Q1 2024 Fortune Brands Innovations Inc Earnings Call

Maria: Good afternoon. My name is Maria, and I'll be your conference operator today. At this time, I would like to welcome everyone to Fortune Brand's first quarter 2024 earnings conference call. All lines have been placed on mute to prevent any background noise.

Good afternoon, My name is Maria and I'll be your conference operator today at this time I would like to welcome everyone to the Fortune Brands' first quarter 'twenty 'twenty four earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there'll be a question and answer session I would now like to turn.

Maria: After the speaker's remarks, there will be a question and answer session. I would now like to turn the call over to Leigh Avsec, Vice President of Investor Relations and Corporate Affairs. You may begin the conference call. Good afternoon, everyone, and welcome to the Fortune Brands Innovations First Quarter Earnings Call. Hopefully, everyone has had a chance to review the earnings release. The earnings release and the audio replay of this call can be found in the Investor section of our FBIN.com website.

On the call over to Lee <unk>, Vice President of Investor Relations and corporate Affairs. You May begin the conference call. Good afternoon, everyone and welcome to the Fortune brands innovations first quarter earnings call. Hopefully everyone has had a chance to review the earnings release, the earnings release and the audio.

Lee: This call can be found on the investors section of our F. B I N Dot com website.

Maria: I want to remind everyone that the forward-looking statements we make on the call today, either in our prepared remarks or in the associated question and answer session, are based on current expectations and market outlook and are subject to certain risks and uncertainties that may cause actual results to differ materially from those currently anticipated. These risks are detailed in our various filings with the SEC.

Lee: I want to remind everyone that the forward looking statements we make on the call today, either in our prepared remarks or in the associated question and answer session are based on current expectations and market outlook and are subject to certain risks and uncertainties that may cause actual results to differ materially from those currently anticipated.

Lee: These risks are detailed in our various filings with the SEC. The company does not undertake any obligation to update or revise any forward looking statements, except as maybe required by law.

Leigh Avsec: The company does not undertake any obligation to update or revise any forward-looking statements, except if they may be required by law. Any references to operating profit or margin, earnings per share, or free cash flow on today's call will focus on our results on a before charges and gains basis unless otherwise specified. Please visit our website for a reconciliation.

Lee: Any references to operating profit margin earnings per share of free cash flow on today's call will focus on our results on a before charges and gains basis, unless otherwise specified. Please visit our website for a reconciliation.

Leigh Avsec: With me on the call today are Nick Fink, our Chief Executive Officer, and Dave Barry, our Chief Financial Officer. Following our prepared remarks, we have a lot of time to address some questions. I will now turn the call over to Nick.

With me on the call today are Nick Fink, our Chief Executive Officer, and Dave Barry Our Chief Financial Officer. Following our prepared remarks, we had a lot of time to address some questions I will now turn the call over to Nick Nick.

Nicholas Ian Fink: Thank you, Leigh, and thank you to everyone for joining us. On this call, I will walk through the highlights of our first quarter performance, give some color on the drivers of this performance, including progress on our strategic initiatives, and offer some thoughts on the macroenvironment. I will then turn the call over to Dave for a discussion of our financial results, including how we are thinking about the remainder of 2024. Our teams delivered strong first-quarter results by executing on our priorities, including delivering above-market growth and operating margin improvement.

Nick: Thank you Lee and thank you to everyone for joining us today.

On this call I will walk through the highlights of our first quarter performance give some color on the drivers of this performance, including progress on our strategic initiatives.

Nick: And offer some thoughts on the macro environment.

David V. Barry: I'll, then turn the call over to Dave for a discussion of our financial results, including how we were thinking about the remainder of 2024.

David V. Barry: Our teams delivered strong first quarter results by executing on our priorities.

David V. Barry: <unk> delivering above market growth and operating margin improvements.

Nicholas Ian Fink: We saw powerful proof points of our compelling investment thesis this past quarter and are increasingly seeing the benefit of the transformative actions we took over the past few years. These actions all support our strategy as a growth-focused company powered by secular tailwinds, underpinned by leading brands, innovation, and channel management, and fueled by our Fortune Brand's advantages capabilities and our newly aligned structure. Turning to our first quarter performance,

David V. Barry: We saw a powerful proof points of our compelling investment thesis this past quarter.

Dave: <unk> seen the benefit of the transformative actions, we took over the past few years.

Dave: These actions all support our strategy as a growth focused company powered by secular tailwind.

Dave: Underpinned by leading brands innovation and talent management and fueled by a fortune brands advantaged capabilities.

Dave: Really aligned structure.

Dave: Turning to our first quarter performance.

Nicholas Ian Fink: Her teams delivered strong top and bottom line results, driving both sales and margins as they executed on our priorities. Through our strategy of growing the core and accelerating digital products, we were able to focus on those opportunities with the highest potential for returns, including in our leading brands, digital and connected capabilities and products, and meaningful innovation, while also optimizing and aligning our operations. Looking forward to the remainder of the year, we continue to expect to achieve the full-year guidance we initially outlined during our fourth quarter call. Net sales of $1.1 billion were up 7%, while organic sales were down 3% versus the prior year's first quarter.

Dave: Our teams delivered strong top and bottom line results driving both sales and margins as they executed on our priorities.

Dave: Through our strategy of growing the core and accelerating digital products.

Dave: Well to focus on those opportunities with the highest potential for returns, including leading brands digital and connected capabilities products and a meaningful innovation, while also optimizing and aligning our operations.

Dave: Looking forward to the remainder of the year, we continue to expect to achieve the full year guidance. We initially outlined during our fourth quarter call.

Dave: Net sales of $1 1 billion were up 7%.

Dave: Organic sales were down 3% versus the prior year's first quarter.

Nicholas Ian Fink: We estimate that our POS performance outperformed the larger market for our products by over 100 basis points, reflecting our commitment to focus on the highest growth opportunity. Operating income increased 22%, and our operating margin was 200 basis points higher than the first quarter of 2023. Our results are a great testament to the ability of our newly aligned organization to unlock value. Our sales and margin performance generated earnings per share of $0.83 in the first quarter, a 20% increase over the first quarter of 2020.

Dave: We estimate that our Pos performance outperformed the larger market for our products by over 100 basis points, reflecting our commitment to focus on the highest growth opportunities.

Dave: Operating income increased 22% and operating margin was 200 basis points higher than the first quarter of 2023.

Dave: Our results are a great Testament to the ability of our newly aligned organization to unlock value.

Dave: Our sales and margin performance generated earnings per share of 83 cents in the first quarter, a 20% increase over the first quarter of 2023.

Nicholas Ian Fink: As we have previously highlighted, Fortune Brand's operating model is designed to accelerate our leadership in brand and innovation, while also creating value for our channel partners. We are now designed to operate more efficiently and are focused on investing those efficiencies in opportunities with the highest potential for return. Most importantly, our new structure is a catalyst for accelerated growth.

Dave: As we have previously highlighted the fortune brands' operating model is designed to accelerate our leadership in brand and innovation, while also creating value for our channel partners.

Dave: We are now designed to operate more efficiently and are focused on investing in those efficiencies and opportunities with the highest potential for returns.

Dave: Most importantly, our new structure is a catalyst for accelerated growth.

Nicholas Ian Fink: This past quarter, we had some compelling proof points of the power of our new structure as we further sharpened our focus on brands, innovation, and channel leaders. We saw a particular acceleration in our smart water network and are achieving many of our milestones well ahead of schedule. In furtherance of our Whole Home Water Management Strategy, we announced our acquisition of SpringWall, which provides residential whole home water filtration and water softening solutions via direct-to-consumer channels.

Dave: This past quarter, we had some compelling proof points of the power of our new structure as we further sharpened our focus on brands innovation and channel leadership.

Dave: We saw particular acceleration and our smart water network and they're achieving many of our milestones well ahead of schedule.

Nicholas Ian Fink: The addition of Springwell paves the way for Fortune Brands to invest in and capture opportunities in the approximately $4 billion U.S. residential water filtration and water quality market. We expect this acquisition to increase Fortune Brands' exposure to recurring revenues. Stringwell's digital and direct marketing expertise augments Fortune Brand's existing digital capabilities, and it is proving to be highly synergistic with our flow leak detection system, with a double-digit attachment rate since flow has been available on the Stringwall site.

Dave: And further in some of our whole home water management strategy, we announced our acquisition of three well, which provides residential whole home water filtration and water softening solutions via direct to consumer channels.

Dave: The additional string well paves the way for fortune brands to invest and capture opportunities in the approximately 4 billion dollar U S residential water filtration water quality market.

Dave: We expect this acquisition to increase fortune brands exposure to recurring revenue streams.

Dave: Well, its digital and direct marketing expertise augments fortune brands existing digital capabilities.

Dave: It is proving to be highly synergistic with our flow leak detection system.

Dave: With a double digit attachment rate flow has been available on the three well site.

Nicholas Ian Fink: Consistent with our M&A priorities, this strategic discipline deal will not only augment our product portfolio but has the potential to accelerate our capabilities as we look to integrate their expertise across our business. Our brands and products are increasingly being recognized for their innovation, aesthetics, and ability to make the world a better place. In March, Moen was named to Foss Company's 2024 list of Most Innovative Companies. This impressive honor recognizes our leadership as a pioneer in whole home water management, including our leading smart water network.

Dave: Consistent with our M&A priorities the strategic discipline deal, we'll not only augment our product portfolio that has the potential to accelerate our capabilities as we look to integrate their expertise across our businesses.

Dave: Our brands and products are increasingly being recognized for their innovation.

Dave: Fedex and ability to make the world a better place.

Dave: In March <unk> was named to fast company's 2024 list of most innovative companies.

Dave: This impressive honor recognizes our leadership as a pioneer in whole home water management, including leading Smartwater network.

Nicholas Ian Fink: Within our security business, our connected residential locks continue to receive critical acclaim, with our recent Yale Assure Lock 2 Touch being named by Forbes Magazine as the best fingerprint and key code smart lock. The innovative features of this exciting product are clearly resonating. Finally, our fiber-on-wildwood composite cladding was recognized by Green Builder Media as a Sustainable Product of the Year.

Dave: Within our security business are connected residential locks continue to receive critical acclaim with a recent Yale assure lock to touch being named by Forbes magazine as the best fingerprint and key code Smart lock. The innovative features of this exciting product are clearly resonating.

Dave: Finally, our fiber on Wildwood composite cladding was recognized by Green builder media as a sustainable product of the year.

Nicholas Ian Fink: Whether it's saving water, protecting people, or incorporating recycled inputs, our brands are highlighting how a company can be successful and benefit people, communities, and the planet. Our brands and teams are working together to delight consumers with our innovative and beautiful products, and our increasingly cohesive and integrated portfolio was on display at the recent industry shows in Las Vegas in February. Our House of Roll booth displayed our comprehensive suite of luxury fixtures and provided clear and tangible evidence of how seamlessly our existing House of Roll brands integrate with our newly acquired Emtek and Schaub brands. Our message of curated luxury clearly resonated, and House of Roll was awarded the best large booth at CABUS.

Dave: It's saving water protecting people, we're incorporating recycled inputs our brands are highlighting how a company can have success and benefit people communities and the planet.

Dave: Our brands and teams are working together to delight consumers with our innovative and beautiful products and our increasingly cohesive and integrated portfolio wasn't display at the recent industry shows in Las Vegas in February.

Dave: Our house of ROHL Booth displayed a comprehensive suite of luxury fixtures and provides a clear and tangible evidence of how seamlessly existing house of ROHL brands integrate with our newly acquired amtech and shop rates.

Dave: Our message of curated luxury clearly resonated in house of ROHL was awarded the best large booth of cases.

Nicholas Ian Fink: And, for the first time, Thermature, Larson, Fiberon, FIPOM, and Solar Innovations were all on display together in a cohesive booth that showcased our material science expertise and product innovations working together. Turning to our digital portfolio, we saw over 200,000 device activations in the first quarter, and the overall digital business continues to accelerate. Our connected water business was particularly strong. In the first quarter alone, we added 15,000 users of Flow, and our POS performance exceeded our expectations.

Dave: And for the first time furniture Larson fiber on pipeline and soda elevations were all on display together.

Dave: Cohesive booth that showcased our material science expertise and product innovations working together.

Dave: Turning to our digital portfolio, we saw over 200000 device activations in the first quarter.

Dave: And the overall digital business continues to accelerate.

Dave: Ah connected water business was particularly strong in the first quarter alone. We added 15000 users of flow and.

Dave: And our P O S performance exceeded our expectations.

Nicholas Ian Fink: And in the quarter, our retail and e-commerce POS performance for flow grew by 85% versus the first quarter of 2020. As you may recall, last fall we formed a new connected products group by combining the original Fortune Brands team with the Yale and August team into a single powerhouse organization under aligned leadership. This group of about 200 engineers is performing very well in delivering milestones ahead of schedule, as we leverage our combined insights and talent across the entire portfolio with increasing speed and efficiency.

Dave: And in the quarter, our retail and E Commerce Pos performance for flow grew by 85% versus the first quarter of 2023.

Dave: As you May recall last fall, we formed a new connected products group by combining the original fortune brands team with E. L. In August team into a single powerhouse organization under aligned leadership.

Dave: This group of about 200 engineers is performing very well and delivering milestones ahead of schedule.

Dave: As we leverage our combined insights and talent across the entire portfolio with increasing speed and efficiency.

Nicholas Ian Fink: Our results this quarter and some of the exciting developments we are seeing give me full confidence in Fortune Brand's innovations, ability to deliver long-term growth and sustained value creation through the cycle, and we remain committed to achieving our long-term goals. Turning now to some additional thoughts on the current housing market and the market for our products. Looking at the overall market, and consistent with what we anticipated on our fourth quarter call, we saw continued softness in the R&R market, while we also saw encouraging POS growth in our products which serve the single-family new construction channel, including mown and Thermitree.

Dave: Our results this quarter and some of the exciting developments. We are seeing give me full confidence fortune brands innovations ability to deliver long term growth and sustained value creation through the cycle and we remain committed to achieving our long term goals.

Dave: Turning now to some additional thoughts on the current housing market and the market for our products.

Dave: Looking at the overall market and consistent with what we anticipated in our fourth quarter call. We saw continued softness in the R&R market. While we also saw encouraging P. O S growth and our products, which are the single family New construction channel, including bone in cemetery.

Nicholas Ian Fink: The need and desire for homes remains incredibly strong, and our products are optimally positioned in the context of the larger macroenvironment. Earlier this quarter, amid a more stable interest rate environment, we saw an uptick in buyers in the market, although activity slowed as interest rates increased in the face of persistent inflation. As the progress of the quarter demonstrated, consumers remain sensitive to rate fluctuations, but the need for and interest in housing remains strong. The U.S. continues to be massively under- housing prices, and home equity levels continue to remain high.

Dave: The need and desire for homes remains incredibly strong.

Dave: Products optimally positioned in the context of the larger macro environment.

Dave: Earlier this quarter amid a more stable interest rate environment, we saw an uptick of buyers in the market, although activity slowed as interest rates increased in the face of persistent inflation.

Dave: As the progress in the quarter demonstrated consumers remain sensitive to rate fluctuations, but the need for an interest in housing remains strong.

Dave: The U S continues to be massively under both.

Dave: Housing prices and home equity levels continue to remain high.

Nicholas Ian Fink: Demographic factors and high personal income levels continue to support housing demand while housing supply remains extremely constrained. At the same time, the stock of existing homes that are currently available for sale remains far below pre-pandemic norms, and home values increased faster in March of 2024 versus March of 2023. Turning to new construction, single-family new construction permit activity and starts were strong in the first quarter of 2024, while completions continued to lag.

Dave: Demographic factors and high personal income levels continues to support housing demand.

Dave: <unk> stock remains extremely constrained.

Dave: At the same time the stock of existing homes that are currently available for sale remains far below pre pandemic norms and home values increased foster in March of 2024 versus March of 2023.

Dave: Turning to new construction.

Dave: Single family, New construction permit activity in starts was strong in the first quarter of 2024, well completions continued to lag.

Nicholas Ian Fink: Over the last few months, mortgage applications increased in response to stabilized mortgage rates and the expectation of interest rate cuts. While it appears interest rates will remain higher for slightly longer, the market continues to remain massively underbuilt, and pent-up demand is only being exacerbated. In addition, large production builders remain optimally positioned to continue to be able to address the need for housing.

Dave: Over the last few months mortgage applications increased in response to stabilize mortgage rates and the expectation of interest rate cuts.

Dave: Well it appears interest rates will remain higher for slightly longer.

Dave: It continues to remain massively into bolt and pent up demand, there's only been exacerbated.

Dave: In addition, large production builders remain optimally positioned to continue to be able to address the need for housing.

Nicholas Ian Fink: And we are a trusted partner to a very significant number of these large home builders. Importantly, because our products are incorporated closer to completion than starts, our products are experiencing the tailwinds from the uptick in housing that began in the second half of 2023, and we expect this tailwind to remain robust. Turning to R&R, we expect the R&R market to remain dynamic throughout 2024, and there are many variables that are impacting the repair and remodel space, including consumer savings and confidence, employment levels, home equity levels, and existing home turnover.

Dave: And we are trusted partner to a very significant number of these large homebuilders.

Dave: Importantly, because our products are incorporated closer to completion and starts our products are experiencing a tailwind from the uptick in housing that began in the second half of 2023, and we expect this tailwind to remain robust.

Dave: Turning to R&R, we expect R&R market to remain dynamic throughout 2024, and there are many variables that are impacting the repair and remodel space, including consumer savings and confidence employment levels.

Dave: QWERTY levels in existing home turnover.

Nicholas Ian Fink: We continue to expect the R&R market for our products to be down 2% to 4% in 2024. However, the combination of high home equity levels, the low supply of homes, an aging housing stock, and the fact that many homeowners are living in homes that they purchased with no mortgage or with low interest rates is causing many people to rethink their existing standards.

Dave: We continue to expect the R&R market for our products to be down 2% to 4% in 2024. However, the combination of high home equity levels, the low supply of homes and aging housing stock and the fact that many homeowners are living in homes that they purchased with no mortgage with low interest rates.

Dave: Many people to rethink their existing space.

Nicholas Ian Fink: Google Search shows that search terms around home renovations are up versus a year ago, while a recent third-party study of homeowners indicated 82% of respondents were planning on engaging in home renovations in the next six months. The same survey indicated that the most compelling attributes of products are product quality, trusted brands, and attractive features. Our portfolio is optimally positioned, with our leading brands, innovative features, and beautifully designed products, all responding to the needs of our core customers.

Dave: Google search shows that search terms around home renovations are up versus a year ago. While our recent third party study of homeowners indicated 82% of respondents were planning on engaging in home renovations in the next six months.

Dave: The same survey indicated that the most compelling attributes extra product quality trusted brands and attractive features.

Dave: Our portfolio is optimally positioned with our leading brands innovative features and beautifully designed products all resonating with the needs of our core customers.

Nicholas Ian Fink: Finally, in China, the market continues to transition away from speculative new construction to R&R. We have confidence in our team's ability to successfully navigate the disruption and remain focused on creating long-term value in China, including in the emerging and high-potential R&R sector. We continue to believe that our China business will serve as an innovation engine for the larger business and that it offers attractive optionality for future opportunities. Fortune Brands is very well positioned; branding power, meaningful and value-added innovation, and channel strength are powerful catalysts for accelerated growth in the most attractive categories.

Dave: Finally in China, the market continues to transition away from speculative new construction R&R, we have confidence in our team's ability to successfully navigate the disruption and remained focused on creating long term value in China, including in the emerging and high potential R&R space.

Dave: We continue to believe that our China business will serve as an innovation engine for the larger business and that it offers attractive optionality for future opportunities.

Dave: Fortune brands is very well positioned.

Dave: Our branding power meaningful and value added innovation and channel strategy powerful catalysts for accelerated growth in the most attractive categories.

Nicholas Ian Fink: We are focused on driving outperformance in categories driven by secular growth tailwinds, like connected products, material conversion, luxury, Products with Sustainability, and Safety Benefits. Our consumers continue to reward us with growing market share, and our customers continue to view us as valued partners with unique insight, category management expertise, and best-in-class supply chain performance. We believe our products and brands are uniquely positioned to outperform, as our results demonstrated this past quarter. Turning now to our individual businesses, starting with water innovation.

Dave: We are focused on driving outperformance in categories, driven by secular growth tailwind like connected products until conversion.

Dave: Luxury and.

Dave: In products with sustainability and safety benefits.

Dave: Our consumers continue to reward us with growing market share because our customers continue to view us as valued partners with unique insights category management expertise and best in class supply chain performance.

Dave: We believe our products and brands are uniquely positioned to outperform.

Dave: Our results demonstrated this past quarter.

Dave: Turning now to our individual business results.

Dave: Starting with water innovations this segment delivered 5% sales growth versus the prior year with organic sales down 7%, while generating a 100 basis points of operating margin improvement.

Nicholas Ian Fink: This segment delivered 5% sales growth versus the prior year, with organic sales down 7% while generating 100 basis points of operating margin improvement. Sales in the U.S. largely rebounded following the inclement weather to start the year, and our Moen POS was around 100 basis points higher than our market estimates.

Dave: Sales in the U S largely rebounded following the inclement weather to start the year and our Mon Pos was around 100 basis points higher than our market estimate.

Nicholas Ian Fink: We're also seeing single-family new construction volume coming through. The Fientech brand continues to perform extremely well, and our reputation for delivering market-leading products is being rewarded with continued share gains, including low single-digit positive POS versus a market we estimate is down mid-single-digit. Finally, our work toward integrating our brains into one comprehensive and complementary luxury portfolio is progressing very well, including our work to update existing showrooms with our combined suite of luxury products and integrating our M-TECH products into our luxury outdoor offering.

Dave: We're also seeing single family, new construction volume coming through.

