: Amongst all of our competitors, we're competing with all of them all the time and so they've certainly been on our radar and certainly been aggressively going after them for many years, we're going to continue to accelerate here and see that as a great opportunity.

Duffy Fischer: Taking outsized share of that demand.

Duffy Fischer: We'll see.

Duffy Fischer: Leverage on our SG&A gone out.

Duffy Fischer: Thanks Duffy.

Kevin Mccarthy: Thank you Kevin.

Duffy Fischer: Yeah.

Duffy Fischer: Your next question is coming from Kevin Mccarthy with vertical research partners.

Kevin Mccarthy: Your next question is coming from Garik <unk> with loop capital.

Kevin Mccarthy: [laughter].

Speaker Change: Yes, Thank you and good morning.

Kevin Mccarthy: Hi, Thanks, just a clarification question for me.

Speaker Change: About two weeks ago, the trade press reported that one of your competitors Kelly Moore.

Kevin Mccarthy: Thank you.

Garik <unk>: Paint stores placed increasingly guidance in advance of the start first implementation date, just hoping you could confirm that and then maybe just speak to the pacing of gross margin expansion.

Kevin W. McCarthy: Essentially going out of business as I understand it and so my question would be does that open the door for sherwin to gain a little bit more share than you otherwise would perhaps on the west coast.

Garik <unk>: [noise] unfolds.

Garik <unk>: Yeah, Derik, we absolutely have the price increase for paint stores as well as targeted price increases across each of the other segments and our full year guidance.

Kevin W. McCarthy: And if so.

Kevin W. McCarthy: Are you allocating resources any differently or might anything change operationally to take advantage of that void.

Garik <unk>: You know when you when you look at our gross margin.

Garik <unk>: You know in the expansion.

Kevin W. McCarthy: Before your competitors act to do so.

Perfect.

Well, Kevin I would tell you that that void is absolutely our opportunity.

Garik <unk>: It's probably going to be a little heavier than our first half with.

Kevin W. McCarthy: And I won't get into details here, but I can share with you that you should expect us to be very competitive.

Garik <unk>: But like I talked about the stronger.

Garik <unk>: Raw material deflation that we're going to see in our first half.

Kevin W. McCarthy: With that with that announcement.

Garik <unk>: Plus the pricing in our first half and so.

Duffy Fischer: Yes, I think very aggressive approach as <unk> says, we've been making the investments and I would tell you Kevin Kerr.

Garik <unk>: So we will see a little bit more.

Garik <unk>: Expansion of our first half and then although we do expect second half to continue with the expanded expansion. It just won't be as much year over year, plus we're going against.

Duffy Fischer: More.

Duffy Fischer: Most all of our competitors, we're competing with all of them all the time and so they've certainly been on our radar.

Garik <unk>: Tougher comp on our second half when it comes to our gross margin.

We've been aggressively going after them for many years, we're going to continue to accelerate here and see that as a great opportunity.

Garik <unk>: Thanks Derek.

Garik <unk>: Your next.

Kevin W. McCarthy: Thank you Kevin.

Speaker Change: Question is coming from Adam Baumgarten with Zelman.

Garik S. Shmois: Your next question is coming from Garik <unk> with loop capital.

Adam Baumgarten: Hey, Thanks for taking my question just just on the new Res market can you maybe remind us what the typical lag between the start and when the pain.

Garik S. Shmois: Yeah.

Garik S. Shmois: Okay.

Adam Baumgarten: Sale gets made and I guess beyond that have you at least been seeing the declines in that market for you guys moderate as you move through the back half and into the first half of next year.

Adam Baumgarten: Yeah, Adam the lag that we have traditionally described which had traditionally been about four months and I think that's elongated the vet.

Adam Baumgarten: Probably another two months.

Adam Baumgarten: And largely due to labor shortages and some other factors that are weighing in there.

Adam Baumgarten: In terms of the other piece I'll hand that over to you you can make.

Adam Baumgarten: It makes some comments on that Adam.

Adam Baumgarten: You know what what I expect to ship expectation is as new single family starts continue to improve.

Adam Baumgarten: Our first half will be one just to be clear you look at 2023, the new resident new single family starts were down significantly.

Adam Baumgarten: Highly talked in the opening we were down only slightly which tells you we're taking share in that market and we expect to continue to take share in that market. Our national account team along with the the field of paint stores grew field organization do a terrific job of servicing those customers.

And adding tremendous value.

Adam Baumgarten: Those are large national and regional builders and even local build local custom builders. So.

Adam Baumgarten: That being said we are going to go up against a tougher comparison in our first quarter.

Adam Baumgarten: So we do expect to be.

Adam Baumgarten: Not as strong in our first half, but then as we see these completion starts coming to completion, we're painting as at the end of that project or that house, we expect to see a stronger second half.

Adam Baumgarten: Thank you Adam.

Adam Baumgarten: Your next question is coming from Eric Bullets hard with Cleveland Research Company.

Adam Baumgarten: On the price increases.

Adam Baumgarten: I appreciate the headline all you're pretty clear of the price increases and the guidance for paint stores and in the other segments.

Adam Baumgarten: I'm just curious in terms of implementation of this.

Adam Baumgarten: Heidi.

Heidi Petz: You get started and take a price increase to market.

Heidi Petz: The feedback on that and then also curious related to that I know over the cycle that the mix gets better but I am curious if you have any observation of a different mix experienced in any of the areas now in the current environment.

