Q1 2024 Whirlpool Corp Earnings Call

Operator: Good morning, and welcome to Whirlpool Corporation's first quarter 2024 earnings call. Today's call is being recorded.

Good morning, and welcome to Whirlpool Corporation's first quarter 'twenty 'twenty four earnings call. Today's call is being recorded joining me today are Marc Bitzer, our chairman and Chief Executive Officer, and Jim Peters, our chief financial and administrative officer.

Operator: Joining me today are Marc Bitzer, our Chairman and Chief Executive Officer, and Jim Peters, our Chief Financial and Administrative Officer. Our remarks today track with the presentation available on the investor section of our website at WhirlpoolCorp.com. Before we begin, I want to remind you that as we conduct this call, we will be making forward-looking statements to assist you in better understanding Whirlpool Corporation's future expectations. However, our actual results could differ materially from these statements due to many factors discussed in our latest 10-K, 10-Q, and other periodic reports.

Our remarks today track with a presentation available on the investors section of our website at Whirlpool Corp Dot com.

Before we begin I want to remind you that as we conduct this call we will be making forward looking statements to assist you in better understanding whirlpool corporation's future expectations.

Our actual results could differ materially from these statements due to many factors discussed in our latest 10-K 10-Q and other periodic reports.

Operator: We also want to remind you that today's presentation includes the non-GAAP measures outlined in further detail at the beginning of our earnings presentation. We believe these measures are important indicators of our operations as they exclude items that may not be indicative of our results from ongoing business operations. We also think the adjusted measures will provide you with a better baseline for analyzing trends in our ongoing business operation. Listeners are directed to the supplemental information package posted on the investor relations section of our website for the reconciliation of non-GAAP items to the most directly comparable GAAP measures.

We also want to remind you that today's presentation includes non-GAAP measures outlined in further detail at the beginning of our earnings presentation.

We believe these measures are important indicators of our operations as they exclude items that may not be indicative of our results from ongoing business operations.

We also think the adjusted measures will provide you with a better baseline for analyzing trends in our ongoing business operations.

Centers are directed to the supplemental information package posted on the Investor Relations section of our website for the reconciliation of non-GAAP items to the most directly comparable GAAP measures.

Operator: At this time, all participants are in listen-only mode. Following our prepared remarks, the call will be open to analyst questions. As a reminder, we ask that participants ask no more than two questions. With that, I'll turn the call over to Marc.

At this time all participants are in listen only mode. Following our prepared remarks, the call will be open for analyst questions. As a reminder, we ask that participants ask no more than two questions with that I'll turn the call over to Mark.

Marc Robert Bitzer: Thanks, Scott, and good morning, everyone. I'm pleased to report that, despite a challenging macro environment, we've reported a solid first quarter, in line with our expectations, and we're on track to deliver on our full year guidance. This quarter marked the completion of our EMEA transaction following the UK's CMEA. It is a major milestone in our portfolio transformation initiative to a higher growth and higher margin business, unlocking significant value creation opportunities for both.

Mark: Thanks, Scott and good morning, everyone.

I am pleased to report that despite challenging macro environment, we've reported a solid first quarter in line with our expectations and we're on track to deliver on our full year guidance.

Mark: This quarter marked the completion of our EMEA transaction following the case CMA approval.

Mark: It is a major milestone in our portfolio transformation initiative to a higher growth and higher margin business unlocking significant value creation opportunities for whirlpool.

Marc Robert Bitzer: As expected, North American industry volumes were soft during the first quarter, as promotions remained elevated on the back of persistently high interest rates, which continue to put pressure on housing affordability and overall consumer discretionary spending. Against this backdrop, we were highly selective with how we promoted and pulled back on promotions that were not value created.

Mark: As expected the North America industry volumes were soft during the first quarter as promotions remained elevated on the back of persistently high interest rates, which continue to put pressure on housing affordability and overall consumer discretionary spending.

Mark: Against this backdrop, we were highly selective with how we promoted and pulling back on promotions, but we're not value creating.

Marc Robert Bitzer: And we did so while maintaining our market share position. We also remain disciplined and executed on our operational priorities, achieving meaningful cost reductions in the quad. Looking holistically at our business portfolio, we had a strong quarter in our small domestic appliance business, where we saw a top line and margin increase. We continue to innovate in this business and launch our automatic espresso machine product line. Outside the U.S., our Latin America and Asia business performed very well, and we continue to see meaningful long-term potential from this business.

Mark: And we did so while maintaining our market share position.

Mark: We also remained disciplined and execute towards our operational priorities achieving meaningful cost reductions in the quarter.

Looking holistically at our business portfolio, we had a strong quarter in our small domestic appliance business, where we saw a topline and margin expansion. We continue to innovate in this business and launched our automatic espresso machine product lineup.

Mark: Outside the U S Latin America, and Asia business performed very well and we continue to see meaningful long term potential from these businesses.

Marc Robert Bitzer: In my quarter, we also executed a renowned sale of our 24% stake in Whirlpool of India, retaining 51% ownership, and remain firmly committed to returning value to our shareholders and continuing our nearly 70-year track record of steady or increasing dividends by recently declaring a dividend of $1.75 to be paid in the second quarter, putting us on track to deliver $400 million of dividends for the year. We also continue to de-risk our boundaries, and we are on track to achieve our long-term leverage target.

Mark: In the quarter, we also executed on <unk> sale of our 24% stake and we'll put a india retaining 51% ownership.

Mark: We remain firmly committed to returning value to our shareholders and continued our nearly 70 year track record of steady or increasing dividends by recently, declaring a dividend of $1 75.

To be paid in the second quarter.

Putting us on track to deliver $400 million of dividends for the year.

Mark: We also continued to derisk, our balance sheet and on track to achieve our long term leverage targets.

Marc Robert Bitzer: We remain committed to our long-term free cash flow goals and fully expect free cash flow to ramp up throughout the year from its seasonal low in the first quarter and with the closing of a European transaction. As we look to the year ahead, we continue to view 2024 as a tale of two halves.

Mark: We remain committed to our long term free cash flow goals and fully expect free cash flow to ramp up throughout the year from our seasonal low in the first quarter and with the closing of a European transaction.

Mark: As we look to the year ahead, we continue to view 2024 is a tale of two halves.

Marc Robert Bitzer: In particular, we expect the promotional environment in the U.S. to remain elevated in the first half of the year, a carryover impact from last year. However, we will be comparing high promotions in the second half. We announced a North America promotional program price increase of 5%, which is now in effect to offset inflationary pressures, which would also benefit our top line. We do see value in our products and expect the benefits from this action to possibly impact the second half of 2024. Our positive view of the U.S. housing market remains unshaken.

Mark: In particular, we expect the promotional environment of U S to remain elevated in the first half of year, a carryover impact from last year.

Mark: However, we will be Comping high promotions in the second half of a year.

Mark: We announced our North America promotional program price increase of 5%, which is now in effect to offset inflationary pressures, which would also benefit our top line.

Mark: We do see buying our products and expect the benefits from this extra to positively impact the second half of 2024.

Mark: Our positive view of the U S housing market remains unchanged.

Marc Robert Bitzer: Given the current undersupply of 3 to 4 million houses in the market, we remain very bullish on the trajectory of the housing sector and its medium and long-term prospects. We're clearly well positioned to benefit from a coming housing recovery, given the high correlation between existing home sales and appliance sales. We have a strong position with the builders as we work with eight out of the top 10, holding the number one share position with builders, which we expect to continue to grow.

Mark: Given the current under supply of three to 4 million houses in the market. We remain very bullish on the trajectory of our housing sector and its medium and long term prospects.

Mark: We're clearly well positioned to benefit from our coming housing rebound.

Mark: Given the high correlation between existing home sales and appliance sales.

Mark: We have a strong position with our builders as we work with eight out of a top 10, holding the number one share position with builders, which we expect to continue to grow.

Marc Robert Bitzer: Importantly, we have a very strong product pipeline for 2024, and we continue to invest in new product development as we laid out at Investor Day. We're particularly excited about the new products that we're rolling out this year, and there will be more to come.

Mark: Importantly, we have a very strong product pipeline for 2024, and we continue to invest in new product development as we laid out at Investor day.

Mark: We're particularly excited about the new products that were rolling off this year more to come there.

Marc Robert Bitzer: We also remain focused on maintaining cost discipline and are taking actions to increase cost takeout in the second half of the year. While we're seeing sticky inflation, especially in supply chain costs, these actions should put us on the path to deliver $300 to $400 million in cost savings, excluding any raw materials. Overall, I'm confident that we're taking the right steps to drive long-term shareholder value and are on track with both our short-term goals as well as with our long-term strategic plans that we outlined in our recent investment.

Mark: We also remain focused on maintaining cost discipline and are taking actions to increase cost take out in the second half of the year.

While we are seeing sticky inflation, especially in our supply chain costs. These actions should put us on the path to deliver $300 million to $400 million in cost savings.

Mark: Excluding any raw material savings.

Mark: Overall, I'm confident we're taking the right steps to drive long term shareholder value.

Mark: And are on track with both our short term goals as well as with our long term strategic plans, but we outlined at our recent Investor day.

Marc Robert Bitzer: We are exiting the first quarter on solid footing, and we continue to expect meaningful progress in the remainder of the year. The actions we have taken give us the confidence to reaffirm our full year guidance of $13 to $15 ongoing earnings per share. Turning to slide five, I will provide an overview of our first quarter results. Net sales declined approximately 3% in the quarter.

Mark: We're exiting the first quarter on solid footing and we continue to expect meaningful progress in the remainder of the year.

Mark: The actions, we've taken give us the confidence to reaffirm our full year guidance of $13 to $15 ongoing earnings per share.

Speaker Change: Turning to slide five I will provide an overview of our first quarter results.

Speaker Change: Net sales declined approximately 3% in the quarter and as we said in our January earnings call. The carryover in the second half of 2023 normalized promotion environment unfavorably impacted price mix in the first half of 2024.

Marc Robert Bitzer: As we said in our January earnings call, the carryover of the second half of 2023 normalized promotion environment unfavorably impacts price mix in the first half of 2024. In North America, we held on to the market share we gained last year. At the same time, MDA Latin America saw strong share gains along with improved industry demand in the region. Our prior year carryover cost actions delivered, as expected, $100 million of year-over-year cost takeout in the first quarter.

Speaker Change: In North America, we held on to the market share. We gained last year at the same time MDA Latin America saw strong share gains along with improved industry demand dropped the region.

Speaker Change: Our prior year carryover cost actions delivered as expected $100 million of year over year cost takeout in the first quarter.

Marc Robert Bitzer: As previously noted, with stick inflation impacting supply chain costs, we experienced a slower start to our incremental costs, leading us to trend towards the lower end of a 300 to 400 million dollar range for cost takeout at this time. We delivered ongoing earnings per share of $1.78, with ongoing EBIT margins of 4.3%, including the margin dilutive MDA Europe, excluding Europe's major domestic appliance business. We delivered ongoing EBIT margins of approximately 5.

Speaker Change: As previously noted the sneak inflation impacting supply chain costs, we experienced a slower start to our incremental cost actions.

Speaker Change: Leading us to trend towards the lower end of $300 million to $400 million range for cost take out at this time.

Speaker Change: We delivered ongoing earnings per share of $1 78.

Speaker Change: EBIT margins of four 3%, including the margin dilutive MDA Europe business.

Speaker Change: Excluding Europe's major domestic appliance business, we delivered ongoing EBIT margins of approximately five 5%.

Marc Robert Bitzer: As you may recall, we expect this transaction will structurally improve our margins by approximately 100 basis points on a go-forward basis. The results were largely in line with our expectations, but not fully the way we expected, due to the challenging North America macro environment. Free cash flow was negatively impacted by non-recurring cash outflows associated with the MDA Europe business of approximately $250 to $300 million, reaffirming our expectation that the European transaction will strengthen our 2025 free cash flow delivery. Finally, 2024 marks the 69th consecutive year of dividends, with $1.75 per share paid in the first quarter.