Dave: The Amtech brand continues to perform extremely well and our reputation for delivering market leading products is being rewarded with continued share gains, including low single digit positive P. O S versus a market we estimate was down mid single digits.

Dave: Finally, I work towards integrating our brands into one comprehensive and complementary luxury portfolio is progressing very well, including our work to update existing showrooms with a combined suite of luxury products and integrating our amtech products into our luxury outdoor offerings.

Nicholas Ian Fink: As I mentioned earlier, our flow-connected leak detection product continues to gain traction with insurance companies, municipalities, and consumers. We recently launched a new flow site on our Moen website and employed an exciting branding campaign designed to raise awareness of how our products can help solve the critical issue of residential water leaks, according to the Environmental Protection Agency. The average American family is wasting 9,400 gallons of water annually from preventable household leaks, and the resulting damage costs U.S. insurers and homeowners billions of dollars every year.

Dave: As I mentioned earlier, our flow connected leak detection product continues to gain traction with insurance companies.

Dave: Apologies and consumers.

Dave: We recently launched a new flow site on our own website and deployed an exciting branding campaign designed to raise awareness of our products can help solve their critical issue of residential water leaks.

Dave: According to the environmental Protection Agency. The average American family is wasting 9400 gallons of water annually from preventable household leaks.

Dave: And the resulting damage costs U S insurers and homeowners many billions of dollars every year.

Nicholas Ian Fink: At a time when insurance costs are rising and water scarcity is becoming even more serious, the need for a product like our FlowSmart water monitor and shutoff is becoming more acute. In addition to the billions of dollars we believe our products can save insurance companies and homeowners every year, we are working to help homeowners, builders, and municipalities achieve their water saving and carbon reduction goals. Our innovative connected sprinkler system recently achieved EPA WaterSense certification, which significantly expands the number of rebates available to consumers across the country.

Dave: At a time in which insurance costs are rising and water scarcity is becoming even more serious the need for a product like our flow Smartwater monitoring shutoff is becoming more acute.

Dave: In addition to the billions of dollars, we believe our products can save insurance companies and homeowners every year we're.

Dave: We're working to help homeowners builders and municipalities achieve their water saving and carbon reduction goals.

Dave: Our innovative connected sprinkler system recently achieved EPA waterson certification, which significantly expands the number of rebates available to consumers across the country.

Nicholas Ian Fink: Additionally, we are finalizing a partnership that we expect will greatly facilitate the number and availability of rebates for our smart water products for residents of municipalities across California, which should help further drive adoption of our products. We expect this program will officially launch this summer. And we are excited about how it can help raise awareness and adoption of HomeSmart leak detection solutions in a location where it is greatly needed. Looking to the remainder of 2024, we expect our water segment to continue to execute on our commitment to deliver above-market sales performance by focusing on those parts of the market with the greatest potential for growth.

Dave: Additionally, we are finalizing a partnership.

Dave: We expect we're greatly facilitate the number of in availability of rebates for Smartwater products for residents of municipalities across California.

Dave: Which should help further drive adoption of our products.

Dave: We expect this program will officially launch this summer.

Dave: We are excited for how it can help raise awareness and adoption of home smart leak detection solutions in a location where it is greatly needed.

Dave: Looking to the remainder of 'twenty 'twenty four we expect our water segment to continue to execute on our commitment to deliver above market sales performance by focusing on those parts of the market with the greatest potential for growth.

Nicholas Ian Fink: We plan to continue to make thoughtful investments in our key priorities, including branding and marketing, digital, and capacity. We expect our pricing actions to hold up as we continue to innovate, as the benefits of our products resonate with our customers and consumers, and the promotional environment remains stable.

Dave: We plan to continue to make thoughtful investments in our key priorities, including branding and marketing digital and capacity.

Dave: We expect our pricing actions to hold up as we continue to innovate as the benefits of our products resonate with our customers and consumers.

Dave: On the promotional environment remains stable.

Nicholas Ian Fink: We are on track to open two new facilities in the second quarter of 2024, including a new, highly efficient West Coast distribution center for lawn and a state-of-the-art UK production facility for the House of Roll. These targeted investments will help drive our strategy to grow the core and accelerate digital and connected products. We continue to be very excited about our water business, particularly the opportunities we see to capture growth in connected, luxury, and water filtration. Turning to Outdoors.

Dave: We are on track to open two new facilities in the second quarter of 2024, including a new highly efficient West Coast distribution center for a moment in his state of the art UK production facility for the house of ROHL.

Dave: These targeted investments will help drive our strategy to grow the core and accelerate digital and connected products.

Dave: We continue to be very excited about our water business, particularly the opportunities we see to capture growth in connected luxury and water filtration.

Dave: Turning to our doors.

Nicholas Ian Fink: We had a strong first quarter with an impressive 9% sales growth and operating margins that increased 680 basis points versus last year. Our performance is a direct result of the hard and strategic work of the team, and I thank them for their dedication. We are laser-focused on leveraging our expertise and investing in our core categories and in those products which we expect will offer the most attractive growth opportunities. Our door brands delivered low double-digit sales growth as tailwinds from new construction and recent product launches drove growth.

Dave: We had a strong first quarter with an impressive 9% sales growth and operating margins that increased 680 basis points versus last year.

Dave: Our performance is a direct result of the hardest strategic work of the team and I. Thank them for their dedication we are laser focused on leveraging our expertise and investing behind our core categories. I mean, those products, which we expect will offer the most attractive growth opportunities.

Dave: Our door brands delivered low double digit sales growth as tailwind from new construction and recent product launches drove growth.

Nicholas Ian Fink: Firmature is seeing the benefit of the increase in starts and completions which began last year. As we previewed this past quarter at the International Builders Show, Larson is introducing some innovative and on-trend new products at key price points. Additionally, we will continue to roll out synergistic product offerings between our door brands and our larger portfolio, including Emtek Hardware and Yale and August Connected Loss, which we expect to drive incremental future growth.

Dave: Furniture, you're seeing the benefit of the increase in starts and completions, which began last year.

Dave: As we previewed this past quarter at the International Builders' show Larsson is introducing some innovative and on trend new products at key price points.

Dave: Additionally, we will continue to rollout synergistic product offerings between outdoor brands in a larger portfolio, including amtech hardware and the L. In August connected locks, which we expect to drive incremental future growth.

Nicholas Ian Fink: Once again, our fiber on business is a great proof point of the power of our strong channel relationship. We saw over 20% growth for Fibron in the profitable wholesale channel, and our POS data indicates that our Fibron wholesale sell-through significantly outpaced the market. Finally, the security segment grew sales 9% in the quarter, but it was down high single digits on an organic basis, primarily due to de-stocking activities at select customers ahead of general consumer weakness.

Dave: Once again, our fiber one business is a great proof point of the power of our strong channel relationships.

Dave: We saw over 20% growth for fiber on in the profitable wholesale channel and our P. O S data indicates that our fiber on wholesale sell through significantly outpaced the market.

Dave: Finally, our security segment grew sales, 9% in the quarter, but it was down high single digits on an organic basis, primarily due to destocking activities at select customers ahead of general consumer weakness.

Nicholas Ian Fink: However, this segment also saw 170 basis points of operating margin improvement, inclusive of the investments in the Yale and August Smart Lock residential brands, as the work we did around continuous improvement and optimizing our footprint continues to pay off. We expect the security segment will continue to benefit from the transformational work that we have done over the past two years. We've evolved our legacy brands from mechanical-only products into innovative and growth-oriented businesses with a much more strategic portfolio. We will reinvest the efficiencies gained from our recent optimization of the business to take advantage of strong secular trends like connected products and safety. The Yale and August brands have proven to be a strong fit.

Dave: However, this segment also saw 170 basis points of operating margin improvement inclusive of the investments and Yale and August Smart lock residential brands is the work we did around continuous improvement and optimizing our footprint continues to pay off.

Dave: We expect our security segment will continue to benefit from the transformational work that we've done over the past two years.

Dave: We've evolved our legacy brands from mechanical only products into innovative growth oriented businesses with a much more strategic portfolio.

Dave: We will reinvest the efficiencies gained from our recent optimization of the business to take advantage of strong secular trends like connected products and safety.

Dave: The young August brands have proven to be a strong fit.

Nicholas Ian Fink: In addition to being great assets, the Yale and August team is excellent, and their capabilities have made significant contributions to our collective group across the product portfolio. To recap, in the first quarter, we executed our priorities of focusing on the core and accelerating digital products and delivered above-market performance. For the remainder of 2024, we will continue this focus of driving above-market growth by pursuing incremental growth opportunities and by building on the foundational work established by our transformation into a brand, innovation, and channel leader.

Dave: In addition to being great assets. The M. August team is excellent and their capabilities have made significant contributions to our collective group across the product portfolio.

Dave: To recap in the first quarter, we executed a party so focusing on the core and accelerating digital products and delivered above market performance for them.

Dave: End of 'twenty 'twenty four we will continue this focus of driving above market growth by pursuing incremental growth opportunities and by building on the foundational work established by our transformation into a brand innovation and channel leader.

Nicholas Ian Fink: We will productively manage any dynamic periods while actively positioning Fortune Brand's innovations for the future. We continue to have full confidence in our ability to meet the targets we outlined in our full year guidance on our fourth quarter call. I will now turn the call over to David. Thanks, Nick.

Dave: We will proactively manage any dynamic periods, while actively positioning fortune brands innovations for the future.

Dave: We continue to have full confidence in our ability to meet the targets, we outlined in our full year guidance on our fourth quarter call.

Dave: I will now turn the call over to Dave.

David V. Barry: As a reminder, my comments will focus on income before charges and gains to best reflect ongoing business performance. Additionally, comparisons will be made against the same period last year unless otherwise noted. Let me start with our first quarter results. As Nick highlighted, our teams executed our priorities amid a dynamic macro environment. As I will detail in my section, our financial results have some very compelling examples of how the transformative actions we undertook over the past year and a half are generating tangible return. In the first quarter, sales were $1.1 billion, up 7%, and down 3% excluding acquisitions.

Dave: Thanks, Nick as a reminder, my comments will focus on income before charges and gains to best reflect ongoing business performance. Additionally.

Dave: Additionally, comparisons will be made against the same period last year unless otherwise noted.

David V. Barry: Consolidated operating income was $167 million, up 22%. Total company operating margin improved 200 basis points to 15.1%, and earnings per share were 83 cents, a 20% increase versus last year. Our first quarter performance was driven by higher than expected sales in our outdoors and water segments and resulting margin flow through. As Nick mentioned, we remain focused on driving out performance, including above-market growth, enhancing margins, and generating cash. Our teams continue to focus on managing our P&L and balance sheet while maintaining key strategic growth investments.

Dave: Let me start with our first quarter results.

Dave: As Nick highlighted our teams executed our priorities amid a dynamic macro environment.

Dave: As I will detail in my section our financial results have some very compelling examples of how the transformative actions, we undertook over the past year and a half are generating tangible returns.

Dave: In the first quarter sales were $1 1 billion up 7% and down 3% excluding acquisitions.

Dave: Consolidated operating income was 167 million up 22%.

Dave: Total company operating margin improved 200 basis points to 15, 1% and earnings per share were <unk> 83 cents, a 20% increase versus last year.

Dave: Our first quarter performance was driven by higher than expected sales in our outdoors and water segments, and resulting margin flow through.

Dave: As Nick mentioned, we remain focused on driving outperformance, including above market growth enhancing margins and generating cash.

Dave: Our teams continue to focus on managing our P&L and balance sheet, while maintaining key strategic growth investments.

David V. Barry: Now let me provide more color on our segment results. Beginning with water innovations, sales were $625 million, up $31 million, or 5%, and down 7% excluding the impact of acquisition. Our organic results reflect POS down mid-single digits and channel inventory reductions at select customers. China sales declined mid-single digits and were up low-single digits, excluding the impact of FX.

Dave: Now, let me provide more color on our segment results.

Dave: Beginning with water innovations sales were $625 million up $31 million or 5%.

Dave: And down 7%, excluding the impact of acquisitions.

Dave: Our organic results reflect Pos down mid single digits and channel inventory reductions at select customers.

Dave: China sales declined mid single digits and were up low single digits, excluding the impact of FX.

David V. Barry: As Nick indicated, the Chinese consumer remains cautious in the housing space, and our team continues to manage the dynamic environment well while finding pockets of growth in emerging channels and in product category expansion. Water Innovation's operating income was $141.5 million, an increase of 10%. Operating margin was 22.6%, an increase of 100 basis points, reflecting the impact of higher volume. Turning to Outdoors,

Dave: As Nick indicated the Chinese consumer remains cautious in the housing space and our team continues to manage the dynamic environment, well, while finding pockets of growth in emerging channels and in product category expansion.

Dave: Water innovations operating income was $141 5 million.

Dave: An increase of 10%.

Dave: Operating margin was 22, 6% an increase of 100 basis points, reflecting the impact of higher volumes.

Dave: Turning to outdoors.

David V. Barry: Outdoors had a strong first quarter. Sales were $315 million, up 9%, driven by strength in indoors and fiber on wholesale. Doors sales increased by low double digits. Sales were supported by higher volumes at ThermaTru, driven by the increase in single-family new construction. Decking sales were roughly flat, driven by strength in wholesale, and partially offset by anticipated declines in retail.

Dave: Outdoor has had a strong first quarter sales were $315 million up 9% driven by strength in doors and fiber on wholesale.

Dave: Doors sales increased low double digits sales.

Dave: Sales were supported by higher volumes at Therma true driven by the increase in single family New construction.

Dave: Decking sales were roughly flat driven by strength in wholesale and partially offset by anticipated declines in retail.

David V. Barry: Our results this quarter reflect our ongoing strategic approach of focusing on those core categories in which we expect to have the best opportunities to achieve long-term, above-market growth and profitability. Outdoor Segment Operating Income was $37.9 million, up 150%; segment operating margin more than doubled to 12%, a 680 basis point improvement. Segment operating income increases were driven by favorable volume leverage in our businesses and productivity and profitability improvements. We believe this segment is on the right track as we focus on those parts of the market that will drive the greatest potential returns and growth and where we have the right to win. In security, our first quarter sales increased 9%. However, organic sales decreased 8%, reflecting soft POS and select channel destocking ahead of soft consumer activity.

Dave: Our results this quarter reflect our ongoing strategic approach of focusing on those core categories in which we expect to have the best opportunities to achieve long term above market growth and profitability.

Dave: Outdoor segment operating income was $37 9 million up 150%.

Dave: Segment operating margin more than doubled to 12% a 680 basis point improvement segue.

Dave: Segment operating income increases were driven by favorable volume leverage in our businesses and productivity and profitability improvements.

Dave: We believe this segment is on the right track as we focus on those parts of the market that will drive the greatest potential returns and growth and where we have the right to win.

Dave: In security, our first quarter sales increased 9%.

Dave: Organic sales decreased 8%, reflecting soft P O S and select channel Destocking ahead of soft consumer activity.

David V. Barry: We continue to see momentum in the categories we have identified as having higher growth potential, such as Master Lock Commercial and our Connected Security products. Segment operating income was $27 million, up 22%, and segment operating margin was 15.7%, an increase of 170 basis points versus the prior year, and was driven by continuous improvement initiatives. As we have discussed previously, we think our security segment is a great example of the power of our Fortune Brand's differentiated capabilities, and we expect great things from this business.

Dave: We continued to see momentum in the categories, we have identified as having the higher growth potential such as master light commercial and our connected security products.

Dave: Segment operating income was $27 million up 22%.

Dave: Segment operating margin was 15, 7% an increase of 170 basis points versus prior year.

Dave: And was driven by continuous improvement initiatives.

Dave: As we've discussed previously we think our security segment is a great example of the power of our fortune brands advantaged capabilities, and we expect great things from this business.

David V. Barry: Turning to the balance sheet, our balance sheet remains solid with cash of $360 million, net debt of $2.7 billion, and our net debt to EBITDA leverage is 2.9 times. We remain on track to achieve our target net leverage ratio of two and a quarter times by year end. We have 875 million available on our revolver. In the first quarter, we returned $130 million to shareholders via a combination of share repurchases and dividends, including $100 million of share repurchases. Year-to-date, we have repurchased $125 million of shares. Our first quarter free cash flow was negative $136 million, reflecting the typical seasonality of our business and in line with our expectations.

Dave: Turning to the balance sheet.

Dave: Our balance sheet remains solid with cash of $360 million net debt of $2 7 billion and our net debt to EBITDA leverage is two nine times we.

Dave: We remain on track to achieve our target net leverage ratio of two and a quarter times by yearend.

Dave: We have $875 million available on our revolver.

Dave: In the first quarter, we returned $130 million to shareholders via a combination of share repurchases and dividends, including $100 million of share repurchases.

Dave: Year to date, we have repurchased $125 million of shares.

Dave: Our first quarter free cash flow was negative $136 million, reflecting the typical seasonality of our business and in line with our expectations.

David V. Barry: To summarize the quarter, we delivered strong sales and margin results and are on the path of delivering on our full-year commitment to grow sales above market, expand our margins, and generate cash. While our first quarter results were certainly encouraging and spoke to the strength of our business, we are aware of the dynamic macro environment. For the second quarter, we expect net sales growth of around 10 percent, with operating margins between 16.5 and 17 percent. Operating margins will be impacted by inefficiencies related to the start-up of our two new water facilities, which we expect will provide long-term capacity for market-beating growth and cost savings for the business.

Dave: To summarize the quarter, we delivered strong sales and margin results and are on the path of delivering on our full year commitments to grow sales above market expand our margins and generate cash.

Dave: While our first quarter results were certainly encouraging and speak to the strength of our business. We are aware of the dynamic macro environment.

Dave: For the second quarter, we expect net sales growth of around 10% with operating margins between 16, and a half and 17%.

Dave: Operating margins will be impacted by inefficiencies related to the startup of our two new water facilities, which we expect will provide long term capacity for market, beating growth and cost savings for the business.

David V. Barry: Looking forward to the second half of the year, we continue to expect sales growth of between 2% and 3% and operating margins of around 18%. As a reminder, we closed on our Yale, August, and M-TEC acquisitions in June of last year, and the performance of those brands will be included in our second half organic results. Finally, we remain confident in our ability to hit our previously communicated full-year 2024 guidance, including full-year net sales up 3.5% to 5.5%, with organic net sales down 1% to up 1%, and operating margins between 16.5% and 17.5%, the midpoint of which includes 100 basis points of operating margin improvement.

Dave: Looking forward to the second half of the year, we continue to expect sales growth of between 2% and 3% and operating margins of around 18%.

Dave: As a reminder, we closed on or Yale August and Amtech acquisition in June of last year and the performance of those brands will be included in our second half organic results.

Dave: Finally, we remain confident in our ability to hit our previously communicated full year 2024 guidance, including full year net sales up three and a half to five 5% with organic net sales down 1% to up 1% and operating margins between 16, 5% and 17 and a half.

Dave: Were sent the midpoint of which includes a 100 basis points of operating margin improvement.

David V. Barry: We continue to expect EPS of $4.20 to $4.40, the midpoint of which represents 10% earnings per share growth. Our teams are off to a great start against our full-year targets and will remain focused on the execution of our key priorities. I will now pass the call back to Leigh to open the call for questions.

Dave: We continue to expect EPS of $4 20 to $4 40.

Dave: The midpoint of which represents 10% earnings per share growth.

Dave: Our teams are off to a great start against our full year targets and we'll remain focused on the execution of our key priorities.

Dave: I will now pass the call back to Lee to open the call for questions Lee.

Leigh Avsec: Thanks Dave. That concludes our prepared remarks. We will now begin taking a limited number of questions. Since there are a number of you who would like to ask a question, I will ask that you limit your initial questions to two and then re-enter the queue to ask additional questions. I will now turn the call back over to the operator to begin the question and answer session. Operator, can you open the line for questions?

Lee: Thanks, Dave that concludes our prepared remarks, we will now begin taking a limited number of questions. Since there are a number of you who'd like to ask a question I'll ask that you limit your initial questions to two and then reenter the queue to ask additional questions.

Speaker Change: I will now turn the call back over to the operator to begin the question and answer session. Operator can you open the line for questions. Thank you.

Operator: Thank you. Thank you. If you would like to ask a question, please press star 1 on your telephone keypad at this time. A confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue.

Speaker Change: Thank you if you would like to ask a question. Please press star one on your telephone keypad at this time a confirmation tone will indicate your line is another question you May press star two if he would like to remove your question Tim Mchugh for participants using speaker equipment. It may be necessary to pick your handset the floor.

Speaker Change: Pressing the star keys.

Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Again, that is star one to register a question at this time. Good evening, guys, and thank you for taking my questions. Nick, maybe I'll start high-level, sort of where you started.

Speaker Change: Again that is star one to register a question at this time.

Speaker Change: Our first question comes from John Lovallo with UBS. Please proceed with your question.

John Lovallo: Good evening, guys and thank you for taking my questions, maybe I'll start high level sort of where you started.

John Lovallo: And just looking for any update on the progress of the various kinds of Fortune initiatives to align the company more as one company, you know, whether it's connected products, you know, integrated supply chain efforts, the transformation office. I mean, where are the biggest opportunities for improvement this year? I think John, um...

John Lovallo: And just looking for any update on the progress of the various kind of fortunate initiatives to align the company more as one company, whether it's connected products integrated supply chain efforts. The transformation office I mean, where are the biggest opportunities for improvement this year.

Speaker Change: Hi, John.

Nicholas Ian Fink: It's a great question. I mean, we're a little more than a year into that now, right? So, it was September 22 when we announced the realignment of the company. It is a heavy lift to go and redesign an operating model and then really work through a full cycle, which was 2023, of operating in that new model. And now we seem to be hitting our groove.

John Lovallo: So great question I mean, we're a little more than a year into that now right. So.

Speaker Change: It was 22, when we announced the realignment.

Speaker Change: The company and.

Speaker Change: It.

Speaker Change: Shy away from it is a heavy lift to go and redesign and operating model.