Heidi Petz: Yeah.

Heidi Petz: I'd say the.

Heidi Petz: Conversations as we mentioned earlier in the earlier prepared remarks, we do this with our customers and so as we took this out towards the end of last year. It was making sure that they understand why we're going out with us, but also making sure that they are prepared to pass this along and make sure that theyre not absorbing that I think the car.

Heidi Petz: First Asian here quickly becomes making sure that there's a.

Heidi Petz: Greater outcome here for a focus on the premium products and that's what that's what we're going to continue to focus on yeah, Eric I think to your point on the mix.

Heidi Petz: Would you point to across each of the segments and the opportunities that each of our painting contractors have as you as you know paint is a small portion of a painting project and that goes for.

You think about the cost of paint and a new house or possible paint in the commercial.

Heidi Petz: Job so.

Heidi Petz: It's really a small portion of the overcall overall cost, but if you as you elevate to the higher qualities that gets such a great.

Heidi Petz: Efficiency improvement you can get on and off jobs faster than over the last three or four years that we've been talking about labor shortages it really.

Heidi Petz: Really the big driver of that mix shift so again opportunities across all the all of the segments and our painting contractors or understanding boy I can get more topline and bottom line growth with the same number of workers by moving to a higher quality product. The other piece I would mention on that as we talk about value and.

Heidi Petz: We're out demonstrating our value to these contractors every day and so when we bring a price to them Erik It's we're not it's not that we're not having a price conversation, we're making sure. They understand holistically again I'll go back to my earlier comments in terms of access to the reps the store to store consistency and our ability to help with them with Lee.

Pass this along and make sure that theyre not absorbing that I think the conversation here quickly becomes making sure that there's a.

Greater outcome here for a focus on the premium products and that's what that's what we're going to continue to focus on yeah, Eric I think to your point on the mix I mean it.

Erik It's: And to help them with bidding activity.

Erik It's: So it's a very it's a very different discussion than I than I think many others in our industry are having.

Would you point to across each of the segments and the opportunity that each of our painting contractors have as you as you know paint is a small portion of a painting project and that goes for you now.

Erik It's: Thank you Eric.

Erik It's: Your final question for today is coming from Patrick Cunningham with Citi.

Erik It's: Hi, This is Eric Zhang on for Patrick.

Eric Zhang: Can you provide an update on contracted backlogs in repairing them, although it can be for the quarter and where do you see levels for both in 2024 relative to 2023. Thank you.

You think about the cost of paint and a new house or possible painting a commercial.

Job so.

It's really a small portion of the overcall overall cost, but if you as you elevate to the higher qualities that gets such a great.

Eric Zhang: I would say they're normalizing.

Eric Zhang: Don't have a lot of color I think as you look at some of the the visibility.

Eric Zhang: <unk> into backlog, it's not as long as we have with other segments such as commercial so to Al's earlier comment.

Efficiency improvement you can get on and off jobs faster than over the last three or four years that we've been talking about labor shortages it really.

Al Smith: Like everybody else, we'll know more in the next quarter or two but at this point, it's pretty limited in terms of future visibility. So the base case characteristic would be that its normalized at the current state.

Really is a big driver of that mix shift so again opportunities across all the all of the segments and our painting contractors or understanding boy I can get more topline and bottomline growth with the same number of workers by moving to a higher quality product. The other piece I would mention on that as we talk about value and.

Al Smith: Thank you Patrick.

Al Smith: Eric I'm sorry.

Al Smith: We have reached the end of our question and answer session and I will now turn the call over to Jim Jaye for closing remarks.

That we're out demonstrating our value to these contractors every day and so when we bring a price to them Erik It's we're not it's not that we're not having a price conversation, we're making sure. They understand holistically again I'll go back to my earlier comments in terms of access to the reps the store to store consistency and our ability to help with them with Lee.

Al Smith: Well. Thank you again, everybody for joining us today I hope you heard today that we're very confident in our strategy.

Jim Jaye: We're going to deliver an increase in sales and earnings this year, even as the environment continues to be choppy so as.

Jim Jaye: As always we'll be available to answer your questions over the next few days and thanks for joining us today.

And to help them with bidding activity.

So it's a very it's a very different discussion than I than I think many others in our industry are having.

Jim Jaye: Great day.

Jim Jaye: This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.

Thank you Eric.

Your final question for today is coming from Patrick Cunningham with Citi.

Hi, This is Eric Zhang on for Patrick.

Can you provide an update on contracted backlogs in repair and remodel activity for the quarter and where do you see levels for both in 2024 relative to 2023. Thank you.

I would say they're normalizing.

Don't have a lot of color I think as you look at some of the the visibility into backlog, it's not as long as we have with other segments such as commercial so to Al's earlier comment will [laughter] like everybody else, we'll know more in the next quarter or two but at this point, it's pretty limited in terms of future visibility So the bay.

<unk> K characteristic would be that its normalized at the current state.

Thank you Patrick.

Eric I'm sorry.

We have reached the end of our question and answer session and I will now turn the call over to Jim Jaye for closing remarks.

Well. Thank you again, everybody for joining us today I hope you heard today that we're very confident in our strategy and we're going to deliver an increase in sales and earnings this year, even in an environment continues to be choppy. So.

As always we'll be available to answer your questions over the next few days and thanks for joining us today.

Great day.

This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.

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