Speaker Change: As you May recall, we expect this transaction will structurally improve our margin by approximately 100 basis points on a go forward basis.

Speaker Change: Our results were largely in line with our expectations, but not fully we're way we expected due to the challenging North America macro environment.

Speaker Change: Free cash flow was negatively impacted by nonrecurring cash outflows associated with the MDA Europe business of approximately $250 million to $300 million.

Speaker Change: Reaffirming our expectation that the Europe transaction will strengthen our 2025 free cash flow delivery.

Speaker Change: Finally, 2020 full marks a 69th consecutive year of dividend with $1 75 per share paid in the first quarter.

Marc Robert Bitzer: Turning to slide six, I will review first quarter ongoing EBIT margin. Price mix impacted margin unfavorably by 375 basis points. For context, this is similar to what we saw in the second half of 2020.

Speaker Change: Turning to slide six I will review, our first quarter ongoing EBIT margin drivers price mix impacted margin unfavorably by 375 basis points for context. This is similar to what we saw in the second half of 2023.

Marc Robert Bitzer: We expect this trend to improve as a result of a recently announced increase in our promotion price programs in North America. Additionally, our cost takeout actions deliver 225 basis points of margin expansion due to a strong realization of prior year carryover actions, as previously mentioned. As you have all seen, raw material costs have recently trended up. Steel remains stubbornly high, and geopolitical tensions are impacting oil prices. While not meaningfully impacting margin Q1, we continue to closely follow commodity trends which could potentially put pressure on our raw material guide.

Speaker Change: We expect this trend to improve as a result of the recently announced increase of our promotion price programs in North America.

Speaker Change: Our cost takeout actions delivered 225 basis point margin expansion from strong realization of prior year carryover actions as previously mentioned.

Speaker Change: As you have all seen raw material costs have recently trended upward.

Speaker Change: Steel remains stubbornly high geopolitical tensions are impacting oil prices.

While not meaningfully impacting margin in Q1, we continued to closely follow commodity trends, which could potentially put pressure on our raw material guidance.

Marc Robert Bitzer: Finally, we saw approximately 50 base points of favorable margin impacted largely by a strengthening peso and Brazilian real. Ultimately, we delivered ongoing EBIT margin of 4.3%. Now, I will turn it over to Jim to review our segment results and folio guidance.

Speaker Change: Finally, we saw approximately 50 basis points favorable margin impacted largely from a strengthening peso and Brazilian real.

Speaker Change: Ultimately, we delivered ongoing EBIT margin of four 3%.

Speaker Change: Now I will turn it over to Jim to review our segment results and full year guidance.

James W. Peters: Thanks, Marc. Good morning, everyone.

Jim: Thanks, Mark good morning, everyone.

James W. Peters: Turning to slide seven, I'll review first quarter results for our MDA North America business. With stable share, revenue was down 8% year over year as the segment continued to be impacted by the promotional environment. The U.S. industry was down approximately 2% with elevated mortgage rates impacting existing home sales and discretionary demand.

Jim: Turning to slide seven I'll review first quarter results for our MDA North America business.

Jim: With stable share revenue was down 8% year over year as the segment continued to be impacted by the promotional environment.

The U S industry was down approximately 2% with elevated mortgage rates impacting existing home sales and discretionary demand.

James W. Peters: Overall, the segment delivered 5.6% EBIT margins for the quarter. While the MDA North America business had a slower start than expected, we are confident that previously announced promotional program actions will drive sequential margin expansion of over a point per quarter, with pricing action benefits being fully realized in the third quarter. Turning to slide eight, I will review the broader cost environment and how sticky inflation has led to a slower ramp-up in incremental cost benefits in 2024.

Jim: Overall, the segment delivered five 6% EBIT margins for the quarter.

Jim: While the MDA North America business had a slower start than expected. We are confident that previously announced promotional program actions will drive sequential margin expansion of over one point per quarter with pricing action benefits being fully realized in the third quarter.

Jim: Turning to slide eight I will review the broader cost environment and how sticky inflation has led to a slower ramp up in incremental cost benefits in 2024.

James W. Peters: As you may recall, beginning in 2021 and continuing through 2022, we experienced unprecedented inflation and absorbed $2.5 billion of raw material inflation along with rising labor and freight costs. In 2023, we delivered our cost takeout actions, driving approximately $500 million of net cost takeout, coupled with $300 million of raw material benefits. We took a significant step toward resetting our cost structure. However, we have seen inflation persist more than expected in 2024, and our input, logistics, and labor costs remain elevated.

Jim: As you May recall, beginning in 2021, and continuing through 2022, we experienced unprecedented inflation and absorbed to $5 billion of raw material inflation, along with rising labor and freight costs.

In 2023, we delivered our cost takeout actions driving approximately $500 million.

Jim: Of net cost takeout, coupled with $300 million of raw material benefits.

Jim: We took a significant step toward resetting our cost structure.

Jim: However, we have seen inflation persist more than expected in 2024, and our input logistics and labor costs remain elevated.

James W. Peters: Despite the macro environment, we delivered approximately $100 million of cost takeout in the first quarter, supported by strong carryover from 2023 actions. We expect to see our manufacturing and supply chain cost actions continue to ramp up throughout the year. With the EMEA transaction finalized, this allows us to simplify the complexity of our organization operating model globally. We executed the first wave of our global actions in the first quarter and will begin to see the margin benefit in the second quarter. Additionally, the second wave of actions will be executed in Q2, and we will see the full impact of the organizational simplification efforts in Q3. Both waves combined eliminate approximately 1,000 global salary rolls.

Despite the macro environment, we delivered approximately $100 million of cost takeout in the first quarter supported by strong carryover from 2023 actions, we expect to see our manufacturing and supply chain cost actions continue to ramp up throughout the year.

Jim: With the EMEA transaction finalized this allows us to simplify the complexity of our organization operating model globally. We.

We executed the first wave of our global actions in the first quarter and we will begin to see the margin benefit in the second quarter.

Jim: Additionally, the second wave of actions will be executed in Q2, and we will see the full impact of the organizational simplification efforts in Q3.

Jim: Both waves combined eliminate approximately 1000 global salaried roles.

James W. Peters: We remain confident these actions will position our business to be successful now and into the future. Turning to slide 9, I will share more about our actions to expand margins in North America. In the first quarter, we saw a promotional environment in the U.S. similar to what we saw in the second half of 2023 without the incremental volume lifts we would expect. It is clear that the current level of promotional investments is not achieving our value creation expectations.

Jim: We remain confident these actions will position our business to be successful now and into the future.

Jim: Turning to slide nine I will share more about our actions to expand margins in North America.

Jim: In the first quarter, we saw a promotional environment in the U S. Similar to what we saw in the second half of 2023 without the incremental volume lifts, we would expect.

Jim: It is clear that the current level of promotional investments is not achieving our value creation expectations, we remain committed to creating value with our promotional participation and we are acting to address both the sticky inflation and promotional intensity.

James W. Peters: We remain committed to creating value with our promotional participation, and we are acting to address both the sticky inflation and promotional intensity. As Marc mentioned earlier, we announced a weighted average 5% promotional program price increase. We believe these promotional program actions are in line with our strategy of participating in promotions that create value and reflect the value of our products and brands. By adjusting our promotional program prices, we are able to quickly and efficiently increase net prices with relatively little lead time. To provide a little context, we communicated and implemented these program changes in the month of April, as opposed to our previously executed list price increases, which typically take 60 to 90 days to implement.

Jim: As Mark mentioned earlier, we announced a weighted average 5% promotional program price increase we believe these promotional program actions are in line with our strategy of participating in promotions that create value and reflect the value of our products and brands.

Jim: By adjusting our promotional programming prices, we are able to quickly and efficiently increase net prices with relatively little lead time.

Jim: To provide a little context, we communicated and implemented these program changes in the month of April.

Jim: As opposed to our previously executed list price increases, which typically takes 60 to 90 days to implement.

James W. Peters: These promotional program changes, coupled with our company-wide organizational actions, are expected to deliver sequential margin expansion for North America throughout 2024. Starting on slide 10, I'll review the results for our MDA Europe business. Revenue was down 5% year-over-year as the segment continued to see demand weakness from negative consumer sentiment.

Jim: These promotional program changes coupled with our companywide organization actions are expected to deliver sequential margin expansion for North America throughout 2024.

Jim: Starting on Slide 10, I'll review the results for our MDA Europe business.

Jim: Revenue was down 5% year over year as the segment continued to see demand weakness from negative consumer sentiment.

James W. Peters: EBIT margins decreased 50 basis points year over year, impacted by negative price mix. As a reminder, MDA Europe will no longer be a reportable business segment moving forward. Turning to slide 11, our MDA Latin America business reported very strong results in the quarter. The segment saw 8% net sales growth, excluding currency, driven by share gains throughout the region and an improving industry in both Brazil and Mexico, more than offsetting an unfavorable price mix.

EBIT margins decreased 50 basis points year over year impacted by negative price mix.

Jim: As a reminder, MDA Europe will no longer be a reportable business segment moving forward.

Jim: Turning to slide 11, our MDA Latin America business reported very strong results in the quarter. The segment saw 8% net sales growth, excluding currency driven by share gains throughout the region and an improving industry in both Brazil, and Mexico more than offsetting unfavorable price mix.

James W. Peters: EBIT margins expanded to nearly 8% from incremental volumes, cost actions, and approximately 200 basis points from an operating tax related item. Turning to slide 12, I'll review the solid results for our MDA Asia business. Revenue was down 2%, excluding currency, with increased volumes from share gains.

EBIT margins expanded to nearly 8% from incremental volumes cost actions and approximately 200 basis points from an operating tax related item.

Jim: Turning to slide 12, I'll review the solid results for our MDA Asia business.

Jim: Revenue was down 2%, excluding currency with increased volumes from share gains negative price mix impacted both sales and margins with cost takeout actions driving margin expansion to four 6% for the quarter.

James W. Peters: Negative price mix impacted both sales and margins, with cost takeout actions driving margin expansion to 4.6% for the quarter. Turning to slide 13, I'll review the very strong results for our SDA global business. The segment delivered approximately seven points of net sales growth, excluding currency, driven by key countries and our direct-to-consumer business. We expect continued net sales momentum from our expanded product offering throughout the year. As a reminder of the seasonality for the SDA segment, the first quarter typically represents less than 20% of full-year revenue.

Turning to slide 13, I'll review, the very strong results for our SDA global business.

Jim: The segment delivered approximately seven points of net sales growth, excluding currency driven by key countries and our direct to consumer business, we expect.

Jim: Continued net sales momentum from our expanded product offering throughout the year as.

Jim: As a reminder of the seasonality for the SDA segment, the first quarter typically represents less than 20% of full year revenues.

James W. Peters: Finally, we achieved 18% EBIT margins through our cost actions, new product introductions, and volume growth. We expect our first half margins to be in line with or slightly better than what was communicated at Investor Day, as we will have incremental marketing investments in Q2 related to new product launches. Turning to slide 14, I will review a few of our exciting new product launches across our business segment. During Q1, we launched many new products across our regional major domestic appliance businesses and global small domestic appliance business.

Jim: Finally, we achieved 18% EBIT margins through our cost actions and new product introductions and volume growth.

Jim: We expect our first half margins to be in line with or slightly better than what was communicated at investor day, as we will have incremental marketing investments in Q2 related to new product launches.

Turning to slide 14, I will review a few of our exciting new product launches across our business segments.

Jim: During Q1, we launched many new products across our regional major domestic appliance businesses and global small domestic appliance business earlier. This month, we launched in Florida, our new semi and fully automatic kitchenaid espresso machines at premium retailers.