Speaker Change: And then really worked through a full cycle, which was 2023 of operating in that new model and now were seem to be hitting or.

Nicholas Ian Fink: And what I really look at are the proof points of things that we've been able to get done that we might not have been able to get done had we not come together in this way? And I think you can see that across a number of things. Firstly, the portfolio is getting increasingly cohesive. A lot of people remarked, I think, at the industry shows that K-Biz and iBiz are an example of what's already rolling out in the market. We were able to do that.

Speaker Change: What I really look through or what are the proof points are things that we've been able to get done that we might not have been able to get done.

Speaker Change: Had we not come together in this way and I think you can see it across a number of things Jamie.

Speaker Change: Our portfolio is getting increasingly cohesive.

Speaker Change: A lot of people who are marketing at the industry shows <unk>.

Speaker Change: I see and check in house of ROHL together on display is really gotcha.

Speaker Change: An example of what is already rolling out in the market.

Speaker Change: We were able to do that I think was very surprising coming into our stores.

Nicholas Ian Fink: I think it was very surprising coming into our outdoor area and not just seeing products on display together but starting to see how those innovations will work together to bring those technologies across the various brands. [inaudible] So that is a big area for us. I think another big area is our operational leverage, which you just have now, and the team that comes with that. What they're getting done in the time that they're getting it done is pretty remarkable. I mean, if you just think about recently reformatting the entire security management faction and doing it with grace.

Speaker Change: Im not just seen products on display together, but you're starting to see how those innovations will work together to bring those technologies across the various brands.

Speaker Change: In areas like our doors within second yes, you're starting to see the portfolio with the line organization and you're able to extract greater value.

Speaker Change: It was less of a wider more siloed.

Speaker Change: That is a big area for us I think another big area.

Speaker Change: Leverage right you just have now.

Speaker Change: <unk> team supporting the entire business and the caliber of the team that comes with that.

Speaker Change: What theyre getting done in the time that they're getting it done is pretty remarkable I mean, if you just think about your most recently reformatting the entire security manage factory footprint in doing it.

Speaker Change: With the Grace.

Speaker Change: Team did it in any people who are a great place, but also driving.

Speaker Change: The results that Youre seeing now start to come through security optimizing.

Speaker Change: There might be a supplier spend.

Speaker Change: And resilience at greater speeds than ever Theyre getting more capacity on a fiber on that.

Speaker Change: We thought it was Derek and Scott.

Speaker Change: There'll be two major water facilities in this quarter alone.

Speaker Change: Awesome.

Speaker Change: We've gotten that amount of time in this short of time prior to this.

Speaker Change: I think it's a great proof point and then you.

Nicholas Ian Fink: They're optimizing their suppliers. [inaudible] I think it's a great proof point. And then, finally, I might just point you to one of the things we're most excited about, which is our digital. And that's a journey where, you know, you now have a single line, a group of over 200 engineers this year, and we achieved it a quarter ahead of schedule. I really don't think we could have done that without bringing the whole team together with the depth of knowledge that they now have.

Speaker Change: Finally, I might just point you to.

Speaker Change: Most excited about which is our digital and connected journey.

Speaker Change: You don't have a single aligned.

Speaker Change: Group over to go about Trojan engineers.

Speaker Change: And.

Speaker Change: It is much much more like a.

Speaker Change: Sure.

Speaker Change: Our digital business.

Speaker Change: They've set out a set of milestones for example for the flow and Smartwater network for this year and achieved a quarter ahead of schedule I really don't think we have done that without bringing the whole team together.

Speaker Change:

Speaker Change: <unk> got the knowledge that they now have so let me just a few proof points that could go into the things like integration management office, which you didn't have before the progress is effectively already have.

Nicholas Ian Fink: So, you know, those are just a few proof points I could get into things like the integration management office, which we didn't have before, the progress, the fact that we already have flow selling on the Springwall website, and seeing a great attachment right there. I mean, you know, there's just a speed to things now and a clarity of vision across the whole business. And I think while we always had that ambition, it was hard to unlock.

Speaker Change: Slow selling on spring more websites machine.

Speaker Change: Attachment rates there.

Speaker Change: Pete sure things now.

Speaker Change: Clarity of vision across the whole business.

Speaker Change: I think while we've always had that addition was hard to unlock in the old structure.

Nicholas Ian Fink: Got it. That's really helpful. And then maybe turning just to outdoors, you know, revenue was up 9% in the first quarter versus your full year outlook of plus 1 to 3. Was there some timing benefit here? Because, you know, the remainder of the year implies more modest growth on a year-over-year basis. And then, along the same lines within decking, it sounds like retail may have been down meaningfully to offset that 20% increase in wholesale. So can you provide any color on what's going on there?

Speaker Change: Got it that's really helpful and then maybe turning just to outdoors.

Speaker Change: Revenue was up 9% in the first quarter versus your full year outlook of plus one to three.

Speaker Change: Is there some timing benefit here because the remainder of the year implies more modest growth on a year over year basis, and then along the same lines within decking. It sounds like retail may have been down meaningfully to offset that.

Speaker Change: The percent increase in wholesale so can you provide any color on what's going on there. Thank you ill give you some perspective.

Nicholas Ian Fink: Thank you. I'll give you some perspectives, and Dave can round them out for the rest of the year. I'm super excited about the performance afterwards. The recorder, I think you may really like it.

Speaker Change: And Dave can round it out.

Dave: The rest of the year I mean, obviously <unk>.

Dave: Excited about the performance outdoors third quarter, I think you didn't really see that.

Nicholas Ian Fink: That business, coming into its own again, much more aligned under its leadership. [inaudible] Back up. So some really good stuff there. On, you know, five runs, you're absolutely right.

Speaker Change: Coming into its own again much more aligned under.

Speaker Change: Leadership.

Speaker Change: Great performance out of the doors business.

Speaker Change: To work.

Speaker Change: And of course, Youre seeing you construction finally, starting to come through as we sort of work towards the end of the year and starting into this year.

Speaker Change: Back up so some really good stuff there.

Speaker Change: Brian you're absolutely right I mean, we've made some strategic costs really focus.

Nicholas Ian Fink: I mean, we've made some strategic calls to really focus on the possible part of the market, where we can hopefully generate the types of margins we'd like to see in order to be able to fuel future growth and future innovation. I mean, that's really how we think about the margin journey, and the whole company is on this. And so, you know, seeing really the growth continue to come through the wholesale channel and seeding some in the retail channel. And then, you know...

Speaker Change: On the most profitable part.

Speaker Change: It's a market, where we can hopefully generate the types of margins, we'd like to see in order to be able to fuel future growth and future innovation I mean, that's really how we think about the margin journey and all companies on this that's the real purpose.

Speaker Change: And so we're seeing really the growth continue to come through the wholesale channel.

Speaker Change: Some in.

Speaker Change: In the retail channel and then.

Nicholas Ian Fink: Very interestingly for us, as we start to see some of the work that we've been doing at Larson for the last couple of years hit the marketplace, and so Larson is kind of going through a total refresh of some of the ideas that we had, and acquisitions, and the pandemic, and some of the changes we had to make. A Less Profitable Business Than We Once Were, for a while to align that organization, and now it's starting to see some really positive POS coming there.

Speaker Change: Very interestingly for us as we start to see some of the work that we've been at Larson for the last couple of years hit the marketplace.

Speaker Change: And for Washington category.

Speaker Change: Total refresh some of the ideas that we had coming into that acquisition.

Speaker Change: The pandemic.

Speaker Change: The changes we had to make sure that.

Speaker Change: Less profitable business that we walked away from just took a while to unwind that organization and now starting to see some really positive.

Nicholas Ian Fink: So I'd say, you know, overall, a really good quarter coming in ahead of where we thought the rest of the year would be. [inaudible] With the outdoor segment, we saw P.O.S. up mid-single digits, which was mostly volume-driven in the quarter, and then, as a reminder, we had a low single-digit benefit, primarily due to a prior year inventory reduction. [inaudible] You know, going forward. We do think it was a better quarter than we expected. It gives us confidence in the full-year guide and helps us de-risk some of the second half.

Speaker Change: I mean, there so I'd say in whole.

Speaker Change:

Speaker Change: Really good quarter coming in ahead of where we thought.

Speaker Change: Gives us some good confidence for.

Speaker Change: Not just the rest of the year.

Speaker Change: And John.

Speaker Change: Ed.

Speaker Change: The outdoor segment, we saw Pos.

Speaker Change: Mid single digits, which was mostly volume driven in the quarter and then as a reminder, we had a low single digit benefit from a prior year inventory reduction primarily in cemetery.

Speaker Change: It took place last quarter, so that drove the 9% of sales.

Speaker Change: Going forward.

Speaker Change: We do think there's a better quarter than we expected it gives us confidence in the full year guide it helps us de risk some of the second half.

Speaker Change: Sales expectation that's true across the business when you look at our first quarter results.

Speaker Change: And then without doors specifically.

David V. Barry: You know, as the volume returns, and we weren't drawing them in... driven by law. Great. Thank you, guys. Our next question comes from Phil Ng with Jeffries. Please proceed with your question. Hey guys.

Speaker Change: The volume returns and we werent drawing down inventories.

Speaker Change: Again volume drove margin improvement driven by volume and by productivity do you expect that to continue through the year.

Speaker Change: Really good start for that business out of the gate.

Speaker Change: Great. Thank you guys.

Speaker Change: Yes.

Speaker Change: Our next question comes from Xiaomi with Jefferies. Please proceed with your question.

Philip H. Ng: After a slower start to the year, it looks like your business certainly picked up. Any color on how intracore insurance is going to progress early read in April? A little surprise here; some of your customers are still destocking, I think, and securing water. What channel, and have you seen that kind of calm down and maybe restock, potentially? Yeah, as you know, I'd say we called out in the last quarter. Not unusually, but your instrumental flow and then certainly picked up, I would say.

Xiaomi: Hey, guys. After a slower start to it looks like to get your business certainly picked up any color on how at your core insurance kind of progress early read in April little surprised to hear semi customers are still destocking I think insecure in water.

Xiaomi: Channel and have you seen that kind of calmed down and maybe restock potentially.

Speaker Change: Yes.

Speaker Change: Sorry.

Speaker Change: You've called out from a lot of color.

Speaker Change: Not unusually.

Speaker Change: As John will slow and then certainly picked up I would say.

Nicholas Ian Fink: It's been a bit choppier to work at the end of the quarter, particularly with some of the noise around interest rates... [inaudible] And, you know, I think, I think Garth Orgel, as soon as we come into the... [inaudible] Funds and Surveys saying, you know, they're planning projects. So I think, you know, we just need to manage it. As far as the de-stocking part of your question is concerned, you know, it was interesting because we see that, you know, particularly in e-commerce, more than elsewhere, but e-commerce, a little bit of wholesale across the business, so it wasn't really isolated. Spot. I think taking inventory out ahead of what they might perceive as general consumption for those channels, and Phil on your POS trend question. I'll provide some colors sequentially.

Speaker Change: It was a choppy here towards the end of the quarter.

Speaker Change: Some of the noise around.

Speaker Change: Right.

John Lovallo: Thanks Scott.

John Lovallo: But these are kind of still seeing resilience, where we called it out.

John Lovallo: The wholesale channel single family New construction.

John Lovallo: Some areas.

John Lovallo: Mike Larsen.

John Lovallo:

Michael Jason Rehaut: I think I think our affordable excuse me coming to that.

Michael Jason Rehaut: Season picks.

Michael Jason Rehaut: Picks up you certainly see a lot of consumer interest as mentioned in his prepared remarks, we still see.

Speaker Change: This up relative to even last year, we're seeing.

Speaker Change:

Speaker Change: Simon It's a survey.

Speaker Change: They are planning projects.

Speaker Change: And so I think we just need to manage it as far as the Destocking part.

Speaker Change: Your question is concerned.

Speaker Change: Interesting because we see that.

Speaker Change: Particularly in e-commerce.

Speaker Change: More than elsewhere, but ecommerce is a little bit of wholesale across the business. So it wasn't really isolated to just one spot.

Speaker Change: Question.

Speaker Change: Some customers I think taking inventory.

Speaker Change: Head of what they might perceive as some general consumer weakness and so those channels are pretty clean from an inventory perspective.

Speaker Change: And then Phil on the.

Speaker Change: POS trend question.

David V. Barry: So first quarter POS. We finished dollar for dollar, almost exactly in line. Typically, I think we'd see a first quarter that's a little bit softer. But we were almost dollar for dollar, almost equal.

Phil: I'll provide some color sequentially. So first quarter POF finish dollar for dollar almost exactly in line with the fourth quarter. So typically I think we'd see a first quarter, that's a little bit softer than in the fourth but we were dollar for dollar almost equal Q4, 23% of Q1 'twenty four.

David V. Barry: Q423 to Q124. And as we've moved through April, we've seen our retail and e-commerce POS ramp up. Seasonally, as we would expect, moving from the first quarter to the second quarter. So still negative year over year, but the channel serving single-family new construction continues to show growth and see nice input trends to start the quarter. Super, that's helpful.

Speaker Change: As we've moved through April we've seen our retail and E Commerce Pos ramp.

Speaker Change: Seasonally as we would expect moving from the first quarter, the second quarter, though still negative year over year.

Speaker Change: The channel serving single family New construction continued to show growth, we've seen nice input trends to start the quarter in those businesses in those channels.

Speaker Change: Super that's helpful.

Philip H. Ng: And then on your water innovation business, it would be helpful to kind of give us a little more color on how to think about the margin profile, perhaps in Tiki and the backups, given perhaps some of the startup costs from the new facilities as you kind of ramp that up. And in some of the investments and growth opportunities you see in connected products, water filtration, and flow, how should we think about the margin profile of that business versus, let's say, your core lawn business? On the connected side, you know, really strong confidence.

Speaker Change: And then on your water innovation.

Speaker Change: Is that helpful kind of give us a little more color on how to think about the.

Speaker Change: The margin profile of <unk> in the back apps, given perhaps some of the startup costs in many facilities as you kind of ramp that up and then some of the investments in growth opportunities you see in connected products water filtration and flow how should we think about the margin profile of that business versus let's say your core <unk> business.

Speaker Change: Yes.

Speaker Change: Connected side.

Speaker Change: Strong contribution margin.

Speaker Change: Or.

David V. Barry: Stillman Investment Phase. Investments are coming through. But product margins are good. And then on the margin side, overall, for the segment, you'll still feel... and they're all very competent in tracking to that 24 to 24 and a half full year margin target, and actually, we were a little bit ahead of our internal expectations in Q1. I think you'll see sequential improvement Q1 to Q2 and then continued sequential improvement back out to the year. We're ramping up new facilities and getting the savings there, as we have. Okra

Speaker Change: It's still in an investment phase.

Speaker Change: So those investments coming through.

Speaker Change: Product margins are good.

Speaker Change: And then on the margin side overall for the segment still feel confident in tracking to that 24 to 24 and a half full year margin target and actually were a little bit ahead of our internal expectations in Q1.

Speaker Change: You will see sequential improvement Q1 to Q2.

Speaker Change: And then continued to get sequential improvement as we move through the back half of the year as we're ramping up new facilities and getting the savings there and as we have some continued price cost favorability come through the P&L.

David V. Barry: Thank you. Appreciate the color, guys. Our next question comes from Adam Baumgarten with Yeoman. Please proceed with your question. Hey guys, could you give some more color on the upcoming Smart Water Partnership in California? It sounds pretty interesting. Just anything else you could add?

Speaker Change: Okay. Thank you I appreciate the color guys.

Speaker Change: Our next question comes from Adam Baumgarten Magellan. Please proceed with your question.

Adam Michael Baumgarten: Hey, guys.

Adam Michael Baumgarten: Could you give some more color on the upcoming Smartwater partnership in California, It sounds pretty interesting just anything else you could add.

Adam Michael Baumgarten: Sure, I mean, we've got a number of these, I would say, in the works right now. So, you know, you'll be able to see us ahead of some internal milestones that we're really excited about. And then we're working on a number, we referenced one, but a number of external partnerships that could really amplify. Price Point, Placement. [inaudible] in your house.

Adam Michael Baumgarten: Sure I mean, we've got a number of these I would say in the.

Speaker Change: Works right now so.

Speaker Change: That's being ahead on some internal milestones.

Speaker Change: We're really excited about and then we're working on a number we referenced one but a number of external partnerships that we believe could really amplify.

Speaker Change: The business.

Speaker Change: H.

Speaker Change: Sort of just frame, whether its ease of purchase price point placements installation to life. The B awareness awareness is still a huge thing for a category, that's very nascent and will be complementing that with our AD campaign is just rolling out now which will all be around.

Speaker Change: Awareness around that.

Speaker Change: That you will have an event like this.

Speaker Change: In your house and so.

Nicholas Ian Fink: And so, you know, these are big initiatives; they're big partnerships. You know, I've long said it, I don't think... when this category really starts to take hold. We're seeing now sort of a buildup of momentum and initiatives that we think are really going to sort of amplify our voice and this new category's voice, you know, out in front of the consumer. And I also mentioned an 85% uptick in POS in retail and e-commerce in the quarter. I'm going to say it kind of caught us by surprise, but, you know, caught us a little bit by surprise.

Speaker Change: These are these are big initiatives.

Speaker Change: They are big partnerships and.

Speaker Change: I've long said that I don't think this isn't a.

Speaker Change: When.

Speaker Change: This category really starts to take hold and I think what we're seeing now.

Speaker Change: A buildup of momentum and initiatives.

Speaker Change: That we think is really going to amplify our voice and the endless new categories voice out in front of the consumer and I also mentioned, 85% uptick in Pos and retail and e-commerce in the quarter.

Speaker Change: Perfect.

Speaker Change: By surprise that caused a little bit by surprise, we actually can accelerate.

Nicholas Ian Fink: We're actually going to accelerate the amount of inventory we're going to bring in to support our customers in this space. And I do think, you know, between our internal activities and both the product, our... America, and then through these partnerships. Review of Musicality. Schurz.

Speaker Change: Out of inventory, we're going to bring in to support our cup.

Speaker Change: In this space and I do think.

Speaker Change: I mean, our internal activities in both product.

Speaker Change: Our activities.

Speaker Change: Speaking externally, whether it be through media and marketing.

Speaker Change: Online youll see much more activity and then through these partnerships.

Speaker Change: Salaries insurers.

Nicholas Ian Fink: I think you're really going to see an amplification of what we're doing in the marketplace. Great. Thanks.

Speaker Change: I think you're really going to see an amplification of what we're doing.

Speaker Change: Great.

David V. Barry: And then, Dave, maybe for you, just on input costs for the year, how you're thinking about that, and maybe, generally, price costs as we move through the year? Yep. So still, I'd say, line of sight to, on the price side, and Mark.

Speaker Change: Great. Thanks, and then Dave maybe for you just on input costs for the year. How are you thinking about that and maybe generally price cost as we move through the year.

Dave: Still the same.

Dave: Your line of sight to that.

Dave: Price side.

Dave: The net price positive for the full year no change there in our businesses both of our businesses took gross price in the first quarter and we're successful with that implementation.

David V. Barry: So, we're looking at a lot of different things. We're looking at the cost side. We're looking at the net price positive for the full year. No change there. Our businesses, most of our businesses took gross prices in the first quarter and were successful with that implementation. On the cost side, you still expect net deflation of around 1% of COGS.

Dave: On the cost side is still expect net deflation of around 1% of cost.

David V. Barry: I know our base input costs, really, during the second quarter have increased for some of our base metals. But I'd remind everyone, you know, the way our supply chain is structured, that we really won't see that impact until either very, very late in the year, more likely the first. Based Metals doesn't change the price for us until the following year, giving our team some visibility into what's coming and allows them to work on price and cost actions to get ahead of it and feel good about our price off. Okay, great. Thanks, and best of luck!

Dave: <unk> based input costs really here in the second quarter of increases in base metals, but I would remind everyone. The way our supply chain. This structure that we really wont see that impact in our P&L until either very very late in the year or really more likely in the first quarter of 2025.

Dave: Any movement in base metals doesn't change the price rise until the following quarter and that has to work through it and supply chain. So that gives our team some visibility to what's coming and allows them to work on price and cost actions to get ahead of it.

Dave: So feel good about our price cost estimates for the year that we laid out on the last call.

Speaker Change: Okay, great. Thanks best of luck.

Stephen Kim: Our next question comes from Stephen Kim with Evercore ISI. Please proceed with your question. Yeah, great. Thanks a lot, guys.

Dave: Our next question comes from Stephen Kim with Evercore ISI. Please proceed with your question.

Nicholas Ian Fink: You made a comment about how I guess there was a little bit of slowing at the end of the quarter. Sounds like into April, you've seen some – you saw some – maybe some improving signs, I guess, in e-commerce and retail POS. I don't want to put words in your mouth, but would you say that that was better than what you saw at the end of the quarter or not?

Stephen Kim: Yeah, great. Thanks, a lot guys.

Stephen Kim: You made a comment about how I guess I was a little bit of slowing at the end of the quarter.

Stephen Kim: Sounds like into April you've seen some.

Stephen Kim: You saw some maybe some improving signs I guess in e-commerce and retail Pls I, just I don't want to put words in your mouth, but I guess would you say that that was.

Stephen Kim: Better than what you saw at the end of the quarter.

Nicholas Ian Fink: And would it be fair to say that the beat in one queue and then not raising the guide for the year sort of reflect some cautiousness based on what you saw at the end of the quarter? Yeah, I would.

Stephen Kim: Or not and would it be fair to say that the beat in <unk> and then not raising the guide for.

Stephen Kim: For the year sort of reflect some cautiousness based on what you saw at the end of the quarter.

Stephen Kim: Yes.

Speaker Change: I think that's absolutely right.

David V. Barry: I think that's absolutely right. Phil's copy is out there, and we want to see how it evolves, you know. I don't want to get too excited about more weeks and things, you know. I'm looking a little bit healthier, I just... Shopping.

Speaker Change: It's still choppy out there and we want to see how it evolves I don't want to get too excited about a.

Speaker Change: Couple of more weeks and things.

Speaker Change: Looking.

Speaker Change: A little bit healthier I think consumers pretty choppy and so we wanted to see.

Nicholas Ian Fink: So we wanted to see how it evolved. We're overall, you know, happy with the quarter relative to where we are today and Summer. Steve on POS.

Speaker Change: Paul.

Speaker Change: Overall, we're happy with the quarter relative to expectations, but I'd say that one again.

Speaker Change: Beyond where we are today.

Speaker Change: Four weeks into the spring and summer before we haven't really good.

Speaker Change: And Steve on the Pos.

David V. Barry: I think of it as sequentially week-on-week improving numbers, which we would expect to see, given where we are in history. We're going to be building a ramp seasonally, though year over year still negative for retail and e-commerce, which for us is really our best read into R&R. That said, as I've mentioned on the flip side, you know, single-family new construction input remains strong, and I think that will continue. A strong level of single-family starts in the first quarter, though completions were still down 6%. Transcription by Transcriptional Subs.

Steve: I think of it.

Speaker Change: Essentially week on week, improving numbers, which we would expect to see.

Speaker Change: Given where we are in the season.

Speaker Change: Building, a ramp seasonally though year over year still negative for retail and ecommerce, which for US is really our best read into R&R.

Speaker Change: That said as I've mentioned on the flip side single family New construction input.

Speaker Change: So the growth.

Speaker Change: And I think that will continue strong level of starts.

Speaker Change: We started in the first quarter, though completions were still down 6%.

Speaker Change: So as we as our products have been closer to a complete.

Speaker Change: Negative completion rates really gives us good line of sight to continued volume flow through the year as builders worked through the uptake.

Stephen Kim: Gotcha. Okay, right. But with respect to the POS, the ramp you're seeing is kind of just normal seasonality, so not something that we should get too excited about yet. Okay. Yeah, perfect.

Speaker Change: Gotcha, Okay, right, so, but with respect to the pls the ramp Youre seeing is kind of just normal seasonality. So not not something that we should should get too excited about yes.

Speaker Change: Okay.

Speaker Change: Yeah perfect.

David V. Barry: You made some comments with respect to the two facilities and water weighing a little bit. Can you quantify that for us in some way? And I think you made some comments also about Chinese consumers sort of transitioning away from new construction to R&R. I was just kind of curious, what does that entail?

Speaker Change: You made some comments with respect to.

Speaker Change: B.

Speaker Change: The two facilities and water weighing a little bit can.

Speaker Change: Can you quantify that for us in some way and I think you made some comment also about Chinese consumers sort of transitioning away from new construction to R&R I was just kind of curious what does that entail what you maybe could provide a little context around that.

David V. Barry: Maybe provide a little context around that. On the facility piece, from a margin standpoint, I'd say... 25 to 50 basis points in the quarter of margin headwind. The facilities ramp up, and we have some production in this area. Relative to a normal rate, and then, you know, on the China question. That market, especially as we move away from... Speculative New Construction, I think, which drove a lot of the sales, to R&R. New, it probably emerged over the past three-ish years. You know, it is, we do see a transition. It has been.

Speaker Change: Yes.

Speaker Change: The facility fees differently.

Speaker Change: From a margin standpoint, I would say.

Speaker Change: 25 to 50 basis points in the quarter a margin headwind is.

Speaker Change: Those facilities ramp up and we have some production inefficiencies.

Speaker Change: Relative to a normal rate.

Speaker Change: And then on the.

Speaker Change: China question.

Speaker Change: That market, especially as we move away from.

Speaker Change: Speculative new construction.

Speaker Change: <unk> drove a lot of the sales to R&R, we're seeing in our business Chinese consumers engaging in different categories. So there's a home decoration channel.

Speaker Change: New affiliates emerge over the past three ish years of the team.

Speaker Change: Taking some nice share and then focusing their efforts on e-commerce and in our showroom network to make sure we're capturing that R&R as the market transitions.

Speaker Change: It is we do see a transition that it has been.

David V. Barry: The Overhang from New Construction has been greater than the transition, and, you know, interestingly... For a lot of last year, you actually saw growth in some of those R&R channels. So you can see consumers coming in upon her for the size of the new construction. But, you know, it's a natural transition for that market to now, a lot of those, all that, you know, our exposure is Donnelly to Tier 1, where we have the highest share, where most of the R&R demand is.

Speaker Change: Overhangs of new construction has been greater than that.

Speaker Change: R&R at this point.

Speaker Change: Interestingly for a lot of last year, you actually saw growth.

Speaker Change: So those R&R channels that Dave was mentioning and so you could see consumers coming in it's just.

Speaker Change: The size of the.

Speaker Change: The new construction that needs to come into play before you really see that but it's a natural transition for that market to now make.

Speaker Change: A lot of those these are established and I would just.

Speaker Change:

Speaker Change: If you recall that our exposure is predominantly to tier one and tier two cities. So that's where we have the highest share in.

Speaker Change: That's where most of the R&R demand will start to form and so we like the optionality of the market. The team has done a great job.

David V. Barry: We like the optionality of the market; the team has done a great job managing that P&L, and toxicology; very, very healthy. We like the optionality that it gives us to get exposure to R&R, as well as the innovation engine that it brings because it's in that market, highly innovative, and is also building a new adjacent. Okay, great.

Speaker Change: Managing that P&L.

Speaker Change: And keeping the profitability very very healthy as we've navigated through this.

Speaker Change: We like Optionality that it gives us to get exposure to R&R as well as the innovation engine that it brings because you know.

Speaker Change: In that market. The team is highly innovative and is also building out new adjacencies for Sofia.

Speaker Change: Yeah.

Speaker Change: Okay, great. Thanks, a lot guys.

Stephen Kim: Thanks a lot, guys. Our next question comes from Matthew Bouley with Barclays. Please proceed with your question. Good afternoon, everyone. Thank you for taking the questions. I'll ask you about security.

Speaker Change: Our next question comes from Matthew Bouley with Barclays. Please proceed with your question.

Matthew Adrien Bouley: It sounded like it was a little softer in Q1 there, and maybe a little bit of destocking as well. But it looks like you held the full year guide unchanged. So just any additional elaboration on sort of what happened in Q1 and then the confidence in some improvement to kind of achieve that full year guidance. Thank you. Sure, I was going to say security, you know, just talking more about the Mosh Lock and SentrySafe sides of the portfolio. I mean, most of the year, really, really healthy losses here.

Matthew Adrien Bouley: Good afternoon, everyone. Thank you for taking the questions.

Matthew Adrien Bouley: So I'll ask on security it sounded like it was a little.

Speaker Change: Softer.

Matthew Adrien Bouley: In Q1, there may be a little bit of Destocking as well it looks like you held the full year guide.

Matthew Adrien Bouley: Unchanged. So just any additional elaboration on sort of what happened in Q1, and then the confidence in some.

Matthew Adrien Bouley: Some improvement to kind of achieve that full year guide. Thank you.

Speaker Change: Sure Security, just probably more on the <unk>.

Speaker Change: Marshall Atkins with century safe side of the portfolio and most of the really really healthy last year. Then you can see the consumer kind of slowed.

Nicholas Ian Fink: Then you can see the consumer kind of slowed towards the end of the year, and we saw that continue to play out into... Climbing Q1 of about 50% of the, So that brings the actual PLS, and there's a lot of work underway in that business, into much, much more of a growth business by focusing both on some exciting areas like commercial, where it's now a third of the business, and we've been seeing really, really nice growth, connected, integrating it with the Yale and August side, where we think we can drive a lot of growth, as well as just refreshing the offering in both SAFE and in Padlocks.

Speaker Change: Towards the end of the year and we saw that continue to play out.

Speaker Change: Into Q1.

Speaker Change: Interestingly I would say.

Speaker Change: Net.

Speaker Change: Decline in Q1 about 50% of that was destocking and so that brings.

Speaker Change: Actual pls number you are much closer to that kind of mid single digits.

Speaker Change: And there's a lot of work underway in that business.

Speaker Change: To drive.

Speaker Change: And too much much more of a growth business by focusing both on some exciting areas like commercial where it is now a third of the business. We've been seeing really really nice growth connected integrating it with the August side.

Speaker Change: If we can drive a lot of growth as well as just refreshing the offering in both safe and padlocks amount is going to start to hit shelves as we go through the year and so on.

Nicholas Ian Fink: And that's going to start to hit shelves as we roll through the year. And so, you know, a lot of work has gone into re-engineering that business over the last few years and, you know, just starting out the business in a much, much healthier margin profile and gives us confidence to invest and sort of, you know, stick behind where the business is. Thank you. Thank you. Thank you.

Speaker Change: A lot of work has gone to reengineer that business over the last few years just started out of the business.

Speaker Change: Much much healthier margin profile and gives us confidence to invest in through stick behind where the business is heading and continued to be very excited about it.

Nicholas Ian Fink: Gotcha. Okay. Thank you for that, Nick.

Speaker Change: Got you okay. Thank you for that.

Speaker Change: Secondly, just looking at the balance sheet it looks like.

Matthew Adrien Bouley: Secondly, just looking at the balance sheet, it looks like inventory dollars stepped up a bit. Presumably, the acquisition played into that, but maybe you could just kind of refresh us on how you're thinking about inventory going forward. Does there need to be any sort of right sizing of production from here, or is that really just the acquisition? Any additional color there?

Speaker Change: Inventory dollars stepped up a bit.

Speaker Change: Presumably the acquisition played into that but maybe you can just kind of refresh us on how.

Speaker Change: Are you thinking about inventory going forward does there need to be any sort of right sizing of production from here or is that really just the acquisition any additional color there. Thank you.

David V. Barry: Thank you. Matt, I'd say a few things. The acquisition is a piece of it, but also, say we're back more to a normal seasonal first quarter where we're building inventory for a couple of reasons. One, to mitigate the Chinese New Year's supply chain. So we still expect to deliver free cash flow conversion of around. [inaudible] I don't think there's anything unusual in the results.

Speaker Change: Matt I would say a few things.

Speaker Change: Acquisition is a piece of it but also say we're back more to a normal seasonal first quarter, where we're building inventory.

Matt: Sure a couple of reasons, one to mitigate Chinese new year supply chain impacts into in advance.

Speaker Change: Spring and summer season.

Speaker Change: And so we still expect to deliver free cash flow conversion of around 100% for the year and half.

Speaker Change: Positive free cash flow quarters, Q2 to Q4, which is consistent with this business I don't think theres anything unusual.

David V. Barry: I think, actually, last year's first quarter was more unusual because we were pulling inventory down at such a rapid rate. We had positive results. We had positive results. We had positive results.

Speaker Change: And the results.

Speaker Change: Last year first quarter was more unusual through pulling inventory down at such a rapid rate.

Speaker Change: Free cash flow in the first quarter of 'twenty three.

Speaker Change: Back to normal results. The team continues to work to optimize inventory and.

David V. Barry: The team continues to work to optimize inventory and will do so throughout the year, more driven by. And then the final driver is we brought in a bit of extra inventory to offer our supply chain, the Suez Canal in Panama, holding on to that maybe a bit longer than we... Gotcha. First question about the Aligned organization.

Speaker Change: We will do so throughout the year.

Speaker Change: More driven by system enhancements and process enhancements.

Speaker Change: And then the final driver is we brought in a bit of extra inventory.

Speaker Change: Buffered, our supply chain against the <unk>.

Speaker Change: As you know in Panama Canal.

Speaker Change: Disruptions that have taken place there by holding on to that maybe a bit longer than we expected through the year.

Speaker Change: Given the continued disruption.

Speaker Change: Got you.

Speaker Change: Add to that as you come back to that.

Speaker Change: First question about the aligned organization.

Speaker Change: Particularly excited to be a lot of this last year and I think we'll continue to see it this year.

Speaker Change: Is this.

Nicholas Ian Fink: Now, kind of one supply chain operations team really owning not just inventory but thinking about the total balance sheet from a shareholder perspective and working to pull every lever on it. And so they're having conversations with some of our suppliers, look, if we're going to have to put extra inventory on the water. [inaudible] A big driver's lost here, and I think it continues. Thanks, Nick. Thanks, Dave.

Speaker Change: It's not kind of one.

Speaker Change: The operations team really owning youre, not just inventory, but thinking about.

Speaker Change: Total balance sheet from a shareholder perspective, and working to pull every lever on it and so they are having conversations with some of our suppliers.

Speaker Change: We're going to have to put extra inventory on the water.

Speaker Change: To support all of our businesses you know what are the impacts of the total working capital how do we think about that.

Speaker Change: Having that shareholder alignment side of the business are working all the time is part of what's going to drive total.

Speaker Change: Working capital improvement beyond just inventory and I think the big drivers last year and I think you'll continue to see that improvement for this year.

David V. Barry: Good luck, guys. Our next question comes from Susan Maklari with Goldman Sachs. Please proceed with your question. Thank you.

Speaker Change: Thanks, Nick Thanks, David Good luck guys.

Speaker Change: Our next question comes from Susan Mcclary with Goldman Sachs. Please proceed with your question.

Susan Marie Maklari: Thank you good afternoon, everyone.

Susan Marie Maklari: My first question is about the acquisition you did of the water filtration operations there, which is an interesting add to your whole smart water network that you're building out there. Can you talk a bit about that opportunity, how it fits into this, where it can go over time, the potential there, and maybe just how to think about the M&A pipeline more broadly and what you're seeing as well? Sure. Let's start with Spring Wall.

Speaker Change: Sure.

Susan Marie Maklari: Good My first question is on the acquisition you did of deepwater filtration operation, there, which is an interesting.

Susan Marie Maklari: To your whole Smartwater network that you're building out there can you talk a bit about that opportunity how it fits into this.

Susan Marie Maklari: Where it can go over time, the potential there and maybe just how to think about the M&A pipeline more broadly and what youre seeing as well.

Susan Marie Maklari: Sure.

Speaker Change: I'll start with spring well so.

Nicholas Ian Fink: So, you know, it's a space you've been looking at for quite some time. We've been fairly discerning about wanting to find a very high-quality entry point into that business. But I'll break it down for you.

Susan Marie Maklari: <unk> been looking at for a <unk>.

Susan Marie Maklari: Quite some time.

Speaker Change: We've been fairly discerning about wanting to find out a very high quality entry point into that business, but I'll break it down I mean, firstly, just the business itself.

Nicholas Ian Fink: I mean, firstly, just the business itself. Greece has an addressable market. It's $4 billion in the U.S. alone today.

Susan Marie Maklari: That addressable market.

Susan Marie Maklari: It's $4 billion in the U S.

Susan Marie Maklari: Alone today, it's growing.

Susan Marie Maklari: Concern about water quality is growing and there's going to be a tech enablement for that and the ability then to another quality water kind of coming in.

Nicholas Ian Fink: And there's going to be a tech enablement for that, and the ability to know the quality of water coming in and out. And so just, you know, The Knob itself, a very exciting project. Secondly, Digital Native Business, right? It started out as Digital Natives, the team. I'm going to make sure they use that word because there's no other way they'd build a business when you start it.

Susan Marie Maklari: And al.

Susan Marie Maklari: Of your system and so just in and of itself.

Susan Marie Maklari: Very exciting entry point secondly.

Susan Marie Maklari: A digital native business.

Susan Marie Maklari: Started up as digital natives the team.

Susan Marie Maklari: I'm not even sure that use that word because there is no other way to build the business and he started today.

Nicholas Ian Fink: And just as we have with Yale August, you know, or with M-TECH, the team is really kind of holding it to the side and saying, I want to learn everything about what you do and be careful to integrate only the best of the best. If they do something better than we do it, we're going to adopt that in, and we're being very, very deliberate about that, but their ability to interact. The way they work at SAIL is very, very interesting to us.

Susan Marie Maklari: And just as we have with AGA.

Susan Marie Maklari: August or with Amtech.

Susan Marie Maklari: <unk> is really kind of holding it aside and saying I want to learn everything about what you do and be careful to integrate only the best of the best if they do something better than we do it we're going to adopt that into our business and we're being very very deliberate about that but their ability to interact with consumers.

Susan Marie Maklari: In a digital setting the speed at which they can get things done the way they work is sale.

Susan Marie Maklari: It's very very interesting to us and that is a capability that we will seek to adopt over the entire business.

Nicholas Ian Fink: And that is a capability that we will seek to adopt. So, you know, another pillar of that that's very interesting. And then, you know, the third part is just, there is a lot of industrial logic around our smart water network and filtration. They go in, you know, at the same time. Certainly flow, I mean, there are other elements to the smart water network, but the flow goes in at the same point as filtration, and if you're coming in to get someone to touch your main and put a filter on it, or vice versa, put a flow on it, it is a very logical crosshatch.

Susan Marie Maklari: Another Florida that is very interesting and then the third part is just there is a lot of industrial logic around our smart water network and filtration. They go in at the same point certainly, Florida, there's other elements to the Smartwater network.

Susan Marie Maklari: And at the same point as filtration and if youre coming in to get someone to touch.

Susan Marie Maklari: And to put a filter on it or vice versa for the fall and it is a very logical cross sell so really isn't earlier experiment and kind of remarkable that <unk> got it done.

So quickly.

Nicholas Ian Fink: We just put Flow up on their site, but I wouldn't say we spent a ton of time training them on Flow and really understanding how it works. And we've seen double-digit attachment rates. So we're excited about where we can take it in the water quality arena and do it in a smart way. We think this is going to be a very, very important foundational piece to the whole smart water network. And then the second part of your question, you know, the M&A pipeline, it continues to be robust.

Susan Marie Maklari: For flow up on their side I wouldn't services.

Susan Marie Maklari: I'm trading them on flow and really understanding how it works and we're seeing double digit catastrophe rate.

So that thesis is playing itself out.

Pretty quickly and so we're excited about where we can take it to continue to push into.

Water quality arena and do it in a smart way. We think this is going to be a very very important foundational piece to the whole Smartwater network.

And then the second part of your question.

Susan Marie Maklari: The M&A pipeline continues to be robust, we will continue to be very very disciplined about how we think about it but as we deepen these capabilities I think you'll find that to be more selective around things that really have these.

Nicholas Ian Fink: We'll continue to be very, very disciplined about how we think about it. But as we deepen these capabilities, you know, I think you'll find us more selective and subject to secular growth tailwinds like water quality, right, you know, if it's probably going double digits as an area.

Susan Marie Maklari: Secular growth tailwind like a.

Susan Marie Maklari: Water quality right.

Susan Marie Maklari: I'll be growing double digits.

Susan Marie Maklari: An area.

Nicholas Ian Fink: But we're going to be able to go deeper and extract more value, or, you know, going forward. I'm excited about what's out in the pipeline. We were in a lot of cash. Okay. All right. That's encouraging. Thanks for the color.

Susan Marie Maklari: <unk>.

Susan Marie Maklari: But we're going to be able to go deeper and extract more value from them and so going forward I'm excited about what's out of the pipeline I think.

Susan Marie Maklari: They generate a lot of casualty disciplined in deciding how to deploy it.

Susan Marie Maklari: In the best manner possible for shareholders, but I think there's going to be a lot of interesting opportunities to continue to grow their business.

Speaker Change: Okay, Alright, that's encouraging thanks for the color and then maybe turning a bit to the consumer talked a fair amount about new versus R&R activity in the quarter, but.

Susan Marie Maklari: And then maybe turning a bit to the consumer. I talked a fair amount about new versus R&R activity in the quarter, but anything that you would highlight in terms of consumer behavior or any changes you're seeing in the business across the various price points, luxury versus some of the other offerings that you have, just anything of note there, and I guess anything that's changed in the last couple of weeks as well. I don't know, and Dave, feel free to add color, you know. I don't know that a ton has changed.

That you would highlight in terms of consumer behavior or any changes youre seeing in the business across the various price points luxury versus some of the other offerings that you have just anything of note there and I guess anything that's changed in the last couple of weeks as well with that.

Speaker Change: I don't know and Dave feel free to add color I don't know that a ton of change I'm just thinking back to some of the trends we talked about on the last last call on them.

Susan Marie Maklari: Just thinking back to some of the trends we talked about on the last call, I did mention I think the consumer has still been somewhat choppy. I think the luxury consumer has outperformed. If I looked at the point of sale for the luxury business, it was probably up mid-single digit. So, you know, more resilient.

Dave: You mentioned I think the consumer is still.

Dave: <unk> been somewhat choppy I think the luxury consumer has outperformed if I looked at the.

Dave: Point of sale for the luxury business.

Dave: Probably up.

Dave: Mid single digits, and so more of affiliates there kind of store at the same rate come almost.

Nicholas Ian Fink: They're kind of still at the same rate, kind of almost 2x what the underlying water business is doing. Consumer interest continues to be there. We do a lot of work around that to make sure that we're right because we're placing bets on where that consumer will be. We are continuing to see a shift online, and so we are very cognizant about investing in and building our online capabilities. I think Springwell is going to fit very, very well into that capability.

Dave: To X.

Dave: But the underlying water business is doing.

Dave: Consumer interest continues to be there, we do a lot of work around that to make sure. We're right because we're placing bets on.

Dave: Where that consumer will be we are continuing to see a shift online and so being very cognizant about investing in and building our online capabilities and it's not just the pricing piece that whole online shops, and the ability to manage that extremely well he is going to play very very well.

Nicholas Ian Fink: But, you know, beyond that, I don't think a whole lot new. Dave gave some color around that. Heimstall, dollars that we're seeing through retail and e-commerce. (inaudible) You know, I do think it's the noise around.

Dave: That capability, but beyond that I don't think a whole lot new Dave gave some color around the sequential.

Dave: Dollars that we're seeing through to retail and E. Commerce I think we just wanted to see how it plays out now.

Dave: I do think as the noise around.