James W. Peters: Earlier this month, we launched and floored our new semi- and fully automatic KitchenAid Espresso machines at Premium Retail, providing a product lineup offering in one of the categories with the highest growth potential based on current market trends. You no longer have to be a barista to make a high-quality espresso at home. Our new lineup of espresso machines offers quality performance, versatility, unique features, and a beautiful design, all coming from a brand that has been trusted in the kitchen for over 100 years. We also introduced our KitchenAid grain and rice cooker with an integrated scale and water tank that automatically senses the amount of grains, rice, or beans and dispenses the ideal amount of water.

Jim: Providing a product lineup offering and one of the categories with the highest growth potential based on current market trends you no longer have to be a barista to make a high quality espresso at home.

Jim: Our new lineup of espresso machines offers quality performance versatility unique features and a beautiful design all coming from a brand that has been trusted in the kitchen for over 100 years. We also introduced our kitchenaid grain and rice cooker with an integrated scale in water tank that automatically census, the amount of grains race or beef.

Jim: <unk> and dispenses the ideal amount of water.

James W. Peters: I am extremely pleased to share that these products won multiple awards recognizing their design from Red Dot and IF. SDA Global continues to expect strong growth and margins from new product introductions. Within North America, for homes with pets, we launched our first Maytag Pets Dishwasher. Using the Pet Pro Sanitation Cycle, you can now conquer pet grime in your pet's bowls like a pro.

Jim: I am extremely pleased to share that these products won multiple awards recognizing their design from Red Dot and <unk>.

Jim: SDA Global continues to expect strong growth and margins from new product introductions within North America for homes with pets, we launched our first maytag pets dishwasher.

Jim: Using the pro sanitation cycle, you can now conquer pet grime and your pet's bowls like approach.

James W. Peters: Finally, as an example of one of the many regional product launches, in Latin America, we launched a freestanding range with the most powerful burner in the value segment, redefining what is accessible to consumers. These are just a few examples of how we are investing in future growth and innovation to improve life at home. Turning to slide 15, let me remind you of the benefits expected following the closure of the European transaction. Whirlpool now owns 25% of a newly formed appliance company, Beko Europe BV.

Jim: Finally, as an example of one of the many regional product launches in Latin America, we launched a freestanding range with the most powerful burner in the value segment redefining what is accessible to consumers.

Jim: These are just a few examples of how we are investing in our future growth and innovation to improve life at home.

Jim: Turning to slide 15, let me remind you of the benefits expected following the closure of the Europe transaction.

Jim: Whirlpool now owns 25% of a newly formed appliance company Banco Europe BV.

James W. Peters: From a governance perspective, we have two of the six boards. We expect to participate in the significant efficiencies that BAKO will generate, including sustained productivity, building upon already established purchasing capabilities, and continued commitment to product design, innovation, and sustainability. We have the potential to unlock long-term value creation through our ability to monetize our minority interest at an estimated net present value of $500 million. Even though we anticipate a long-term profitable relationship with Archilech, the shareholder agreement includes a number of exit options at predetermined parameters after five years. Our 40-year Whirlpool brand licensing agreement is expected to generate predictable cash flows of more than $20 million per year.

Jim: From a governance perspective, we have two of the six board seats.

Jim: We expect to participate in the significant efficiencies that <unk> will generate including sustained productivity building upon already established purchasing capabilities and continued commitment to product design innovation and sustainability, we have the potential to unlock long term value creation through our ability to monetize our <unk>.

Jim: <unk> interest at an estimated net present value of $500 million.

Jim: Even though we envision a long term profitable relationship with our chiller. The shareholder agreement includes a number of exit options at predetermined parameters. After five years or 40 year Whirlpool brand licensing agreement is expected to generate predictable cash flows of more than $20 million per year.

James W. Peters: Overall, we expect $750 million in net present value of future cash flows and approximately $250 to $300 million of incremental free cash flow expected in 2025, with the absence of the cash-consuming MDA Europe business. We are excited to have achieved this milestone in our portfolio transformation that significantly progresses us towards a higher growth, higher margin business. Turning to slide 16, I will review our full year 2024 guidance. We are reaffirming our ongoing earnings per share range of $13 to $15 and free cash flow guidance of $550 to $650 million.

Jim: Overall, we expect $750 million net present value of future cash flows and approximately $250 million to $300 million of incremental free cash flow expected in 2025.

With the absence of the cash consuming MDA Europe business we.

Jim: We are excited to have achieved this milestone in our portfolio transformation that significantly progresses towards a higher growth higher margin business.

Speaker Change: Turning to slide 16, I will review, our full year 2020 for guidance.

Speaker Change: We are reaffirming our ongoing earnings per share range of $13 to $15 and free cash flow guidance of $550 million to $650 million.

James W. Peters: Additionally, our net sales guidance of approximately $16.9 billion, alongside approximately 6.8% full year ongoing EBIT margins, remains unchanged. Although our MDA North America business had a slower than expected start to 2024, we are confident that we have the right actions in place to expand margins sequentially throughout the year. We expect second half MDA North America margins to expand approximately four points compared to the first six months of 2024. We still expect MDA North America full year margins of approximately 9% with an exit rate of 10 to 11%.

Speaker Change: Additionally, our net sales guidance of approximately $16 9 billion.

Speaker Change: Alongside approximately six 8% full year ongoing EBIT margins remains unchanged, although our MDA North America business had a slower than expected start to 2024, we are confident that we have the right actions in place to expand margin sequentially throughout the year.

Speaker Change: We expect second half MDA, North America margins to expand approximately four points compared to the first six months of 2024.

Speaker Change: We still expect MDA North America full year margins of approximately 9% with an exit rate of 10% to 11%.

James W. Peters: We expect to deliver approximately 30% to 35% of our earnings in the first half of the year and continue to expect a full year adjusted tax rate of 0% reflecting the benefits of the year-up transaction. We are updating our GAAP guidance to reflect non-cash charges related to the European transaction. We continue to expect our full-year GAAP tax rate to be approximately 25%. However, as we finalize the impact of the transaction, the GAAP tax rate may be materially impacted.

We expect to deliver approximately 30% to 35% of our earnings in the first half of the year and continue to expect a full year adjusted tax rate of zero percent, reflecting the benefits of the Europe transaction, we are updating our GAAP guidance to reflect noncash charges related to the Europe transaction.

We continue to expect our full year GAAP tax rate to be approximately 25%. However.

Speaker Change: However, as we finalize the impact of the transaction the GAAP tax rate may be materially impacted.

James W. Peters: Turning to slide 17, our free cash flow guidance remains unchanged. In the first quarter, working capital consumed approximately $600 million of cash. Accounts receivable was impacted by sales seasonality within the quarter, with weak industry demand in January, while March ended stronger than March 2023. Accounts payable were impacted by lower production levels in the quarter as we took actions to match supply with demand.

Speaker Change: Turning to slide 17, our free cash flow guidance remains unchanged.

In the first quarter working capital consumed approximately $600 million of cash accounts receivable was impacted by sales seasonality within the quarter with weak industry demand in January while March ended stronger than March of 2023 accounts.

Speaker Change: Accounts payable were impacted by lowering production levels in the quarter as we took actions to match supply with demand.

James W. Peters: As we progress through the year, we expect to see accounts receivable and accounts payable recover to similar levels as the end of 2023, generating sequential free cash flow from working capital throughout the year. As we navigate the challenging macro environment in North America, we will continue to optimize our working capital. Overall, we continue to expect free cash flow of $550 to $650 million. Turning to slide 18, I will review how we are on track to deliver our 2024 capital allocation priority.

As we progressed through the year, we expect to see accounts receivable and accounts payable recover to similar levels as the end of 2023 generating sequential free cash flow from working capital throughout the year.

Speaker Change: As we navigate the challenging macro environment in North America, we will continue to optimize our working capital overall, we continue to expect free cash flow of $550 million to $650 million.

Speaker Change: Turning to slide 18, I will review, how we are on track to deliver our 2024 capital allocation priorities.

James W. Peters: We continue to take actions to strengthen our balance sheet. In the first quarter, we completed the sale of 24% of Whirlpool of India's outstanding shares while retaining a majority. And the divestiture of our Brastemp-branded water filtration business in Brazil is expected to close later this year.

Speaker Change: We continue to take actions to strengthen our balance sheet in the first quarter. We completed the sale of 24% of whirlpool of India's outstanding shares while retaining a majority interest in.

Speaker Change: And the divestiture of our bras temp branded water filtration business in Brazil is expected to close later this year.

James W. Peters: Combined, these two actions will generate approximately $500 million of cash in 2024. With our first quarter dividend of $1.75 per share and declaring the same for Q2, we are on track to pay dividends of approximately $400 million in 2024. Additionally, we repaid $500 million of our term loan in April. Additionally, demonstrating our commitment to maintaining our strong investment-grade credit rating, we completed $50 million of share buybacks in the first quarter, offsetting dilution from employee compensation programs. As you can see, we're on track to deliver our 2024 capital allocation priorities. Now, I will turn the call over to Marc. Thanks, Jim. Turning to slide 19, let me recap.

Speaker Change: Combined these two actions generate approximately $500 million of cash in 2024.

Speaker Change: With our first quarter dividend of $1 75 per share and declaring the same for Q2, we are on track to pay dividends of approximately $400 million in 2024.

Speaker Change: Additionally, we repaid $500 million of our term loan in April demonstrating our commitment to maintaining our strong investment grade credit rating, we completed $50 million of share buybacks in the first quarter offsetting dilution from employee compensation programs. As you can see we are on track to deliver on.

Speaker Change: <unk> 2004 capital allocation priorities now I will turn the call over to Mark.

Marc Robert Bitzer: Thanks, Jim. Turning to slide 19, let me recap what you heard. The first quarter results were largely in line with expectations while navigating a challenging macro environment, with a strong performance in SDA Global, MDA Latin America, and MDA Asia. While we had a slower than expected start in North America, we continue to be well positioned to disproportionately benefit from a recovery in the U.S. housing market, with eight of the top 10 U.S. builders under contract.

Mark: Thanks, Tim turning to Slide 19, let me recap what you heard to date.

First quarter results were largely in line with expectations, while navigating a challenging macro environment.

Mark: We had a strong performance in SDA Global EMEA, Latin America, and MDA Asia.

While we had a slower than expected start in North America, we continue to be well positioned to disproportionately benefit from a recovery in the U S housing market is eight of the top 10 U S builders on the contract.

Marc Robert Bitzer: We are and will continue to take action to address the macroeconomic environment, including the already implemented promotional program price increase of 5%. We expect sequential margin expansion to begin in Q2 and fully ramp up by the third quarter. With approximately $100 million of cost takeout delivered in the first quarter, we'll remain focused on delivering $300-400 million of full-year cost takeout. We have already taken action on our company-wide organization simplification, and the second wave will be completed in the second quarter.

And we'll continue to take action to address the macroeconomic environment, including.

Mark: Including the already implemented promotion program price increase of 5%.

Mark: We expect sequential margin expansion to begin in Q2 and fully ramp up by the third quarter.

Mark: With approximately $100 million of cost takeout delivered in the first quarter, we remain focused on delivering 300 $400 million of full year cost takeout.

Mark: We have already taken action on our company wide organizational simplification and the second wave will be completed in the second quarter.

Marc Robert Bitzer: The MEA transaction represents a considerable step towards a higher growth, higher margin business. The transaction is expected to meaningfully accelerate our structure of free cash flows by approximately $250 to $300 million in 2025. We have clear capital allocation priorities, including sustaining a strong dividend and reducing debt leverage, supported by strong 2024 cash generation. We are confident that we have the right operational priorities and actions to navigate this dynamic environment and deliver sustained shareholder return. And that concludes our formal remarks, and we will now open it up to questions.

Mark: The EMEA transaction represents a considerable step towards a higher growth higher margin business.

Mark: <unk> is expected to meaningfully accelerate our structural free cash flows by approximately $250 million to $300 million in 2025.

Mark: We have clear capital allocation priorities, including sustaining a strong dividend and reducing debt leverage.

Mark: Ported by strong 2020 for cash generation.

Mark: We are confident but we have right operational priorities and actions to navigate this dynamic environment and deliver sustained shareholder returns.

Speaker Change: And that concludes our formal remarks, and we will now open it up for questions.

Operator: Bye while we prepare for the question and answer period. At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. Your first question comes from the line of Susan Maklari from Goldman Sachs. Your line is open.

Speaker Change: While we prepare for the question and answer period.

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

Susan Marie Maklari: Thank you. Good morning, everyone. Good morning.

Susan Marie Maklari: Thank you good morning, everyone.

Susan Marie Maklari: Good morning.

Operator: I want to start by focusing a bit on the North America MDA segment. You mentioned that you expect to get a point of price every quarter relative to the 5% promotional price increase that's been announced. I guess what gives you the confidence in that 1%? Does it feel like that is conservative or in line with where you think things will come in? And how do you think volumes will move in response to that? And can you help us perhaps bridge, as that comes through, getting from that 5.6% margin you reported this quarter to the 10 to 11% exit rate you expect for this year?

Susan Marie Maklari: I wanted to start by focusing a bit on the North America. MDA segment, you mentioned that you expect to get a point of price every quarter relative to the 5% promotional increase promotional price increase thats been announced I guess, what gives you the confidence on that 1% does it feel like that is conservative or.

Susan Marie Maklari: In line with where you think things will come in and how do you think volumes will move in response to that and just can you help us perhaps a bridge as that comes through getting from that five 6% margin you reported this quarter, the 10% to 11% exit rate you expect for this year.

Susan Marie Maklari: Susan, it's Marc. So, let me just comment on the North America margins and the pricing announcement that we made. And first of all, maybe, which I think is beneficial for the broader audience, explain a little bit how pricing in North America is typically structured. First of all, starting out with, you know, the retailers set the consumer prices. So the way we typically talk about prices towards retail and how we guide it is there are typically two goal posts. One is what we call the MSRP, which is the Manufacturer Suggested Retail Price, which tends to be the high mark. And there are these promotion price programs, and they're typically tied to corporate advertising.

Susan Marie Maklari: Susan It's Marc So let me let me just comment on the North America margins and the pricing announcements, which was done in first of all maybe which I think is beneficial from a broad audience explain a little bit to help pricing in North America is typically structure.

Susan Marie Maklari: First of all is starting out with the retailers set for consumer prices.

Susan Marie Maklari: How we typically talk about prices towards the retail and how we guided us.

Susan Marie Maklari: So if we get to go approach one is what we call. The MSRP manufacturer suggested retail price, which tends to be the high Mark and <unk> promotion price programs.

Susan Marie Maklari: And that typically tied towards co op advertising, so there's a monetary incentive.

Marc Robert Bitzer: So there's a monetary incentive to stick to these prices. On our retail side, the vast majority of volumes, typically about 70 percent, are somewhat tied to this promotion price program. So what we have announced is a structural, across-the-board increase in these promotion price programs of 5%. If you compare that to moving MSRPs, there's a benefit of being able to move faster because it doesn't take a lead time, so it's in effect now, and it really affects the real business, so it's very relevant.

Susan Marie Maklari: We stick to these prices.

Susan Marie Maklari: On our retail side, the vast majority of volume to be about 70% is somewhat tied towards these promotion price programs.

Susan Marie Maklari: So what we have announced.

Susan Marie Maklari: The structure across the board increase of these promotional price programs of 5%.

Susan Marie Maklari: If you compare that to moving MSR piece, there is a benefit of being able to move faster because it doesn't take a lead times, which in effect now.

Susan Marie Maklari: And it really affects the real business.

Marc Robert Bitzer: In terms of timing, first of all, 4Q2, even though it's now in effect, of course, you can't touch April anymore. So it starts touching May and Memorial Day and then July 4th, and then it starts building from there.

Susan Marie Maklari: Relevant.

Susan Marie Maklari: In terms of the timing first of all for Q2.

Susan Marie Maklari: Even though it is now in effect of course, you can't touch April anymore. So it starts touching may and memorial day in mid July 4th.

Marc Robert Bitzer: So that's just the sequence of how you get into the market. As a reminder, and this is typically due to our successful price increases in the past, a 5% typically doesn't translate directly into a 5% bottom line impact. There is some leakage because of the margin protection, but you typically would expect over time to be this 2% to 3% net price realization. So that explains the sequential move. So of that one in Q2, we expect about a point and then subsequently with similar elements. So that's a buildup of the rate.

Susan Marie Maklari: And then it starts building from there. So so that's just the sequencing of how you get into the markets. As a reminder, envisaged typically to our successful price increase in the past our 5% to pick it doesn't translate directly into 5% bottom line impact very some leakage because of the margin protection, but typically we would expect over time to be.

Susan Marie Maklari: EBIT.

Susan Marie Maklari: 2% to 3% net price realization, so thats medics basis sequential move so off of that one in Q2, we expect about a point and then subsequently be similar elements. So we had some build up of the range.

Marc Robert Bitzer: Now on the volume impact, of course, North America is a highly competitive market environment. But frankly, we feel very confident about our product launches. As we have demonstrated over the last 15 months, we have had solid share gains, and we have a strong product pipeline. So we do believe our promotional pricing and the revised promotion pricing clearly reflects the value which the consumer gets for it, and the consumer is willing to pay for it. So actually, I think we're pretty confident, particularly on the back of the distribution gains which we got in the last three to four quarters, that the volume impact will be moderate.

Susan Marie Maklari: And on the volume impact.

Susan Marie Maklari: Of course, North America is highly competitive market environment, but frankly, we feel very confident about our product product launches.

Susan Marie Maklari: Evidenced over the last 15 months, we had a solid share gains we have a strong product pipeline. So we do believe our promotional pricing and the revised promotion pricing fully reflects the value, which will consumer gets further consumers willing to pay for it.

Actually I think we're pretty confident in particular also on the back of the distribution gains that you've got melas.

Susan Marie Maklari: Three to four quarters.

Volume impact will be moderated.

Susan Marie Maklari: Okay, that's a helpful color, Marc. Thank you.

Speaker Change: Okay. That's helpful color Marc Thank you.

Susan Marie Maklari: And then maybe turning to the small domestic appliance business, you had some really impressive results there, especially on that margin. Can you talk a bit more about what drove some of those factors and just how you're thinking about where we are today relative to the guide that you didn't change for this year? What are the puts and takes that will take us through the next couple quarters?

Speaker Change: Then maybe turning to the small domestic appliance business you had some really impressive results there, especially on that margin can you talk a bit more about what drove some of those factors and just how youre thinking about.

Speaker Change: And where we are today relative to the guide that you didn't change for this year what are the puts and takes that take us through the next couple of quarters.

Marc Robert Bitzer: Yeah, Susan, so SDA, while we're very much like Latin America and Asia had a really strong start to the year, and we feel very good about it, very, very proud of it. The small domestic appliance business is a combination of both.

Speaker Change: Yes, Susan so SBA, while we very much like Latin America, and Asia had a really strong start up a year and we feel very good about and very very proud of it.

Speaker Change: The small domestic appliance business is a combination of both.

Marc Robert Bitzer: We had good cost progress, that's one element. We had a very solid sell-through on, what we call our bread-and-butter business, the stand mixer. But, frankly, also some of the new product introductions like the cordless and the rice grain cooker.

Speaker Change: Good cost progress.

Speaker Change: That's one element, we had a very solid sell through on called out bread and butter business the stand mixer, but for.

Frankly also some of our new product introductions like the cordless.

Marc Robert Bitzer: So we have some good momentum also coming from these new product introductions. So, put that all together, and we had a very strong Q1. The reason why, I mean, Q1 is not the right quarter to kind of change full guidance, it's just, in particular, the SDA business; it's the smallest of all four quarters. So there's a full year coming, and the seasonality in the small domestic appliance business is more back half loaded.

Speaker Change: The writers grain cooker to waive some good momentum also coming from these new product introduction. So you put that altogether, we had a very strong Q1 <unk>.

Speaker Change: The reason why I mean, Q1 is not the right quarter to kind of change with 40 guidance. It's just in particular on the SBA business. It's the smallest of all four quarters. So bearish about full year coming in but he is now giving small domestic appliance business is more back half loaded.

Marc Robert Bitzer: We also have a massive product launch in Q2, which we will invest in with significant marketing dollars. So there's some moving parts. But no matter what, we're off to a very strong start. And, you know, could there be some ups at one point? Yes, but it's way too early to kind of commit and confirm.

Speaker Change: Also have a massive product launch in Q2, which we will invest significant marketing dollars. So there are some moving parts.

Speaker Change: No matter, what we're off to a very strong start and could there be some upside one point, yes, but it's way too early to kind of commit and confirm that.

Operator: Your next question comes from the line of Michael Rehaut from JP Morgan. Your line is open.

Speaker Change: Your next question comes from the line of Michael Rehaut from Jpmorgan. Your line is open.

Michael Jason Rehaut: Yes. Hi. Good morning, everyone. Thanks for taking my question. Good morning.

Michael Jason Rehaut: Yes, hi, good morning, everyone. Thanks for taking my questions.

Michael Jason Rehaut: Good morning good.

Michael Jason Rehaut: First, I just wanted to drill down a little bit on the movement in North American industry shipments. I think you said down 2%, which would actually, if you kind of strip out the headwind from your price mix in the quarter, would be consistent with the slight sequential gains, but also, AHAM shipments kind of stead down 6% for the quarter. I was wondering if you could kind of reconcile those two and also more broadly just talk about discretionary demand and why it's lagging here perhaps in spite of some of the promotional activity and, You know, you're talking about, on a bigger picture question, a price increase.

Michael Jason Rehaut: Good morning.

Michael Jason Rehaut: First I just wanted to drill down a little bit on the movement in the North American industry.

Michael Jason Rehaut: Industry shipments I think you said down 2%.

Michael Jason Rehaut: Which would actually if you kind of strip out the.

Michael Jason Rehaut: The headwind from your price mix in the quarter.

Michael Jason Rehaut: Would be consistent with the slight sequential gains, but also the AGM shipments kind of stepped down 6% for the quarter.

Michael Jason Rehaut: I was wondering if you could kind of reconcile those two and also more broadly just talk about.

Michael Jason Rehaut: The discretionary demand and why it's lagging here perhaps.

In spite of some of the promotional activity.

Michael Jason Rehaut: You're talking about a kind of on a bigger picture question.

Michael Jason Rehaut: [inaudible] You know, if your competitors are not following that, I'm just kind of wondering, in a weaker demand backdrop, if, you know, they don't follow, let's say, if there could be some potential for share loss in the next quarter or two.

Michael Jason Rehaut: This increase.

If your competitors are not following that I'm, just kind of wondering in a weaker <unk>.

Michael Jason Rehaut: <unk> backdrop.

Michael Jason Rehaut: If if.

Michael Jason Rehaut: They don't follow let's say, if there could be some potential for share loss in the next quarter or two.

Marc Robert Bitzer: So Michael, it's Marc. Let me first address the industry shipments. As you noted, AHAM has restated the Q1 numbers and some other restatements in the past. This restatement was driven by one of our smaller import players, and frankly, we have some questions about the consistency and validity of these restatements. And the reason I'm saying this one is that typically, in the past, between what we know from our sell-through data, and what we know from our balance of sale data from retailers, it typically triangulates very well with AEM data. And we feel pretty confident about the numbers which we've given are directionally correct.

Michael Jason Rehaut: So Michael it's Marc let me first address the industry shipments.

As you noted AAM Hasnt restated.

Q1 numbers.

Marc: We had some restatements in the past.

Marc: Pigment was driven by one of our smaller important players.

And frankly, we have some questions about the consistency gop's restatements.

Marc: And the reason why I'm, saying, we've gone typically in the past we between what we know from our sell through data what we know from our balance of sales of retailer. It typically triangulate very well the phase <unk> data and we feel pretty confident about the numbers, which we've given our directionally correct.