Dave: This stabilizes you know whether that impacts a few people.

Or not and does not impact our product that much but just your level of confidence.

Dave: Probably does hopefully see more consumers come in and do some of these projects that you're talking about.

Nicholas Ian Fink: I would agree with everything Nick said in relation to the consumer as they're engaged with us in housing. I think one area we did see a change is in security, from our recent trends. And that probably speaks more to the broader consumer, right? That's a piece of the portfolio that's bigger. [inaudible] bit core and then some of the non-core things like TSA, LOX, spike... Purchase, and a variety of others that weren't.

Speaker Change: I would agree with everything mix that in relation to the consumer as they're engaged with us and housing I think one area. We did see a change is in security.

Speaker Change: From our recent trends and that probably speaks more towards the broader consumer piece of the portfolio that's more fixed.

Speaker Change: Fixed those generally to the consumer and as we look at where the POS trends were soft it was on the consumer products that were really.

Speaker Change: So a bit core and then some of the noncore things like TSA locks bike locks and things that were maybe purchased in prior quarters. This year.

Speaker Change: Going forward and so I think thats, maybe a read into the broader consumer is thinking that that's a trend we'll keep an eye on but I think everything et cetera around the consumer with respect to housing we haven't seen a lot of change in trends in that space.

Nicholas Ian Fink: So I think that might be a read into how the broader consumer is thinking; it's a trend we'll keep an eye on, but I think everything revolves around that. The Consumer with Respect to Housing. Okay. All right. Thank you for the color and good luck with everything.

Speaker Change: Okay, Alright, thank you for the color and good luck with everything.

Speaker Change: Great. Thank you.

David V. Barry: Thank you for joining us on today's conference call. You may now disconnect. BF-WATCH TV 2021, My name is Maria, and I'll be your conference operator today. At this time, I would like to welcome everyone to Fortune Brand's first quarter 2024 earnings conference call. All lines have been placed on mute to prevent any background noise.

Speaker Change: Thank you for joining today's conference call you may now disconnect.

Speaker Change: Yeah.

Speaker Change: [music].

Hum.

Speaker Change: Hum.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change:

Speaker Change:

Speaker Change: [music].

Speaker Change: Uh huh.

Speaker Change: [music].

Speaker Change: Hum.

Speaker Change: [music].

Speaker Change: Hum.

Speaker Change: Oh.

Speaker Change: [music].

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: [music].

Marianne: Good afternoon. My name is Marianne I will be your conference operator today at this time I would like to welcome everyone to the Fortune brands first quarter 2024 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session I would now like to turn the call over to Lee.

Marianne: Zach.

Lee Zach: Vice President of Investor Relations and corporate Affairs, you May begin the conference call. Good afternoon, everyone and welcome to the Fortune brands innovations first quarter earnings call. Hopefully everyone has had a chance to review the earnings release the earnings release and the audio replay of this call can be found on the inverse.

Operator: After the speaker's remarks, there will be a question and answer session. I would now like to turn the call over to Leigh Avsec, Vice President of Investor Relations and Corporate Affairs. You may begin the conference call. Good afternoon, everyone, and welcome to the Fortune Brands Innovations First Quarter Earnings Call. Hopefully, everyone has had a chance to review the earnings release. The earnings release and the audio replay of this call can be found in the investor section of our FBIN.com website.

Lee Zach: <unk> section of our F B I N dot com website.

Operator: I want to remind everyone that the forward-looking statements we make on the call today, either in our prepared remarks or in the associated question and answer session, are based on current expectations and market outlook and are subject to certain risks and uncertainties that may cause actual results to differ materially from those currently anticipated. These risks are detailed in our various filings with the SEC.

Lee Zach: I want to remind everyone that the forward looking statements we make on the call today, either in our prepared remarks or in the associated question and answer session are based on current expectations and market outlook and are subject to certain risks and uncertainties that may cause actual results to differ materially from those currently anticipated. These risks are detailed in our various.

Filings with the SEC the company does not undertake any obligation to update or revise any forward looking statements, except as may be required by law.

The company does not undertake any obligation to update or revise any forward-looking statements, except if they may be required by law. Any references to operating profit or margin, earnings per share, or free cash flow on today's call will focus on our results on a before-charges-and-gains basis, unless otherwise specified. Please visit our website for a reconciliation.

Lee Zach: Any references to operating profit or margin earnings per share of free cash flow on today's call will focus on our results on a before charges and gains basis, unless otherwise specified. Please visit our website for a reconciliation.

With me on the call today are Nick Fink, our Chief Executive Officer, and Dave Barry, our Chief Financial Officer. Following our prepared remarks, we have a lot of time to address some questions. I will now turn the call over to Nick.

Lee Zach: With me on the call today are Nick Fink, our Chief Executive Officer, and Dave Barry Our Chief Financial Officer. Following our prepared remarks, we had a lot of time to address some questions I will now turn the call over to Nick Nick.

Thank you, Leigh, and thank you to everyone for joining us. On this call, I will walk through the highlights of our first quarter performance, give some color on the drivers of this performance, including progress on our strategic initiatives, and offer some thoughts on the macroenvironment. I will then turn the call over to Dave for a discussion of our financial results, including how we are thinking about the remainder of 2024. Our teams delivered strong first-quarter results by executing on our priorities, including delivering above-market growth and operating margin improvement.

Nicholas Ian Fink: Thank you Lee and thank you to everyone for joining us today.

Nicholas Ian Fink: On this call I will walk through the highlights of our first quarter performance give some color on the drivers of this performance, including progress on our strategic initiatives.

Nicholas Ian Fink: And offer some thoughts on the macro environment.

I'll, then turn the call over to Dave for a discussion of our financial results, including how we're thinking about the remainder of 2024.

David V. Barry: Our teams delivered strong first quarter results by executing on our priorities, including delivering above market growth and operating margin improvements.

We saw powerful proof points for our compelling investment thesis this past quarter and are increasingly seeing the benefit of the transformative actions we took over the past few years. These actions all support our strategy as a growth-focused company powered by secular tailwinds, underpinned by leading brands, innovation, and channel management, and fueled by our Fortune Brand's advantages capabilities and our newly aligned structure. Turning to our first quarter performance,

David V. Barry: We saw a powerful proof points of our compelling investment thesis this past quarter and are increasingly seeing the benefit of the transformative actions we took over the past few years.

David V. Barry: These actions all support our strategy as a growth focused company powered by secular tailwind.

David V. Barry: Underpinned by leading brands innovation and talent management and fueled by a fortune brands advantaged capabilities.

David V. Barry: <unk> aligned structure.

David V. Barry: Turning to our first quarter performance.

Our teams delivered strong top and bottom line results, driving both sales and margins as they executed on our priorities. Through our strategy of growing the core and accelerating digital products, we were able to focus on those opportunities with the highest potential for returns, including in our leading brands, digital and connected capabilities and products, and meaningful innovation, while also optimizing and aligning our operations. Looking forward to the remainder of the year, we continue to expect to achieve the full-year guidance we initially outlined during our fourth quarter call. Net sales of $1.1 billion were up 7%, while organic sales were down 3% versus the prior year's first quarter.

David V. Barry: Our teams delivered strong top and bottom line results driving both sales and margins as they executed on our priorities.

Through our strategy of growing the core and accelerating digital products, we were able to focus on those opportunities with the highest potential for returns, including leading brands digital and connected capabilities and products.

David V. Barry: Meaningful innovation, while also optimizing and aligning our operations.

Looking forward to the remainder of the year, we continue to expect to achieve the full year guidance. We initially outlined during our fourth quarter call.

David V. Barry: Net sales of $1 1 billion were up 7%, while organic sales were down 3% versus the prior year's first quarter.

We estimate that our POS performance outperformed the larger market for our products by over 100 basis points, reflecting our commitment to focus on the highest growth opportunity. Operating income increased 22%, and our operating margin was 200 basis points higher than the first quarter of 2023. Our results are a great testament to the ability of our newly aligned organization to unlock value. Our sales and margin performance generated earnings per share of 83 cents in the first quarter, a 20% increase over the first quarter of 2020.

David V. Barry: We estimate that our Pos performance outperformed the larger market for our products by over 100 basis points, reflecting our commitment to focus on the highest growth opportunities.

David V. Barry: Operating income increased 22% and operating margin was 200 basis points higher than the first quarter of 2023.

David V. Barry: Our results are a great Testament to the ability of our newly aligned organization to unlock value.

Our sales and margin performance generated earnings per share of <unk> 83, the first quarter, a 20% increase over the first quarter of 2023.

As we have previously highlighted, Fortune Brand's operating model is designed to accelerate our leadership in brand and innovation, while also creating value for our channel partners. We are now designed to operate more efficiently and are focused on investing those efficiencies in opportunities with the highest potential for return. Most importantly, our new structure is a catalyst for accelerated growth.

David V. Barry: As we have previously highlighted the fortune brands' operating model is designed to accelerate our leadership in brand and innovation, while also creating value for our channel partners.

David V. Barry: We are now designed to operate more efficiently and are focused on investing those efficiencies and opportunities with the highest potential for returns.

David V. Barry: Most importantly, our new structure as a catalyst for accelerated growth.

This past quarter, we had some compelling proof points of the power of our new structure as we further sharpened our focus on brands, innovation, and channel leaders. We saw a particular acceleration in our smart water network and are achieving many of our milestones well ahead of schedule. In furtherance of our whole-home water management strategy, we announced our acquisition of Springwell, which provides residential whole-home water filtration and water softening solutions via direct-to-consumer channels.

David V. Barry: This past quarter, we had some compelling proof points of the power of our new structure as we further sharpened our focus on brands innovation and channel leadership.

David V. Barry: We saw particular acceleration and our smart water network and are achieving many of our milestones well ahead of schedule.

David V. Barry: And further in some of our whole home water management strategy, we announced our acquisition of spring well, which provides residential whole home water filtration water softening solutions via direct to consumer channels.

The addition of Springwell paves the way for Fortune Brands to invest in and capture opportunities in the approximately $4 billion U.S. residential water filtration and water quality market. We expect this acquisition to increase Fortune Brands' exposure to recurring revenues. Stringwell's digital and direct marketing expertise augments Fortune Brand's existing digital capabilities, and it is proving to be highly synergistic with our flow leak detection system, with a double-digit attachment rate since Flow has been available on the Spring-Law site.

David V. Barry: The additional string well paves the way for <unk> to invest and capture opportunities in the approximately 4 billion dollar U S residential water filtration and water quality market.

David V. Barry: We expect this acquisition to increase fortune brands exposure to recurring revenue streams.

David V. Barry: Very well with digital and direct marketing expertise augments fortune brands existing digital capabilities.

David V. Barry: It is proving to be highly synergistic with our flow leak detection system with.

David V. Barry: With a double digit attachment rate flow has been available on the sprint well site.

Consistent with our M&A priorities, this strategic discipline deal will not only augment our product portfolio but has the potential to accelerate our capabilities as we look to integrate their expertise across our business. Our brands and products are increasingly being recognized for their innovation, aesthetics, and ability to make the world a better place. In March, Moen was named to Foss Company's 2024 list of Most Innovative Companies. This impressive honor recognizes our leadership as a pioneer in whole home water management, including our leading smart water network. The Van Nuys security business, our connected residential locks, continue to receive critical acclaim, with our recent Yale Assure Lock 2 Touch being named by Forbes Magazine as the best fingerprint and key code smart lock.

David V. Barry: Consistent with our M&A priorities the strategic discipline deal.

David V. Barry: Not only augment our product portfolio, but has the potential to accelerate our capabilities as we look to integrate their expertise across our businesses.

David V. Barry: Our brands and products are increasingly being recognized for their innovation.

David V. Barry: Fedex and ability to make the world a better place.

David V. Barry: In March <unk> was named to fast company's 2024 list of most innovative companies.

David V. Barry: This impressive honor recognizes our leadership as a pioneer in whole home water management, including leading Smartwater network.

David V. Barry: Within our security business are connected residential locks continue to receive critical acclaim with a recent Yale assured locked to touch being named by Forbes magazine as the best fingerprints and key code Smart lock. The innovative features of this exciting product are clearly resonating.

The innovative features of this exciting product are clearly responding. Finally, our fiber on wildwood composite cladding was recognized by Green Builder Media as a sustainable product of the year. Whether it's saving water, protecting people, or incorporating recycled inputs, our brands are highlighting how a company can be successful and benefit people, communities, and the planet. Our brands and teams are working together to delight consumers with our innovative and beautiful products, and our increasingly cohesive and integrated portfolio was on display at the recent industry shows in Las Vegas in February.

Finally, our fiber on Wildwood composite cladding was recognized by Green builder media as a sustainable product of the year.

David V. Barry: Whether it's saving water protecting people, we're incorporating recycled inputs our brands are highlighting how company can have success and benefit people communities and the planet.

David V. Barry: Our brands and teams are working together to delight consumers with our innovative and beautiful products and our increasingly cohesive and integrated portfolio was on display at the recent industry shows in Las Vegas in February.

Our House of Roll booth displayed our comprehensive suite of luxury fixtures and provided clear and tangible evidence of how seamlessly our existing House of Roll brands integrate with our newly acquired Emtek and Schaub brands. Our message of curated luxury clearly resonated, and House of Roll was awarded the Best Large Booth of Cadence.

David V. Barry: Our house of ROHL Booth displayed a comprehensive suite of luxury fixtures and provides a clear and tangible evidence of how seamlessly existing house of ROHL brands integrate with our newly acquired amtech and shop rates.

David V. Barry: Our message of curated luxury clearly resonated in house of ROHL was awarded the best large booth of cases.

And, for the first time, Thermature, Larson, Fiberon, FIPOM, and Solar Innovations were all on display together in a cohesive booth that showcased our material science expertise and product innovations working together. Turning to our digital portfolio, we saw over 200,000 device activations in the first quarter, and the overall digital business continues to accelerate. Our connected water business was particularly strong. In the first quarter alone, we added 15,000 users of Flow, and our POS performance exceeded our expectations.

David V. Barry: And for the first time furniture Larson fiber on five pump installed innovations were all on display together in a cohesive booth that showcased our material science expertise and product innovations working together.

David V. Barry: Turning to our digital portfolio, we saw over 200000 device activations in the first quarter.

David V. Barry: And the overall digital business continues to accelerate.

David V. Barry: Our connected water business was particularly strong in the first quarter alone. We added 15000 users of flow and.

David V. Barry: And our Pos performance exceeded our expectations.

And in the quarter, our retail and e-commerce POS performance for flow grew by 85% versus the first quarter of 2020. As you may recall, last fall, we formed a new connected products group by combining the original Fortune Brands team with the Yale and August team into a single powerhouse organization under aligned leadership. This group of about 200 engineers is performing very well in delivering milestones ahead of schedule, as we leverage our combined insights and talent across the entire portfolio with increasing speed and efficiency.

David V. Barry: And in the quarter, our retail and E Commerce Pos performance for flow grew by 85% versus the first quarter of 2023.

David V. Barry: As you May recall last fall, we formed a new connected products group by combining the original fortune brands team with the <unk> in August team into a single powerhouse organization under aligned leadership.

David V. Barry: This group of about 200 engineers is performing very well and delivering milestones ahead of schedule.

David V. Barry: As we leverage our combined insights and talent across the entire portfolio with increasing speed and efficiency.

Our results this quarter and some of the exciting developments we are seeing give me full confidence in Fortune Brand's innovation's ability to deliver long-term growth and sustained value creation through the cycle, and we remain committed to achieving our long-term goals. Turning now to some additional thoughts on the current housing market and the market for our products. Looking at the overall market, and consistent with what we anticipated on our fourth quarter call, we saw continued softness in the R&R market, while we also saw encouraging POS growth in our products which serve the single-family new construction channel, including mown and Thermitree.

David V. Barry: Our results this quarter and some of the exciting developments. We are seeing give me full confidence fortune brands innovations ability to deliver long term growth and sustained value creation through the cycle and we remain committed to achieving our long term goals.

The need and desire for homes remains incredibly strong, and our products are optimally positioned in the context of the larger macroenvironment. Earlier this quarter, amid a more stable interest rate environment, we saw an uptick in buyers in the market, although activity slowed as interest rates increased in the face of persistent inflation. As the progress of the quarter demonstrated, consumers remain sensitive to rate fluctuations, but the need for and interest in housing remains strong. The U.S. continues to be massively under- housing prices, and home equity levels continue to remain high.

David V. Barry: Turning now to some additional thoughts on the current housing market and the market for our products.

David V. Barry: Looking at the overall market and consistent with what we anticipated in our fourth quarter call. We saw continued softness in the R&R market. While we also saw encouraging Pos growth and our products, which are the single family, new construction channel, including loan and cemetery.

David V. Barry: The need and desire for homes remains incredibly strong.

David V. Barry: Products optimally positioned in the context of the larger macro environment.

David V. Barry: Earlier this quarter amid a more stable interest rate environment, we saw an uptick of buyers in the market, although activity slowed as interest rates increased in the face of persistent inflation.

David V. Barry: As the progress in the quarter demonstrated consumers remain sensitive to rate fluctuations, but the need for an interest in housing remains strong.

David V. Barry: The U S continues to be massively under both.

David V. Barry: Housing prices and home equity levels continue to remain high.

Demographic factors and high personal income levels continue to support housing demand, while housing supply remains extremely constrained. At the same time, the stock of existing homes that are currently available for sale remains far below pre-pandemic norms, and home values increased faster in March of 2024 versus March of 2023. Turning to new construction, single-family new construction permit activity and starts were strong in the first quarter of 2024, while completions continued to lag.

David V. Barry: Demographic factors some high personal income levels continue to support housing demand.

David V. Barry: <unk> stock remains extremely constrained.

David V. Barry: At the same time the stock of existing homes that are currently available for sale remains far below pre pandemic norms and home values increased foster in March of 2024 versus March of 2023.

David V. Barry: Turning to new construction.

David V. Barry: Single family, New construction permit activity in starts was strong in the first quarter of 2024, well completions continued to lag.

Over the last few months, mortgage applications increased in response to stabilized mortgage rates and the expectation of interest rate cuts. While it appears interest rates will remain higher for slightly longer, the market continues to remain massively underbuilt, and pent-up demand is only being exacerbated. In addition, large production builders remain optimally positioned to continue to be able to address the need for housing.

David V. Barry: Over the last few months mortgage applications increased in response to stabilize mortgage rates and the expectation of interest rate cuts.

David V. Barry: While it appears interest rates will remain higher for slightly longer.

David V. Barry: It continues to remain massively into bolt and pent up demand is only being exacerbated.

David V. Barry: In addition, large production builders remain optimally positioned to continue to be able to address the need for housing.

And we are a trusted partner to a very significant number of these large home builders. Importantly, because our products are incorporated closer to completion than starts, our products are experiencing the tailwinds from the uptick in housing that began in the second half of 2023, and we expect this tailwind to remain robust. Turning to R&R, we expect the R&R market to remain dynamic throughout 2024, and there are many variables that are impacting the repair and remodel space, including consumer savings and confidence, employment levels, home equity levels, and existing home turnover.

David V. Barry: And we are trusted partner to a very significant number of these large homebuilders.

David V. Barry: Importantly, because our products are incorporated closer to completion and starts our products are experiencing a tailwind from the uptick in housing that began in the second half of 2023, and we expect this tailwind to remain robust.

David V. Barry: Turning to R&R, we expect the R&R market to remain dynamic throughout 2024, and there are many variables that are impacting the repair and remodel space, including consumer savings and confidence employment levels.

Equity levels in existing home turnover.

David V. Barry: We continue to expect R&R market for our products to be down 2% to 4% in 2024. However, the combination of high home equity levels, the low supply of homes and aging housing stock and the fact that many homeowners are living in homes that they purchased with no mortgage with low interest rates.

We continue to expect the R&R market for our products to be down 2% to 4% in 2024. However, the combination of high home equity levels, the low supply of homes, an aging housing stock, and the fact that many homeowners are living in homes that they purchased with no mortgage or with low interest rates is causing many people to rethink their existing... Google Search shows that search terms around home renovations are up versus a year ago, while a recent third-party study of homeowners indicated 82% of respondents planned on engaging in home renovations in the next six The same survey indicated that the most compelling attributes of products are product quality, trusted brands, and attractive features.

Causing many people to rethink their existing space.

Google search shows that search terms around home renovations are up versus a year ago. While our recent third party study of homeowners indicated 82% of respondents were planning on engaging in home renovations in the next six months.

The same survey indicated that the most compelling attributes of products or product quality trusted brands and attractive features.

Our portfolio is optimally positioned, with our leading brands, innovative features, and beautifully designed products, all responding to the needs of our core customers. Finally, in China, the market continues to transition away from speculative new construction to R&R. We have confidence in our team's ability to successfully navigate the disruption and remain focused on creating long-term value in China, including in the emerging and high-potential R&R sectors. We continue to believe that our China business will serve as an innovation engine for the larger business and that it offers attractive optionality for future opportunities. Fortune Brands is very well positioned.

David V. Barry: Our portfolio is optimally positioned with our leading brands innovative features and beautifully designed products all resonating with the needs of our core customers.

David V. Barry: Finally in China, the market continues to transition away from speculative new construction to R&R, we have confidence in our team's ability to successfully navigate the disruption and remained focused on creating long term value in China, including in the emerging and high potential R&R space.

David V. Barry: We continue to believe that our China business will serve as an innovation engine for the larger business and that it offers attractive optionality for future opportunities.

David V. Barry: Fortune brands is very well positioned.

Our branding power, meaningful and value-added innovation, and channel strength are powerful catalysts for accelerated growth in the most attractive categories. We are focused on driving outperformance in categories driven by secular growth tailwinds, like connected products, material conversion, luxury, and Products with Sustainability and Safety Benefits. Our consumers continue to reward us with growing market share, and our customers continue to view us as valued partners with unique insight, category management expertise, and best-in-class supply chain performance.

Our branding power meaningful and value added innovation and channel.