Marc Robert Bitzer: Having said that, so if you take the revised AHAM numbers, that would mean we had a fairly sizable market share gain in Q1, which would be nice. But I think it's more fair to say we basically held on to the share gains which we had last year and think eventually it's flat to slightly up. And I think that's a more realistic scenario. So right now, and also based on the self-rule data, I would say that it's, again, pretty much in line with the expectations that we had coming into Q1. U.S. industry was down minus two. I think self-rule was pretty much in my ballpark, and that's also what we seem to be confirmed.

Marc: Having said that so if you would take the revised AAM numbers that would mean, we had in Q1 fairly sizable market share gain.

Marc: Which would be nice, but I think it's more fair to say, we basically held onto share gains, which we had last year and think graduates flat to slightly up and I think that's a more realistic scenario. So right now and also based on the sell through data.

Marc: I would say embedded again pretty much in line with the expectations that we had coming into Q1 U S industry was down minus two.

Marc: I think sell through was pretty much in that ballpark and that's also what we seem to be confirmed.

Marc Robert Bitzer: It doesn't fully change our outlook on zero to two percent, obviously, with some moving parts. And, of course, there's also a baseline from last year, Q3 and Q4. And, you know, we all know it's ultimately driven by consumer sentiment. Mortgage rates don't help existing home sales. I think as a result of stubbornly high mortgage rates, you might see still fairly solid new home sales, and existing home sales being soft. But you may also see a resurgence of home improvements and remodeling because people need consumer equity, but the balance sheet is not bad. People have money. They just don't want to leave their existing homes.

Marc: It doesn't change our full year outlook on zero to 2%.

Marc: There's some moving parts.

Marc: Of course, there is also based on from Nokia Q3 and Q4.

Marc: And we all know, it's ultimately driven consumer.

Marc: Sentiment is mixed but mortgage rates don't help existing home sales.

Marc: As a result of of stubbornly high mortgage rates, you might see still fairly solid new home sales existing home sales being soft.

Marc: You May also see a resurgence of home improvements and remodeling because people the consumer equity, but the balance sheet is not bad people have money.

Marc Robert Bitzer: So I think you will see more and more trends toward remodeling and refurbishment. And to be honest, that's not a bad business for us. So again, right now, at this point, we still feel that 0-2% industry guidance is the right level. As it relates to promotion price increases, again, let's first of all keep in mind that historically, consumer elasticity to broader category pricing is very low, i.e., given that it's an infrequent purchase, there's no hypersensitivity on the consumer side towards category pricing.

Marc: Just don't want to leap existing homes. So I think you will see more and more trends towards remodeling refurbishment and to be honest, that's not a bad business for us. So so again right now at this point, we still feel with zero to 2% industry guidance is the right one.

Marc: As it relates to promotion price increase again, let's first of all keep in mind, historically consumer elasticity to broader category pricing is very little I E.

Marc: Given that it's an infrequent purchase consumers theres no hypersensitivity on consumer side towards category pricing and of course, we are living in a competitive environment.

Marc Robert Bitzer: And, of course, we're living in a competitive environment. We do what we think is right for our business, where we participate and do promotions that create value for us. And we do what we think our products are valued for in the marketplace. And again, it comes back to we have a strong product pipeline. And with that product pipeline and the distribution gains of last year, I think we have a very good opportunity to make the price increase work and have a very moderate impact on volume.

Marc: We do what we think is right for our business, where we participate and do promotions, which create value for us and we do what we think our products are valued for our marketplace and again it comes back to.

Marc: We have a strong product pipeline and with that product pipeline and distribution gains with last year I think we are.

Marc: We have a very good opportunity to make a price increase work and have a very moderated impact on volume.

Michael Jason Rehaut: Okay, I don't know.

Michael Jason Rehaut: I appreciate that. I guess, you know, I also just wanted to focus on the EBIT margin bridge for the full year. You know, I've noticed that, you know, your components remain unchanged in terms of price mix and NETCOST. But, at the same time, you're talking about a 5% price increase on your promotional program actions, which would be, everything else equal or positive. I'm wondering why that component hasn't been changed.

Speaker Change: Okay No I appreciate that.

Speaker Change: I guess.

Speaker Change: Also just wanted to focus on the EBIT margin.

Speaker Change: Bridge.

Speaker Change: For the full year.

Speaker Change: I noticed that your components remain unchanged in terms of price mix.

Speaker Change: And net cost.

Speaker Change: At the same time.

Speaker Change: You are talking about a 5% price increase on your promotion promotional program actions, which would be a <unk>.

Speaker Change: Everything else equal a positive.

Speaker Change: I was wondering why why is that component hasnt been changed.

Michael Jason Rehaut: Also, the net cost. You're talking about maybe being at the lower end of the cost actions, as well as some incremental cost inflation on areas like freight, logistics, etc. So, it seems like maybe there's a little bit of downside risk there, a little bit of upside risk, maybe on the price mix. Just kind of your thoughts on why some of the components haven't changed yet, while some of the inputs have.

Speaker Change: Also the net cost.

Speaker Change: You are talking about.

Speaker Change: Maybe being at the lower end of the cost actions as well as some incremental.

Speaker Change: Cost inflation on on areas like freight.

Speaker Change: Logistics et cetera, so it would seem like maybe there's a little bit of downside risk there little bit of upside risk maybe on the price mix.

Speaker Change: Just kind of your thoughts on why some of the components.

Speaker Change: Haven't changed yet while some of the inputs have.

James W. Peters: Yeah, Michael, this is Jim. Let me start, and then I'll have Marc kind of chime in. And, you know, as you pointed out, as we look at where we are at the end of the first quarter, we do believe these are the big drivers. And we do believe, in terms of order of magnitude, they're directionally correct, but they're also order of magnitude correct. I would say, to your point on the price mix, as we roll out the price increase, the promotional price increase that we've done here, it's coming out throughout Q2.

Speaker Change: Yes, Michael This is Jim let me start and then I'll have mark chime in and as you called out as we look at where we are at the end of the FERC first quarter. We do believe these are the big drivers and we do believe in terms of order of magnitude. There are directionally correct, but theyre also order of magnitude correct I would say to your point on the price mix as we rollout.

Speaker Change: The price increases a promotional price increase that we've done here, it's coming out throughout Q2, So we'll see the benefit partially in Q2 later Q2, but in the back half of the year.

James W. Peters: So we'll see, you know, the benefit partially in Q2, later in Q2, but in the back half of the year. You know, as we look at it today, it should take us to the higher end of the range or possibly even better than that, you know, as we get to the back half of the year. But I'd say right now that's why at least we use a range to point out where that could be.

Speaker Change: As we look at it today it should take us to the higher end of the range or possibly even better than that as we get to the back half of the year, but I'd say right now that's why at least we use a range to point out where there could be but we do think we're going to the higher end there from a net cost perspective as we did highlight we do think we're possibly at the low end of that range right now and.

James W. Peters: But we do think we're going to the higher end there. From a net cost perspective, you know, as we did highlight, we do think we're possibly at the low end of that range right now. And, you know, we are driving the cost actions that we mentioned. But, you know, I would say if you looked at the broader range, the $300 to $400, we're probably closer to the low end. So we do see some possible upside on price mix, but we do know we have some, you know, additional incremental inflation that we weren't counting on in the net cost.

Speaker Change: We are driving the cost actions that we mentioned, but I would say if you looked at the broader range of 3% to 400, we're probably closer to the low end. So we do see some possible upside on price mix, but we do know we have some additional incremental inflation that we werent counting on in the net cost and right now we believe they'd offset each other on a full year basis.

James W. Peters: And right now, we believe they'd offset each other on a full year basis, most likely. But, you know, as we get through the second quarter, we'll continue to have a better picture of what all our actions will deliver for the full year.

Speaker Change: Most likely but as we get through the second quarter will continue to have a better picture of what all our actions will deliver for the full year.

Michael Jason Rehaut: Michael, just maybe to add, and that's just the nature of a Q1. If you first of all look at our different businesses, you have three businesses which are right now running higher than even the EBIT guidance, and North America is slightly running behind, but we have the EBIT guidance. I think at the end of the day, right now, yes, there's still some moving parts, but it's a way to move too early to kind of even think about the changing of this one. The same is true a little bit on the component. First of all, just to clarify, the bridge which you saw is the total company bridge. It's not necessarily North America.

Speaker Change: Mike just maybe to add Amazon, obviously and Thats just the nature of a Q1. If you first of all look at our different businesses you had three businesses, which are right now running higher than the EBIT guidance in North America slightly running behind but we have the EBIT guidance I can give you innovate.

Speaker Change: Right now, yes, there are still some moving parts, but wait to move too early to kind of even think about the change in <unk>. The same as a little bit on the components first of all just to clarify but bridge, which you saw that's the total company bridge Thats not necessarily North America to Jim's point of net costs, yes, because sticky inflation, we're kind of more on the low end.

Marc Robert Bitzer: To Jim's point on net cost, yes, because of sticky inflation, we're kind of more on the low end. But I think also with what we demonstrated as carryover and additional cost action Q1, I think we're pretty solid on this one. On pricing, and with the price increase which we announced, yeah, it could be in the better part of that range. But again, there's still a lot of moving parts. But overall, putting it all together, we feel confident about this margin guidance as a total EBIT guidance which we've given for the full year.

Speaker Change: I think also what we demonstrate we deliver that's carryover and additional cost actually Q1, I think were pretty solid in Michigan.

Speaker Change: Pricing.

Speaker Change: And we have a price increase which we announced yen it could be on the better part of that range, but again, there's still a lot of moving parts, but overall put it all together we feel confident about.

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

Speaker Change: Margin guidance in total EBIT, which was given for the full year.

Speaker Change: Your next question comes from the line of David Macgregor from Longbow Research. Your long his line is open.

David Sutherland MacGregor: Yes, good morning everyone, and thanks for taking the questions. Hey guys, I guess I just wanted to start off by asking you about U.S. retail inventories. It looks like there was a pretty significant destock in January ahead of the retail year-end. It was followed by relatively flat units in February and March, if you combine the two months. But how much additional destock do you think is left at retail, and how would that impact the typical 2Q seasonal build in refrigeration?

David Sutherland MacGregor: Yes, good morning, everyone and thanks for taking the questions.

David Sutherland MacGregor: Right.

David Sutherland MacGregor: Hey, guys I guess I just wanted to start off asking about U S retail inventories it looks like there was a pretty significant destock in January ahead of the retail year end followed by some relatively flat units in February March if you combine the two months, but how much additional destock do you think is left at retail and how would that impact the typical seasonal build in refrigeration.

Marc Robert Bitzer: So David, it's Marc. So you're correct. In January, there was quite a bit of destocking at the retail site. I think there was a little bit of a rebuild back up in March. So I would still say, slightly down versus year-end, we're still by and large a little bit elevated in the retail environment. Not particularly concerning, but slightly elevated. So what we saw at the end of the year is not being completely reduced because, again, there was some rebuild back into March. Doesn't make me overly nervous. And it's, and again, to some extent expected, and I don't think it should impact the typical refrigeration season outside.

David Sutherland MacGregor: Yes, so David it's Marc So youre correct in January but it was quite a bit of destocking of our retail side I think there was a little bit of rebuild back up on March. So I would still say flat slightly down versus year end, there's still by and large a little bit of elevated inventory levels.

David Sutherland MacGregor: The retail environment.

David Sutherland MacGregor: Not particularly concerning but slightly elevated so.

David Sutherland MacGregor: We saw end of the year has not been completely reduced because again there were some rebuild back into March.

David Sutherland MacGregor: Make me overly nervous.

David Sutherland MacGregor: And again to some extent expected.

David Sutherland MacGregor: I don't think it should impact, but typically refrigeration seasonality.