David V. Barry: For catalysts for accelerated growth in the most attractive categories.

David V. Barry: We are focused on driving outperformance in categories, driven by secular growth tailwind like connected products until conversion.

David V. Barry: Sri.

David V. Barry: In products with sustainability and safety benefits.

David V. Barry: Our consumers continue to reward us with growing market share because our customers continue to view us as valued partners with unique insights category management expertise and best in class supply chain performance.

We believe our products and brands are uniquely positioned to outperform, as our results demonstrated this past quarter. Turning now to our individual business results, starting with water innovation. This segment delivered 5% sales growth versus the prior year, with organic sales down 7%, while generating 100 basis points of operating margin improvement. Sales in the U.S. largely rebounded following the inclement weather to start the year, and our moment POS was around 100 basis points higher than our market estimate.

David V. Barry: We believe our products and brands are uniquely positioned to outperform.

David V. Barry: Our results demonstrated this past quarter.

David V. Barry: Turning now to our individual business results.

David V. Barry: Starting with water innovations this segment delivered 5% sales growth versus the prior year with organic sales down 7%, while generating a 100 basis points of operating margin improvement.

David V. Barry: Sales in the U S largely rebounded following the inclement weather to start the year and our Mon Pos was around 100 basis points higher than our market estimates.

We're also seeing single-family new construction volume coming through. The Fientech brand continues to perform extremely well, and our reputation for delivering market-leading products is being rewarded with continued share gains, including low single-digit positive POS versus a market we estimate is down mid-single-digit. Finally, our work toward integrating our brains into one comprehensive and complementary luxury portfolio is progressing very well, including our work to update existing showrooms with our combined suite of luxury products and integrating our M-TECH products into our luxury outdoor offering.

David V. Barry: We're also seeing single family, new construction volume coming through.

David V. Barry: The <unk> brand continues to perform extremely well and our reputation for delivering market leading products is being rewarded with continued share gains.

David V. Barry: Low single digit positive Pos versus a market, we estimate was down mid single digits.

David V. Barry: Finally, our work towards integrating our brands into one comprehensive and complementary luxury portfolio is progressing very well, including our work to update existing showrooms with a combined suite of luxury products and integrating our amtech products into our luxury outdoor offerings.

As I mentioned earlier, our flow-connected leak detection product continues to gain traction with insurance companies, municipalities, and consumers. We recently launched a new flow site on our Moen website and deployed an exciting branding campaign designed to raise awareness of how our products can help solve the critical issue of residential water leaks, according to the Environmental Protection Agency. The average American family is wasting 9,400 gallons of water annually from preventable household leaks, and the resulting damage costs U.S. insurers and homeowners billions of dollars every year.

As I mentioned earlier, our flow connected leak detection product continues to gain traction with insurance companies.

David V. Barry: <unk> and consumers.

David V. Barry: We recently launched a new flow site on our Mone website and deployed an exciting branding campaign designed to raise awareness of our products can help solve the critical issue of residential water leaks.

David V. Barry: According to the environmental Protection Agency. The average American family is wasting 9400 gallons of water annually from preventable household leaks.

David V. Barry: And the resulting damage costs U S insurers and homeowners many billions of dollars every year.

At a time when insurance costs are rising and water scarcity is becoming even more serious, the need for a product like our FlowSmart water monitor and shutoff is becoming more acute. In addition to the billions of dollars we believe our products can save insurance companies and homeowners every year, we are working to help homeowners, builders, and municipalities achieve their water-saving and carbon reduction goals. Our innovative connected sprinkler system recently achieved EPA WaterSense certification, which significantly expands the number of rebates available to consumers across the country.

David V. Barry: At the time in which insurance costs are rising and water scarcity is becoming even more serious the need for a product like our flow Smartwater monitoring shutoff is becoming more acute.

David V. Barry: In addition to the billions of dollars, we believe our products can save insurance companies and homeowners every year.

David V. Barry: We're working to help homeowners builders and municipalities achieve their water saving and carbon reduction goals.

David V. Barry: Our innovative connected sprinkler system recently achieved EPA waterson certification, which significantly expands the number of rebates available to consumers across the country.

Additionally, we are finalizing a partnership that we expect will greatly facilitate the number and availability of rebates for our smart water products for residents of municipalities across California, which should help further drive adoption of our products. We expect this program will officially launch this summer, and we are excited for how it can help raise awareness and adoption of HomeSmart leak detection solutions in a location where it is greatly needed. Looking to the remainder of 2024, we expect our water segment to continue to execute on our commitment to deliver above-market sales performance by focusing on those parts of the market with the greatest potential for growth.

David V. Barry: Additionally, we are finalizing a partnership and we expect will greatly facilitate the number and availability of rebates for smartwater products for residents of municipalities across California.

David V. Barry: Which should help further drive adoption of our products.

David V. Barry: We expect this program will officially launch this summer.

David V. Barry: We are excited for how it can help raise awareness and adoption of home smart leak detection solutions in a location where it is greatly needed.

David V. Barry: Looking to the remainder of 2024, we expect our water segment to continue to execute on our commitment to deliver above market sales performance by focusing on those parts of the market with the greatest potential for growth.

We plan to continue to make thoughtful investments in our key priorities, including branding and marketing, digital, and capacity. We expect our pricing actions to hold up as we continue to innovate, as the benefits of our products resonate with our customers and consumers, and the promotional environment remains stable.

David V. Barry: We plan to continue to make thoughtful investments in our key priorities, including branding and marketing digital and capacity.

David V. Barry: We expect our pricing actions to hold up as we continue to innovate as the benefits of our products resonate with our customers and consumers.

And the promotional environment remains stable.

We're on track to open two new facilities in the second quarter of 2024, including a new, highly efficient West Coast Distribution Center for Moen and a state-of-the-art UK production facility for House of Roll. These targeted investments will help drive our strategy to grow the core and accelerate digital and connected products. We continue to be very excited about our water business, particularly the opportunities we see to capture growth in connected, luxury, and water filtration. Turning to Outdoors.

David V. Barry: We are on track to open two new facilities in the second quarter of 2024, including a new highly efficient West Coast distribution center for moment and a state of the art UK production facility for the house of ROHL.

David V. Barry: These targeted investments will help drive our strategy to grow the core and accelerate digital and connected products.

David V. Barry: We continue to be very excited about our water business, particularly the opportunities we see to capture growth in connected luxury and water filtration.

David V. Barry: Turning to our doors.

We had a strong first quarter with an impressive 9% sales growth and operating margins that increased 680 basis points versus last year. Our performance is a direct result of the hard and strategic work of the team, and I thank them for their dedication. We are laser-focused on leveraging our expertise and investing in our core categories and in those products, which we expect will offer the most attractive growth opportunities. Our door brains delivered low double-digit sales growth as tailwinds from new construction and recent product launches drove growth. Firmature is seeing the benefit of the increase in starts and completions which began last year.

David V. Barry: We had a strong first quarter with an impressive 9% sales growth and operating margins that increased 680 basis points versus last year.

David V. Barry: Our performance is a direct result of the hard and strategic work of the team and I. Thank them for their dedication we are laser focused on leveraging our expertise and investing behind our core categories and those products, which we expect will offer the most attractive growth opportunities.

David V. Barry: Our door brands delivered low double digit sales growth as tailwind from new construction and recent product launches drove growth.

Furniture, you're seeing the benefit of the increase in starts and completions, which began last year.

As we previewed this past quarter at the International Builders Show, Larson is introducing some innovative and on-trend new products at key price points. Additionally, we will continue to roll out synergistic product offerings between our door brands and our larger portfolio, including Emtek Hardware and Yale and August Connected Lock, which we expect to drive incremental future growth. Once again, our fiber to business is a great proof point of the power of our strong channel relationship.

David V. Barry: As we previewed this past quarter at the International Builders' show Larsson is introducing some innovative and on trend new products at key price points.

Additionally, we will continue to rollout some logistic product offerings between outdoor brands in a larger portfolio, including amtech hardware and the L. In August connected locks, which we expect to drive incremental future growth.

David V. Barry: Once again, our fiber one business is a great proof point of the power of our strong channel relationships.

We saw over 20% growth for Fibron in the profitable wholesale channel, and our POS data indicates that our Fibron wholesale sell-through significantly outpaced the market. Finally, the security segment grew sales 9% in the quarter, but it was down high single digits on an organic basis, primarily due to de-stocking activities at select customers ahead of the general consumer week.

We saw over 20% growth for fiber on in the profitable wholesale channel.

David V. Barry: POS data indicates that our fiber on wholesale sell through significantly outpaced the market.

Finally, our security segment grew sales, 9% in the quarter, but was down high single digits on an organic basis, primarily due to the destocking activities at select customers ahead of general consumer weakness.

However, this segment also saw 170 basis points of operating margin improvement, inclusive of the investments in Yale and August's Smart Lock residential brand, as the work we did around continuous improvement and optimizing our footprint continues to pay off. We expect our security segment will continue to benefit from the transformational work that we have done over the past two years. We've evolved our legacy brands from mechanical-only products into innovative and growth-oriented businesses with a much more strategic portfolio.

However, this segment also saw a 170 basis points of operating margin improvement inclusive of the investments at Yale and August Smart lock residential brands is the work we did around continuous improvement and optimizing our footprint continues to pay off.

David V. Barry: We expect our security segment will continue to benefit from the transformational work that we've done over the past two years.

David V. Barry: Our legacy brands from mechanical only products into innovative growth oriented businesses with a much more strategic portfolio.

We will reinvest the efficiencies gained from our recent optimization of the business to take advantage of strong secular trends like connected products and safety. The Yale and August brands have proven to be a strong fit. In addition to being great assets, the Yale and August team is excellent, and their capabilities have made significant contributions to our collective group across the product portfolio.

David V. Barry: We will reinvest the efficiencies gained from our recent optimization of the business to take advantage of strong secular trends like connected products and safety.

David V. Barry: Beyond August brands have proven to be a strong fit.

David V. Barry: In addition to being great assets. The M. August team is excellent and their capabilities have made significant contributions to our collective group across the product portfolio.

To recap, in the first quarter, we executed our priorities of focusing on the core and accelerating digital products and delivered above-market performance. For the remainder of 2024, we will continue this focus of driving above-market growth by pursuing incremental growth opportunities and by building on the foundational work established by our transformation into a brand, innovation, and channel leader. We will productively manage any dynamic periods while actively positioning Fortune Brand's innovations for the future. We continue to have full confidence in our ability to meet the targets we outlined in our full year guidance on our fourth quarter call. I will now turn the call over to David.

David V. Barry: To recap in the first quarter, we executed a party so focusing on the core and accelerating digital products and delivered above market performance.

David V. Barry: The remainder of 2024, we will continue this focus of driving above market growth by pursuing incremental growth opportunities by building on the foundational work established by our transformation into a brand innovation and channel leader.

David V. Barry: We will proactively manage any dynamic periods, while actively positioning fortune brands innovations for the future.

David V. Barry: We continue to have full confidence in our ability to meet the targets, we outlined in our full year guidance on our fourth quarter call.

I will now turn the call over to Dave.

Thanks, Nick. As a reminder, my comments will focus on income before charges and gains to best reflect ongoing business performance. Additionally, comparisons will be made against the same period last year, unless otherwise noted. Let me start with our first quarter results. As Nick highlighted, our teams executed our priorities amid a dynamic macro environment. As I will detail in my section, our financial results provide some very compelling examples of how the transformative actions we undertook over the past year and a half are generating tangible returns. In the first quarter, sales were $1.1 billion, up 7%, and down 3% excluding acquisitions.

David V. Barry: Thanks, Nick as a reminder, my comments will focus on income before charges and gains to best reflect ongoing business performance. Additionally.

David V. Barry: Additionally, comparisons will be made against the same period last year unless otherwise noted.

Consolidated operating income was $167 million, up 22%. Total company operating margin improved 200 basis points to 15.1%, and earnings per share were 83 cents, a 20% increase versus last year. Our first quarter performance was driven by higher than expected sales in our outdoors and water segments and resulting margin flow through. As Nick mentioned, we remain focused on driving out performance, including above market growth, enhancing margins, and generating cash. Our teams continue to focus on managing our P&L and balance sheet while maintaining key strategic growth investments.

David V. Barry: Let me start with our first quarter results.

David V. Barry: As Nick highlighted our teams executed our priorities amid a dynamic macro environment.

David V. Barry: As I will detail in my section our financial results have some very compelling examples of how the transformative actions, we undertook over the past year and a half are generating tangible returns.

In the first quarter sales were $1 1 billion up 7% and down 3% excluding acquisitions.

David V. Barry: Consolidated operating income was $167 million up 22%.

David V. Barry: Total company operating margin improved 200 basis points to 15, 1% and earnings per share were <unk> 83 and.

David V. Barry: A 20% increase versus last year.

David V. Barry: Our first quarter performance was driven by higher than expected sales in our outdoors and water segments, and resulting margin flow through.

David V. Barry: As Nick mentioned, we remain focused on driving outperformance, including above market growth enhancing margins and generating cash.

David V. Barry: Our teams continue to focus on managing our P&L and balance sheet, while maintaining key strategic growth investments.

Now let me provide more color on our segment results. Beginning with Water Innovations, sales were $625 million, up $31 million, or 5%, and down 7% excluding the impact of acquisition. Our organic results reflect POS down mid-single digits and channel inventory reductions at select customers. China sales declined mid-single digits and were up low-single digits, excluding the impact of FX.

David V. Barry: Now, let me provide more color on our segment results.

David V. Barry: Beginning with water innovations sales were $625 million up $31 million or 5%.

David V. Barry: And down 7%, excluding the impact of acquisitions.

David V. Barry: Our organic results reflect Pos down mid single digits and channel inventory reductions at select customers.

David V. Barry: China sales declined mid single digits and were up low single digits, excluding the impact of FX.

As Nick indicated, the Chinese consumer remains cautious in the housing space, and our team continues to manage the dynamic environment well while finding pockets of growth in emerging channels and in product category expansion. Water Innovation's operating income was $141.5 million, an increase of 10%. Operating margin was 22.6%, an increase of 100 basis points, reflecting the impact of higher volume. Turning to Outdoors,

David V. Barry: As Nick indicated the Chinese consumer remains cautious in the housing space and our team continues to manage the dynamic environment, well, while finding pockets of growth in emerging channels and and product category expansion.

David V. Barry: Water innovations operating income was $141 5 million.

David V. Barry: An increase of 10%.

David V. Barry: Operating margin was 22, 6% an increase of 100 basis points, reflecting the impact of higher volumes.

Outdoors had a strong first quarter. Sales were $315 million, up 9%, driven by strength in indoors and fiber on wholesale; door sales increased low double digits. Sales were supported by higher volumes at ThermaTru, driven by the increase in single-family new construction. Decking sales were roughly flat, driven by strength in wholesale, and partially offset by anticipated declines in retail.

David V. Barry: Turning to outdoors.

Outdoor has had a strong first quarter sales were $315 million up 9% driven by strength in doors and fiber on wholesale.

Doors sales increased low double digits sales.

David V. Barry: Sales were supported by higher volumes at therma through driven by the increase in single family New construction.

Decking sales were roughly flat driven by strength in wholesale and partially offset by anticipated declines in retail.

Our results this quarter reflect our ongoing strategic approach of focusing on those core categories in which we expect to have the best opportunities to achieve long-term, above-market growth and profitability. Outdoors segment operating income was $37.9 million, up 150%, and segment operating margin more than doubled to 12%, a 680 basis point improvement. Segment operating income increases were driven by favorable volume leverage in our businesses and productivity and profitability improvements. We believe this segment is on the right track as we focus on those parts of the market that will drive the greatest potential returns and growth and where we have the right to win. In security, our first quarter sales increased 9%. However, organic sales decreased 8%, reflecting soft POS and select channel destocking ahead of soft consumer activity.

David V. Barry: Our results this quarter reflect our ongoing strategic approach of focusing on those core categories in which we expect to have the best opportunities to achieve long term above market growth and profitability.

David V. Barry: Outdoor segment operating income was $37 9 million up 150%.

Segment operating margin more than doubled to 12% a 680 basis point improvement segue.

David V. Barry: Segment operating income increases were driven by favorable volume leverage in our businesses and productivity and profitability improvements.

David V. Barry: We believe this segment is on the right track as we focus on those parts of the market that will drive the greatest potential returns and growth and where we have the right to win.

David V. Barry: In security, our first quarter sales increased 9%.

Organic sales decreased 8%, reflecting soft Pos and select channel Destocking ahead of soft consumer activity.

We continue to see momentum in the categories we have identified as having higher growth potential, such as Master Lock Commercial and our Connected Security products. Segment operating income was $27 million, up 22%, and segment operating margin was 15.7%, an increase of 170 basis points versus the prior year, and was driven by continuous improvement initiatives. As we have discussed previously, we think our security segment is a great example of the power of our Fortune Brand's advantages, and we expect great things from this business. Turning to the balance sheet. Our balance sheet remains solid with cash of $360 million, net debt of $2.7 billion, and our net debt to EBITDA leverage is 2.9 times.

David V. Barry: We continued to see momentum in the categories, we have identified as having the higher growth potential such as master light commercial and our connected security products.

David V. Barry: Segment operating income was $27 million up 22%.

David V. Barry: Segment operating margin was 15, 7% an increase of 170 basis points versus prior year.

David V. Barry: And was driven by continuous improvement initiatives.

David V. Barry: As we've discussed previously we think our security segment is a great example of the power of our fortune brands advantaged capabilities, and we expect great things from this business.

We remain on track to achieve our target net leverage ratio of two and a quarter times by year end. We have 875 million available on our revolver. In the first quarter, we returned $130 million to shareholders via a combination of share repurchases and dividends, including $100 million of share repurchases. Year-to-date, we have repurchased $125 million of shares. Our first quarter free cash flow was negative $136 million, reflecting the typical seasonality of our business and in line with our expectations.

David V. Barry: Turning to the balance sheet.

David V. Barry: Our balance sheet remains solid with cash of $360 million net debt of $2 7 billion and our net debt to EBITDA leverage is two nine times.

David V. Barry: We remain on track to achieve our target net leverage ratio of two and a quarter times by yearend.

David V. Barry: We have $875 million available on our revolver.

David V. Barry: In the first quarter, we returned $130 million to shareholders.

David V. Barry: A combination of share repurchases and dividends, including a $100 million of share repurchases.

Year to date, we have repurchased $125 million of shares.

David V. Barry: Our first quarter free cash flow was negative $136 million, reflecting the typical seasonality of our business and in line with our expectations.

To summarize the quarter, we delivered strong sales and margin results and are on the path of delivering on our full year commitments to grow sales above market, expand our margins, and generate cash. While our first quarter results were certainly encouraging and spoke to the strength of our business, we are aware of the dynamic macro environment. For the second quarter, we expect net sales growth of around 10 percent, with operating margins between 16.5 and 17 percent. Operating margins will be impacted by inefficiencies related to the start-up of our two new water facilities, which we expect will provide long-term capacity for market-beating growth and cost savings for the business.

David V. Barry: To summarize the quarter, we delivered strong sales and margin results and are on the path of delivering on our full year commitments to grow sales above market expand our margins and generate cash.

David V. Barry: While our first quarter results were certainly encouraging and speak to the strength of our business. We are aware of the dynamic macro environment.

David V. Barry: For the second quarter, we expect net sales growth of around 10% with operating margins between 16, and a half and 17%.

David V. Barry: Operating margins will be impacted by inefficiencies related to the startup of our two new water facilities, which we expect will provide long term capacity for market, beating growth and cost savings for the business.

Looking forward to the second half of the year, we continue to expect sales growth of between 2% and 3% and operating margins of around 18%. As a reminder, we closed on our Yale, August, and M-TEC acquisitions in June of last year, and the performance of those brands will be included in our second half organic results. Finally, we remain confident in our ability to hit our previously communicated full-year 2024 guidance, including full-year net sales up 3.5% to 5.5%, with organic net sales down 1% to up 1%, and operating margins between 16.5% and 17.5%, the midpoint of which includes 100 basis points of operating margin improvement. We continue to expect EPS of $4.20 to $4.40, the midpoint of which represents 10% earnings per share growth.

David V. Barry: Looking forward to the second half of the year, we continue to expect sales growth of between 2% and 3% and operating margins of around 18%.

David V. Barry: As a reminder, we closed on or Yale August and Amtech acquisition in June of last year and the performance of those brands will be included in our second half organic results.

David V. Barry: Finally, we remain confident in our ability to hit our previously communicated full year 2024 guidance, including full year net sales up three and a half to five 5% with organic net sales down 1% to up 1% and operating margins between 16, 5% and 17 five.

David V. Barry: Were sent.

The midpoint of which includes a 100 basis points of operating margin improvement.

David V. Barry: We continue to expect EPS of $4 20 to $4 40.

David V. Barry: The midpoint of which represents 10% earnings per share growth.

Our teams are off to a great start against our full-year targets and will remain focused on the execution of our key priorities. I will now pass the call back to Leigh so that she can open the call for questions. Thanks, Dave.

David V. Barry: Our teams are off to a great start against our full year targets and we will remain focused on the execution of our key priorities.

David V. Barry: I will now pass the call back to Lee to open the call for questions Lee.

That concludes our prepared remarks. We will now begin taking a limited number of questions. Since there are a number of you who would like to ask a question, I will ask that you limit your initial questions to two and then re-enter the queue to ask additional questions. I will now turn the call back over to the operator to begin the question and answer session. Operator, can you open the line for questions?

Lee Zach: Thanks, Dave that concludes our prepared remarks, we will now begin taking a limited number of questions. Since there are a number of you who'd like to ask a question I'll ask that you limit. Your initial questions to two and then re enter the queue to ask additional questions I will now turn the call back over to the operator to begin the question and answer session. Operator can you.

Lee Zach: On the line for questions. Thank you.