David Sutherland MacGregor: I guess as a follow-up, I just wanted to ask you about the RSLIC transaction. You know, your 25% stake in the earnings moves to the equity income line, I would believe. But can you quantify the stranded costs that were left behind and how those costs resolve over the remaining three quarters of this year? And what could that represent in the way of an incremental margin benefit for full year 25 versus full year?

Speaker Change: I guess as a follow up I just wanted to ask you about the transat.

David Sutherland MacGregor: Transaction your 25% stake in the earnings moves to the equity income line I would believe.

David Sutherland MacGregor: Can you quantify the stranded costs that were left behind and how those cost resolve over the.

David Sutherland MacGregor: The remaining three quarters of this year and what could that represent in the way of incremental margin benefit for full year 'twenty five versus full year 'twenty four.

James W. Peters: Yeah, David, this is Jim. And maybe I'll start out with that. And, you know, as you said, now our 25% stake will move to, you know, a different line in the P&L, and being only 25%, it will obviously be significantly smaller. If you look at it from a stranded cost perspective, you would see most of that flow through our corporate expense line, which, actually, right now is trending at a relatively positive level. And why is that?

David Sutherland MacGregor: Yes, David This is Jim and maybe I'll start out with that and as you said that now the 25% stake we will move to a different line in the P&L and being only 25% will obviously be significantly smaller if you look at it from a stranded cost perspective, you would see most of that.

David Sutherland MacGregor: Flow through our corporate expense line, which actually right now it's trending in a relatively positive level and why is that well.

James W. Peters: Well, there are a couple things here. One, we actually did sell off that business as a fully operating business. So there weren't a significant amount of stranded costs that stayed. I mean, we covered a lot of the costs that went with it, and we do have some remaining costs that we may have had. But obviously, in a transaction like this, you have transaction service agreements where you're also providing those services and being paid for them.

David Sutherland MacGregor: There's a couple of things there is one we actually did sell off that business in terms of fully operating business. So there weren't a significant amount of stranded cost that state I mean, we did a lot of the costs went with it.

David Sutherland MacGregor: And we do have some remaining costs that we may have had but obviously in a transaction like this you have transaction service agreements, where youre also providing those services and being paid for them. So when we look at it like that and then we look at the cost takeout actions and the organization simplification actions that we're taking those are also then offsetting any of the stranded.

James W. Peters: So, you know, when we look at it like that, and then we look at the cost takeout actions and the organization simplification actions that we're taking, those are also then offsetting any of the stranded costs that we might see. So right now, we don't see stranded costs as a significant headwind for us this year because, as I said, we're taking actions to really deal with them.

David Sutherland MacGregor: Cost that we might see so right now we don't see the stranded cost as a significant headwind for us this year because as I said, we're taking actions to really deal with them. When you look at 2025 and beyond the biggest driver on margin improvement is just the fact that we don't have the dilutive.

James W. Peters: When you look at 2025 and beyond, you know, the biggest driver of margin improvement is just the fact that we don't have the dilutivumia business within our portfolio anymore. Because, as I said, most of the costs will come out within this year. So there's not a big year over year impact, but we don't have that dilution.

David Sutherland MacGregor: Dilutive EMEA business within our portfolio anymore, because as I said most of the costs will come out within this year. So there's not a big year over year impact but.

James W. Peters: What you will see going into 2025, similar to what you see in 2024, is that when we take cost actions like this, there's always a carryover because it's a partial year type of thing. So, you know, this year, we started with about 100 million carryover from the prior year in terms of cost actions. And I think as you just look towards next year, that's typically what you would expect from this type of cost takeout business. Now, again, we're not going to go further into that.

David Sutherland MacGregor: But we don't have that dilution what you will see going into 2025 similar to what you see in 2024 is when we take cost actions like this there is always a carryover because it's a partial year type of thing. So this year, we started with about $100 million of carryover from the prior year in terms of cost actions and I think as you just look towards next year, that's typically what.

David Sutherland MacGregor: You would expect in this type of cost take out business now again, we're not going to go further into that but you should always assume that because of these benefits come later in the year. There is a carryover component to next year and we did talk about that at Investor day too as you look at a multiyear cost trend cost takeout trend, we do expect some continuing benefits from this.

James W. Peters: But you should always assume that because these benefits come later in the year, there is a carryover component to next year. And we did talk about that at Investor Day, too. As you look at a multi-year cost trend, cost takeout trend, we do expect some continuing benefits from that. Hey Dave.

Marc Robert Bitzer: Hey David, maybe just to add to Jim's point, one for clarity, absolutely correct my minority interest. Keep in mind there's also a sizable royalty income from a Whirlpool brand that will show up in operating results in North America because that's where the majority of the Whirlpool brand work is happening and the cost is being paid. So there is a benefit to our North America business. The other comment on the stranding cost, to Jim's point, again, that's very important to know, and the vast majority of existing costs were basically passed on in this transaction.

Speaker Change: David maybe just to add to Jim's 0.1 quote guarantee absolutely correct minority interest keep in mind. There's also a sizable royalty income from our local brand that will show up in operating results in North America, because that's the majority of a whirlpool brand work is happening of course is being paid so there is a benefit to our North America business.

David Sutherland MacGregor: The the ever comment on the stranded cost to Tim's point again, it's very important to know.

David Sutherland MacGregor: The vast majority of existing costs were basically passed on in this transaction.

Marc Robert Bitzer: The stranded cost, I would say, is largely dealt with, and that comes back to what we announced already in Q1, and what we are, I think you may have seen some headlines yesterday, taking out $100 million of infrastructure organization costs. To be clear, that goes beyond what would have been the stranded costs because, ultimately, we now have a significantly simplified business, and as such, we now have the opportunity to also have a significantly simplified organizational setup. So, $100 million goes way beyond the pure stranded costs, which would have been the stranded costs, which would have been the stranded costs, which would have

David Sutherland MacGregor: The stranded cost I would say is largely dealt with.

David Sutherland MacGregor: And then it comes back to what we announced already in Q1 and what we are I think you may have seen some headlines yesterday were taken out of the $100 million of infrastructure on installation cost to.

David Sutherland MacGregor: To be clear met goes beyond what would have been the stranded cost because ultimately we have now.

David Sutherland MacGregor: Significantly simplify our business and as such we are we have now be opportunity to also have a significantly simplified organization set up so the $100 million goes way beyond.

David Sutherland MacGregor: Pure stranded costs, which would have been there.

Operator: Your next question comes from a line of Laura Champine from Loop Capital. Your line is open.

David Sutherland MacGregor: Your next question comes from the line of Laura Champine from Loop capital. Your line is open.

Laura Allyson Champine: Thanks for taking my question. I just wanted to clarify some comments that you've made.

Laura Champine: Hi, Thanks for taking my question just wanted to clarify.

Operator: So the outlook for revenues hasn't changed. The price increase has been announced. And my understanding is that you expect to realize, say, 1% in Q2 and then 2% to 3% in the back half. Does that price increase in North America have any impact on your views on taking market share this year in North America?

Laura Champine: Comments that you've made so the outlook for revenues Hasnt changed the price increase has been announced.

Laura Champine: Yes.

Laura Champine: And my understanding is that you expect to realize say, 1% in Q2, and then two to three in the back half does that price increase in North America have any impact in your views on taking market share this year in North America.

Marc Robert Bitzer: So Laura, it's Marc. So again, what Jim alluded to, and what I also confirmed earlier, that's a one point net P&L impact which we're expecting in Q2 and then Q3 subsequently. But of course, that also has an impact on net revenues. At this point, and, of course, that depends on overall market development, etc. I would expect our market share to be stable in the current environment and after the promotion price.

Laura Champine: So Laura it's Mark so again.

Mark: Jim alluded to and what I also we confirmed earlier that through one one net P&L impact, which we expect in Q2 and then Q3 subsequently but of course. We had also been has had an impact on the net revenues at basis points and of course that depends on overall market development et cetera, I would expect that our market share to be stable in the card environment and often.

Laura Allyson Champine: Okay, so market share stable as opposed to market share gain. So there is a change in share, but not a change in your view for industry-level demand in North America. Is that true?

Mark: The promotional price increase.

Laura Champine: Okay, so market share stable as opposed to market share gains. So there is a change in share not a change in your view for industry level demand in North America is that is that true.

Marc Robert Bitzer: Well, again, a lot, right? It's just... Of course, when you go into price increases, you don't exactly know what will happen to your market in the short and midterm. Right now, I think we are adjusting production volumes and everything else with the assumption that we hold market share in that environment. But again, there's a lot of moving parts still, and we need to see now how retailers and everything else respond to that environment.

Laura Champine: But again a lot right. It's just it's of course, but when you go into price increases you don't exactly know what will happen to you Mark Jim short midterm right. Now I think we are adjusting production volumes and everything else with the assumption that we hold market share in that environment, but again, there's a lot of moving parts still in what we need to see in Alba our retail.

Operator: Your next question comes from a line from Sam Darkatsh from Raymond James. Your line is open.

Laura Champine: <unk> and everything else responds to that environment.

Laura Champine: Your next question comes from the line of Sam <unk> from Raymond James.

Samuel John Darkatsh: Good morning, Marc. Good morning, Jim.

Samuel John Darkatsh: Good morning, Tim. And I wanted to say congratulations to Korey on the new post. Well-deserved, Korey.

Sam: It is open.

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

Sam: Good morning, Tim.

Sam: I wanted to say congratulations to Corey on the on the new post well well deserved Corey.

Samuel John Darkatsh: Thank you. So I have a couple of questions here. First, the price increase in North America seems at least partially a function of what you called the... Sticky elements of supply chain related inflation. Can you go a little bit more in the weeds in terms of what specifically you're seeing there? And I'm more interested in, is this widespread in the industry, or is this more Whirlpool specific, especially knowing that you may be potentially alone in the price increase now?

Speaker Change: Please let us know.

Speaker Change: Couple of questions here first.

Speaker Change: The price increase in North America seems at least partially a function of what you called the.

Sam: Sticky elements of supply chain related inflation.

Corey: Can you go a little bit more in the weeds in terms of what specifically you are seeing there.

Corey: More so interested in.

Corey: Is this widespread in the industry or is this more whirlpool specific, especially knowing that youre may be potentially alone in the price increase announcements.

Marc Robert Bitzer: Sam, it's Marc. I mean, ultimately, the rationale for the price increase is twofold. One is this sticky inflation, as we call it. The second part is very simply what we already alluded to in Q1: discretionary demand is limited. Replacement demand is very strong, but discretionary demand is limited. So it just does not economically make sense to have a lot of promotional investments when the lift you get from these investments is just pure math. Economics just doesn't work.

Corey: Sam It's Marc I mean, ultimately the rationale for the price increase is twofold, one is sticky and placement as we call it.

Corey: The second part is very simply what we already alluded to in Q1 is the discretionary demand is limited.

Corey: Replacement demand is very strong, but discretionary demand is limited. So it just does not economically make sense to have a lot of promotion investments than the lift you get from these investments is just limited to just pure math hopefully economics, just don't work so.

Samuel John Darkatsh: So there are two components to why we're doing the promotion price program adjustment. On mystique inflation, of course, I don't know the competitors' P&Ls, but I would assume that it is industry spread. And the reason why I'm saying this one is that we see it to some extent in logistic costs. We see it in certain strategic components, which... Very rarely do we have exclusive suppliers. So it's still the tail end of a broader cost inflation which we saw last year and which we are experiencing right now. Sticky, as we said before,

Corey: So there's two components on why we are doing.

Corey: But promotional price program adjustments.

Corey: Sneak inflation of course, I don't know if a competitor's p&l's, but I would assume that is industry spreads and the reason why I'm, saying as long as we see it to some extent logistic costs, we see it in certain strategic components, which.

Corey: Very rarely do we have exclusive suppliers.

Corey: So it's still the tail end of a broader cost inflation, which we saw last year.

Marc Robert Bitzer: So it's components, it's logistic costs. Raw material trends to Jim's early points, they didn't impact Q1, but of course, we're closely watching what happens to steel prices, oil prices, etc. And these are broad-based commodities, so not exclusive to us.