Lee Zach: Thank you could you would like to ask a question. Please press star one on your telephone keypad at this time a confirmation tone will indicate your line is another question queue. You May press star two if he would like to remove your question Tim Mchugh for participants.

Thank you. Thank you. If you would like to ask a question, please press star 1 on your telephone keypad at this time. A confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Again, that is star one to register a question at this time. Good evening, guys, and thank you for taking my questions. Nick, maybe I'll start high level, sort of where you started.

Lee Zach: Participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Lee Zach: Again that is star one to register a question at this time.

Lee Zach: Our first question comes from John Lovallo with UBS. Please proceed with your question.

John Lovallo: Good evening, guys and thank you for taking my questions.

John Lovallo: Maybe I'll start high level sort of where you started.

And just looking for any update on the progress of the various kinds of Fortune initiatives to align the company more as one company, you know, whether it's connected products, you know, integrated supply chain efforts, the transformation office. I mean, where are the biggest opportunities for improvement this year? Hey John, um... Great question. I mean, we're a little more than a year into that now, right?

John Lovallo: And just looking for any update on the progress of the various kind of fortunate initiatives to align the company more as one company, whether it's connected products integrated supply chain efforts. The transformation office I mean, where are the biggest opportunities for improvement this year.

Speaker Change: Hi, John.

John Lovallo: It's a great question I mean, we're a little more than a year into that now right. So it was 22, when we announced the realignment of the company and.

So it was September 22, when we announced the realignment of the company. It is a heavy lift to go and redesign an operating model and then really work through a full cycle, which was 2023, of operating in that new model. And now we seem to be hitting our groove.

John Lovallo: It.

Speaker Change: Shy away from it is a heavy lift to go and redesign and operating model.

And then really worked through a full cycle, which was 2023 of operating in that new model and now were seem to be hitting or.

And what I really look at are the proof points of things that we've been able to get done that we might not have been able to get done had we not come together in this way? And I think you can see that across a number of things. Firstly, the portfolio is getting increasingly cohesive. A lot of people remarked, I think, at the industry shows at KBiz and iBiz as an example of what's already rolling out in the market.

Speaker Change: What I really look through or what are the proof points are things that we've been able to get done that we might not have been able to get done.

Speaker Change: Had we not come together in this way and I think you can see it across a number of things I mean, firstly the portfolio is getting increasingly cohesive.

Speaker Change: A lot of people remarketing of the industry shows <unk>.

Speaker Change: And check in house of ROHL together on display is really not just.

Speaker Change: It is an example of what is already rolling out in the market and the speed with which we were able to do that I think was very surprising coming into our stores area and not just seeing products on display together, but you're starting to see how those innovations will work together to bring those technologies across the various brands.

We were able to do that. I think it was very surprising coming into our outdoor area and not just seeing products on display together but starting to see how those innovations will work together to bring those technologies across the various brands and M.M. Brown.

Speaker Change: In areas like our doors within second yeah, So you're starting to see the portfolio with the line organization and you're able to extract greater value.

And, you know, areas like outdoors with ENCEC and Yevlin. So you start to see the portfolio with an aligned organization be able to extract greater value than when it was less aligned or had more silos. So that is a big area for us. I think another big area is our operational leverage; you just have it now. [inaudible] They're optimizing their suppliers. [inaudible] I think it's a great proof point. And then finally, I might just point you to one of the things we're most excited about, which is our digital. There's a group of over 200 engineers.

Speaker Change: It was less aligned or more siloed.

Speaker Change: That is a bigger for us I think another big area is our op leverage right you just have now.

Speaker Change: A single team supporting the entire business and the caliber of the team that comes with that.

Speaker Change: They're getting done and the team.

Speaker Change: They're getting it done is pretty remarkable I mean, if you just think about your most recently reformatting the entire security managed faction footprint and doing it with.

Speaker Change: With the Grace with which our team did it have any people who are a great place, but also driving the car.

Speaker Change: The results that Youre seeing now start to come through security.

Speaker Change: Optimizing our supplier spend.

Speaker Change: And resilience of our carriage fees whenever theyre getting more capacity on a fiber on.

Speaker Change: But we thought it was fair.

They're hoping to major water facilities in this quarter alone.

Speaker Change: Awesome.

Speaker Change: Got in that amount of time in this short a time in a prior to this.

Speaker Change: I think it's a great proof point and then you.

Speaker Change: Finally, I might just point you to.

Speaker Change: Most excited about which is digital and connected journey.

Speaker Change: Youre not with single aligned.

Speaker Change: Group over to about 200 engineers.

You know, we're operating much, much more like a... I really don't think we could have done that without bringing the whole team together and the depth of knowledge that they now have. So, you know, those are just a few proof points that could get into things like the integration management office, which we didn't have before, the progress, the fact that we already have flow selling on the Springboard website, and seeing a great attachment right there. I mean, you know, there's just a speed to things now and a clarity of vision across the whole business. And I think while we always had that ambition, it was hard to unlock and move on.

Speaker Change: And operating much much more like a.

Sure.

Speaker Change: Our digital business.

Speaker Change: I set out a set of milestones for example for the flow and Smartwater network for this year and achieved a quarter ahead of schedule I really don't think we could have done that without bringing the whole team together.

Speaker Change: Yeah.

Speaker Change: The depth of knowledge.

Speaker Change: So let me just a few proof points that could go into the things like integration management office, which we didn't have before the progress is effectively already have flow selling on spring more websites machine.

Speaker Change: Great attachment rates there I mean, there's just a.

Speaker Change: Speed of things now and have clarity of vision across the whole business.

Speaker Change: I think while we've always had that addition was hard to unlock in the in the old structure.

Got it. That's really helpful. And then maybe turning just to outdoors, revenue was up 9% in the first quarter versus your full year outlook of plus 1 to 3. Was there some timing benefit here?

Speaker Change: Got it that's really helpful and then maybe turning just to outdoors.

Speaker Change: Revenue was up 9% in the first quarter versus your full year outlook of plus one to three.

Because, you know, the remainder of the year implies more modest growth on a year-over-year basis. And then, along the same lines within decking, it sounds like retail may have been down meaningfully to offset that 20% increase in wholesale. So can you provide any color on what's going on there?

Speaker Change: Was there some timing benefit here because the remainder of the year implies more modest growth on a year over year basis, and then along the same lines within decking. It sounds like retail may have been down meaningfully to offset that 20% increase in wholesale. So can you provide any color on what's going on there. Thank you Ken I'll give you some perspective.

Thank you. Yeah, I'll give you some perspectives, and Dave can round them out for the rest of the year. I mean, obviously...

Speaker Change: And Dave can round it out.

The rest of the year I mean, obviously <unk>.

I'm super excited about the performance of that first quarter; I think you may really like it. That business, coming into its own again, much more aligned under its leadership. Great performance out of the doors business; they did some work to align it, and, of course, you're seeing new construction finally starting to come through as we set up towards the end of the year and starting into this year. So some really good stuff there. On, you know, the five run, you're absolutely right.

Speaker Change: We are excited about the performance outdoors third quarter I think you know you're really seeing that.

Speaker Change: Coming into its own again much more aligned under.

Ken: His leadership.

Ken: Great performance out of the doors business.

Ken: To work.

Ken: And of course, Youre seeing new construction finally, starting to come through as we sort of work towards the end of the year and starting it this year.

Ken: Back up so some really good stuff there.

I mean, we've made some strategic calls to really focus on the most profitable part of the market, where we can hopefully generate the types of margins we'd like to see in order to be able to fuel future growth and future innovation. I mean, that's really how we think about the margin journey in all companies on this real. And so, you know, seeing really the growth continue to come through the wholesale channel and seeding some in the retail channel.

Speaker Change: Brian you're absolutely right I mean, we've made some strategic costs really focus that on the most profitable part of the market, where we can hopefully generate the types of margins, we'd like to see in order to be able to fuel future growth and future innovation I mean, that's really how we think about the margin journey and all companies on this that's the real purpose.

And so we're seeing really the growth continue to come through the wholesale channel.

Speaker Change: Ceding some in.

Speaker Change: The retail channel and then.

Very interestingly for us, as we start to see some of the work that we've been doing at Larson for the last couple of years hit the marketplace, and so Larson is kind of going for a total refresh of some of the ideas that we had, and Acquisition. A Less Profitable Business Than We Once Were, for a while to align that organization, and now I'm starting to see some really positive POS coming there.

Speaker Change: Very interestingly for us as we start to see some of the work that we've been at Larson for the last couple of years to hit the marketplace.

Speaker Change: And for Washington kind of going through.

Speaker Change: Total refresh of some of the ideas that we had coming into that acquisition.

Speaker Change: The pandemic.

Speaker Change: And some of the changes we had to make in some of the.

Speaker Change: Less profitable business that we walked away from just took a while to align that organization and now starting to see some really positive Pos coming there so I'd say in whole.

So I'd say, you know, in whole... a really good quarter coming in ahead of where we thought the rest of the year and John Eisenstein. With the outdoor segment, we saw POS up mid-single digits, which was mostly volume-driven in the quarter, and then, as a reminder, we had a low single-digit benefit, a prior year inventory reduction primarily. Grove, The Nine Percent.

Speaker Change:

Speaker Change: Really good quarter coming in ahead of where we thought.

Speaker Change: It gives us some good confidence for.

Speaker Change: Not just the rest of the year, but if we take this business from here.

Speaker Change: And John I'd add with the <unk>.

Speaker Change: <unk> segment, we saw Pos.

Speaker Change: Mid single digits, which was mostly volume driven in the quarter and then as a reminder, we had a low single digit benefit from a prior year inventory reduction primarily in thermal true.

Speaker Change: That took place last quarter, so that drove the 9% sales.

You know, going forward. We do think it was a better quarter than we expected. It gives us confidence in the full-year guide. It helps us de-risk some of the second half, and under that door is the Pacific.

Speaker Change: Going forward.

Speaker Change: We do think.

Speaker Change: Quarter than we expected it gives us confidence in the full year guide and helps us de risk some of the second half.

Speaker Change: Sales expectation that's true across the business when you look at our first quarter results.

Speaker Change: And then without doors specifically.

You know, as the volume returns, and we weren't drawing them in... driven by volunteers. Great. Thank you, guys.

<unk> returns and we werent drawing down inventories.

Speaker Change: Again volume drove margin improvement driven by volume and by productivity can we expect that to continue through the year.

Speaker Change: A really good start for that business out of the gate.

Speaker Change: Great. Thank you guys.

Speaker Change: Yes.

Our next question comes from Phil Ng with Jeffrey's. Please proceed with your question. Hey guys.

Speaker Change: Our next question comes from Sheila <unk> with Jefferies. Please proceed with your question.

After a slower start to the year, it looks like your business certainly picked up. Any color on how Intracore Insurance kind of caressed early read in April? Little surprise here, some of your customers are still destocking, I think, and securing water. What channel and have you seen that kind of calm down and maybe restock, potentially?

Sheila: Hey, guys. After a slower start to you it looks like your business certainly picked up any color on how intra quarter insurance kind of progress early read in April little surprised to hear semi customers are still destocking, I think insecure and water.

Sheila: What channel and have you seen that kind of calmed down and maybe restock potentially.

Yeah, I'd say we, as it called out on a lot of calls, Not unusually, but your internal flow and then certainly picked up, I would say. It's been a bit choppier towards the end of the quarter, particularly as some of the noise around interest rates picked up, but still seeing resilience where we called it up. From the wholesale channel, single-family new construction, some areas like Larson.

Sheila: Yes.

Speaker Change: I'd say we.

Speaker Change: We called out on the last call.

Not unusually.

Speaker Change: Sean will flow and then certainly picked up I would say.

Speaker Change: That is a choppy here towards the end of the quarter.

Particularly as some of the noise around.

Interest rates.

Hey, Scott.

Speaker Change: Five.

Speaker Change: So seeing resilience, where we called it out.

Speaker Change: The wholesale channel single family New construction.

Speaker Change: Some areas.

Like Mike Larsen.

And, you know, I think going forward, we'll see as we come into the... [inaudible] So I think, you know, we just need to manage it. As far as the de-stocking part of your question is concerned, you know, it was interesting because we see that, particularly in e-commerce, more than elsewhere, a little bit of wholesale across the business, so it wasn't really isolated. Bot

Speaker Change: Hum.

I think I think our affordable excuse me coming to the.

Speaker Change: The season just picks.

Speaker Change: Picks up you certainly see a lot of consumer interest as mentioned in his prepared remarks, we still see.

Speaker Change: She was up relative to even last year, we're seeing.

Speaker Change: Responding to the survey.

Speaker Change: They are planning projects.

And so I think we just need to manage it as far as the Destocking part of your question is concerned.

Speaker Change: Drifting because we see that.

Particularly in e-commerce.

Speaker Change: More than elsewhere, but ecommerce.

Little bit of wholesale across the business. So it wasn't really isolated to just one spot.

We're We're We're, I think taking inventory out ahead of what they might perceive as general consumption for those channels, and Phil on your POS trend question. I'll provide some color sequentially. So first quarter POS, finished, dollar for dollar, almost exactly in line. Typically, I think we'd see a first quarter that's a little bit softer. We were dollar for dollar almost equal, Q4'23 to Q1'24. And as we've moved through April, we've seen our retail and e-commerce POS ramp up.

Question.

Speaker Change: We saw some customers I think taking inventory.

Speaker Change: Head of what they might perceive as some general consumer weakness and so those channels pretty clean from an inventory perspective.

Speaker Change: And then Phil on the.

Speaker Change: POS trend question.

Phil: I'll provide some color sequentially. So first quarter. Pos finished dollar for dollar almost exactly in line in the fourth quarter. So typically I think we'd see a first quarter, that's a little bit softer than in the fourth but we were dollar for dollar almost equal, yes, Q4, 23% in Q1 24.

Phil: And as we've moved through April.

Phil: Seen our retail and E Commerce Pos ramp.

We would expect moving from the first quarter to the second quarter, though still negative year over year. That said, the channel serving single-family new construction continued to show growth, and we've seen nice input trends to start the quarter. Super, that's helpful.

Phil: And really as we would expect moving from the first quarter, the second quarter, though still negative year over year.

Phil: The channel serving single family, New construction continued to show growth and we've seen nice input trends to start the quarter in those businesses in those channels.

And then on your water innovation business, it would be helpful to kind of give us a little more color on how to think about the margin profile perhaps in TQ and the backups given perhaps some of the start-up costs from the new facilities as you kind of ramp that up. And in some of the investments and growth opportunities you see in connected products, water filtration, and flow, how should we think about the margin profile of that business versus, let's say, your core lawn business?

Speaker Change: Super that's helpful.

Speaker Change: And then on your water innovation.

Is that helpful kind of give us a little more color on how to think about the.

Speaker Change: The margin profile, perhaps in <unk> in the back apps, given perhaps some of the startup costs in many facilities as you kind of ramp that up and then some of the investments in growth opportunities you see in connected products water filtration and flow.

Speaker Change: Should we think about the margin profile of that business versus let's say your core <unk> business.

On the connected side, really strong competition. Still in an investment phase. Investments are coming through. But product margins are good. And then on the margin side overall for the segment, you'll still feel, [inaudible] back out to the years. We're ramping up new facilities and getting the savings there, and as we have, some continued pricing. Okra.

Speaker Change: Yes.

Speaker Change: Connected side.

Speaker Change: Really strong contribution margin.

Speaker Change: At its core.

Speaker Change: It's still in an investment phase.

Speaker Change: Those investments coming through.

Speaker Change: Product margins are good.

Speaker Change: And then on the margin side overall for the segment.

Speaker Change: Confident in tracking to that 24 to 24 and a half full year margin target and actually were a little bit ahead of our internal expectations. In Q1, I think youll see a sequential improvement Q1 to Q2, and then continued sequential improvement as we move through the back half of the year as we are ramping.

Speaker Change: New facilities and getting the savings there and as we have some continued price cost favorability come through the P&L.

Thank you. Appreciate the color, guys. Our next question comes from Adam Baumgarten, ladies and gentlemen. Could you give some more color on the upcoming Smart Water Partnership in California? It sounds pretty interesting. Just anything else you could add?

Speaker Change: Okay. Thank you I appreciate the color guys.

Speaker Change: Our next question comes from Adam Baumgarten Macquarie. Please proceed with your question.

Adam Michael Baumgarten: Hey, guys.

Adam Michael Baumgarten: Could you give us some more color on the upcoming Smartwater partnership in California, It sounds pretty interesting just anything else you could add.

Sure, I mean, we've got a number of these, I would say, in the works right now. So, you know, you'll be able to see us ahead of some internal milestones that we're really excited about. And then we're working on a number, we referenced one, but a number of external partnerships that could really amplify. Price Point, Placement. [inaudible] in your house.

Adam Michael Baumgarten: Sure I mean, we've got a number of these I would say in.

Adam Michael Baumgarten: Works right now so.

Speaker Change: That's being ahead on some internal milestones.

Speaker Change: We're really excited about and then we're working on a number we referenced one but a number of external partnerships that we believe could really amplify.

Speaker Change: The business.

H.

Speaker Change: So were just bringing whether it's ease of purchase price point placements installation to life that be awareness awareness is still a huge thing for a category, that's very nascent and will be complementing that with our AD campaign that is just rolling out now which will all be.

Speaker Change: Awareness around the odds that you will have an event like this.

And so, you know, these are big initiatives; they're big partnerships. You know, I've long said it, I don't think... when this category really starts to take hold. We're seeing now sort of a buildup of momentum and initiatives that we think are really going to sort of amplify our voice and this new category's voice, you know, out in front of the consumer. And I also mentioned that the 85% uptick in POS in retail and e-commerce in the quarter kind of caught us by surprise, but, you know, caught us a little bit by surprise, and then through these partnerships with the I think you're really going to see an amplification of what we're doing in the marketplace. Thanks.

Speaker Change: In your house and so.

Speaker Change: These are these are big initiatives.

Speaker Change: There are big partnerships and.

Speaker Change: I've long said that I don't think this is an effort it's a win.

Speaker Change: This category really starts to take hold and I think what we're seeing now is sort.

Speaker Change: A buildup of momentum and initiatives.

Speaker Change: That we think is really going to amplify our voice and the endless new categories voice out in front of the consumer and I also mentioned, 85% uptick in Pos and retail and e-commerce in the quarter.

Perfect.

Speaker Change: Surprised that caused a little bit by surprise, we are actually going to accelerate.

Out of inventory, we're going to bring in to support our customers in this space and I do think the tree.

Speaker Change: Our internal activities in both product.

Speaker Change: <unk> activities.

Speaker Change: Speaking externally, whether it be through media and marketing.

Speaker Change: Online youll see much more activity and then through these partnerships.

Speaker Change: Municipalities insurers.

I think you are.

Speaker Change: Really going to see an amplification of what we're doing in the marketplace.

Very exciting.

And then, Dave, maybe for you, just on input costs for the year, how you're thinking about that, and maybe generally price costs as we move through the year? Yep. So still, it's a line of sight on the price side.

Great. Thanks, and then Dave maybe for you just on input costs for the year. How are you thinking about that and maybe generally price cost as we move through the year.

David V. Barry: Still let's say line of sight too on the price side.

David V. Barry: Net price positive for the full year no change there in our businesses most of our businesses took gross price and in the first quarter and we're successful with that implementation.

David V. Barry: On the cost side is still expect net deflation of around 1% of cost.

David V. Barry: Our based input costs really here in the second quarter of increase with some of our base metals, but.

[inaudible] I'd remind everyone, you know, the way our supply chain is structured, that we really won't see that impact until either very, very late in the year, more likely the first. Base Metals doesn't change the price for us until the following year, giving our team some visibility to what's coming and allows them to work on price and cost actions to get ahead of it, and feel good about our price and cost. Okay, great, thanks, and best of luck.

David V. Barry: I would remind everyone the way our supply chain. This structure that we really won't see that impacting our P&L until either very very late in the year or really more likely the first quarter of 2025.

David V. Barry: Any movement in <unk>.

David V. Barry: Metals doesn't change the price until the following quarter and that has to work through with supply chain. So that gives our team some visibility to what's coming and allows them to work on price and cost actions to get ahead of it.

David V. Barry: So I'd say still feel.

David V. Barry: Good about our price cost estimates for the year that we laid out on the last call.

Speaker Change: Okay, great. Thanks best of luck.

Our next question comes from Stephen Kim with Evercore ISI. Please proceed with your question. Yeah, great. Thanks a lot, guys.

Speaker Change: Our next question comes from Stephen Kim with Evercore ISI. Please proceed with your question.

You made a comment about how I guess there was a little bit of slowing at the end of the quarter. Sounds like into April, you've seen some – you saw some – maybe some improving signs, I guess, in e-commerce and retail POS. I don't want to put words in your mouth, but would you say that that was better than what you saw at the end of the quarter or not?

Stephen Kim: Yeah, great. Thanks, a lot guys.

Stephen Kim: You made a comment about how I guess I was a little bit of slowing at the end of the quarter.

Stephen Kim: It sounds like into April you've seen some.

Stephen Kim: You saw some maybe some improving signs I guess in e-commerce and retail Pos I, just don't want to put words in your mouth, but I guess would you say that that was.

Stephen Kim: Better than what you saw at the end of the quarter.

And would it be fair to say that the beat in one queue and then not raising the guide for the year sort of reflect some cautiousness based on what you saw at the end of the quarter? Yeah, I would, I think that's absolutely right.

Or not and would it be fair to say that the beat in <unk> and then not raising the guide.

Stephen Kim: For the year sort of reflect some cautiousness based on what you saw at the end of the quarter.

Stephen Kim: Yes.

Speaker Change: I think that's absolutely right.

I, you know, I, We want to see how it evolves, you know. I don't want to get too excited about it. A couple more weeks and things, you know. I'm looking a little bit healthier, I just... Shopping.

Speaker Change: It's still choppy out there and we want to see how it evolves I don't want to get too excited about.