Corey: Which are right now.

Corey: Vicki said before so its components.

Corey: Logistic cost.

Corey: Raw material trends too to Jim's earlier point they did.

Corey: The impact Q1.

Corey: But of course, we are closely watching is what happens to steel prices oil prices et cetera, and visa broad based commodity so not exclusive to us.

Samuel John Darkatsh: Got it. My second question, if I could ask you, Jim, for a walk, to get to the free cash flow, or I should say the cash from operations guide. I mean, obviously, the first quarter cash burn of $870 million, at least versus what we were expecting, was considerably more of a burn than we thought. And it implies about, I don't know, call it $2 billion or so in cash from options in Q2 to Q4.

Speaker Change: Got it and then my second question.

Corey: If I could ask you Jim for a walk to.

Jim: To get to the free cash flow should say the cash from operations Guide I mean, obviously the.

Jim: First quarter cash burn of $870 million at least versus what we were expecting it was.

Jim: Said early.

Jim: More of a burn than we thought.

Jim: And it implies about I don't know call it $2 billion or so in cash from ops in Q2 to Q4.

Samuel John Darkatsh: And I'm trying to get there. I can see with the net income and the DNA and the working capital guide. At least by my math, it gets somewhere around a billion six, billion seven. So I'm still light by about four or five hundred million. So if you could help with at least a specific walk to get to that guy, Jim.

Jim: I'm trying to get there I can see with the net income in the DNA and the working capital guide.

Corey: Just by my math that gets somewhere around $1 6 billion, 7%, so still light by about $4 $500 million. So if you could help with at least the specific work.

James W. Peters: And Sam, I think that probably the bigger component that you're missing in there and now is even more prevalent in 2024 than it's probably been in some recent years with the elevated level of promotions in the back half of the year; a lot of that gets paid out in the first half of the year. So that's where you're going to see a significant swing in terms of, and it's kind of similar to what we used to see in the 2017, 2018, 2019 time frame when our first quarter cash flow would be in the minus 800 to 900 million dollar range. And so I think you have all the components there.

Corey: To get to that Guy Jim.

Speaker Change: And Sam I think probably the bigger component that youre missing in there now is even more prevalent in 2024, then its probably been in some of the recent years is with the elevated level of promotions in the back half of the year a lot of that gets paid out in the first half of the year, So thats, where youre going to see a significant swing in terms of.

Speaker Change: It's kind of similar to what we used to see in the 2017 2018 2019 timeframe when our first quarter cash flow would be in the minus 800 to 900 some million.

James W. Peters: As you say, we build up earnings throughout the year. We have certain things within the first quarter, and that does include EMEA, 100% of all EMEA effects within the first quarter. Some of that we thought would come later in the year, paying some of the legacy liabilities, but all of that has actually occurred within the first part of the year. But then the big swing is we pay those promotional programs out early in the year for the prior year, and then we build up the accruals throughout the year.

Speaker Change: Range and so I think you had all the components there as you say, we buildup earnings throughout the year.

Speaker Change: We have certain things within the first quarter and that does include the EMEA, 100% of all the EMEA effects within the first quarter. Some of that we thought would come later in the year paying some of the legacy liabilities, but all of that has actually occurred within the first part of the year, but then that big swing is we pay those promotional programs out early in the year for the prior year.

James W. Peters: So it builds up on our balance sheet, and there's very little cash flowing out, which helps us throughout the year. And then in the first quarter of next year, we pay them out again. We have other similar programs like employee compensation programs and things like that that operate, but promotional programs are the biggest driver. And I think if you add that piece in to what you were walking there, you'll get closer to your $2 billion number. So that's how we get it.

Speaker Change: And then we build up the accruals throughout the year. So it builds up on our balance sheet and there's very little cash flowing out which helps us throughout the year and then in the first quarter of next year, we pay those out again, we have other similar programs like employee compensation programs and things like that that operate but promotional programs are the biggest driver and I think if you add that to what.

Speaker Change: Walking there you'll get closer to year $2 billion number thats, how we get there.

Operator: Your next question comes from the line of Mike Dahl from RBC Capital Markets. Your line is open.

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

Michael Glaser Dahl: Hi, thanks for taking my question. I want to start with back on the North American margins, just to make sure I heard correctly. I think there was a comment that the second half would be up 400 basis points versus the first half, so I guess that implies that your second quarter margin is still kind of in the sixes to seven; the first half would be in kind of the six, six and a half range, and then you're exiting; the second half would be north of ten.

Michael Glaser Dahl: Alright, Thanks for taking my question.

Michael Glaser Dahl: I'll start with back on the North American margins to make sure I heard correctly I think there was a comment that second half will be up 400 basis points versus.

Michael Glaser Dahl: First half.

Michael Glaser Dahl: So I guess that implies that your second quarter margin is still kind of in the 6% to seven in the first half would be.

Michael Glaser Dahl: Kind of a 665 range and then.

Michael Glaser Dahl: You know, I think the prior expectation was to start around A and build more slowly and maybe be in like the 9.5% range for the second half, exiting closer to 10. So it seems like the year started slower. The backdrop's a little more challenging, but your second half margin guide has actually effectively gone up. And I understand the incremental pricing, but that's off of a lower base. So can you just, you know, it's another way of asking, just help us walk through kind of what changed in the guide, you know, and that expectation for now is better?

Michael Glaser Dahl: Youre exiting.

Speaker Change: Second half will be north of 10.

Speaker Change: <unk>.

Speaker Change: And I think the prior expectation was the start around <unk> and build more more slowly than maybe in like the nine 5% range for the second half exiting closer to 10. So it seems like the year started slower the backdrop is a little more challenging but your second half.

Speaker Change: Margin guide has actually effectively gone up and I understand.

Speaker Change: Standing incremental pricing, but that's off of a lower base. So can you just.

Speaker Change: Another way of asking just help us help us walk through kind of what changed.

Speaker Change: The guide.

James W. Peters: Yeah, Michael, and this is Jim. And I think you highlighted a couple of points, but let me expand on that. One, at the beginning of the year, we did not assume that we were going to take pricing in North America. And obviously, that's one of the things that now, as we look at the environment, we look at where the promotional spend has normalized to, and we look at what it's driving from a volume perspective, and that it's not driving the value creation that we thought it would. We've taken some incremental actions. And that would say that, yes, we did start off a little bit slower than we thought in North America.

Speaker Change: And that expectation for now a better ramp.

Speaker Change: Yes, Michael This is Jim and I think you did highlight a couple of the points, but let me expand upon that as one at the beginning of the year. We did not assume that we were going to take pricing.

Jim: America and obviously, that's one of the things that now as we look at the environment, we look at where the promotional spend has since normalized too and we look at what it's driving from a volume perspective in <unk>.

Speaker Change: And that it's not driving the value creation that we thought we've taken some incremental actions that would say that yes, we did start off a little bit slower than we thought in North America now when you add in a 5% price increase and if you just say, okay a portion of that.

James W. Peters: Now, when you add in a 5% price increase, and if you just say, okay, a portion of that, that only a certain portion of that gets realized, you still have somewhere between a 1.5 to 2.5 point type of margin improvement that you build up throughout the year and throughout the back half. And then, you know, or for the full year, but that builds throughout the back half.

Speaker Change: Only a certain portion of that gets realized you're still for the back half of the year, that's somewhere between one five to $2 five point type of margin improvement that you build up.

Speaker Change: Throughout the year and throughout the back half and then or for the full year, but that builds throughout the back half. The second thing is is what I would say is listen from a cost takeout perspective.

James W. Peters: The second thing is, what I would say is, listen, from my cost takeout perspective, you know, as we mentioned before, we will continue to see benefits of that build. But now, if we look where we are, we're trying to drive increment while we see cost inflation being stronger than we thought, we're trying to drive, and we will drive, incremental cost actions to offset that. So, we do expect that to build throughout the year.

Speaker Change: As we mentioned before we will continue to see benefits of that build but now if we look where we are we're trying to drive increment, while we see costs being inflation being stronger than we thought we're trying to drive and we will drive incremental cost actions to offset that so we do expect that to build throughout the year, but the biggest variable up from what we originally assumed.

James W. Peters: But the biggest variable off of what we originally assumed is pricing right now. Additionally, if you look at where we see the industry at the beginning of the year, we do also, and we said, as we started the year, we do expect, as we get later in the year, to see the industry at least normalize some and hopefully stabilize some coming off what is a down base right now.

Speaker Change: Is pricing right now.

Speaker Change: Additionally, if you look at where we see the industry at the beginning of the year. We do also and we said as we started the year. We do expect as we get later in the year to see the industry at least normalized summit hopefully stabilize some coming up what is it.

Michael Glaser Dahl: Got it, okay. And then just a follow-up on that cash flow question, yeah. The, I guess, with the driver being some of those, the timing and payments to the extent that you're reducing your promotional activity going forward. Should we see as much of a build in the back half? And then, I think in the past, you have highlighted the seasonality of EMEA cash flows, where you typically get some inflows in the back half of the year.

Speaker Change: Down base right now.

Speaker Change: Got it okay.

Speaker Change: And then just a follow up on that cash flow question.

Speaker Change: The flip.

Speaker Change: With the driver being.

Speaker Change: The timing and payments to the extent that you're reducing your promotional activity.

Speaker Change: Going forward.

Speaker Change: Okay.

Speaker Change: Should we see as much of a build in April.

Speaker Change: In the back half and then I think in the past you have highlighted the seasonality in EMEA cash flows were.

Michael Glaser Dahl: This year, you're only absorbing the outflows; you don't get the inflows. So is that dynamic still the same? It seems like it would be a different dynamic in terms of the first half and second half than maybe you've seen in the past.

Speaker Change: Typically maybe you get some inflows in the back half of the year. This year Youre only absorbing the outflows you don't get the inflows so.

Speaker Change: Is that dynamic.

Speaker Change: Bill.

Bill: It seems like it would be a different dynamic in terms of the first half second half than maybe we've seen in the past.

James W. Peters: Yeah, here's what I would say is, listen, I still think, as you get to the end of the year, we still have higher promotional accruals than we do now because if you just think seasonality and the promotional periods, even in an environment where we're raising our promotional program prices, they're still going to be Black Friday. And there's still going to be, you know, things that go on in December in terms of promotional programs that will be at higher levels than they are throughout the year.

Bill: Yes, here's here's what I would say is listen I still think as you get to the end of the year, we still have higher promotional accruals and we do know because if you just.

Bill: I think seasonality and the promotional periods, even in an environment, where we're raising our promotional program prices are still going to be black Friday, and they are still going to be.

Speaker Change: Things that go on in December in terms of promotional programs that will be at higher levels than they are throughout the year. So we will build.

James W. Peters: So we will build the accruals throughout the year. I'd say, you know, the other thing that you look at on cash flow, and you mentioned EMEA, and part of the reason why we said our cash flow would be 550 to 650 this year, despite the fact that typically on these type of earnings, we would think we could generate a higher level of cash flow is that we've assumed that that EMEA would have a negative this year, without a positive to correspond with it, you know, necessarily in the back half of the year.

Speaker Change: The accruals throughout the year I'd say.

Speaker Change: The other thing that you look at it on cash flow and you mentioned EMEA and part of the reason why we said our cash flow would be $5 50 to $6 50. This year. Despite the fact that typically on these type of earnings we would think we could generate a higher level of cash flow is that we've assumed that that EMEA would have a negative this year without a positive to correspond with it.

James W. Peters: And some of that negative was just the unwinding of some of the working capital programs, working capital finance programs that we had in Europe. So we expected this, this is where we expected it to start. We did expect it.

Speaker Change: Necessarily in the back half of the year and some of that negative was just the unwinding of some of the working capital programs working capital Finance program. These programs that we had in Europe. So we expected. This this is where we expected to start we did expect it and we said when we go into 2025, you can then take that negative for EMEA and add that to this year's number to give you where you should.

James W. Peters: And we said, you know, when we go to 2025, you can then take that negative number from EMEA and add that to this year's number to give you where you should plan to be for next year. I think the other thing that maybe we haven't highlighted yet in the questions around free cash flow is that you will see an improvement in working capital throughout the year. And when we get to the end of the year, you will see a significant improvement in working capital from where we are today. And that is one of the big drivers of, you know, where our cash flow is today to where we expect it to end the year.

Speaker Change: You should plan to be for next year I think the other thing that maybe we haven't highlighted yet and the questions around <unk>.

Speaker Change: Free cash flow you will see an improvement in working capital throughout the year and when we get to the end of the year you will see a significant improvement in working capital from where we are today and that is one of the big drivers.

Operator: Your next question comes from the line of Rafe Jadrosich from Bank of America. Your line is open.

Speaker Change: Where our cash flow is today to where we expect to end the year.

Speaker Change: Your next question comes from the line of Ralph <unk> from Bank of America. Your line is open.

Rafe Jason Jadrosich: Hi, good morning. Thanks for taking my questions.

Rafe Jason Jadrosich: First, just following up on the price increase, can you just tell me what portion of the business it covers? Is it for the entire North America MDA business? And then what are you assuming in terms of realization in your guidance? Is it that net 1% increase that you're baking into the guidance for the remainder of the year?

Ralph: Hi, good morning, Thanks for taking my questions.

Ralph: Just following up on the price increase.

Ralph: Can you talk about what portion of the business does it cover is it for the entire North America MDA business and then how do you.

Ralph: What are you assuming in terms of realization and your guidance is it that net 1% increase that you are.

Marc Robert Bitzer: So let me just re-explain the price increase. Overall, as we said earlier, it affects about 70% of our North America business, to give you a little bit more. Of course, what it excludes is builder-related programs or other programs which are typically not covered by the promotion, the PMAPs, as we call these promotion programs.

Ralph: Taking into the guidance for the remainder of the year.

Ralph: Yeah.

Speaker Change: So let me just.

Ralph: Right.

Ralph: Re explain the price increases overall, we said earlier it affects about 70% of our North America business.

Ralph: And to give you a little bit more of course, what it excludes is bill related to programs or other programs, which are typically not covered by the promotion.

Marc Robert Bitzer: So roughly, you can assume it's about 70% across the board. The absolute amount, of course, varies depending on the product groups. So in some cases, you would see a $20, $30 increase, in some cases $70 to $80. But it is across the board. It's structural, and it largely affects, in particular retail and freestanding. Now, to your point about realization, we said earlier it's a 5% increase. What this means for the bottom line, we would expect 2% to 3% net P&L impact building throughout the different quarters.

Ralph: <unk> as we call. It is promotional programs. So roughly you can assume it's about 70% is across the board.

Ralph: The absolute amount of course different product group of product groups. In some cases, you would see a $2030 increase in some cases 70 to $80.

Ralph: But it is across the board it's structurally.

Ralph: And the larger effects in particular retail and freestanding business.

Ralph: Now to your point about the realization, we said earlier, it's a 5% increase what it means for bottom line, we would expect 2% to 3% net P&L impact build.

Rafe Jason Jadrosich: And then how do you think strategically about market share relative to pricing? If margins start to improve in the second half, but you're giving up some market share, is that a trade-off that you're willing to make? Is that, just how do you think about the balance between pricing and volume? And just to clarify, we...

Ralph: Building throughout the different quarters.

Ralph: And then how do you think strategically about market share relative to pricing.

Ralph: Margins start to improve in the second half, but youre, giving up some market share is that a trade off that youre that youre willing to make is that.

Marc Robert Bitzer: Just to clarify, we didn't say we wanted to give up market share. I said right now, our assumption is that we basically hold market share, and that assumption is built based on the product pipeline which we have, and the distribution expansion which we gained last year. So ultimately, you have to earn market share from a consumer. So you've got to provide a consumer value proposition through innovation and what we deliver as a product which is being earned.

Ralph: Just how do you think about the balance between.

Ralph: Pricing and volume.

Speaker Change: And just to clarify we didn't say we wanted to give up market share I said right now our assumption is that we basically hold market share and that assumption is built based on the product pipeline, which we have the distribution expansion, which we gained last year. So.

Speaker Change: Ultimately you have to earn market share from a consumer so you got to provide the consumer value proposition through innovation and what we deliver product, which is being earned and we see that actually really based on where momentum which were both last year and what we see coming we feel very confident that the <unk>.

Marc Robert Bitzer: And we feel, actually, based on the momentum which we built last year and what we see coming, we feel very confident that what we offer as a consumer value proposition justifies and potentially, at one point, offers the opportunity to even expand market share.

Speaker Change: What we offer is a consumer value proposition justifies.

Operator: Your next question comes from the line of Eric Bosshard from Cleveland Research. Your line is open.

Speaker Change: Potentially up one point, obviously opportunity to even expand market share.

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

Eric Bosshard: Thanks. A follow-up and then a question if I could. The 1Q margin around two points lower than expected, you've talked about it a little bit, but the bridge between the 7.5 or 8 and the 5.6. What explains that difference?

Eric: Thanks, a follow up and then a question if I could.

Eric: <unk> margin around two points lower than expected.

Eric: You've talked about a little bit, but the bridge between the seven 5% rate in the $5 six.

James W. Peters: You know, in terms of which, are you talking about North America or global margin?

Eric: What explains that difference.

Eric Bosshard: It's just the North American margin.

Eric: In terms of which are you talking North America or global margin curve.

James W. Peters: So, you know, as we said, I mean, within the North America margin and the slower start to the year, we would say one thing we saw was volume was a little bit weaker than we thought, and cost was a little bit higher than we thought from an inflationary perspective. And then the promotional environment was right about where we thought it would be, but again, probably at the higher end of what we thought.

Eric: The North American margin.

Speaker Change: So as we said I mean.

Speaker Change: And then the North America margin and the slower start to the year. We would say is one that what we saw is volume was a little bit weaker.

Speaker Change: And then we thought cost was a little bit higher than we thought from an inflationary perspective, and then the promotional environment was right about where we thought but again probably at the higher end of what we thought so you take all those factors and combine them and Thats why we would have said we had a slower start now you start to.

James W. Peters: So you take all those factors and combine them, and that's why we would have said we had a slower start. Now you start to roll that forward. And as we said, that's why we're taking incremental actions, especially on the cost and the pricing side. We did see things, you know, in the first quarter that told us that we needed to take additional actions on top of what we planned. But I'd say those are the three biggest drivers. But sticky inflation was probably one of the biggest impacts we saw, at least within the first quarter compared to what we expected.

Speaker Change: Will that forward and as we said Thats why were taking incremental actions, especially on the cost and the pricing side is we did see things in.

Speaker Change: In the first quarter that told us that we needed to take additional actions on top of what we plan, but I'd say those are the three biggest driver, but the sticky inflation was probably one of the biggest impacts we saw at least within the first quarter compared to what we expected.

Eric Bosshard: Eric, it's Marc. Let me just add to this one, because I think one of your earlier questions was referring to a North American margin of 8% in Q1. As you know, we don't give quarterly margin by region, okay? If you ask me, it's absolutely true.

Speaker Change: Eric It's Marc let me just add to this one because I think one of the earlier questions was referring to a north American market of 8% in Q1 as you know we don't give quarterly margin by region. Okay. If you ask me.

Marc Robert Bitzer: North America is off to a slower start. I think that underperforms our internal expectation by probably one to one and a half points, which ultimately, to Jim's point, is a reflection of the promotion environment was intense. Some of the inflation has turned out to be more sticky than we originally assumed. There's also a third element. Typically, in Q1 and Q2, in most regions, we start building a lot of production inventory, and we're right now a little bit cautious, and we didn't build a lot of inventory. That, of course, has a lack of volume leverage on the production side. These are the three elements.

Eric: It's absolutely true North America is off to a slower start I think the offers our internal expectation by probably one to one five points, which ultimately to Jim's point as refractories promotion environment was intense.

Marc: Some of the inflation has turned out to be more sticky when we originally assumed.

Speaker Change: There's also a third element we typically in Q1 and Q2 in most regions. We start building a lot of production and inventory and we're right a little bit cautious and we didn't build a lot of inventory. So that of course has lack of volume leverage on the production side. So you sort of a free elements.

Eric Bosshard: You heard earlier the comments in terms of how we intend to address it with both the promotion price increase and, frankly, also additional cost actions. Some of them we have already announced. That's how we intend to make the margin walk from Q1 in North America to the full year.

Speaker Change: You heard earlier comments in terms of how we intend to address it with both the promotion price increase but frankly also additional cost actions.

Speaker Change: We announced already so.

Marc Robert Bitzer: And then the question on the promoted price, I guess specifically, to just cut to the point: Memorial Day is 30 days from now, and you've communicated to retailers that your promoted prices will be 5% higher. Had the retailers told you that you're going to keep your space and we'll have the same discounts, or is your product going to be discounted less than other products, or are you going to lose space within the promoted programs that they're going to have for Memorial Day? What have retailers communicated to you will be the real-time effect?

Speaker Change: That's how we intend to make the margin walk from Q1 in North America to a full year.

Speaker Change: And then the question on the promoted price.

Speaker Change: I guess, specifically to just cut to the point Memorial days 30 days from now.

Speaker Change: Indicating our retailers that you are promoted prices will be 5% higher.

Speaker Change: Had the retailers told you youre going to keep your space and we will have the same discounts or is your product going to be discounted less than other products or are you going to lose space within the promoted programs that theyre going to have for memorial day, what are retailers communicated to you will be the real time effectiveness.

Eric Bosshard: Yes, so Eric, and of course, a question, I understand why you're asking, it may go too far for an earnings call. As you know, we typically don't comment on individual retail locations or retail reactions. I would argue right now, it's kind of, we are very confident that our price increase will be successful. Of course, with a short notice, Memorial Day, you may see something, but actually right now, how our April shipments went, we're in line with expectations.

Speaker Change: Yes, so Eric.

Eric: And then a question.

Speaker Change: I understand why you're asking it may go too far for an earnings call. As you know, we typically don't comment on individual retailers our retail reaction.

Speaker Change: I would argue right now it's kind of.

Speaker Change: We are very confident that our price increase will be successful.

Speaker Change: Of course with the short notice Memorial day May see something but actually right now even though how April shipments were in line with expectations. So I would say overall.

Eric Bosshard: So, I would say overall that the initial reaction confirmed our confidence that the price increase will work. But, please, I hope you accept that I can't comment on specific retailer comments. So that marks the end of our questions. First of all, I appreciate all the questions.

Speaker Change: The initial reaction confirmed our confidence that the price increase would work, but please I hope you accept that I cant comment on specific retailer comments.

Marc Robert Bitzer: Again, to recap, as we're overall satisfied with our Q1. Our earnings per share were large, in line with what we expected. We all recognize we have three regions of business units which are running very strong and even ahead. North America is off to a slow start.

Speaker Change: So that marks the end of our question first of all I appreciate all the questions.

Speaker Change: Again to recap overall.

Speaker Change: Satisfied with our Q1 our earnings per share were largely in line with what we expected. We all recognized we have three regions of business units, which are running very strongly even ahead northern markets. After a slower start I think you also heard from US we are taking clear and decisive actions to address margins.

Operator: I think you also heard from us that we're taking clear and decisive actions to address margins. And with that confidence, we're actually reconfirming our four-year guidance. So again, we appreciate you all calling in and hope to talk to you soon.

Speaker Change: And if that confidence, we're actually reconfirming, our full year guidance. So.

Operator: Ladies and gentlemen, that concludes today's conference call. Everyone else has left the call. Disconnect.

Speaker Change: Again I appreciate you all calling in and hope to talk to you soon thanks a lot.

Speaker Change: Ladies and gentlemen that concludes today's call everyone else has left the disconnect.

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