Speaker Change: A couple more weeks and things.

Speaker Change: Looking.

A little bit healthier consumer.

Speaker Change: Consumers pretty choppy and so we wanted to see how it evolves.

So we wanted to see how it evolved. We're overall, you know, happy with the quarter relative to where we are today and Summer. Steve, I'm POS.

Speaker Change: We are overall happy with the quarter relative to expectations.

Speaker Change: When it gets here.

Speaker Change: Well beyond where we are today, a few more weeks into the spring and summer before we haven't really good read on the year.

Speaker Change: Steve on Pos.

I think of it as sequentially week-on-week improving numbers, which we would expect to see, given where we are today. We're going to be building a ramp seasonally, though year over year still negative for retail and e-commerce, which for us is really our best read into R&R. That said, as I've mentioned on the flip side, you know, single family new construction input remains an agreement, and I think that will continue. A strong level of single family starts in the first quarter, though completions were still down 6%.

I think of it as sequentially week on week, improving numbers, which we would expect to see.

Speaker Change: Even where we are in the season.

Building, a ramp seasonally though year over year still negative for retail and ecommerce, which for US is really our best read into R&R.

Speaker Change: That said as I've mentioned on the flip side single family New construction input remains in a growth.

Speaker Change: Mode, and I think that will continue the strong level of starts single family starts in the first quarter, though completions were still down 6%.

Speaker Change: So as we as our products come in closer to a complete.

Speaker Change: Negative completion rates really gives us good line of sight to continued volume flow through the year as builders were through the uptake there.

This is a good line of sight to continue volume flow through the year. Gotcha. Okay, right.

But with respect to the POS, the ramp you're seeing is kind of just normal seasonality, so not something that we should get too excited about yet. Okay. Yeah, perfect.

Speaker Change: Gotcha Okay.

Speaker Change: But with respect to the Pls. The ramp you are seeing is kind of just normal seasonality so not not something that we should get too excited about yes. Okay.

Speaker Change: Yes perfect.

You made some comments with respect to the two facilities and water weighing a little bit. Can you quantify that for us in some way? And I think you made some comments also about Chinese consumers sort of transitioning away from new construction to R&R. I was just kind of curious, what does that entail?

Speaker Change: You made some comments with respect to.

Speaker Change: B.

The two facilities and water weighing a little bit can.

Speaker Change: Can you quantify that for us in some way and I think you made some comment also about Chinese consumers sort of transitioning away from new construction to R&R I was just kind of curious what does that entail what you maybe could provide a little context around that.

Maybe provide a little context around that. On the facility piece, from a margin standpoint, I'd say... 25 to 50 basis points in the quarter of margin headwind, relative to a normal rate, and then you know on the China question. That market, especially as we move away from... Speculative new construction, I think, which drove a lot of the sales to R&R. New, probably emerged over the past three-ish years.

Speaker Change: Yes.

Speaker Change: Facility fees.

From a margin standpoint, I would say.

Speaker Change: 25 to 50 basis points in the quarter a margin headwind.

Speaker Change: Those facilities ramp up and we have some production inefficiencies.

Speaker Change: Relative to a normal rate.

Speaker Change: And then on the.

Speaker Change: China question.

Speaker Change: That market, especially as we move away from speculative new construction, I think which drove a lot of the sales to R&R, we're seeing in our business Chinese consumers engaging in different categories. So there's a home decoration channel.

Speaker Change: New really has emerged over the past three ish years that the team is.

Speaker Change: Taking some nice share and then focusing their efforts on e-commerce and in our showroom network to make sure we're capturing that R&R as the market transitions.

[inaudible] You know, we do see a transition. It has been. The Overhang from New Construction has been greater than the Transition, and, you know, interestingly... For a lot of lots here, you actually saw growth in some of those R&R channels. And so you can see consumers coming in, pondering the size of the nucleus.

Speaker Change: It is we do see a transition that it has been.

Speaker Change: The overhang from new construction has been greater than the transition to R&R at this point.

Speaker Change: What you're seeing right.

A lot of last year, you actually saw growth.

Speaker Change: So those R&R channels that Dave was mentioning and so you could see consumers coming in it's just the preponderance of the size of the.

Speaker Change: The new construction.

Speaker Change: Eastern Canada fleet before you really see that but it's a natural transition for that market to now make.

It's a natural transition for that market to now, a lot of those, all that, you know, our exposure is predominantly to Tier 1, where we have the highest share. We like the optionality of the market, the team has done a great job managing that P&L. Proxima Coli is very, very healthy.

Speaker Change: A lot of those these are established and I just.

Speaker Change: Have you recall that our exposure is.

Speaker Change: Dominantly to tier one and tier two cities. So that's where we have the highest share in and Thats, where most of the R&R demand will start to form and so we like the optionality of the market the team's done a great job.

Speaker Change: Managing that P&L.

Speaker Change: And keeping.

Speaker Change: The ability very very healthy as we've navigated through this and we like Optionality.

We'd like the optionality that it gives us to get exposure to R&R, as well as, you know, the innovation engine that it brings because, you know, in that market, highly innovative and is also building a new adjacent. Okay, great. Thanks a lot, guys.

Speaker Change: Optionality that it gives us to get exposure to R&R as well as the innovation engine that it brings because you know.

Speaker Change: In that market that team is highly innovative and is also building a new adjacencies for Sofia.

Speaker Change: Okay, great. Thanks, a lot guys.

Our next question comes from Matthew Bouley with Barclays. Please proceed with your question. Good afternoon, everyone.

Our next question comes from Matthew Bouley with Barclays. Please proceed with your question.

Thank you for taking the questions. I'll ask about security. It sounded like it was a little softer in Q1 there, and maybe a little bit of destocking as well. It looks like you held the full year guide unchanged. So any additional elaboration on sort of what happened in Q1 and then the confidence in some improvement to kind of achieve that full year guide? Thank you.

Matthew Adrien Bouley: Good afternoon, everyone. Thank you for taking the questions.

Matthew Adrien Bouley: So I'll ask on security.

Matthew Adrien Bouley: Like it was a little.

Matthew Adrien Bouley: Softer.

Matthew Adrien Bouley: In Q1, there, maybe a little bit of Destocking as well it looks like you held the full year guide.

Matthew Adrien Bouley: Unchanged. So just any additional elaboration on sort of what happened in Q1, and then the confidence in some.

Matthew Adrien Bouley: Some improvement to kind of achieve that full year guide. Thank you.

Sure, as in security, you know, just talking more about the mosh lock and essentially safe side of the portfolio. I mean, most of the year, a really, really healthy loss year. Then you can see the consumer kind of slowed towards the end of the year. And we saw that continue to play out into Q1, but interestingly, I'd say that... Climbing Q1 of about 50% of the...

Sure John Security.

Good morning.

Marshall Atkins century safe side of the portfolio most of the really really healthy last year. Then you can see the consumer kind of slowed.

Speaker Change: Towards the end of the year and we saw that continue to play out.

Marshall Atkins: Into Q1.

Marshall Atkins: But interestingly I would say that.

Marshall Atkins: The decline in Q1 of about 50% of that is destocking right. So that brings.

So that brings the actual PLS number, you know, much closer to kind of mid-single digits, and there's a lot of work underway in that business to drive it into much, much more of a growth business by focusing both on some exciting areas like commercial, where it's now a third of the business, and we can see really, really nice growth. Connected, integrating it with the Elm August side, where we think we can drive a lot of growth, as well as just refreshing the offering in both SAFE and in Padlocks, and that's going to start to hit shelves as we go through the year. And so a lot of work has gone into re-engineering that business over the last few years in this country and others. Gotcha. Okay. Thank you for that, Nick.

Marshall Atkins: Actual pls number much closer to that kind of mid single digits.

Marshall Atkins: And there is a lot of work underway in that business.

Marshall Atkins: To drive.

Marshall Atkins: And too much much more of a growth business by focusing both on some exciting areas of commercial where it is now a third of the business. We can see really scrubbed connected integrating it with the August side.

Marshall Atkins: I think we can drive a lot of growth as well as just refreshing the offering in both safe and padlocks notice going to start to hit shelves as we go through the year and so on.

Marshall Atkins: A lot of work has gone to reengineer that business over the last few years and just started about the business at a much much healthier margin profile and gives us confidence to invest in sort of stick behind where the business is heading and continues to be very excited about it.

Secondly, just looking at the balance sheet, it looks like inventory dollars stepped up a bit. Presumably, the acquisition played into that, but maybe you could just kind of refresh us on how you're thinking about inventory going forward. Does there need to be any sort of right sizing of production from here, or is that really just the acquisition? Any additional color there?

Speaker Change: Got you okay. Thank you for that.

Secondly, just looking at the balance sheet it looks like.

Speaker Change: Inventory dollars stepped up a bit.

Speaker Change: We believe the acquisition played into that but maybe just kind of refresh us on.

Speaker Change: How are you thinking about inventory going forward does there need to be any sort of right sizing our production from here or is that really just the acquisition any additional color there. Thank you.

Thank you. Matt, I'd like to say a few things. The acquisition is a piece of it, but also, to say we're back more to a normal seasonal first quarter where we're building inventory for a couple of reasons. One, to mitigate the Chinese New Year supply chain. So we still expect to deliver free cash flow conversion of around. Positive Free Cash, I don't think there's anything unusual in the results. I think, actually, last year's first quarter was more unusual because we were pulling inventory down at such a rapid rate.

Speaker Change: Hey, Matt I'd say a few things.

Speaker Change: The acquisition is a piece of it but I'd also say we're back more to a normal seasonal first quarter, where we're building inventory for <unk>.

Reasons, one to mitigate Chinese new year supply chain impacts into in advance.

Speaker Change: Spring and summer season.

Speaker Change: So we still expect to deliver free cash flow conversion of around a 100% for the year and have positive free cash flow quarters Q2 to Q4, which is consistent with this business I don't think there's anything unusual.

And the results.

Speaker Change: Last year first quarter was more unusual through pulling inventory down in such a rapid rate and we had positive free cash flow in the first quarter of 'twenty three.

We had positive results. The team continues to work to optimize inventory and will do so throughout the year, more driven by the And then the final driver is that we brought in a bit of extra inventory to offer our supply chain, the Suez Canal in Panama, holding on to that maybe a bit longer than we... Gotcha. First question about the Aligned organization.

Speaker Change: The normal results the team continues to work to optimize inventory and.

Speaker Change: And we will do so throughout the year.

Speaker Change: More driven by system enhancements and process enhancements.

Speaker Change: And then the final driver is we brought in a bit of extra inventory.

Speaker Change: Buffered, our supply chain against the.

Speaker Change: <unk> can now in Panama Canal.

Speaker Change: Disruptions that have taken place there by holding on to that maybe a bit longer than we expected through the year.

Speaker Change: Given the continued disruption.

Speaker Change: Got you.

Speaker Change: Add to that as you come back to that.

Speaker Change: First question about the aligned organization.

Speaker Change: Particularly excited to be a lot of this last year and I think we'll continue to see it this year.

You saw a lot of this last year, and I think we'll continue to see it this year. Now, kind of, one supply chain operations team really owning not just inventory but thinking about the total balance sheet from a shareholder perspective and working to pull every lever on it. And so they're having conversations with some of our supplier collectors. We're going to have to put extra inventory on the water. [inaudible] A big driver's lost here, and I think it continues.

As you know this.

Speaker Change: It's now kind of one.

The operations team really owning youre, not just inventory, but thinking about.

Speaker Change: Total balance sheet from a shareholder perspective, and working to pull every lever on it. So they are having conversations with some of our suppliers, we're going to have to put extra inventory on the water.

Speaker Change: To support all of our businesses what are the impacts of the total working capital how do we think about that.

Speaker Change: Just having a shareholder lines and size of the business are working all the time is part of what's going to drive total working capital improvement beyond just inventory.

The big drivers last year, and I think you'll continue to see that improvement for this year.

Thanks, Nick. Thanks, Dave. Good luck, guys. Our next question comes from Susan Maklari with Goldman Sachs. Please proceed with your question. Thank you. Good afternoon, everyone.

Speaker Change: Thanks, Nick Thanks, David Good luck guys.

Speaker Change: Our next question comes from Susan Mcclary with Goldman Sachs. Please proceed with your question.

Susan Marie Maklari: Thank you good afternoon, everyone.

I'm good. My first question is about the acquisition you did of the water filtration operations there, which is an interesting add to your whole smart water network that you're building out there. Can you talk a bit about that opportunity, how it fits into this, where it can go over time, the potential there, and maybe just how to think about the M&A pipeline more broadly and what you're seeing as well? Let's start with a spring roll.

Susan Marie Maklari: Sure.

Susan Marie Maklari: Good My first question is on the acquisition you did of deepwater filtration operation, there, which is an interesting.

Susan Marie Maklari: Add to your whole Smartwater network that you're building out there can you talk a bit about that opportunity how it fits into this.

Where it can go over time, the potential there and maybe just how to think about the M&A pipeline more broadly and what youre seeing as well.

Susan Marie Maklari: Sure.

Susan Marie Maklari: Let's start with extremely well so interest rates have been looking at for a.

So, you know, it's a space you've been looking at for quite some time. We've been fairly discerning about wanting to find a very high-quality entry point into that business. But I'll break it down for you.

Susan Marie Maklari: Quite some time.

Susan Marie Maklari: It's fairly discerning about wanting to find out a very high quality entry point into that business, but I'll break it down I mean, firstly, just the business itself.

I mean, firstly, just the business itself. We're excited about that addressable market. It's $4 billion in the US alone today.

Susan Marie Maklari: We're excited about that addressable market.

Susan Marie Maklari: $4 billion in the U S.

Susan Marie Maklari: Alone today, it's growing.

Concern about water quality is growing and there's going to be a tech enablement for that and the ability to another quality deepwater kind of coming in.

There's going to be a tech enablement for that, and the ability to know the quality of the water coming in and out. So just, you know, The Knob itself is very exciting. Secondly, Digital Native Business, right? It started out as Digital Natives, the team.

Susan Marie Maklari: And al.

Of your system and so just in and of itself.

Susan Marie Maklari: Very exciting entry point secondly.

Susan Marie Maklari: Digital native business.

Susan Marie Maklari: Started up as digital natives the team.

I'm not even sure that use that word because theres no other way that book of business. When you started today.

And just as we have with Yale August, you know, or with M-TECH, the team is really kind of holding it to the side and saying, I want to learn everything about what you do and be careful to integrate only the best of the best. If they do something better than we do it, we're going to adopt that, and they're being very, very deliberate about that, but their ability to interact. The way they work at SAIL is very, very interesting to us, and that is a capability that we will seek to adopt.

Susan Marie Maklari: And just as we have with AGA.

Susan Marie Maklari: August <unk>.

Susan Marie Maklari: Amtech.

Our team is really kind of holding it aside and saying I want to learn everything about what you do and be careful to integrate only the best of the best if they do something better than we do it we're going to adopt that into our business and are being very very deliberate about that but their ability to interact with consumers.

Susan Marie Maklari: And a digital setting the speed at which they can get things done the way they work is sale.

Susan Marie Maklari: <unk> is very very interesting to us and that is a capability that we will seek to adopt over the entire business.

So, you know, another pillar that is very interesting. And then, you know, the third part is just that there is a lot of industrial logic around our smart water network and filtration. They go in, you know, at the same point. Certainly flow, I mean, there's other elements to the smart water network, but flow goes in at the same point as filtration. And if you're coming in to get someone to touch your main and to put a filter on it, or vice versa, put a flow on it, it is a very logical crosshatch.

Susan Marie Maklari: Other Florida that is very interesting and then the third part is just as a lot of industrial logic around our smart water network and filtration.

Susan Marie Maklari: And at the same point certainly flow I mean, there's other elements to the Smartwater network with logos and at the same point as filtration and if youre coming in to get someone to touch.

Susan Marie Maklari: And to put a filter on it or vice versa or are falling and it is a very logical cross sell so really isn't earlier experiment and kind of remarkable that team got it done so quickly.

We just put Flow up on their site. I wouldn't say we spent a ton of time training them on Flow and really understanding how it works. And we've seen double-digit attachment rates. My name is Michael Rehaut.

Susan Marie Maklari: Per flow up on their side I wouldn't there be some kind of time training them on flow and really understanding how it works and we're seeing double digit catastrophe rates.

Susan Marie Maklari: So that thesis is playing itself out.

Quickly. And so we're excited about where we can take the water quality arena and do it in a smart way. We think this is going to be a very, very important foundational piece to the whole smart water network. And then the second part of your question, you know, the M&A pipeline, I mean, it continues to be robust, and we'll continue to be very, very disciplined about how we think about it. But as we deepen these capabilities, you know, I think you'll find us be more selective around secular growth tailwinds such as

Pretty quickly. So we're excited about where we can take it to continue to push into.

Susan Marie Maklari: Water quality arena and do it in a smart way. We think this is going to be a very very important foundational piece to the whole Smartwater network.

Speaker Change: And then the second part of your question.

Speaker Change: Our M&A pipeline continues to be robust, we will continue to be very very disciplined about how we think about it but as we deepen these capabilities I think youll find us be more selective around things that really have these.

Speaker Change: Secular growth tailwind like a.

Water Quality, right, you know, that's probably going double digits as an area. But we're going to be able to go deeper and extract more value, or, you know, going forward, I'm excited about what's out in the pipeline. They were in a lot of cash.

Speaker Change: Water quality right.

Speaker Change: I'll be growing double digits.

Speaker Change: Area.

Speaker Change: But we're going to be able to go deeper and extract more value from them and so in our going forward I'm excited about what's out of the pipeline I think.

Speaker Change: Because we generate a lot of cash will be disciplined in deciding how to deploy it.

Speaker Change: In the best manner possible for shareholders, but I think there's going to be a lot of interesting opportunities to continue to build our business.

Okay. All right. That's encouraging. Thanks for the color.

Okay, Alright, that's encouraging thanks for the color and then maybe.

And then maybe turning a bit to the consumer. I talked a fair amount about new versus R&R activity in the quarter, but anything that you would highlight in terms of consumer behavior or any changes you're seeing in the business across the various price points, luxury versus some of the other offerings that you have, just anything of note there, and I guess anything that's changed in the last couple of weeks as well. I don't know, and Dave, feel free to add color. You know, I don't know that a ton has changed.

Speaker Change: Turning a bit to the consumer.

Speaker Change: A fair amount about new versus R&R activity in the quarter, but.

Speaker Change: And that you would highlight in terms of consumer behavior or any changes youre seeing in the business across the various price points luxury versus some of the other offerings that you have just anything of note there and I guess anything that's changed in the last couple of weeks as well with that.

Speaker Change: I don't know and Dave feel free to add color I don't know that a tonnage change I'm just thinking back from the trends we talked about on the last last call on them.

Just thinking back to some of the trends we talked about on the last call, and you know, I did mention I think the consumer has still been somewhat choppy. But I think the luxury consumer has outperformed. If I looked at the point of sale for the luxury business, it was probably up mid-single digit. So, you know, more resilient.

David V. Barry: You mentioned I think the consumer is still been somewhat choppy I think the luxury consumer has outperformed if I looked at the.

Point of sale for the luxury business.

David V. Barry: Is probably up.

David V. Barry: Mid single digits, and so more resilient, they're kind of store at the same rate come almost.

They're kind of still at the same rate, kind of almost 2X what the underlying water business is doing. Consumer interest continues to be there. We do a lot of work around that to make sure that we're right because we're placing bets on where that consumer will be. We are continuing to see a shift online, and so we are very cognizant about investing in and building our online capabilities for Pricing TV. I think Springwell is going to fit very, very well into that capability.

David V. Barry: <unk>.

David V. Barry: But the underlying water business is doing.

David V. Barry: Consumer interest continues to be there, we do a lot of work around that to make sure. We're right because we're placing bets on.

David V. Barry: Where that consumer will be we are continuing to see a shift online and so being very cognizant about investing in and building our online capabilities and that's not just the pricing piece of it.

David V. Barry: Whole online shelf from the ability to manage that extremely well is going to play a very very well into that capability, but beyond that I don't think a whole lot new Dave gave some color around the sequential.

But, you know, beyond that, I don't think there's anything new. Dave gave some color around that. The dollars that we're seeing through retail and e-commerce have played that. You know, I do think it's the noise around. We were not, probably will not.

David V. Barry: Dollars that we received through to retail and E. Commerce I think we just wanted to see how it plays out now.

I do think as the noise around.

David V. Barry: This stabilizes whether that impacts a few people.

David V. Barry: Or not and does not impact our product that much but just your level of confidence.

David V. Barry: Probably does and hopefully see more consumers come in and do some of these projects that they are talking about.

I would agree with everything Nick said in relation to the consumer as they're engaged with us in housing. I think one area we did see a change is in security. [inaudible] Groupit Core, and then some of the non-core things, like TSA, LOX, PyCore. I think that might be a read into how the broader consumer is thinking; it's a trend we'll keep an eye on, but I think everything nicks around that. The Consumer with Respect to Housing

David V. Barry: Would agree with everything mixed that in relation to the consumer as they're engaged with us and housing I think the one area. We did see a change is in security.

From our recent trends and that probably speaks more towards a broader consumer piece of the portfolio that's more fixed.

Fixed both generally to the consumer and as we look at where the POS trends were soft it was on the consumer products that were really.

David V. Barry: So a bit core and then some of the noncore things like TSA lock Spike locks and things that were maybe purchased in prior quarters. This year.

David V. Barry: Going forward and so I think thats, maybe a read into the broader consumer is thinking.

David V. Barry: And we'll keep an eye on but I think everything et cetera around the consumer with respect to housing we haven't seen a lot of change in trends in that state.

Okay, all right. Thank you for the color and good luck with everything. Thank you for joining today's conference call. You may now disconnect.

Speaker Change: Okay, Alright, thank you for the color and good luck with everything.

Speaker Change: Thank you.

Thank you for joining today's conference call you may now disconnect.